<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarter Ended September 30, 1996
Commission File Number 0-21626
ELECTROGLAS, INC.
(exact name of registrant as specified in its charter)
DELAWARE 77-0336101
(state or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
2901 CORONADO DRIVE
SANTA CLARA, CA 95054
TELEPHONE: (408) 727-6500
(address of principal executive
offices and telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
Yes X No
--- ---
As of October 31, 1996, 18,176,442 shares of the Registrant's common stock,
$0.01 par value, were issued and outstanding.
<PAGE> 2
INDEX
ELECTROGLAS, INC.
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements
Consolidated condensed statements of income -- Three months and
nine months ended September 30, 1996 and September 30, 1995 .... 3
Consolidated condensed balance sheets -- September 30, 1996
and December 31, 1995 ........................................... 4
Consolidated condensed statements of cash flows -- Nine months
ended September 30, 1996 and September 30, 1995 ................. 5
Notes to consolidated condensed financial statements --
September 30, 1996 .............................................. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ................... 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ................................ 12
SIGNATURES .................................................................... 13
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements
ELECTROGLAS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 31,467 $ 45,339 $132,171 $118,660
Cost of sales 17,014 20,401 64,762 53,399
-------- -------- -------- --------
Gross profit 14,453 24,938 67,409 65,261
-------- -------- -------- --------
Operating expenses:
Engineering, research and development 4,819 3,402 14,312 9,625
Selling, general and administrative 6,566 6,855 21,335 18,434
-------- -------- -------- --------
Total operating expenses 11,385 10,257 35,647 28,059
-------- -------- -------- --------
Operating income 3,068 14,681 31,762 37,202
Interest income 1,199 959 3,510 2,774
Other income (expense), net 54 (98) 90 77
-------- -------- -------- --------
Income before income taxes 4,321 15,542 35,362 40,053
Provision for income taxes 98 5,672 10,962 14,619
-------- -------- -------- --------
Net income $ 4,223 $ 9,870 $ 24,400 $ 25,434
======== ======== ======== ========
Net income per share $ 0.24 $ 0.54 $ 1.35 $ 1.41
======== ======== ======== ========
Shares used in per share calculations 17,878 18,269 18,044 18,005
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements
-3-
<PAGE> 4
ELECTROGLAS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---- ----
(Unaudited) (1)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 10,145 $ 6,796
Short-term investments 120,155 111,448
Accounts receivable, net 25,972 32,081
Inventories 24,450 22,434
Prepaid expenses and other current assets 2,511 1,054
Deferred income taxes 7,383 7,383
--------- ---------
Total current assets 190,616 181,196
Deferred income taxes 4,821 4,821
Equipment and leasehold improvements, net 9,129 5,066
Other assets 1,294 658
--------- ---------
Total assets $ 205,860 $ 191,741
========= =========
Liabilities and stockholders' equity
Current liabilities:
Short-term borrowings $ 3,854 $ 1,952
Accounts payable 5,838 7,713
Accrued liabilities 19,558 18,663
Income taxes payable -- 6,019
--------- ---------
Total current liabilities 29,250 34,347
Stockholders' equity:
Preferred stock, $0.01 par value;
authorized 1,000,000; none outstanding -- --
Common stock, $0.01 par value;
authorized 40,000,000; issued and outstanding 18,175,442 at
September 30, 1996 and 18,010,738 at December 31, 1995 182 180
Additional paid in capital 89,270 87,000
Deferred stock compensation (1,351) --
Retained earnings 94,614 70,214
--------- ---------
182,715 157,394
Less cost of common stock in treasury;
400,000 at September 30, 1996 6,105 --
--------- ---------
Total stockholders' equity 176,610 157,394
--------- ---------
Total liabilities and stockholders' equity $ 205,860 $ 191,741
========= =========
</TABLE>
(1) The information in this column was derived from the Company's audited
consolidated financial statements for the year ended December 31, 1995.
See accompanying notes to consolidated condensed financial statements
-4-
<PAGE> 5
ELECTROGLAS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
-------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 24,400 $ 25,434
Changes to income not affecting cash 2,769 1,705
Net changes in current assets and current liabilities (4,363) (9,454)
--------- ---------
Cash provided by operating activities 22,806 17,685
Cash flow from investing activities:
Capital expenditures (5,993) (2,143)
Purchase of investments (185,837) (140,432)
Maturities of investments 176,482 126,238
Other assets (856) (432)
--------- ---------
Cash used in investing activities (16,204) (16,769)
Cash flow from financing activities:
Short-term borrowings 1,902 1,194
Sales of common stock, net of issuance costs 978 5,215
Purchase of treasury stock (6,105) --
--------- ---------
Cash (used in) provided by financing activities (3,225) 6,409
Effect of exchange rate changes (28) (189)
--------- ---------
Net increase in cash and cash equivalents 3,349 7,136
Cash and cash equivalents at beginning of period 6,796 7,347
--------- ---------
Cash and cash equivalents at end of period $ 10,145 $ 14,483
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements
-5-
<PAGE> 6
ELECTROGLAS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE: 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared by the Company in accordance with generally accepted accounting
principles for interim financial information and with Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete consolidated
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for fair presentation have
been included. These consolidated condensed financial statements should be read
in conjunction with the audited consolidated financial statements for the year
ended December 31, 1995, included in the Company's Annual Report on Form 10-K.
During the quarter, the Company reclassified certain demonstration equipment
from inventory to fixed assets and other assets to more appropriately reflect
the use of such equipment. For comparative purposes, prior year amounts have
been reclassfied to conform to the current year presentation.
Operating results for the three and nine month periods ended September 30, 1996
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1996.
The Company's fiscal year end is December 31. The Company's fiscal quarters end
on the Saturday nearest the end of the calendar quarter. For convenience, the
Company has indicated that its quarters end on March 31, June 30 and September
30.
USE OF ESTIMATES - The preparation of the accompanying unaudited consolidated
condensed financial statements requires management to make estimates and
assumptions that affect the amounts reported in the financial statements.
Actual results could differ from those estimates.
NOTE: 2 - INVENTORIES
Inventories comprised the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
(in thousands)
- --------------------------------------------------------
<S> <C> <C>
Raw materials $10,782 $12,360
Work in process 8,952 6,932
Finished goods (including
demonstration units) 4,716 3,142
- --------------------------------------------------------
$24,450 $22,434
- --------------------------------------------------------
</TABLE>
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<PAGE> 7
NOTE: 3 - NET INCOME PER SHARE
Net income per share is computed using the weighted average number of common
shares and dilutive common equivalent shares attributable to stock options
outstanding during the period.
NOTE: 4 - DEFERRED STOCK COMPENSATION
On July 1, 1996, the Company issued 100,000 shares of restricted stock to Curtis
S. Wozniak, Chief Executive Officer, under its 1993 Long-Term Stock Incentive
Plan, as an incentive to join the Company and in anticipation of future
achievements. The Company has recorded a deferred compensation charge equal to
the fair market value of the restricted stock at the time of issuance of
$1,425,000. The deferred compensation charge will be amortized over the five
year vesting period.
NOTE: 5 - STOCK OPTION REPRICING
On July 24, 1996, the Company repriced 819,036 employee stock options to $14.25,
the closing market value at June 28, 1996.
NOTE: 6 - STOCK REPURCHASE PROGRAM
On March 14, 1996, the Board of Directors authorized the repurchase of up to
1,000,000 shares of the Company's common stock on the open market. The Company
has since repurchased 400,000 shares of its common stock at a cost of
$6,105,000.
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<PAGE> 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis contains forward-looking statements that
reflect the Company's current judgement regarding the matters addressed by such
statements. Such statements apply to future events and, therefore, are subject
to risks and uncertainties that could cause actual results to differ
significantly. Important factors that could cause actual results to differ are
described in the following discussion and are particularly noted under "Factors
that may affect Results and Financial Conditions" on page 10.
The components of the Company's statements of income, expressed as a percentage
of net sales, are as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 54.1 45.0 49.0 45.0
----- ----- ----- -----
Gross profit 45.9 55.0 51.0 55.0
----- ----- ----- -----
Operating expenses:
Engineering, research and development 15.3 7.5 10.8 8.1
Selling, general and administrative 20.9 15.1 16.2 15.5
----- ----- ----- -----
Total operating expenses 36.2 22.6 27.0 23.6
----- ----- ----- -----
Operating income 9.7 32.4 24.0 31.4
Interest income 3.8 2.1 2.7 2.3
Other income, net 0.2 (0.2) 0.1 0.1
----- ----- ----- -----
Income before income taxes 13.7 34.3 26.8 33.8
Provision for income taxes 0.3 12.5 8.3 12.4
----- ----- ----- -----
Net income 13.4% 21.8% 18.5% 21.4%
===== ===== ===== =====
</TABLE>
RESULTS OF OPERATIONS
Net Sales
Net sales for the quarter ended September 30, 1996 were $31,467,000, a 30.6%
decline from net sales of $45,339,000 in the comparable period last year. The
decrease was due primarily to lower system unit sales.
-8-
<PAGE> 9
For the quarters ended September 30, 1996 and 1995, net sales comprised of the
Horizon 4000 series (52.5% and 60.5%, respectively), the 2000 series (28.4% and
27.6%, respectively) and aftermarket sales, consisting primarily of service,
spare parts and upgrades (19.1% and 11.9%, respectively).
For the quarter ended September 30, 1996, international sales accounted for
44.7% of net sales as compared to 41.2% for the same period last year. During
the quarter, the Company experienced sales declines across all major geographic
regions.
Net sales for the first nine months of 1996 were $132,171,000, a 11.4% increase
over net sales of $118,660,000 for the same period last year. The increase was
due primarily to higher system unit and aftermarket sales.
For the nine months ended September 30, 1996 and 1995, net sales comprised of
the Horizon 4000 series (58.3% and 58.2%, respectively), the 2000 series (28.1%
and 28.5%, respectively) and aftermarkets sales (13.6% and 13.3%, respectively).
For the first nine months of 1996, international sales accounted for 43.9% of
net sales as compared to 46.2% for the same period last year. This was due to an
increase in U.S. sales for the first nine months of 1996 over 1995. Increased
European sales were offset partially by decreases in Asian Pacific and Japanese
sales for the first nine months of 1996 over 1995.
In recent months, the semiconductor industry has been experiencing volatility in
terms of product demand and pricing which have caused semiconductor
manufacturers to exercise caution in making their capital equipment decisions.
As a result of the uncertainties in this current market environment, any
rescheduling or cancellations of planned capital purchases by semiconductor
manufacturers will cause the Company's sales to fluctuate on a quarterly basis.
Gross Profit
Gross profit, as a percentage of sales, was 45.9% for the third quarter of 1996,
compared to 55.0% for the third quarter of 1995. As a result of the decline in
sales for the quarter, gross profit was negatively impacted by underutilization
of manufacturing capacity. In addition, higher material costs, as a percentage
of sales, and lower selling prices exacerbated the decrease in gross profit.
For the first nine months of 1996, gross profit was 51.0% compared to 55.0% for
the first nine months of 1995. The decrease in gross profit was due to higher
material and warranty costs, and underutilization of manufacturing capacity as
production volume decreased during the third quarter of 1996.
Engineering, Research and Development
Engineering, research and development expenses were $4,819,000 for the third
quarter of 1996, up 41.7% from $3,402,000 in the comparable quarter of a year
ago. For the first nine months of 1996, these expenses were $14,312,000, up
48.7% from $9,625,000 for the same period last year. The increases reflect the
Company's commitment to engineering resources necessary to continue efforts in
developing new and existing products, as demonstrated by the recent addition of
the model 4090 to its Horizon product line.
-9-
<PAGE> 10
Selling, General and Administrative
Selling, general and administrative expenses were $6,566,000 for the third
quarter of 1996, down 4.2% from $6,855,000 in the comparable quarter last year.
The decrease was due to a reduction in employee incentive compensation resulting
from lower operating income, offset partially by higher payroll costs resulting
from an increase in staffing levels in prior periods.
For the first nine months of 1996, these expenses were $21,335,000, up 15.7%
from $18,434,000 for the same period last year. The increase was due to higher
payroll costs resulting from increased staffing levels, offset partially by a
reduction in employee incentive compensation because of lower operating income.
Income Taxes
The Company's estimated effective tax rate for the three months and nine months
ended September 30, 1996 was 2.3% and 31.0%, respectively, compared to 36.5% for
the comparable periods in 1995. The 2.3% rate in the third quarter of 1996
reflects the cumulative adjustment made to lower the annual effective tax rate
for 1996 from 35% to 31%. The lower rate in 1996 is due to the impact of higher
tax exempt interest income relative to total estimated pretax income, new
federal tax legislation reinstating the research and development tax credit, and
the decrease in state taxes.
FACTORS THAT MAY AFFECT RESULTS AND FINANCIAL CONDITIONS
The Company's future results may be affected by inherent uncertainties that
exist in the worldwide semiconductor equipment industry. Such uncertainties
include, but are not limited to, capital expenditures of semiconductor
manufacturers, competitive pricing pressures, product volume and mix, the
availability of needed components, the availability of skilled employees, timing
of orders received, fluctuations in foreign exchange rates, development of new
products, enhancement of existing products, and the introduction of competitors'
products having technological and/or pricing advantages. As a result, the
Company's operating results and financial condition may fluctuate, especially
when measured on a quarterly basis.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased to $161,366,000 at September 30, 1996, from
$146,849,000 at December 31, 1995.
For the nine months ended September 30, 1996, operating activities provided cash
of $22,806,000. This was primarily due to net income of $24,400,000 and a
decrease in accounts receivable of $6,109,000, offset by a decrease in income
taxes payable of $7,404,000. The decrease in accounts receivable was due mainly
to lower sales levels in the third quarter of 1996. The decrease in income taxes
payable was due to third quarter estimated tax payments.
The Company used $16,204,000 of cash for investing activities, including
$9,355,000 for net purchases of investments and $5,993,000 for capital
expenditures primarily on design and test equipment and leasehold improvements
to the Company's facilities.
-10-
<PAGE> 11
Cash used in financing activities was $3,225,000. This was due to the repurchase
of 400,000 shares of the Company's common stock at a cost of $6,105,000, offset
by the sale of common stock under employee stock plans generating cash of
$978,000 and additional borrowings by the Company's Japanese subsidiary
contributing $1,902,000.
At September 30, 1996, the Company's Japanese subsidiary had lines of credit
with Japanese banks with a total borrowing capacity of approximately $6,000,000
(denominated in Yen). Amounts outstanding under these facilities were $3,854,000
at September 30, 1996. These facilities enable the Company's Japanese subsidiary
to finance its working capital requirements locally.
Historically, the Company has generated cash in an amount sufficient to fund its
operations. The Company believes that cash on hand and cash generated from
operations will be sufficient to meet the Company's working capital and capital
expenditure requirements at least through the next twelve months.
VOLATILITY OF STOCK PRICE
The Company believes that any of the following factors can cause the price of
the Company's Common Stock to fluctuate, perhaps substantially: announcements of
developments related to the Company's business, fluctuations in the Company's
operating results, sales of substantial amounts of securities of the Company in
the marketplace, general conditions in the semiconductor industry or worldwide
economy, a shortfall in revenue or earnings from or changes in analysts'
expectations, announcements of technological innovations or new products or
enhancements by the Company or its competitors, developments in patents or other
intellectual property rights, and changes in the Company's relationships with
certain customers and suppliers. In addition, in recent years, the stock market
in general, and the market for the shares of small capitalization stocks in
particular, including the Company's, have experienced extreme price fluctuations
which have often been unrelated to the operating performance of affected
companies. There can be no assurance that the market price of the Company's
Common Stock will not continue to experience significant fluctuations in the
future, including fluctuations that are unrelated to the Company's performance.
-11-
<PAGE> 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.11* Employment and Consulting Agreement Between
Electroglas, Inc. and Neil R. Bonke
10.12* Electroglas Officers' Retirement Medical
and Dental Coverage Policy
27 Financial Data Schedule
* Management contracts, or Company
compensatory plans or arrangements
(b) Reports on Form 8-K: None.
-12-
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ELECTROGLAS, INC.
(Registrant)
DATE: November 5, 1996 BY: /s/ Armand J. Stegall
------------------- ------------------------------------------
Armand J. Stegall
Duly authorized officer of the registrant,
and Chief Financial Officer
-13-
<PAGE> 1
EXHIBIT 10.11
ELECTROGLAS, INC.
EMPLOYMENT AND CONSULTING AGREEMENT
This Employment and Consulting Agreement (the "Agreement") is
entered into by and between Electroglas, Inc., a Delaware corporation
("Company"), and Neil R. Bonke ("Bonke"), and was approved by the Board of
Directors on July 23, 1996.
RECITALS
A. Bonke is currently employed by the Company and serves as
Chairman of its Board of Directors.
B. Bonke desires to reduce his time commitment to the Company.
C. The Company desires to retain the services of Bonke as an
employee/consultant through 1997, subject to the mutual agreement of Bonke and
the Company.
Accordingly, the parties agree as follows:
AGREEMENT
1. CONTINUED EMPLOYMENT. Bonke shall continue as an
employee/consultant of the Company through December 31, 1997. During such
period, he shall continue to serve as an advisor to the Chief Executive Officer.
He shall not be required to devote his full time to the affairs of the Company.
2. SALARY, BONUS, BENEFITS, ETC. Bonke's salary shall continue
at the annual rate of $278,000 through December 31, 1996. Thereafter, Bonke's
salary shall be at the monthly rate of $25,000 through June 30, 1997.
Thereafter, Bonke's salary will terminate unless Bonke remains as Chairman of
the Board and/or enters into a definitive consultancy agreement with the
Company, in such instance(s) the parties will agree to appropriate compensation.
Bonke shall not be eligible to receive an incentive
bonus for 1996, or thereafter.
<PAGE> 2
Bonke shall continue to receive all benefits
currently received by him, or made available to executive officers on or after
the date hereof, until December 31, 1997.
3. CONTINUED SERVICE AS CHAIRMAN OF THE BOARD. Bonke shall
continue to serve as Chairman of the Board of the Company, with the consent of
the Board. Bonke may resign as Chairman at any time.
4. RETIREMENT. Bonke shall retire from the Company on January
1, 1998, which shall be his retirement date for purposes of all stock option
agreements and other arrangements between Bonke and the Company. Bonke shall be
entitled to receive any applicable company executive officer retirement
benefits.
5. NOTICES. All notices or other communications required or
permitted hereunder shall be made in writing and shall be deemed to have been
duly given if delivered by hand or mailed, postage prepaid, by certified or
registered mail, return receipt requested, and addressed to the Company at:
Electroglas, Inc.
3045 Stender Way
Santa Clara, California 95054
and to Bonke at:
13635 Vaquero Court
Saratoga, California 95070
6. ENTIRE AGREEMENT. The terms of this Agreement are intended
by the parties to be the full and final expression of their agreement with
respect to Bonke's relationship with the Company and may not be contradicted by
evidence of any prior or contemporaneous agreement. The parties further intend
that this Agreement shall constitute the complete and exclusive statement of its
terms and that no extrinsic evidence whatsoever may be introduced in any
judicial, administrative, or other legal proceeding involving this Agreement.
Except as set forth herein, this Agreement fully supersedes any prior oral or
written employment or consulting agreements between Bonke and the Company. The
Change of Control Agreement between Bonke and the company, dated June 9, 1995,
shall be applicable to this Agreement.
7. AMENDMENTS; WAIVERS. This Agreement may not be modified or
amended, except by an instrument in writing, signed by Bonke and by a duly
authorized representative of the Company. By an instrument in writing similarly
executed, either party may waive compliance by the other party with any
provision of this Agreement that such other party was or is
<PAGE> 3
obligated to comply with or perform, provided, however, that such waiver shall
not operate as a waiver of, or estoppel with respect to, any other or subsequent
failure. No failure to exercise and no delay in exercising any right, remedy, or
power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, or power hereunder preclude any other or
further exercise thereof or the exercise of any other right, remedy, or power
provided herein or by law or in equity.
8. SEVERABILITY; ENFORCEMENT. If any provision of this
Agreement, or the application thereof to any person, place, or circumstance,
shall be held by a court of competent jurisdiction to be invalid, unenforceable,
or void, the remainder of this Agreement and such provisions as applied to other
persons, places, and circumstances shall remain in full force and effect.
9. GOVERNING LAW. Subject to Section 8, the validity,
interpretation, enforceability, and performance of this Agreement shall be
governed by and construed in accordance with the law of the State of
California.
The parties have duly executed this Agreement as of the 23rd
of July, 1996.
ELECTROGLAS, INC. NEIL R. BONKE
By: /s/ Curtis S. Wozniak /s/ Neil R. Bonke
------------------------------- -----------------------------------
Title: Chief Executive Officer
<PAGE> 1
EXHIBIT 10.12
ELECTROGLAS OFFICERS' RETIREMENT MEDICAL AND DENTAL
COVERAGE POLICY
The following resolution was approved by the Electroglas Board of
Directors on July 23, 1996.
RESOLVED, that the Board hereby adopts the following policy with
respect to continuing medical/dental coverage of executive officers.
1. Eligible Officers.
This policy shall apply to executive officers of the Company
who are elected by the Board of Directors. Other officers and
senior management employees may be offered similar coverage
with the recommendation by the Chief Executive Officer and
written consent of the Board of Directors Compensation
Committee.
Eligible officers who retire from the Company after the date
of this resolution shall (i) have reached the age of
sixty-five at or prior to such retirement; or (ii) have
reached the age of fifty-five at or prior to such retirement
and the sum of such officers' age plus the full number of
years of employment with the Company (and its predecessor,
General Signal Corporation) equals at least sixty-five.
2. Benefits Policy.
Following the retirement of the eligible officer as defined
above, such retired officer shall continue to be entitled to
participation in the Company's group medical and dental plans,
as such plans may be amended from time to time prior to the
executive's retirement. Such participation shall entitle the
retired officer and his or her spouse to continue to be
covered in the Company's medical and dental plans.
Alternatively, at the Company's election, the retired
executive shall be entitled to equivalent coverage. The
coverage may be appropriately adjusted to account for any
applicable state or federal health care benefits to which the
retired officer and his or her spouse are entitled to receive.
Such coverage shall continue for the remainder of the lifetime
of the eligible officer and, as to his or her spouse, for such
spouse's lifetime if he or she shall survive the retired
officer.
<PAGE> 2
3. Costs.
The retired officer and his or her spouse will pay the same
costs for Company-provided coverage as an active employee
would pay for group medical/dental insurance. The Company will
pay all remaining costs.
4. Termination of Coverage.
Notwithstanding Section 2 above, upon employment or
affiliation of an eligible officer with a competitor of the
Company, all benefits under this policy will end permanently.
In addition, in the event the retired executive shall come out
of retirement to accept employment as an employee of a third
party, and the executive is eligible to receive medical and/or
dental benefits through the third party employer's group
plans, then the Company's post-retirement medical coverage
will stop until the executive resumes retirement.
For the purpose of the foregoing, independent consulting shall
not be considered employment with a third party in determining
post retirement medical/dental coverage. However, consulting
services performed for a competitor of the Company will cause
the permanent termination of the benefit.
5. Amendment of Policy.
The Board of Directors of the Company shall be entitled to
amend this policy at any time and in any respect provided that
such amendment shall not materially reduce the benefits
available to any eligible officer who is entitled to receive
benefits under the policy who has retired prior to the date of
such amendment.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 10,145
<SECURITIES> 120,155
<RECEIVABLES> 26,212
<ALLOWANCES> 240
<INVENTORY> 24,450
<CURRENT-ASSETS> 190,616
<PP&E> 23,944
<DEPRECIATION> 14,815
<TOTAL-ASSETS> 205,860
<CURRENT-LIABILITIES> 29,250
<BONDS> 0
0
0
<COMMON> 182
<OTHER-SE> 176,428
<TOTAL-LIABILITY-AND-EQUITY> 205,860
<SALES> 132,171
<TOTAL-REVENUES> 132,171
<CGS> 64,762
<TOTAL-COSTS> 64,762
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 35,362
<INCOME-TAX> 10,962
<INCOME-CONTINUING> 24,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,400
<EPS-PRIMARY> 1.35
<EPS-DILUTED> 1.35
</TABLE>
