<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
Form 10-Q
[ X ] Quarterly Report, Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended September 27, 1996, or
[ ] Transition Report, Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period to
----- -----
Commission File Number 0-22914
------------------------------
UNION SWITCH & SIGNAL INC.
(Exact name of registrant as specified in its charter)
----------------------------
Delaware 25-1579001
- ---------------------------------------- --------------------------------------
(State of Incorporation) (IRS Employer Identification Number)
1901 Main Street, Suite 1150
Columbia, South Carolina 29201
- ---------------------------------------- --------------------------------------
(Address of principal executive offices) (Zip Code)
(803) 929-1200
--------------
(Registrant's telephone no., including area code)
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 requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $0.01 par value 9,737,50
----------------------------- -----------------
Class Outstanding as of
October 31, 1996
<PAGE> 2
UNION SWITCH & SIGNAL INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 27, 1996
INDEX
PART I. FINANCIAL INFORMATION PAGE
--------
Item 1. Financial Statements
Consolidated Balance Sheet as of September 27, 1996 and
December 31, 1995 ..................................... 1
Consolidated Statement of Operations and Accumulated
Earnings for the three and nine month periods ended
September 27, 1996 and September 29, 1995 ............. 2
Consolidated Statement of Cash Flows for the nine month
periods ended September 27, 1996 and September 29,
1995 .................................................. 3
Notes to Consolidated Financial Statements .............. 4-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ..... 7-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ................................... 11
Item 5. Other Information ................................... 11
Item 6. Exhibits and Reports on Form 8-K .................... 12
Signatures ................................................... 13
Index to Exhibits ............................................ 14-16
2
<PAGE> 3
UNION SWITCH & SIGNAL INC.
CONSOLIDATED BALANCE SHEET
($ IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
September 27, December 31,
1996 1995
ASSETS (unaudited) (audited)
--------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................................................ $ 2 $ 2,873
Receivables - net .................................................................... 17,679 29,641
Inventory (Note 4) .................................................................. 29,508 24,807
Costs and estimated earnings in excess of billings
on uncompleted contracts (Note 5) ................................................ 59,126 51,409
Prepaid expenses and other current assets .......................................... 5,365 4,814
------------ ------------
Total current assets ...................................................... 111,680 113,544
Contract receivables - retentions ...................................................... 13,533 13,624
Property, plant and equipment - net ................................................... 37,762 37,944
Other assets ........................................................................... 3,639 5,249
------------ ------------
Total assets .............................................................. $ 166,614 $ 170,361
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short term borrowings and current
obligations under capital leases (Note 6) ...................................... $ 16,177 $ 6,040
Accounts payable .................................................................... 10,575 14,833
Accrued liabilities .................................................................. 4,586 7,135
Billings in excess of costs and estimated earnings
on uncompleted contracts (Note 5) ................................................ 13,269 15,201
------------ ------------
Total current liabilities ................................................. 44,607 43,209
Accounts payable - retentions .......................................................... 2,366 2,493
Accrued post-retirement benefits ....................................................... 2,539 2,359
Long-term borrowings and obligations under capital leases (Note 7) ..................... 48,860 52,128
------------ ------------
Total liabilities ......................................................... 98,372 100,189
------------ ------------
Shareholders' equity:
Preferred stock, $.01 par value, authorized 1,000,000
shares, no shares issued and outstanding ......................................... 0 0
Common stock, $.01 par value, authorized 30,000,000
shares, issued and outstanding 9,737,500 ......................................... 97 97
Additional paid-in capital .......................................................... 59,302 59,302
Accumulated earnings ................................................................. 8,843 10,773
------------ ------------
Total shareholders' equity ................................................ 68,242 70,172
Commitments and contingencies .......................................................... 0 0
- -
Total liabilities and shareholders' equity ................................ $ 166,614 $ 170,361
------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
UNION SWITCH & SIGNAL INC.
CONSOLIDATED STATEMENT OF OPERATIONS
AND ACCUMULATED EARNINGS
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months ended Nine Months ended
------------------ -----------------
September 27, September 29 September 27, September 29
1996 1995 1996 1995
(unaudited) (unaudited) (unaudited) (unaudited)
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenue ...................................... $ 34,872 $ 40,323 $ 113,038 $ 130,473
Cost of revenue .............................. 29,755 31,886 93,826 100,604
------------ ------------- ------------- -------------
Gross profit .......................... 5,117 8,437 19,212 29,869
Operating expenses:
Selling, general and administrative ... 4,629 4,863 14,816 16,359
Research and development - net ........ 1,200 1,609 4,183 5,420
------------ ------------- ------------- -------------
Operating expenses ................ 5,829 6,472 18,999 21,779
------------ ------------- ------------- -------------
Operating income ................. (712) 1,965 213 8,090
Interest expense ............................. 1,139 1,123 3,298 2,694
------------ ------------- ------------- -------------
Income (loss) before income taxes . (1,851) 842 (3,085) 5,396
Provision for (benefit from) income taxes .... (755) 335 (1,155) 2,129
------------ ------------- ------------- -------------
Net income (loss) ................. (1,096) 507 (1,930) 3,267
Accumulated earnings beginning of period .... 9,939 9,909 10,773 7,149
------------ ------------- ------------- -------------
Accumulated earnings, end of period ......... $ 8,843 $ 10,416 $ 8,843 $ 10,416
------------ ------------- ------------- -------------
Earnings (loss) per share of common stock :
Net income (loss) ................. $ (0.11) $ 0.05 $ (0.20) $ 0.34
------------ ------------- ------------- -------------
Weighted average number of common shares
outstanding ................................. 9,737,500 9,737,500 9,737,500 9,737,500
------------ ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE> 5
UNION SWITCH & SIGNAL INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months ended
-----------------
September 27, September 29
1996 1995
(unaudited) (unaudited)
------------------ ----------------
<S> <C> <C>
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net income (loss) ............................................... $ (1,930) $ 3,267
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ................................ 4,032 4,314
Changes in:
Receivables .................................................. 11,962 (6,758)
Inventory .................................................... (4,701) (2,145)
Other assets ................................................. (291) 48
Accounts payable ............................................. (4,258) (1,631)
Accrued liabilities .......................................... (2,142) (327)
Contracts - net (a) .......................................... (9,685) (13,334)
------------------ ----------------
Net cash used in operating activities ...................... (7,013) (16,566)
Cash flows from investing activities:
Capital expenditures ............................................ (2,727) (25,721)
Net assets purchased ............................................ 0 (2,890)
------------------ ----------------
Net cash used in investing activities ..................... (2,727) (28,611)
Cash flows from financing activities:
Net proceeds from short term borrowings ........................ 10,208 16,709
Proceeds from long term borrowings ............................. 7,000 15,000
Payments on long term borrowings ............................... (10,000) 0
Proceeds from (Payments on) capital leases ..................... (339) 7,415
------------------ ----------------
Net cash provided by financing activities ................. 6,869 39,124
Net decrease in cash and cash equivalents ............................. (2,871) (6,053)
Cash and cash equivalents at beginning of period ...................... 2,873 8,573
------------------ ----------------
Cash and cash equivalents at end of period ............................ $ 2 $ 2,520
- -----
------------------ ----------------
Interest paid during period ........................................... $ 3,380 $ 969
------------------ ----------------
Income taxes paid (refund received) during period ..................... $ (910) $ 1,966
------------------ ----------------
</TABLE>
(a) Contract accounting includes costs and estimated earnings in excess of
billings, contract receivables - retentions, billings in excess of costs
and estimated earnings on uncompleted contracts and accounts payable -
retentions.
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
UNION SWITCH & SIGNAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1996
(Unaudited)
($ in thousands, except per share amounts)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Union Switch &
Signal Inc. (the "Company") include all adjustments which are, in the opinion
of management, necessary for a fair statement of the operating results for the
three and nine month periods ended September 27, 1996 and September 29, 1995.
The consolidated financial statements for the three and nine month periods
include only normal recurring adjustments. These consolidated financial
statements have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission and therefore do not include all information
and footnotes necessary for a fair presentation of financial position, results
of operations and changes in cash flows in conformity with generally accepted
accounting principles. The information contained in this Form 10-Q should be
read in conjunction with Management's Discussion and Analysis and the financial
statements as well as the notes thereto contained in the Company's 1995 Annual
Report.
NOTE 2 - RECENT DEVELOPMENTS
The Company announced November 6, 1996 that it will file a Proxy Statement/
Prospectus in which it it will ask its shareholders at a Special Meeting to
approve and adopt an Agreement and Plan of Merger among Union Switch & Signal
Inc., Ansaldo Signal N. V., US&S Merger Sub Inc. (a direct subsidiary of
Ansaldo Signal N. V.) and Ansaldo Trasporti S.p.A. providing for each share of
common stock of Union Switch & Signal Inc. to be converted into one share of
common stock of a new company to be named Ansaldo Signal N. V., and for the
issuance promptly after the merger by Ansaldo Signal N. V. of approximately
10,711,250 of its shares of common stock in exchange for the capital of certain
European subsidiaries of Ansaldo Trasporti S.p.A which are engaged in the
railway signaling and automation business. Ansaldo Signal shares will be
traded on the NASDAQ national market system (Symbol: ASIGF).
NOTE 3 - RELATED-PARTY TRANSACTIONS
The Company is periodically involved in providing certain products and services
to affiliated entities and in purchasing certain products and services from
affiliated entities. During the nine month period ended September 27, 1996,
the Company provided to Ansaldo Trasporti S.p.A. certain advisory and
consulting services which were reflected as a reduction of operating expense of
$452.
6
<PAGE> 7
UNION SWITCH & SIGNAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1996
(Unaudited)
($ In thousands, except per share amounts)
NOTE 3 - RELATED-PARTY TRANSACTIONS (CONTINUED)
The Company relies on affiliated entities for certain financial and management
services. Such services include guaranteeing a $200,000 surety bond facility
(of which $45,361 was utilized at September 27, 1996) and a $5,000 standby
letter of credit facility (of which $2,756 was utilized at September 29,
1996). Fees are paid to Ansaldo Trasporti S.p.A. (ATR) and/or Finmeccanica
S.p.A. for these services as provided. Said fees are equal to 1.0% per annum
on the aggregate principal amount of credit enhanced and 0.50% per annum of any
surety bond or letter of credit for which ATR and/or Finmeccanica provides an
indemnity. For the nine-month period ended September 27, 1996 such fee was
$220. Management expects these services to continue to be provided by ATR
and/or Finmeccanica, to the extent required, through at least 1997.
NOTE 4 - INVENTORY
Components of inventory at September 27, 1996 were as follows:
September 27, 1996
------------------
Raw materials ....................................... $ 16,584
Work-in-process ..................................... 6,853
Finished components ................................. 6,071
-------------
$ 29,508
=============
NOTE 5 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Components of cost and estimated earnings on uncompleted contracts
at September 27, 1996 were as follows:
September 27, 1996
------------------
Costs incurred on uncompleted contracts ............. $ 424,738
Estimated earnings 70,984
-------------
495,722
Less - Billings to date and advances on contracts ... 449,865
-------------
$ 45,857
=============
The net amount above is included in the consolidated balance sheet under
the following captions:
September 27, 1996
------------------
Costs and estimated earnings in excess
of billings on uncompleted contracts ................ $ 59,126
Billings in excess of costs and estimated earnings
on uncompleted contracts ............................ (13,269)
-------------
$ 45,857
=============
7
<PAGE> 8
UNION SWITCH & SIGNAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1996
(Unaudited)
($ In thousands, except per share amounts)
NOTE 6 - SHORT TERM BORROWINGS AND CAPITAL LEASES
Short term borrowings consisted of the following at September 27, 1996:
<TABLE>
<S> <C>
Borrowings (unsecured) under various lines of credit expiring
within one year with interest payable at least quarterly. The interest rate
in effect at September 27, 1996 was 6.0% ........................................ $ 12,790
Borrowings (unsecured) in Australia by Union Switch & Signal Pty. Ltd.
under a revolving credit facility expiring December 31, 1996, with interest payable
quarterly. The interest rate in effect at September 27, 1996 was 8.3% .......... 3,066
Current portion of obligations under capital leases. ............................ 321
--------
Total short term borrowings and current portion of obligations
under capital leases ......................................................... $ 16,177
========
NOTE 7 - LONG TERM BORROWINGS AND CAPITAL LEASES
Long term borrowings consisted of the following at September 27, 1996:
Borrowings (unsecured) under revolving credit facility expiring
May 28, 1998, with interest payable quarterly. The interest rate
in effect at September 27, 1996 was 6.7%.. ...................................... $ 12,000
Senior Notes (unsecured) due 2004, with a
fixed interest rate of 8%. ...................................................... 30,000
Long term obligations under capital leases. ..................................... 6,860
--------
Total long term borrowings and long term portion of obligations
under capital leases ......................................................... $ 48,860
========
</TABLE>
8
<PAGE> 9
UNION SWITCH & SIGNAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1996
(Unaudited)
($ in thousands, except per share amounts)
The Company has a three-year revolving credit facility in the amount of $35,000
which is used to fund working capital needs as well as provide commercial and
stand-by letters of credit and which will expire on May 28, 1998. At September
27, 1996, $12,000 in borrowings and $9,729 in letters of credit were utilized.
In addition, on September 29, 1994, the Company issued senior, unsecured
promissory notes to various lenders in the total amount of $30,000 at an 8%
fixed rate with a ten year term and principal payments beginning in 1998.
As of September 27, 1996, Union Switch & Signal Inc. was in violation of
certain financial covenants associated with its Senior Notes (the Fixed Charge
Coverage Ratio) and its Revolving Credit Facility (Interest Coverage Ratio,
Funded Debt Coverage Ratio and Fixed Charge Coverage Ratio). These violations
constitute Events of Default under the loan agreements associated with these
borrowings. The Company remains current in all interest and principal payments
due. The lenders have waived their rights to an acceleration of principal
payments granted to them under their loan agreements with the Company through
December 31, 1996. Management is presently negotiating new credit facilities
which will serve the borrowing and letter of credit needs of Union Switch &
Signal Inc. as well as those of Ansaldo Signal N.V. and its other operating
units. If the transaction described in Note 2 hereof is consummated,
management believes that the new facilities will be sufficient to meet its
borrowing needs for the foreseeable future. If the referenced transaction is
not consummated, management believes that the Company's existing facilities
will be sufficient to meet its borrowing needs for the foreseeable future.
The Company maintains a $100,000 surety bonding facility ($12,129 outstanding
at September 27, 1996) in addition to a $200,000 surety bonding facility
provided by Finmeccanica (see Note 3).
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
($ in thousands except per share amounts)
OVERVIEW
US&S is a leader in the design, engineering, production and distribution
of integrated railway signaling, automation and control systems and related
component products that provide a variety of train control and rail operations
management capabilities. US&S's customers include all Class 1 freight
railroads and virtually all major rail-based transit systems in the United
States, as well as rail transportation operators in several foreign countries.
The three and nine month periods ended September 27, 1996 were
particuarly challenging periods in both the export and U.S. markets.
Reduction in foreign infrastructure spending, U.S. budget uncertainties and
mergers of U.S. Class 1 railroads caused a reduction in orders received and
have caused a deterioration in revenue and income from 1995 levels.
On November 6, 1996 the Company announced that it will file a Proxy
Statement/ Prospectus in which it will ask its shareholders at a Special
Meeting to approve and adopt an Agreement and Plan of Merger among Union
Switch & Signal Inc., Ansaldo Signal N. V., US&S Merger Sub Inc. (a direct
subsidiary of Ansaldo Signal N. V.) and Ansaldo Trasporti S.p.A. providing for
each share of common stock of Union Switch & Signal Inc. to be converted into
one share of common stock of a new company to be named Ansaldo Signal N. V.,
and for the issuance promptly after the merger by Ansaldo Signal N. V. of
approximately 10,711,250 of its shares of common stock in exchange for the
capital of certain European subsidiaries of Ansaldo Trasporti S.p.A which are
engaged in the railway signaling and automation business. Ansaldo Signal
shares will be traded on the NASDAQ national market system (Symbol: ASIGF).
Unless otherwise indicated, all figures set forth below are for the three
and nine month periods ended September 27, 1996 compared to the three and nine
month periods ended September 29, 1995.
NET INCOME
Net income (loss) for the third quarter of 1996 decreased to ($1,096) or
($0.11) per share from $507 or $0.05 per share for the comparable period last
year. This decrease is due to a decrease in gross profit of $3,320 partially
offset by reductions in operating expense of $643 and income taxes of $695.
Net income (loss) for the nine months of 1996 decreased to ($1,930) or
($0.20) per share from $3,267 or $0.33 per share for the comparable period
last year. This decrease is due to a decrease in gross profit of $10,657 and
an increase in interest of $604, partially offset by reductions in operating
expense of $2,780 and income taxes of $3,284.
10
<PAGE> 11
BACKLOG
The Company's backlog at September 27, 1996 was $121,203, a decrease from
the December 31, 1995 year end backlog of approximately $144,700. Orders for
third quarter 1996 were $28,412 as compared to $22,572 for the third quarter
of 1995. Orders for the nine months ended September 27, 1996 were $89,181 as
compared to $115,128 for the nine months ended September 29, 1995.
Recent and proposed consolidations and mergers among U. S. Class 1
railroads, such as the recent proposed Conrail combination, have had a
continuing adverse affect on customer orders, revenue and gross profit. In
addition, longer than anticipated lead times in the transit and international
markets and increased domestic competition have resulted in lower backlog.
During this quarter, management has observed increasing activity in systems
markets which should result in an increased rate of orders in late 1996 and
1997.
NET REVENUE
Net revenue decreased 13.5% to $34,872 for the third quarter of 1996 from
$40,323 in the comparable period of 1995. Net revenue decreased 13.4% to
$113,038 for the first nine months of 1996 from $130,473 in the comparable
period of 1995. The decreases in net revenue in the third quarter of 1996
resulted from lower volume in system engineering in the Transportation Control
Systems Division. The decreases in net revenue in the first nine months of
1996 resulted from lower volume in Wayside Control Products Division
shipments, and lower volume in system engineering in the Transportation
Control Systems Division.
The following table sets forth net revenue by product line and the percent of
change from year to year:
<TABLE>
<CAPTION>
Nine Months Ended Product Line % Change
Sept. 27, 1996 Sept. 29, 1995 1996-95
-------------- -------------- --------
<S> <C> <C> <C> <C>
$ 76,484 $ 85,426 Transportation Control Systems (10.5)
32,437 40,157 Wayside Control Products (19.2)
4,117 4,890 Vehicle Control Systems (15.8)
-------------- --------------
$ 113,038 $ 130,473 Total Revenue (13.4)
</TABLE>
GROSS PROFIT
Gross profit fluctuates as a result of production volume and the mix
between industry sector and geographical location. The following table sets
forth gross profit in thousands of dollars and as a percentage of total
revenue, and the percent of change from year to year:
11
<PAGE> 12
<TABLE>
<CAPTION>
Nine Months Ended % Change
Sept. 27, 1996 Sept. 29, 1995 1996-95
-------------- -------------- --------
<S> <C> <C> <C> <C>
$ 113,038 $ 130,473 Total Revenue (13.4)
93,826 100,604 Cost of Revenue (6.7)
-------------- --------------
$ 19,212 $ 29,869 Gross Profit (35.7)
17.0% 22.9% Gross Profit as a % of Total Revenue
</TABLE>
Gross profit for the third quarter of 1996 decreased to $5,117 or 14.7%
of revenue from $8,437 or 20.9% of revenue for the comparable period in 1995.
This decrease in gross profit between the third quarter of 1996 and the third
quarter of 1995 of $3,320 is due to a decrease in revenue in systems
engineering of $1,671 and a decrease in gross profit rates in the systems
engineering which resulted in a decrease in gross profit of $1,649. The
decrease in rates reflects a cost adjustment of $2,500 related to a nearly
completed systems contract which involved a major level of software
development.
Gross profit for the first nine months of 1996 decreased to $19,212 or
17.0% of revenue from $29,869 or 22.9% of revenue for the comparable period in
1995. The decrease in gross profit between the first nine months of 1996 and
the first nine months of 1995 was $10,657, of which $2,382 is due to a
decrease in revenue by the Wayside Control Products Division and $3,042 is due
to a decrease in revenue by the System Divisions. In addition, a decrease in
the gross profit rate for the Transportation Control Systems Division resulted
in a decrease in gross profit of $4,810. This decrease in gross profit rate
relates primarily to the development contract discussed above.
OPERATING EXPENSES
The following table sets forth certain consolidated expense items in
thousands of dollars for the periods indicated and the percentage change from
year to year:
<TABLE>
<CAPTION>
NINE MONTHS ENDED EXPENSE ITEMS % CHANGE
SEPT. 27, 1996 SEPT. 29, 1995 1996-95
-------------- -------------- --------
<S> <C> <C> <C> <C>
$ 14,816 $ 16,359 Selling, general and administrative (9.4)
4,183 5,420 Research and development - net (22.8)
-------------- --------------
$ 18,999 $ 21,779 Total operating expenses (12.8)
</TABLE>
Selling, general and administrative expense decreased to $4,629 for the
third quarter of 1996 from $4,863 for the comparable period in 1995, but
increased as a percent of revenue to 13.3% for the third quarter of 1996 from
12.1% for the comparable period in 1995. This reduction is primarily due to
invoicing of Ansaldo Trasporti S.p.A. (ATR) for management services of $152 in
1996 for which there was no comparable invoicing in 1995. Net research and
development decreased to $1,200 for the third quarter of 1996 from $1,609 in
the third quarter of 1995. Net research and development decreased as planned
as a percent of revenue to 3.4% for the third quarter of 1996 from 4.0% for
the comparable period in 1995.
12
<PAGE> 13
Selling, general and administrative expense decreased to $14,816 for the
first nine months of 1996 from $16,359 for the comparable period in 1995, but
increased as a percent of revenue to 13.1% for the first nine months of 1996
from 12.5% for the comparable period in 1995. This reduction in selling,
general and administrative expense resulted from the elimination of certain
one time costs associated with the move to the Pittsburgh Systems and Research
Center, which were included in the comparable 1995 period, and the invoicing
of ATR for management services of $542 in 1996 for which there was no
comparable invoicing in 1995. Net research and development decreased to
$4,183 in the first nine months of 1996 from $5,420 for the comparable period
in 1995. Net research and development decreased as planned as a percent of
revenue to 3.7% for the first nine months of 1996 from 4.2% for the first nine
months of 1995.
FINANCIAL CONDITION
The Company's cash flows have historically been subject to fluctuations
due to the irregular pattern of system bookings. The number, size and timing
of system contracts awarded will continue to impact future cash flows. For
the nine months ended September 27, 1996, the Company's operating activities
used cash of $7,013 compared to using cash of $16,566 in the nine months ended
September 29, 1995, a reduction of $9,553. This resulted primarily from a
decrease in receivables of $11,962 in the nine months ended September 27, 1996
as compared to an increase of $6,758 in the comparable period of 1995. The
decrease in receivables of $11,962 is the result of normal cash collections
in the first nine months of 1996, and reduced sales volumes.
Costs in excess of billings on uncompleted contracts were $59,126 as of
September 27, 1996 as compared to $51,409 as of December 31, 1995. Billings
in excess of costs and estimated earnings on uncompleted contracts were
$13,269 as of September 27, 1996 compared to $15,201 as of December 31, 1995.
The net change reflects an industry-wide trend toward longer term contracts
with invoicing and payment terms based on delivery or installation of material
as opposed to milestones for engineering or manufacturing.
The increase in inventory of $4,701 is due to increasing inventory in
order to improve Customer service.
Capital expenditures decreased to $2,727 for the nine months ended
September 27, 1996 from $25,721 for the nine months ended September 29, 1995.
The reductions reflect the elimination of one time 1995 expenditures related
to furniture and equipment and partial prepayment of construction loans for
the new Pittsburgh Systems and Research Center.
The Company maintains $35,000 in fully committed revolving credit
facilities with commercial banks. In addition, the Company currently
maintains $44,725 in uncommitted lines of credit on an "as available" basis.
Total unused and available credit was $42,785 at September 27, 1996. The
company has also issued senior, unsecured promissory notes to various lenders
in the total amount of $30,000 at an 8% fixed rate with a ten year term and
principal payments beginning in 1998. Management believes these facilities
are sufficient to meet the Company's foreseeable cash needs.
(See Footnote 7 of the Notes to Consolidated Financial Statements, page 9
hereof, with respect to the Company's compliance with certain loan covenants
as of September 27, 1996.)
13
<PAGE> 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Item 3 of the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 and to Item 1
of the Registrant's Quarterly Reports on Form 10-Q for the periods
ended March 29, 1996 and June 28, 1996.
Item 5. Other Information
Walter Alessandrini has resigned effective November 15, 1996 as
President and Chief Executive Officer of the Company to become the
president of a larger company in a different line of business. The
Company has announced the appointment of Mr. Kevin E. Riddett as
Mr. Alessandrini's successor.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required in connection with this quarterly report on
Form 10-Q are listed in the Exhibit Index following the
signature page. Certain of such exhibits, which have
heretofore been filed with the Securities and Exchange
Commission and which are designated by reference to their
exhibit numbers in prior filings, are incorporated herein as
exhibits by such reference and made a part hereof.
(b) No reports on Form 8-K were filed during the
quarter ended September 27, 1996.
14
<PAGE> 15
SIGNATURE
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.
UNION SWITCH & SIGNAL INC.
Date: November 6, 1996 By: /s/ Walter Alessandrini
President, Chief Executive Officer
Date: November 6, 1996 By: /s/ Joseph A. Kirby
Vice President and Chief Financial
Officer (principal financial and
accounting officer)
15
<PAGE> 16
<TABLE>
<CAPTION> INDEX TO EXHIBITS
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NUMBERS
- ----------- ----------- ------------
<S> <C> <C>
3.1 Restated Certificate of Incorporation of the *
Registrant, incorporated by reference to Exhibit 3.1 of the
Registrant's Registration No. 33-69226
3.2 Bylaws of the Registrant incorporated by reference to Exhibit 3.2 *
of the Registrant's Registration No. 33-69226
4.1 Specimen Certificate of Registrant's Common Stock, incorporated *
by reference to Exhibit 4.1 of the Registrant's Registration No. 33-69226
4.2 Specimen Certificate of Registrant's Preferred Stock, incorporated *
by reference to Exhibit 4.2 of the Registrant's Registration No. 33-69226
4.3 Note Purchase Agreements between the Registrant and Connecticut *
General Life Insurance Company, CIGNA Property and Casualty
Insurance Company and Insurance Company of North America, all
dated September 29, 1994, incorporated by reference to Exhibit 4.3 of the
Registrant's Quarterly Report on Form 10Q for the period ended September
30, 1994
10.1 Registration Rights Agreement, dated as of November 24, 1993, between *
the Registrant, ATR and Finmeccanica incorporated by reference to
Exhibit 10.1 of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993
10.2 Preemptive Rights Agreement dated as of November 24, 1993, between *
the Registrant, ATR and Finmeccanica incorporated by reference to
Exhibit 10.2 of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993
10.3 Union Switch & Signal Inc. Performance Unit Plan incorporated *
by reference to Exhibit 10.3 of the Registrant's Registration No. 33-69226
10.4 Union Switch & Signal Inc. Executive Variable Compensation Plan *
incorporated by reference to Exhibit 10.4 of the Registrant's
Registration No. 33-69226
10.5 Union Switch & Signal Inc. 1993 Long-Term Stock Incentive Plan *
incorporated by reference to Exhibit 10.5 of the Registrant's
Registration No. 33-69226
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NUMBERS
- ----------- ----------- ------------
<S> <C> <C>
10.6 Union Switch & Signal Inc. Retirement/Savings Plan Effective *
August 1, 1988 incorporated by reference to Exhibit 10.6 of the
Registrant's Registration No. 33-69226
a. Amendment No. 1 to the Union Switch & Signal Inc. *
Retirement/Savings Plan effective January 1, 1995
incorporated by reference to Exhibit 10.6a of the
Registrant's Quarterly Report on Form 10Q for the
period ended September 29, 1995
b. Amendment No. 2 to the Union Switch & Signal Inc. *
Retirement/Savings Plan effective January 1, 1995
incorporated by reference to Exhibit 10.6b of the
Registrant's Quarterly Report on Form 10Q for the
period ended September 29, 1995
10.7 Development Agreement dated as of September 14, 1993 between *
Regional Industrial Development Corporation of Southwestern
Pennsylvania, Urban Redevelopment Authority of Pittsburgh and
Union Switch & Signal Inc. relating to the Pittsburgh Technology
Center Project (without exhibits) incorporated by reference to Exhibit
10.9 to the Registrant's Registration No. 33-69226
10.8 Lease dated September 14, 1993 between Regional Industrial *
Development Corporation of Southwestern Pennsylvania and the Registrant
incorporated by reference to Exhibit 10.10 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993
10.9 Bonding Support Agreement dated as of January 1, 1993 among *
Finmeccanica, ATR and the Registrant incorporated by reference to
Exhibit 10.10 of the Registrant's Registration No. 33-69226
10.10 Credit Support Agreement dated as of January 1, 1993 among *
Finmeccanica, ATR and the Registrant incorporated by reference to
Exhibit 10.11 of the Registrant's Registration No. 33-69226
10.11 Services Agreement dated as of January 1, 1993 between ATR *
and the Registrant incorporated by reference to Exhibit 10.12 of the
Registrant's Registration No. 33-69226
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NUMBERS
- ----------- ----------- ------------
<S> <C> <C>
10.12 Loan Agreement dated November 30, 1993 between Regional *
Industrial Development Corporation of Southwestern Pennsylvania and the
Pennsylvania Industrial Development Authority incorporated by
reference to Exhibit 10.16 of the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993
10.13 Consent, Subordination and Assumption Agreement dated *
November 30, 1993 among the Registrant, Regional Industrial Development
Corporation of Southwestern Pennsylvania and the Pennsylvania Industrial
Development Authority incorporated by reference to Exhibit 10.17
of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993
10.14 Management Services Agreement dated November 1, 1995 between the *
Registrant and Ansaldo Trasporti S.p.A. incorporated by reference to
Exhibit 10.14 of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995.
a. Renewal No. 1, dated March 1, 1996, of the *
Management Services Agreement dated
November 1, 1995 between the Registrant and
Ansaldo Trasporti, S.p.A. incorporated by
reference to Exhibit 10.14a of the Registrant's
Quarterly Report on Form 10-Q for the period
ended June 28, 1996.
b. Renewal No. 2, dated June 14, 1996, of *
the Management Services Agreement dated
November 1, 1996 between the Registrant
and Ansaldo Trasporti, S.p.A. incorporated by
reference to Exhibit 10.14b of the Registrant's
Quarterly Report on Form 10-Q for the period
ended June 28, 1996.
27.1 Financial Data Schedule 19
</TABLE>
* Previously filed; incorporated herein by reference
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF
OPERATIONS AND ACCUMULATED EARNINGS FOR THE NINE MONTHS ENDED SEPTEMBER 27,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-27-1996
<EXCHANGE-RATE> 1
<CASH> 2
<SECURITIES> 0
<RECEIVABLES> 17,679
<ALLOWANCES> 0
<INVENTORY> 29,508
<CURRENT-ASSETS> 111,680
<PP&E> 37,762
<DEPRECIATION> 0
<TOTAL-ASSETS> 166,614
<CURRENT-LIABILITIES> 44,607
<BONDS> 48,860
0
0
<COMMON> 97
<OTHER-SE> 59,302
<TOTAL-LIABILITY-AND-EQUITY> 166,614
<SALES> 113,038
<TOTAL-REVENUES> 113,038
<CGS> 93,826
<TOTAL-COSTS> 93,826
<OTHER-EXPENSES> 18,999
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,298
<INCOME-PRETAX> (3,085)
<INCOME-TAX> (1,155)
<INCOME-CONTINUING> (1,930)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,930)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
