UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 29, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission file number 000-25102
BRIDGEPORT MACHINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1169678
(State of incorporation) IRS Employer
Identification No.
500 Lindley Street, Bridgeport, CT 06606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 367-3651
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
None Not applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share (the "Common Stock")
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K [ X ]
<PAGE>
The aggregate market value of voting stock held by nonaffiliates of the
registrant on June 18, 1997 was approximately $56,767,000.
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding on June 18, 1997 was 5,679,361.
DOCUMENTS INCORPORATED BY REFERENCE:
Part III incorporates certain information by reference to the Registrant's
definitive proxy statement to be filed with the Commission within 120 days after
the end of the Registrant's fiscal year ended March 29, 1997.
<PAGE>
The Private Securities Litigation Reform of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Annual Report on Form 10-K is forward-looking, such as information relating to
the expansion of the use of the Company's products into the factory floor
market, expansion of the Company's marketing efforts into foreign markets, the
Company's ability to develop additional sources of supply, the Company's
shipment of its current backlog, the Company's expected expenditures on
environmental matters, the Company's use of cash in operating activities, the
Company's ability to satisfactorily resolve outstanding litigation, the ability
of the Company to meet working capital needs, and the effect on the Company of
the adoption of certain accounting standards. Such forward-looking information
involves important risks and uncertainties that could significantly affect
expected results in the future from those expressed in any forward-looking
statements made by, or on behalf of, the Company. These risks and uncertainties
include, but are not limited to, uncertainties relating to general economic
conditions, product introductions, contingent liabilities and general market
conditions.
PART I
ITEM 1. BUSINESS
(A) General Development of the Business
General Description of the Business
Bridgeport Machines, Inc. (the "Company" or "Bridgeport Machines") has
manufactured and distributed metal cutting machine tools and accessories for
over 50 years. The Company's products include machining centers, manual milling
machines, CNC (Computer Numerical Control) manual tool change milling machines
and related software, lathes, surface grinders and CAM (Computer-Aided
Manufacturing) and machine control software. The Company markets its products
under the brand names "Bridgeport," "Harig" and "EZ-CAM."
The Company is headquartered in Bridgeport, Connecticut and has
additional manu-facturing facilities in Leicester, England, Kempten, Germany and
Elgin, Illinois. The Company believes that it is the leading manufacturer of
manual milling machines, surface grinders and CNC manual tool change milling
machines in the United States and believes it is the market leader in sales of
vertical machining centers in the United Kingdom.
The Company's customers are primarily small (up to 20 employees) and
medium (up to 200 employees) independent job shops worldwide. These independent
job shops manufacture components for various industries such as aerospace,
automotive, computer, defense, medical equipment, farm implement, construction
equipment, energy and transportation. In addition, the Company's products are
used in the tool rooms and repair shops of large manufacturing companies such as
The Boeing Company, General Motors Corporation and Rolls-Royce plc.
The Company was established in 1939 and was acquired by Textron Inc.
("Textron") in 1968. In 1986, the Company was acquired in a leveraged buyout
transaction by a group of investors, which included members of the Company's
current management. Commencing in 1991, the machine tool industry in the
Company's primary markets experienced a cyclical downturn in demand. Although
the Company took steps to mitigate the effects of rapidly declining orders by
closing plants, consolidating various operations, shifting production and
reducing personnel, as well as implementing a financial recapitalization, the
Company experienced net losses for fiscal 1991 and 1992 and the nine months
ended January 2, 1993.
<PAGE>
In December 1992, the Company completed the final stages of (i) an
operational restructuring and (ii) a financial restructuring and
recapitalization, pursuant to which the Company obtained a new revolving credit
facility, reduced outstanding subordinated debt and converted all shares of its
outstanding preferred stock to Common Stock (the "1992 Recapitalization"). The
Company accounted for the operational restructuring and the 1992
Recapitalization as a quasi-reorganization as of January 3, 1993. As a result of
its leaner organization, improved operating efficiencies, simplified capital
structure and improved market conditions, the Company returned to profitability.
Recent Developments
In January 1994, Bridgeport Machines entered into a joint venture
agreement with two other companies to establish a joint venture company. The
joint venture company named P.T. Bridgeport Perkasa Machine Tools (the "JV") is
owned 25% by Bridgeport Machines. The JV was formed as a foreign capital
investment company under the laws of Indonesia. When brought into operation, the
purpose of the JV will be to manufacture machine tools in Indonesia for sale
within the Association of South-East Asian Nations. In fiscal 1997, Bridgeport
Machines agreed to increase its ownership of the JV to 40%. As of March 1997,
the JV had not yet begun operations.
In November 1994, the Company's registration statement related to
2,500,000 shares of its Common Stock was declared effective by the United States
Securities and Exchange Commission (the "SEC"). Of these shares, 1,500,000 were
sold to the public by the Company and the remaining 1,000,000 shares were sold
by existing shareholders. The net proceeds received by the Company from the sale
of its Common Stock were approximately $12.9 million.
In February 1995, Bridgeport Machines entered into a joint venture
agreement with Chang Zheng Machine Tool Company Ltd. of China (a company
incorporated in the Peoples Republic of China) to establish a joint venture
company. The joint venture company named Chengdu Chang Zheng Bridgeport Machine
Tools Ltd. (the "JV Ltd.") is owned 48% by Bridgeport Machines. The JV Ltd. was
formed under the Sino-Foreign Joint Venture Enterprise Act of the Peoples
Republic of China ("China"). JV Ltd. manufactures machining centers in China for
sale within China, North Korea, Mongolia and the Commonwealth of Independent
States.
In February 1995, Bridgeport Machines entered into a strategic alliance
agreement with Engineering Geometry Systems (EGS). The agreement provides for
the joint development and marketing of proprietary technology for use in the CAM
(computer-aided manufacturing) market. In addition, the Company purchased 19.5%
of the stock of EGS for $250,000 and agreed to make loans available to EGS of up
to an aggregate amount of $250,000.
In June 1995, the Company established an indirect wholly owned
subsidiary, Bridgeport Machines GmbH, in the Republic of Germany. This
subsidiary acquired certain assets of a German machine tool manufacturer that
was in bankruptcy. The assets acquired consisted of machinery and equipment that
have been used by the Company to establish operations in Germany. In addition,
the subsidiary entered into a lease for manufacturing and office space in
Germany. The Company paid approximately [pound sign]6 million (approximately
$9.6 million) for the assets.
<PAGE>
(B) Financial Information About Industry Segments
The Company participates in the metal cutting machine tool segment of
the machine tool industry.
(C) Narrative Description of Business
Industry Background
There are two principal methods utilized in metalworking: metal cutting
and metal forming. Metal cutting machine tools utilize a process in which a part
or finished product is generated or shaped by either rotating a toothed cutter
or rotating the workpiece. These processes are generally referred to as milling,
drilling, turning and grinding. Metal forming machine tools shape parts from
flat metal sheets through the process of forming, bending and shearing.
Typically, early metal working machines were either manually operated
or specifically engineered for a production application. The advent of numerical
control in 1952 further automated the operation of a machine tool and increased
its efficiency. In 1976, microprocessors were integrated with numerical controls
resulting in CNC machine tool systems which allowed personnel on the shop floor
to program and perform sophisticated metal working tasks without central office
support. These systems permitted economical and automated manufacturing of
different parts in short production runs.
According to the American Machinist 1995 World Machine Tool Survey,
approximately 70% of all machine tools are made for metal cutting applications.
The milling machine is one of the most commonly used metal cutting machine
tools. Milling is a machining process whereby a surface is shaped with a
rotating toothed cutter. Grinding is a machining process whereby a surface is
shaped with a rotating abrasive wheel or tool and is similar to milling in terms
of shapes that can be generated from the machines. Grinding often follows
milling, drilling and turning of a part to produce desired surface finish. Parts
are also generated directly on grinding machines. Lathing is a machining process
whereby a surface is shaped with a tool applied to a rotating part and is
similar to milling.
CNC controlled milling machines, which were introduced in the 1970's,
precisely shape parts by instructing the machine to move a cutting tool across
and/or through the part according to a program for the specific part. Some CNC
milling machines, referred to as machining centers, are equipped with automatic
tool changers which allow several different drills, taps or mills to be used in
a programmed sequence on the same part, without having to remove the part from
the machine.
The overall market for machine tools is cyclical, reflecting economic
conditions, production capacity utilization, changes in tax and fiscal policies,
corporate profitability and financial condition as well as the general level of
business confidence.
The Company believes that the metal cutting machine tool industry
consists of two broad markets: (i) large, customized, highly engineered,
automated manufacturing systems used in the manufacture of various capital goods
and consumer durables and (ii) stand-alone, standardized, relatively lower
priced, machine tools used principally by small to medium-sized job shops to
manufacture short-run, machined components. The Company competes primarily in
the latter market.
<PAGE>
Although the Company expects its principal long-term growth to come
from its CNC products, the Company believes that there will continue to exist
demand for manual milling machines. It is generally believed that several
fundamental factors will support long-term demand for CNC machine tools and
particularly for user-friendly products such as those sold by the Company. The
principal factors include the shrinking supply of skilled machinists, the need
for improved productivity and the need for replacement of older machine tools.
Company Strategy
The Company's business objective is to continue to maintain a leading
position in the manufacture and distribution of metal cutting machine tools to
small and medium-sized job shops in the United States and the United Kingdom and
to expand international sales outside of its traditional markets. The Company
intends to continue to capitalize on its brand name recognition and its
reputation for product reliability, quality and functionality, and customer
service. The key elements of the Company's strategy are as follows:
- Continue Product/Service Focus: The focus of the Company's sales
efforts will continue to be on standardized, general purpose machine
tools for the worldwide short-run metal cutting market, emphasizing
product quality, functionality and ease of use, as well as customer
service and after-market support.
- Sell Higher Technology Products to its Existing Customer Base: The
Company is engaged in a "step-up" marketing program designed to sell
CNC machine tools to its large customer base of users of its manual
metal cutting machines. Through its machining center product lines, the
Company expects to expand beyond the tool room market to the factory
floor market. With the machining center, the Company has greater access
to the production shops of manufacturers to which the Company can
market its entire product line.
- Expand International Markets: The Company plans to expand its marketing
efforts in China, Indonesia, Singapore, Thailand, Malaysia and other
Pacific Rim countries principally through manufacturing joint ventures,
licensing or other similar arrangements with local companies.
- Maintain Competitiveness and Manufacturing Flexibility: The Company has
positioned itself to be competitive on a global basis through product
innovation and cost-effective manufacturing. The presence of facilities
in the United States, the United Kingdom and Germany allows for
manufacturing and sourcing flexibility.
Among other things, competition, economic conditions and market
conditions play an important role in the Company's ability to achieve its
objectives and there is no assurance the Company can successfully implement its
strategy in the future.
<PAGE>
Products
The following table sets forth the percentage of net sales by product
estimated by the Company for the periods indicated:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended
March 29, 1997 March 30, 1996 April 1, 1995
-------------- -------------- -------------
<S> <C> <C> <C>
Machining Centers 48.4% 43.2% 28.8%
CNC Milling Machines 15.0 17.2 19.8
Manual Milling Machines 10.4 13.1 19.3
Lathes 10.6 10.6 11.8
Surface Grinders 4.6 3.7 4.5
Software 1.0 1.4 1.3
After Market Sales & Support 10.0 10.8 14.5
----- ----- -----
Total 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
Machining Centers
The Company currently offers six models of vertical "bed-type"
machining centers, one bridge type frame model machining center and two models
of horizontal machining centers. The horizontal machining centers are built by
the Company through licensing arrangements with a Japanese machine tool
manufacturer. See "Business--Patents, Licenses and Trademarks." These products
are designed to provide CNC controlled precision machining with a variety of
cutting tools.
Each of the machining center products consists of four basic
subsystems: a CNC control system, a multiple axis electromechanical system for
moving and positioning the workpiece and rotating the cutting tool, a single
axis electromechanical system for automatic tool changing and a heavy metal
frame fully enclosed with appropriate sheetmetal safety guarding. The Company's
machining centers are standardized products which the Company believes are
competitive in their respective product classes, incorporating controls and
certain other components that represent "state-of-the-art" technology.
<PAGE>
CNC Milling Machines
The Company's CNC milling machines line consists of three basic
products: "EZ-TRAK," "DX-Control" and "Interact." The EZ-TRAK product line is
composed of two basic models. This machine uses a "teach" method to do
repetitive functions or can be programmed to do such functions.
The DX-Control line consists of two basic CNC milling machines
manufactured in the United States and fitted with the Company's proprietary CNC
control system. The control features the Company's proprietary machine
controller card. Its open architecture allows the control to be easily upgraded.
The DX-Control has networking capability and allows quick programming of
complicated parts either at the machine on the shop floor or off the machine on
a remote computer. The Company believes that its DX-Control, which is used in
the EZ-TRAK and DX-Control product lines, represents "state-of-the-art"
technology for PC-based controls in the metal cutting machine tool industry.
The Interact product line is composed of three basic models which
incorporate a CNC control system produced by a third party. The Interact series
is equipped with "state-of-the-art" interactive programming capabilities with
plain language data entry and visual display of program sequence. Because data
entry and display are simplified, the Interact is shop-floor programmable and is
particularly attractive to first-time CNC users or smaller tool rooms without
separate programming facilities. The Interact line is manufactured in the United
Kingdom.
Manual Milling Machines
The Company's manual milling machine has become a standard tool in
small work-shops, vocational schools and tool rooms of large manufacturing
companies. The Company's basic manual milling machine, commonly referred to as
the "Bridgeport," is offered with various options. The Company has shipped over
330,000 manual milling machines since 1939 to customers in more than 60
countries. The Company believes that its manual milling machines represent
"state-of-the-art" technology in their product class.
Lathes
Since 1982, the Company has imported and distributed lathes
manufactured by Industrias Romi, S.A. ("Romi") of Brazil, one of the largest
machine tool manufacturers in South America. The Company imports standard engine
lathes along with a series of CNC lathes which utilize the Company's PC-based
control. Bridgeport markets the lathes which utilize the Company's control under
the "EZ-PATH" and "Power Path" names. The Company believes the EZ-PATH and Power
Path Romi Bridgeport lathes represent "state-of-the-art" technology in their
product class.
Surface Grinders
The Company's surface grinders are sold under its Harig brand name. The
Harig line is made up of manual grinders, automatic grinders and CNC grinders.
The Harig surface grinder addresses the largest unit volume segment of the
United States market. Recognizing the importance of providing a competitive,
quality product, the Company has focused on increasing the efficiency of its
grinder manufacturing methods and improving the product offering. The Company
believes that its manual grinders and CNC grinders represent "state-of-the-art"
technology in their respective product classes.
<PAGE>
CAM Products
The Company sells its proprietary, computer-aided manufacturing system
called EZ-CAM. This product provides Bridgeport CNC users with a convenient
stand-alone programming tool. The Company's EZ-CAM products may impact favorably
on the demand for the Company's machines by providing end-users with a
compatible, Company supported off-line programming system.
The EZ-CAM products are Company-designed software programs, which are
menu driven and utilize readily available PC hardware. The programs are
compatible with almost every CNC control machine. The Company has also developed
additional software packages for digitizing information and for programming
lathes and coordinate measuring machines. The Company believes that its EZ-CAM
products represent "state-of-the-art" technology in their product class.
In 1995, the Company entered into a strategic alliance agreement with
Engineering Geometry Systems (EGS) for the joint development and marketing of
additional proprietary technology for use in the CAM market. In August 1995, the
Company introduced the EZ-FeatureMill software that is Windows based CAM
software. The EZ-FeatureMill software was developed by EGS in conjunction with
the Company.
Marketing and Sales
The Company markets its products through its direct sales and service
force of approximately 150 employees, which is among the largest in the
industry. The Company's sales organization operates through seven sales and
service centers, four of which are located throughout the continental United
States, two in England and one in Holland. In addition, the Company maintains
other sales offices in the United States. See "Properties."
Complementing its direct sales and service force, the Company sells and
distributes its full range of products through approximately 75 independent
distributors covering approxi-mately 60 countries. The independent distributor
purchases machines, accessories and parts from the Company and maintains an
inventory of products and spare parts. In most cases, the independent
distributor assumes the labor component of the warranty service and the
technical training responsibility for all Company products sold through such
distributor. The Company typically enters into one-year contracts with each of
its independent distributors, pursuant to which such distributors are able to
sell all or a portion of the Company's product line. These contracts generally
permit such distributors to sell products of other companies. In certain cases,
the Company has granted distributors the exclusive right to distribute its
products in particular markets outside of the United States.
The Company offers its domestic customers the ability to purchase its
products through financing arrangements provided by Textron Financial
Corporation ("TFC"), a subsidiary of Textron, and to a lesser extent, by others.
The Company believes that the financing arrangements provided by TFC are
available from others on substantially similar terms.
No customer, including distributors, accounted for more than 10.0% of
net sales during fiscal 1997 and the loss of any one customer would not have a
material adverse effect upon the Company.
<PAGE>
After Market Sales and Support
With the large installed base of the Company's products in customer
locations, the Company has a significant after market replacement parts and
service business. The Company believes that the technical support and repair
service provided to its customers through its direct sales force and distributor
network differentiate the Company's products from those of its competitors.
Because the useful life of metal cutting machine tools can be significantly
affected by factors such as amount and nature of product use and maintenance and
repair practices of a customer, the Company believes its emphasis on technical
support and repair service increases customer satisfaction with its products.
Technical support includes installation, training and applications engineering
as well as programming support. Service support includes repairing machines,
assisting customers in diagnosing parts requirements and/or machine problems,
and shipping replacement parts to customers on a timely basis. The Company
typically ships repair parts within 24 hours of receipt of an order.
The Company's warranty policy covers all manufactured products and
typically provides a warranty on parts and labor of one year after the date of
purchase by the end user of CNC machine tools and a two-year warranty on parts
and one-year warranty on labor for manual milling machines.
In connection with the Company's leveraged buy out transaction in 1986,
Textron assumed certain product liability exposure for products shipped by the
Company prior to the effective date of the closing of such transaction. The
Company currently maintains product liability insurance coverage which it
considers adequate for all of its products.
Product Development
The Company's product development is customer-driven, relying on
surveys, specific customer input and other marketing information. Product
development activities focus on developing improvements on and new applications
for existing machine tool products, introducing new machine tool products and
enhancing its proprietary software systems. The Company believes that its
product development strategy, coupled with its continuous quality improvement
and manufacturing cost reduction programs, will enable the Company to continue
to compete successfully in the global machine tool market.
The Company continues to invest in the development of next generation
CNC controls and related software.
<PAGE>
Manufacturing and Supply
The Company manufactures and assembles its products at its plants in
Bridgeport, Connecticut, Elgin, Illinois, Leicester, England and Kempten,
Germany. Products are manufactured from components purchased from third parties
and from parts manufactured by the Company from various raw materials. Upon
completion of the manufacturing process, products undergo extensive inspection
and testing to insure quality control. Many electrical and mechanical components
are standard items and are readily available from multiple sources. In certain
circumstances, to take advantage of price and quality, the Company may determine
to purchase certain components from a single or limited number of sources. The
Company has not had significant supply interruptions in these components or raw
materials in recent years, and it believes it could develop alternative sources
of supply if supply interruptions were to occur. However, depending upon
conditions in existence at the time such a future interruption were to occur, no
firm assurance can be given that there would be no effect on the Company's
operations. Any significant interruption in the supply of one or more components
or raw materials could have a material adverse effect on revenues and net
income.
Patents, Licenses and Trademarks
The Company owns a number of patents, but does not consider any single
patent to be material to its business. In addition, the Company considers
certain of its products to be proprietary and believes its Bridgeport, Harig,
EZ-CAM and EZ-PATH trademarks have substantial value. The Company typically
requires its employees to execute appropriate non-competition and
confidentiality agreements.
The Company licenses certain technology from unaffiliated third
parties, none of which is material to the Company's operations.
The Company licenses its control technology to an entity which sells
machine retrofit packages to convert manual milling machines to two axis CNC
machines. With a large installed base of manual milling machines, such an
arrangement provides an opportunity for the Company to benefit from the
significant retrofit business. In addition, the Company licenses its DX-Control
technology in Brazil for use in products sold only in Latin America and to the
JV Ltd. for use in products manufactured in China. The Company also licenses
certain rights to manufacture Company designed machines in Brazil, China and
Indonesia.
Seasonality
The Company experiences a seasonal decline in net sales during its
second fiscal quarter, particularly during the July and August summer holiday
period. During such period, the Company's manufacturing facilities typically
close for approximately one to three weeks. The fourth fiscal quarter may also
experience decreases in net sales as a result of weather conditions.
<PAGE>
Backlog
Backlog consists of firm orders received from customers and
distributors. Such orders are subject to cancellation. At March 29, 1997,
backlog was approximately $35.5 million, compared with approximately $83.3
million at March 30, 1996. The Company's backlog balances fluctuate as a result
of many factors including length of time to deliver products, new product
introductions and market conditions. The decline in backlog from March 30, 1996
to March 29, 1997 is due primarily to less favorable market conditions in
Europe. The Company expects to ship substantially all of its current backlog
during fiscal year 1998. However, no firm assurance can be given since many
factors which effect the Company's ability to manufacture its products could
change.
Competition
The metal cutting segment of the machine tool industry is highly
competitive. The Company believes that it competes primarily on the basis of
product quality, reliability, price, features, functionality, availability,
service and support. The Company competes with a number of firms, some of which
are larger and have greater financial resources than the Company.
In the vertical machining center market, the Company competes in the
United States primarily with Fadal Engineering Co., Inc. (a subsidiary of
Giddings and Lewis) and Haas Automatic Inc., who the Company believes have the
leading market shares, and primarily with three companies in the United Kingdom,
where the Company believes it has the largest market share.
In the United States and United Kingdom, the Company competes in the
manual milling machine markets primarily with several Taiwanese manufacturers.
The Company believes it has the leading market share of these products in the
United States and the United Kingdom.
In its other product lines, the Company competes with a number of
firms, some of which are larger and have greater financial resources than the
Company.
Research and Development
The Company's research and development involves creating new products
and modifying existing products to meet market demands and exploring
alternatives to reduce the cost of manufacturing.
Research and development costs are expensed as incurred. Research and
development expense was $5,091,000, $4,634,000 and $3,268,000 for the years
ended March 29, 1997, March 30, 1996 and April 1, 1995, respectively.
<PAGE>
Environmental Matters
The Company's owned and leased facilities are subject to numerous
environmental laws and regulations concerning, among other things, emissions to
the air, discharges to surface and ground water, and the generation, handling,
storage, transportation, treatment and disposal of toxic and hazardous
substances. Under various Federal, state and local environmental laws,
ordinances and regulations, a current or previous owner or operator of real
property may become liable for the costs of removal or remediation of hazardous
or toxic substances on, under or in such property, typically without regard to
fault. In June 1994, the Company and Textron entered into a settlement agreement
whereby Textron agreed to accept sole responsibility to remediate hazardous
substances in certain areas of the Bridgeport facility to the extent required by
law, and the Company and Textron agreed to share equally the costs to remediate
groundwater beneath the property. Based upon the current understanding by the
Company, the Company believes that its share of such costs will not be material.
No firm assurances can be given since conditions, such as environmental laws,
may change and the future outcome may differ.
Except as set forth above, the Company believes that its facilities are
in compliance in all material respects with all applicable United States
Federal, state and local environmental laws, ordinances and regulations, as well
as comparable laws and regulations outside the United States. No assurances can
be given, however, that the current environmental condition of the Company's
owned and leased facilities are not other than as currently understood by the
Company, or will not be adversely affected by the condition of properties in the
vicinity of the Company's owned and leased properties, or by the activities of
third parties unrelated to the Company or by former owners or operators of the
Company's owned or leased facilities, or that future laws, ordinances or
regulations will not impose any material environmental liability on the Company.
Employees
As of March 29, 1997, the Company had 1,252 full-time employees,
consisting of 642 employees based in the United States, 518 employees based in
the United Kingdom, 82 in Germany and 10 employees based in Holland. None of the
United States employees is currently represented by any union. The Company's
United Kingdom employees were covered by annual collective bargaining agreements
which expires on March 28, 1998. The Company's German employees are represented
by a three person workers council in accordance with German law. The Company
believes that its relations with its employees are good.
(D) Financial Information About Foreign and Domestic Operations
and Export Sales
See Note 10 of Notes to Consolidated Financial Statements for
information with respect to the Company's sales, operating income and
identifiable assets by geographic region.
<PAGE>
ITEM 2. PROPERTIES
The following table sets forth certain information, as of March 29,
1997, relating to the Company's principal facilities:
<TABLE>
<CAPTION>
Approximate
Location Principal Activities Square Feet Owned/Leased
-------- -------------------- ----------- ------------
<S> <C> <C>
Bridgeport, Connecticut Corporate Headquarters; 247,000 Owned
Manufacture of Milling
Machines, CNC Mills and
Machining Centers
Bridgeport, Connecticut Assembly and distribution 26,000 Leased
(expires 12/97 with
Company options to
renew to 12/02)
Leicester, England Manufacture of Machining 113,000 Owned
Centers and CNC Mills
Leicester, England Warehouse and assembly 50,000 Leased
(expires 9/98)
Kempten, Germany Manufacture of Machining 107,000 Leased
Center Parts and Assembly (expires 6/02 with
Company options
to renew to 6/15)
Elgin, Illinois Manufacture of Grinding 50,000 Owned
Machines
Bristol, Pennsylvania Software and Control 16,000 Leased
Development (expires 5/99)
</TABLE>
The Company also leases four sales and service centers and two sales
offices in the United States with an aggregate floor space of approximately
46,000 square feet. The Company also maintains two sales and service centers in
the United Kingdom, with an aggregate floor space of approximately 11,000 square
feet and leases one sales and service center in Holland with floor space of
approximately 14,000 square feet.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Other than the following, the Company is not engaged in any legal
proceedings other than ordinary routine litigation incidental to its business.
On January 11, 1996, the Company was named as a defendant in an action
filed by IMS Technology, Inc. (the "Plaintiff") in the United States District
Court for the Eastern District of Virginia. The Plaintiff alleges that the
Company has infringed a patent related to computer numeric controls held by the
Plaintiff. The Plaintiff seeks among other things an award of damages adequate
to compensate the Plaintiff for the alleged infringement and an injunction
against further alleged infringement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(A) Market Information
The Common Stock of the Company is traded on the NASDAQ National Market
under the trading symbol "BPTM." The range of high and low reported bid prices
for the Common Stock during fiscal 1996 and 1997 were as follows:
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Fiscal 1996
First Quarter Ended July 1, 1995 $17 $14
Second Quarter Ended September 30, 1995 $19 $14
Third Quarter Ended December 30, 1995 $21 $15-1/2
Fourth Quarter Ended March 28, 1996 $21 $14-3/4
Fiscal 1997
First Quarter Ended June 29, 1996 $19 $12-1/4
Second Quarter Ended September 28, 1996 $16-1/2 $11
Third Quarter Ended December 28, 1996 $14-3/4 $9-3/4
Fourth Quarter Ended March 29, 1997 $12-3/4 $10
</TABLE>
(B) Holders
As of June 18, 1997, as reported by the Company's transfer agent,
shares of Common Stock were held by 104 holders, based upon the number of record
holders, including several holders who are nominees for an undertermined number
of beneficial owners.
(C) Dividends
The Company has not declared or paid a cash dividend during the two
fiscal years ended March 29, 1997, and its present policy is to retain any
earnings for use in its business.
Payment of dividends is dependent upon the earnings and financial
condition of the Company and other factors which its Board of Directors may deem
appropriate. The Company expects to use any future earnings in its operations
and consequently does not intend to pay out cash dividends on its Common Stock
in the foreseeable future. In addition, the Company is currently prohibited from
declaring or paying any cash dividends on its Common Stock by the terms of its
revolving credit facility.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA (In thousands, except per share data)
<TABLE>
<CAPTION>
Pre-Quasi
---------------Post-Quasi-Reorganization(1)------------- Reorganization(1)
---------------------------- -----------------
Three Combined Nine
Year Year Year Year Months 12 Months Months
Ended Ended Ended Ended Ended Ended Ended
March 29, March 30, April 1, April 2, April 3, April 3, January 2,
1997 1996 1995 1994 1993 1993(2) 1993
-------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales $227,549 $209,214 $148,783 $107,047 $26,747 $98,539 $71,792
Net income (loss) 8,001 8,424 6,921 2,634(3) 1,096 (2,142) (3,238)
Net income (loss) per share $ 1.40 $ 1.47 $ 1.48 $ 0.63(3) $ 0.26 $ (1.32) $ (4.16)
Weighted average shares
outstanding 5,721 5,747 4,680 4,161 4,159 1,624 779
<CAPTION>
March 29, March 30, April 1, April 2, April 3, January 2,
1997 1996 1995 1994 1993 1993
--------- --------- -------- -------- -------- ----------
Balance Sheet Data:
<S> <C> <C> <C> <C> <C> <C>
Working Capital $ 49,696 $ 39,148 $ 42,810 $ 22,076 $22,567 $20,234
Total assets 131,711 129,156 88,394 67,254 61,237 61,821
Long-term debt obligations 5,862 4,475 3,101 3,834 10,781 11,223
Stockholders' equity 65,586 57,109 50,209 25,373 19,798 17,884
</TABLE>
- - ------------------
(1) In December 1992, the Company completed various phases of a restructuring
of its operations, including plant closings, consolidating various
operations, shifting production to other facilities and personnel
reductions and completed the 1992 Recapitalization. The Company accounted
for the various restructurings of its operations and the 1992
Recapitalization as a quasi-reorganization. As part of the 1992
Recapitalization, all outstanding preferred stock was converted to Common
Stock, the terms of its subordinated debt were restructured and a new
revolving credit facility was obtained.
Pursuant to accounting for the quasi-reorganization, the Company adjusted
its January 3, 1993 balance sheet to fair value and transferred the
accumulated deficit and cumulative translation adjustment account balance
to capital in excess of par value. The balance sheet adjustments consisted
of netting accumulated depreciation and amortization against the related
fixed assets and intangible assets. Inventory was valued at the net book
value as of the date of the quasi-reorganization. There was no write-up or
write-down of net assets because the fair value of the assets exceeded the
book value as of January 3, 1993.
<PAGE>
(2) Combined 12 months ended April 3, 1993 represents the summation of the
statement of operations data for the nine months ended January 2, 1993 and
three months ended April 3, 1993.
(3) Includes an after-tax charge of $1.5 million for compensation expense
related to a special management stock award. Also includes an after-tax
gain of $0.6 million realized upon the sale of buildings. Assuming these
two items did not occur, net income and net income per share would have
been $3.5 million and $0.85, respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The following table sets forth, for the periods indicated, the
percentage of net sales represented by certain items reflected in the Company's
Consolidated Financial Statements:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
March 29, 1997 March 30, 1996 April 1, 1995
-------------- -------------- -------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Gross profit 22.4 23.4 26.2
Selling, general & administrative
expenses 15.7 15.5 17.7
Operating income 6.7 7.9 8.5
Interest expense (1.2) (1.2) (1.1)
Other income (expense), net - - 0.2
Income before income taxes 5.5 6.7 7.6
Income taxes 2.0 2.7 2.9
Net income 3.5% 4.0% 4.7%
</TABLE>
Year Ended March 29, 1997 ("fiscal 1997") Compared to Year Ended March 30, 1996
("fiscal 1996")
Net sales were $227.5 million in fiscal 1997, an increase of $18.3
million, or 8.8%, as compared to fiscal 1996. The increase in sales was
primarily a result of increased sales of machining center products of $20
million and sales of a new lathe product introduced during the year of $5
million offset somewhat by a decrease in sales of primarily milling machines.
Backlog at March 29, 1997 was approximately $35.5 million, compared with
approximately $83.3 million at March 30, 1996. As a result of the decline in
backlog, future sales are more dependent on incoming orders than they have been
in the recent past.
<PAGE>
Gross profit was $51.1 million in fiscal 1997, an increase of $2.1
million, or 4.4% as compared to fiscal 1996. As a percentage of net sales, gross
profit in fiscal 1997 was 22.4% as compared to 23.4% in fiscal 1996. The decline
in gross profit as a percentage of net sales resulted primarily from increased
sales of machining centers and CNC lathes, both of which have lower gross
margins than many of the Company's other products. In addition, less favorable
market conditions in continental Europe resulted in price discounts which
contributed to the decline in gross profit.
Selling, general and administrative expenses in fiscal 1997 were $35.7
million, an increase of $3.1, or 9.7%, as compared to fiscal 1996. The increase
in dollar amount consisted primarily of increases in compensation expenses of
$1.7 million and advertising and trade show expenses of $0.9 million. As a
percentage of net sales, selling, general and administrative expenses were 15.7%
in fiscal 1997 as compared to 15.5% in fiscal 1996.
Operating income in fiscal 1997 was $15.4 million, a decrease of $1.0
million, or 6.1%, as compared to fiscal 1996. The decrease in operating income
was a result of lower gross profit margin as a percent of sales and higher
selling, general and administrative expenses.
Interest expense was $2.9 million in fiscal 1997, as compared to $2.5
million in fiscal 1996. The increase in interest expense was a result of
increased average debt borrowings throughout the year.
Provision for income taxes was $4.6 million in fiscal 1997, a decrease
of $1.0 million, as compared to fiscal 1996. The effective tax rate was 36.7% in
fiscal 1997 as compared to 40.1% in fiscal 1996. The decline in the effective
tax rate was primarily the result of the utilization of a net operating loss
carryforward in the Company's German operations.
Year Ended March 30, 1996 ("fiscal 1996") Compared to Year Ended April 1, 1995
("fiscal 1995")
Net sales were $209.2 million in fiscal 1996, an increase of $60.4
million, or 40.6%, as compared to fiscal 1995. Increased production capacity,
along with strong demand for the Company's products, introductions of new
products and a change in sales mix towards higher priced products contributed to
increased net sales. Sales of machining centers, which represent the Company's
highest per unit price products, increased approximately $47.5 million in fiscal
1996 as compared to fiscal 1995. This amount includes approximately $10.3
million of sales of a new machining center product introduced in fiscal 1996.
Lathe sales increased approximately $4.6 million in fiscal 1996 as compared to
fiscal 1995. Of this increase, approximately $3.8 million was sales of a new
lathe introduced in fiscal 1996.
Gross profit in fiscal 1996 was $48.9 million, an increase of $10.0
million, or 25.6% as compared to fiscal 1995. As a percentage of net sales,
gross profit in fiscal 1996 was 23.4% as compared to 26.2% in fiscal 1995. The
decline in gross profit as a percentage of net sales resulted from increased
sales of machining centers and CNC lathes, both of which have lower gross
margins than many of the Company's other products. In addition, start-up losses
and costs incurred in increasing the Company's capacity to produce machining
centers along with fourth quarter production problems encountered in the U.S.
operations of machining centers reduced gross margins on a year-to-year
comparison. The Company estimates that expansion activities and fourth quarter
production problems resulted in a 0.6 percentage point decline in gross profit
margin and that the remaining decline in the gross profit margin was primarily
due to changes in product and distribution mix.
<PAGE>
Selling, general and administrative expenses in fiscal 1996 were $32.5
million, an increase of $6.2 million, or 23.4%, as compared to fiscal 1995. The
increase in dollar amount consisted primarily of increases in compensation
expenses of $3.7 million, sales commissions of $0.3 million, travel expenses of
$0.4 million, depreciation of $0.4 million and general and administrative costs
for the German operations of $0.4 million. As a percentage of net sales,
selling, general and administrative expenses were 15.5% in fiscal 1996 as
compared to 17.7% in fiscal 1995. The decrease is due to higher net sales in
fiscal 1996.
Operating income in fiscal 1996 was $16.4 million, an increase of $3.8
million, or 30.3%, as compared to fiscal 1995. The increased operating income
was a result of increased gross profit and lower selling, general and
administrative expenses as a percentage of net sales. As a percentage of net
sales, operating income was 7.9% in fiscal 1996 as compared to 8.5% in fiscal
1995.
Interest expense was $2.5 million in fiscal 1996, as compared to $1.6
million in fiscal 1995. The increase in interest expense was a result of
increased debt borrowings to support the Company's expansion activities and
increased sales.
Other income, net in fiscal 1996 was $0.2 million, as compared to $0.3
million in fiscal 1995.
Provision for income taxes was $5.6 million in fiscal 1996, an increase
of $1.2 million, as compared to fiscal 1995. The effective tax rate was 40.1% in
fiscal 1996 as compared to 38.8% in fiscal 1995. The increase in the effective
tax rate is primarily a result of a net loss incurred at the Company's newly
established Kempten, Germany facility. These losses are not currently tax
deductible.
Foreign Operations
During fiscal 1997, net sales outside North America represented
approximately 46.5% of total net sales, as compared to 42% for fiscal 1996. A
substantial portion of these net sales were made by the Company's European
operations. The Company's European operations were expanded during fiscal 1996
through the establishment of a manufacturing facility in Kempten, Germany in
June 1995. In addition, in fiscal 1996 approximately 50,000 square feet of
leased assembly and warehouse space was added to the Company's existing
Leicester, England facility.
The Kempten, Germany operations were established in fiscal 1996 through
the acquisition of machinery and equipment by the Company's newly formed
indirectly wholly owned subsidiary, Bridgeport Machines GmbH. In addition, in
June 1995 Bridgeport Machines GmbH entered into a lease for 107,000 square feet
of manufacturing and office space. The Kempten, Germany operations are being
used to machine parts and produce sub-assemblies which are used by the Leicester
facility to assemble and manufacture the Company's machine tool products. In
June 1995, the Company paid approximately $9.6 million to acquire the machinery
and equipment in Kempten, Germany. This payment was financed through borrowings
under the Company's revolving credit facility.
Generally, from time to time, the Company enters into forward exchange
contracts to provide economic hedges against foreign currency fluctuations on
its intercompany sales transactions between its U.S. and U.K. operations and for
payments for certain inventory purchases. At March 29, 1997, the Company had no
commitments under any forward purchase contracts.
<PAGE>
Liquidity and Capital Resources
As of March 29, 1997, the Company had working capital of $49.7 million
compared with $39.1 million at March 30, 1996. The Company meets its short-term
financing needs through cash from operations and its revolving credit facility.
The revolving credit facility provides for maximum borrowings of up to $24.5
million in the United States and $19.5 million in the United Kingdom. The
borrowing availability is limited to the sum of (a) 80% of eligible accounts
receivable plus (b) 40% of eligible inventory (limited to $13.5 million for
domestic inventory and $10.0 million for foreign inventory) minus (x) the
aggregate amount of outstanding letters of credit and (y) any reserves deemed
reasonable by the lenders. The revolving credit facility is available through
December 1999. The Company has term loans which aggregate approximately $8.4
million as of March 29, 1997. These loans are repayable monthly with total
payments of approximately $213,000 per month in the aggregate.
The table below presents the summary of cash flow for the periods
indicated:
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996
----------- -----------
<S> <C> <C>
Net cash provided by (used in)
operating activities $ 5,303,000 $ (8,454,000)
Net cash (used in)
investing activities (3,287,000) (15,536,000)
Net cash provided by (used in)
financing activities (3,848,000) 25,668,000
</TABLE>
Net cash provided by (used in) operating activities fluctuates between
periods primarily as a result of differences in net income, the level of sales
activity and the timing of the collection of accounts receivable, purchase of
inventory and payment of accounts payable. During fiscal 1997, a decrease in the
Company's trade accounts receivable provided $3.8 million in cash from
operations and an increase in inventory accounted for $5.5 million of cash used
in operations. During fiscal 1996, increases in the Company's trade accounts
receivable and inventories accounted for uses of cash in operations of $14.4
million and $14.1 million, respectively.
During periods when the Company's sales are increasing significantly,
net cash used in operating activities generally increases in order to support
higher trade accounts receivable and inventory levels. During 1996, net sales
increased 40.6% as compared with fiscal 1995 while during fiscal 1997, net sales
increased 8.8% as compared with fiscal 1996.
The net cash used in investing activities in fiscal 1996 includes the
acquisition of machinery and equipment in Kempten, Germany for approximately
$9.6 million. The net cash provided by financing activities in fiscal 1996
represents net borrowings under the Company's credit facility. These borrowings
were made to finance the acquisition of the machinery and equipment in Kempten,
Germany, and higher inventory and trade accounts receivable due to the Company's
increased sales level.
<PAGE>
The Company's short-term liquidity is somewhat affected by seasonal
fluctuations in accounts receivable levels. During typical years, the Company's
accounts receivable and inventories decrease during the July and August summer
holiday period. The January through March period may also experience decreases
in receivables as a result of weather conditions.
The Company believes that cash generated from operations and borrowings
available under the revolving credit facility will be sufficient to meet its
working capital and capital expenditure requirements for at least 12 months from
March 29, 1997. Such facility, together with cash from operations, is expected
to be sufficient to enable the Company to meet its working capital and capital
expenditure needs for the longer term. However, there can be no assurance that
liquidity would not be adversely impacted by a decline in general economic
conditions or that future credit facilities will be available.
Changes in Financial Position
At March 29, 1997, trade accounts receivable decreased $2.6 million
(6.4%) and inventories increased $6.7 million (11.9%), respectively, as compared
to March 30, 1996. The decreased trade accounts receivable is a result of timing
of collection of receivables and lower sales in the three months ended March 29,
1997, as compared with sales in the three months ended March 30, 1996. The
increase in inventory is primarily a result of new product introductions.
At March 30, 1996, net property, plant and equipment increased $11.9
million as compared to April 1, 1995. This increase is primarily a result of the
purchase of machinery and equipment for the Company's Kempten, Germany
operations for approximately $9.6 million.
Seasonality
The Company experiences a seasonal decline in net sales during its
second fiscal quarter, particularly during the July and August summer holiday
period. During such period, the Company's manufacturing facilities close for
approximately one to three weeks. The fourth fiscal quarter may also experience
decreases in net sales as a result of weather conditions.
Economic Cycles
The overall market for machine tools is cyclical, reflecting economic
conditions, production capacity utilization, changes in tax and fiscal policies,
corporate profitability and financial condition as well as the general level of
business confidence.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Consolidated Financial Statements beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference from the Company's definitive proxy
statement to be filed with the Securities and Exchange Commission (the
"Commission") within 120 days after the fiscal year covered by this Form 10-K
with respect to its Annual Meeting of Stockholders to be held on September 4,
1997.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference from the Company's definitive proxy
statement to be filed with the Commission within 120 days after the fiscal year
covered by this Form 10-K with respect to its Annual Meeting of Stockholders to
be held on September 4, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference from the Company's definitive proxy
statement to be filed with the Commission within 120 days after the fiscal year
covered by this Form 10-K with respect to its Annual Meeting of Stockholders to
be held on September 4, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference from the Company's definitive proxy
statement to be filed with the Commission within 120 days after the fiscal year
covered by this Form 10-K with respect to its Annual Meeting of Stockholders to
be held on September 4, 1997.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(A) Financial Statements and Schedules
The Consolidated Financial Statements and Schedules listed in the
accompanying Index to Consolidated Financial Statements (at page F-1)
are filed as part of this Annual Report on Form 10-K, and are included
in Item 8 hereof. Financial Statement Schedules not listed therein are
either not required or the information required to be included therein
is reflected in the Consolidated Financial Statements.
(B) Reports on Form 8-K
The Company did not file a Current Report on Form 8-K during the last
quarter of the period covered by this Annual Report on Form 10-K.
<PAGE>
(C) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number
- - -------
<S> <C>
Asset Purchase Agreement, dated June 2, 1995, between Schultz & Braun
GmbH, W. P. Werner Schneider and Bridgeport Machines GmbH
2.1.1 a) German version (binding agreement) (d)
2.1.2 b) English translation (d)
3.1 Amended and Restated Certificate of Incorporation (a)
3.2 Amended and Restated Bylaws (a)
4. See Amended and Restated Certificate of Incorporation,
filed as Exhibit 3.1 (a)
10.1.1 Plan and Agreement of Recapitalization for the Company dated as of
December 15, 1992 (with certain exhibits) (a)
10.1.2 Termination Agreement and Waiver of Nominee Rights, effective
March 8, 1995, among the Company and certain stockholders (e)
10.1.3 Termination and Registration Rights Agreement between the Company and
Textron Inc. (b)
10.1.4 Notice and Waiver of Textron Inc. (b)
10.1.5 Notice and Waiver of Kansas Debt Fund, as nominee for Kansas Public
Employees Retirement System (b)
10.1.6 Notice and Waiver of State of Delaware Employees Retirement Fund (b)
10.2.1 Revolving Credit and Security Agreement dated as of December 18, 1992,
as amended (a)
10.2.2 Amendment No. 4 to Revolving Credit and Security Agreement dated
as of December 18, 1992 (a)
10.2.3 Amended and Restated Revolving Credit, Term Loan and Security
Agreement dated as of December 23, 1994 (c)
10.2.4 Consent and Amendment No. 2 to Amended and Restated Revolving
Credit, Term Loan and Security Agreement (d)
10.2.5 Amendment No. 3 to Amended and Restated Revolving
Credit, Term Loan and Security Agreement (g)
10.2.6 Amendment No. 4 to Amended and Restated Revolving Credit, Term
Loan and Security Agreement (i)
10.2.7 Amendment No. 5 to Amended and Restated Revolving Credit, Term
Loan and Security Agreement
10.3.1 Company's 1994 Stock Incentive Plan (a)T
10.3.2 Form of Stock Option Grant under Company's 1994 Stock Incentive Plan (e) T
10.4.1 Company's 1994 Non-Employee Director Stock Option Plan (a)T
10.4.2 Form of Stock Option Grant under Company's 1994 Non-Employee
Director Stock Option Plan (e) T
10.5 Employment Agreement between the Company and Joseph E. Clancy (f)T
10.6 Employment Agreement between the Company and Dan L. Griffith (f)T
10.7 Employment Agreement between Bridgeport Machines Limited and
Malcolm Taylor (h)T
10.8 Purchase and Sale Agreement dated as of May 7, 1986 between the
Company and Textron Inc. (a)
10.9 Settlement Agreement dated June 22, 1994 between the Company and
Textron Inc. (a)
<PAGE>
<CAPTION>
Exhibit
Number
- - -------
<S> <C>
10.10.1 Management Subscription Agreements dated June 30, 1986 (a)
10.10.2 Termination Agreement among the Company and Management Purchasers (b)
10.10.3 Notice and Waiver of Lehman Brothers Holdings, Inc. (b)
Lease Agreement, dated June 2, 1995, between Alu-Billets Produktions
GmbH and Bridgeport Machines GmbH
10.11.1 a) German version (binding agreement) (d)
10.11.2 b) English translation (d)
11. Statement of Calculation of Earnings Per Share (j)
21. Subsidiaries of the Registrant
23. Consent of Arthur Andersen LLP
27. Financial Data Schedule
</TABLE>
- - --------------------
(a) Incorporated by reference from the Company's Registration on Form S-1
(Registration No. 33-84820), as filed with the Commission on October 6,
1994.
(b) Incorporated by reference from Amendment No. 1 to the Company's
Registration on Form S-1 (Registration No. 33-84820), as filed with the
Commission on October 26, 1994.
(c) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended December 31, 1994.
(d) Incorporated by reference from the Company's Current Report on Form 8-K
dated as of June 2, 1995.
(e) Incorporated by reference from the Company's Annual Report on Form 10-K
for the year ended April 1, 1995.
(f) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1995.
(g) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended December 30, 1995.
(h) Incorporated by reference from the Company's Annual Report on Form 10-K
for the year ended March 30, 1996.
(i) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 28, 1996.
(j) Not included because computation can be determined from material
contained in the Consolidated Financial Statements included in this
Annual Report on Form 10-K.
T A management contract or compensatory plan or arrangement required to
be filed pursuant to Item 14(c) of this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BRIDGEPORT MACHINES, INC.
(Registrant)
By: /s/ Walter C. Lazarcheck
------------------------
Walter C. Lazarcheck
Vice President & Chief
Financial Officer
Date: June 18, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and as the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Joseph E. Clancy Chairman of the Board June 18, 1997
- - --------------------
Joseph E. Clancy
/s/ Dan L. Griffith President, Chief Executive Officer June 18, 1997
- - ------------------- and Director
Dan L. Griffith (Principal Executive Officer)
/s/ Walter C. Lazarcheck Vice President & Chief Financial Officer June 18, 1997
- - ------------------------ (Principal Financial and Accounting Officer)
Walter C. Lazarcheck
/s/ Robert J. Cresci Director June 18, 1997
- - --------------------
Robert J. Cresci
/s/ Eliot M. Fried Director June 18, 1997
- - ------------------
Eliot M. Fried
/s/Bhikhaji M. Maneckji Director June 18, 1997
- - -----------------------
Bhikhaji M. Maneckji
/s/ Brian Murphy Director June 18, 1997
- - ----------------
Brian Murphy
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Pages
-----
<S> <C>
Bridgeport Machines, Inc. and Subsidiaries
Report of Independent Public Accountants F-2
Consolidated Balance Sheets as of March 29, 1997 and
March 30, 1996 F-3 to F-4
Consolidated Statements of Operations for the three years
ended March 29, 1997 F-5
Consolidated Statements of Stockholders' Equity for the
three years ended March 29, 1997 F-6
Consolidated Statements of Cash Flows for the three years ended
March 29, 1997 F-7 to F-8
Notes to Consolidated Financial Statements F-9 to F-23
Schedules to Financial Statements are not required N/A
</TABLE>
F - 1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Bridgeport Machines, Inc.:
We have audited the accompanying consolidated balance sheets of Bridgeport
Machines, Inc. (a Delaware corporation) and subsidiaries as of March 29, 1997
and March 30, 1996 and the related consolidated statements of operations,
stockholders' equity and cash flows for the three years ended March 29, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Bridgeport Machines,
Inc. and subsidiaries as of March 29, 1997 and March 30, 1996 and the results of
their operations and their cash flows for the three years ended March 29, 1997
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Stamford, Connecticut
May 9, 1997
F - 2
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 29, 1997 AND MARCH 30, 1996
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash ............................................. $ 2,992,000 $ 4,960,000
Trade accounts receivable, less allowance
of $1,440,000 in 1997 and $1,182,000
in 1996 ........................................ 38,691,000 41,321,000
Inventories ...................................... 63,068,000 56,364,000
Deferred income taxes ............................ 3,144,000 2,680,000
Prepaid expenses and other current assets ........ 1,944,000 1,275,000
------------- -------------
Total current assets ..................... 109,839,000 106,600,000
------------- -------------
PROPERTY, PLANT AND EQUIPMENT:
Land ............................................. 345,000 334,000
Buildings, improvements and leasehold improvements 3,908,000 3,284,000
Machinery and equipment .......................... 19,164,000 18,087,000
Furniture and fixtures ........................... 4,732,000 4,174,000
------------- -------------
28,149,000 25,879,000
Less: Accumulated depreciation ......... (7,848,000) (4,903,000)
------------- -------------
Property, plant and equipment, net ............... 20,301,000 20,976,000
------------- -------------
INVESTMENTS IN AND ADVANCES TO AFFILIATES .......... 1,008,000 1,088,000
OTHER ASSETS, net of accumulated amortization
of $1,485,000 in 1997 and $1,353,000 in 1996 ..... 563,000 492,000
------------- -------------
Total assets ............................ $ 131,711,000 $ 129,156,000
============= =============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
F - 3
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 29, 1997 AND MARCH 30, 1996
(Continued)
1997 1996
------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Bank overdrafts .................................. $ 2,254,000 $ 1,974,000
Working capital revolver ......................... 21,910,000 27,917,000
Accounts payable ................................. 16,568,000 20,707,000
Accrued expenses ................................. 13,055,000 11,618,000
Income taxes payable ............................. 3,794,000 3,548,000
Current portion of long-term debt obligations .... 2,562,000 1,688,000
------------- -------------
Total current liabilities ................ 60,143,000 67,452,000
LONG-TERM DEBT OBLIGATIONS ......................... 5,862,000 4,475,000
OTHER LONG-TERM LIABILITIES ........................ 120,000 120,000
------------- -------------
Total liabilities ........................ 66,125,000 72,047,000
------------- -------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 2,000,000 shares
authorized, no shares issued ................... -- --
Common stock, $.01 par value, 13,000,000 shares
authorized, 5,679,361 shares issued and
outstanding at March 29, 1997 and 5,676,697
shares issued and outstanding at March 30, 1996 57,000 57,000
Capital in excess of par value ................... 38,285,000 38,259,000
Retained earnings - subsequent to reclass-
ification of $6,750,000 deficit as part of the
quasi-reorganization as of January 3, 1993 ..... 27,076,000 19,075,000
Cumulative translation adjustment ................ 168,000 (282,000)
------------- -------------
Total stockholders' equity ............... 65,586,000 57,109,000
------------- -------------
Total liabilities & stockholders' equity . $ 131,711,000 $ 129,156,000
============= =============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
F - 4
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE YEARS ENDED MARCH 29, 1997
Year Ended Year Ended Year Ended
March 29, 1997 March 30, 1996 April 1,1995
-------------- -------------- -------------
<S> <C> <C> <C>
Net sales .................................................. $ 227,549,000 $ 209,214,000 $ 148,783,000
Cost of sales .............................................. 176,484,000 160,282,000 109,823,000
------------- ------------- -------------
Gross profit ..................................... 51,065,000 48,932,000 38,960,000
Selling, general and administrative expenses ............... 35,661,000 32,519,000 26,360,000
------------- ------------- -------------
Operating income ................................. 15,404,000 16,413,000 12,600,000
Interest expense ........................................... (2,858,000) (2,546,000) (1,622,000)
Other income (expenses), net ............................... 90,000 192,000 340,000
------------- ------------- -------------
Income before provision for
income taxes ................................... 12,636,000 14,059,000 11,318,000
Provision for income taxes ................................. 4,635,000 5,635,000 4,397,000
------------- ------------- -------------
Net income ....................................... $ 8,001,000 $ 8,424,000 $ 6,921,000
============= ============= =============
Primary earnings per share ................................. $ 1.40 $ 1.47 $ 1.48
============= ============= =============
Weighted average number of shares
outstanding .............................................. 5,721,000 5,747,000 4,680,043
============= ============= =============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
F - 5
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED MARCH 29, 1997
Capital Cumulative Total
Common Stock in Excess Retained Translation Stockholders'
Shares Par Value of Par Value Earnings Adjustment Equity
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, April 2, 1994 ............ 3,948,914 $ 39,000 $ 22,251,000 $ 3,730,000 $ (647,000) $ 25,373,000
Translation adjustment for the year
ended April 1, 1995 ............... -- -- -- -- 2,042,000 2,042,000
Net income for the year ended
April 1, 1995 ..................... -- -- -- 6,921,000 -- 6,921,000
Provision in lieu of income taxes . -- -- 1,129,000 -- -- 1,129,000
Issuance of shares awarded to
management in fiscal 1994 ......... 210,469 3,000 1,849,000 -- -- 1,852,000
Sale of common stock, net of
expenses of $2,108,000 ............ 1,500,000 15,000 12,877,000 -- -- 12,892,000
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, April 1, 1995 ............ 5,659,383 57,000 38,106,000 10,651,000 1,395,000 50,209,000
------------ ------------ ------------ ------------ ------------ ------------
Translation adjustment for the year
ended March 30, 1996 .............. -- -- -- -- (1,677,000) (1,677,000)
Net income for the year ended
March 30, 1996 .................... -- -- -- 8,424,000 -- 8,424,000
Provision in lieu of income taxes . -- -- 4,000 -- -- 4,000
Issuance of stock for exercises of
stock options ..................... 17,314 -- 149,000 -- -- 149,000
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, March 30, 1996 ........... 5,676,697 57,000 38,259,000 19,075,000 (282,000) 57,109,000
------------ ------------ ------------ ------------ ------------ ------------
Translation adjustment for the year
ended March 29, 1997 .............. -- -- -- -- 450,000 450,000
Net income for the year ended
March 29, 1997 .................... -- -- -- 8,001,000 -- 8,001,000
Issuance of stock for exercises of
stock options ..................... 2,664 -- 26,000 -- -- 26,000
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, March 29, 1997 ........... 5,679,361 $ 57,000 $ 38,285,000 $ 27,076,000 $ 168,000 $ 65,586,000
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
F - 6
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED MARCH 29, 1997
Year Ended Year Ended Year Ended
March 29, 1997 March 30, 1996 April 1, 1995
-------------- -------------- -------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net Income ........................................................ $ 8,001,000 $ 8,424,000 $ 6,921,000
------------ ------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation .................................................. 3,166,000 3,100,000 1,292,000
Amortization .................................................. 128,000 260,000 387,000
Provision in lieu of income taxes ............................. -- 4,000 1,129,000
(Increase) decrease in deferred income taxes .................. (464,000) (1,126,000) 429,000
Net gain on sale of property, plant and equipment ............. (48,000) (52,000) (63,000)
Changes in operating assets and liabilities:
Decrease (increase) in net trade accounts receivable........... 3,827,000 (14,356,000) (6,951,000)
Decrease (increase) in inventories ............................ (5,543,000) (14,102,000) (9,738,000)
Decrease (increase) in prepaid expenses and other
current assets ............................................. (633,000) (131,000) 734,000
Decrease (increase) in other assets ........................... 80,000 (494,000) (940,000)
Increase (decrease) in bank overdrafts ........................ 279,000 505,000 450,000
Increase (decrease) in accounts payable and
accrued expenses ........................................... (3,490,000) 9,514,000 6,691,000
Increase (decrease) in other long-term liabilities............. -- -- (150,000)
------------ ------------ ------------
Total adjustments ......................................... (2,698,000) (16,878,000) (6,730,000)
------------ ------------ ------------
Cash flows provided by (used in) operating activities ..... 5,303,000 (8,454,000) 191,000
------------ ------------ ------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Capital expenditures .............................................. (3,433,000) (15,666,000) (3,691,000)
Proceeds from sale of property, plant and equipment ............... 146,000 130,000 150,000
------------ ------------ ------------
Cash flows provided by (used in)
investing activities .................................... (3,287,000) (15,536,000) (3,541,000)
------------ ------------ ------------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
F - 7
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED MARCH 29, 1997
(Continued)
Year Ended Year Ended Year Ended
March 29, 1997 March 30, 1996 April 1, 1995
-------------- -------------- -------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Sale of common stock .............................................. 26,000 149,000 12,892,000
Borrowings under working capital revolver ......................... 11,402,000 30,111,000 7,444,000
Repayments under working capital revolver ......................... (17,995,000) (7,203,000) (16,177,000)
Borrowing of other debt ........................................... 5,000,000 3,610,000 --
Payments of other debt and capitalized lease
obligations ..................................................... (2,281,000) (999,000) (1,282,000)
------------ ------------ ------------
Cash flows provided by (used in) financing
activities ............................................. (3,848,000) 25,668,000 2,877,000
------------ ------------ ------------
Effect of exchange rate changes on cash ......................... (136,000) (524,000) 222,000
------------ ------------ ------------
Net change in cash ........................................ (1,968,000) 1,154,000 (251,000)
CASH, beginning of period ........................................... 4,960,000 3,806,000 4,057,000
------------ ------------ ------------
CASH, end of period ................................................. $ 2,992,000 $ 4,960,000 $ 3,806,000
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid ..................................................... $ 2,809,000 $ 2,082,000 $ 1,361,000
Income taxes paid, net ............................................ $ 4,960,000 $ 4,265,000 $ 1,528,000
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
F - 8
<PAGE>
BRIDGEPORT MACHINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation:
Bridgeport Machines, Inc. and subsidiaries (the "Company") is a
manufacturer and distributor of metal cutting machine tools and
accessories. The Company manufactures its products in the U.S. and
Europe. Sales are principally in North America and Europe. A
substantial portion of the end users of the Company's products are
small and medium sized independent job shops who produce machined parts
for customers in a wide variety of industries.
In November 1994, the Company's registration statement related to
2,500,000 shares of its common stock was declared effective by the SEC.
Of these shares, 1,500,000 were sold to the public by the Company and
the remaining 1,000,000 shares were sold by existing stockholders. The
net proceeds received by the Company from the sale of its common stock
were approximately $12,900,000.
In December 1992, the Company completed a financial restructuring and
recapitalization. In conjunction with the Company's recapitalization
and restructuring of its operations, the Company implemented a
quasi-reorganization effective January 3, 1993.
(2) Summary of Significant Accounting Policies:
Principles of consolidation-
The consolidated financial statements include all the accounts of
Bridgeport Machines, Inc. and all of its wholly owned subsidiaries.
All significant intercompany accounts and transactions have been
eliminated. Less than 20% owned investments are accounted for on
the cost basis. Investments that the Company owns 20% to 50% of are
accounted for on the equity basis.
Fiscal year-
The Company's fiscal year is the 52- or 53-week period ending the
Saturday nearest to March 31. Fiscal 1997, 1996 and 1995 ended on
March 29, March 30 and April 1, respectively.
Use of estimates-
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates.
F - 9
<PAGE>
Cash-
Cash consists primarily of uncleared cash deposits. These balances
are periodically invested in overnight cash equivalent investment
alternatives.
Accounts receivable-
The Company's trade receivables are primarily due from domestic and
international distributors and manufacturing companies in a wide
variety of industries.
Inventories-
Inventories located in the United States are valued at the lower of
cost under the last-in, first-out (LIFO) method or net realizable
value. All other inventories are valued at the lower of cost under
the first-in, first-out (FIFO) method or net realizable value.
Property, plant and equipment-
Land is stated at cost. As part of the quasi-reorganization
implemented on January 3, 1993, the accumulated depreciation
related to plant and equipment was netted against the related gross
plant and equipment balances as of the date of the
quasi-reorganization. Additions since the quasi-reorganization are
stated at cost. Depreciation and amortization is calculated using
the straight-line method over the estimated useful lives of the
various classes of depreciable assets or, in the case of leasehold
improvements, over the terms of the lease, whichever is shorter.
Estimated useful lives are as follows:
Buildings and improvements 8-32 years
Machinery and equipment 3-12 years
Furniture and fixtures 5-10 years
Other assets-
Other assets include deferred debt issuance costs that are being
amortized over the period of the related debt agreements which are
up to six years.
Translation of foreign currencies-
Adjustments resulting from the translation of financial statements
of the Company's foreign subsidiaries are excluded from the
determination of income and are accumulated in a separate component
of stockholders' equity. Gains or losses on foreign currency
transactions principally relate to the translation of intercompany
receivables and payables and from forward foreign exchange
contracts. These gains and losses are included in income on a
current basis.
F - 10
<PAGE>
Revenue recognition-
Revenue is recognized by the Company when products are shipped.
Research and development costs-
Research and development costs are expensed as incurred. These
costs have been incurred in connection with the design, development
and enhancement of the Company's products and include costs to
develop software. Research and development expense was $5,091,000,
$4,634,000 and $3,268,000 for the years ended March 29, 1997, March
30, 1996 and April 1, 1995, respectively.
Earnings per share-
Primary earnings per share has been computed based on the weighted
average number of common shares and common equivalent shares
outstanding during each period. Common equivalent shares
outstanding include the common equivalent shares calculated for
stock options under the treasury stock method.
Pursuant to Securities and Exchange Commission Staff Accounting
Bulletin No. 55, common stock awarded to employees within one year
of an initial public offering (see Note 14) have been included in
the calculation of earnings per share as if they were outstanding
for all periods presented.
In February 1997, Statement of Financial Accounting Standards No.
128, "Earnings Per Share" ("FAS 128"), was issued. FAS 128
establishes new standards for computing and presenting EPS. The
Company is required to adopt the new standard in the third quarter
of fiscal 1998. As required, the Company currently calculates EPS
in accordance with APB Opinion No. 15. Had the Company calculated
EPS in accordance with FAS 128 for the three fiscal years ended
March 29, 1997, the amounts to be presented under the new standards
would not be materially different than the amounts shown in the
financial statements.
Reclassifications-
Certain reclassifications have been made to prior year balances to
conform to current year presentation.
(3) Inventories:
Inventories, which include material, labor and manufacturing overhead,
are stated at the lower of cost or market (net realizable value). Cost
is determined using the last-in, first-out (LIFO) method for domestic
inventories and the first-in, first-out (FIFO) method for foreign
inventories.
F - 11
<PAGE>
Inventories consisted of the following as of March 29, 1997 and March
30, 1996:
1997 1996
----------- -----------
Raw materials $21,419,000 $18,195,000
Work-in-process 21,412,000 23,293,000
Finished goods 20,237,000 14,876,000
----------- -----------
$63,068,000 $56,364,000
=========== ===========
Had the FIFO method been used for all inventories, inventory would have
been approximately the same value as shown at March 29, 1997 and March
30, 1996. As of the date of the quasi-reorganization, a new LIFO basis
of the inventory was established.
Inventories valued under the LIFO method comprised approximately 54%
and 63% of consolidated inventories before the LIFO adjustment at March
29, 1997 and March 30, 1996, respectively.
(4) Investments in and Advances to Affiliates:
In fiscal 1995, the Company made a $250,000 investment for 19.5% of the
stock of an entity which designs, develops and markets customized
computer aided manufacturing software. In addition, Bridgeport Machines
paid $125,000 for a license to market certain products of this entity
and has agreed to provide loans to this entity of up to $250,000. As of
March 29, 1997, the Company has a loan receivable of $50,000
outstanding.
In fiscal 1995, the Company entered into a joint venture agreement
under which it owns 48% of a company in the Peoples Republic of China.
The purpose of this joint venture is to manufacture machine tools in
China. The Company contribution to the joint venture consisted of
certain technology, equipment and training services. The net book value
of the assets contributed to this joint venture is approximately
$620,000.
In fiscal 1994, the Company entered into a joint venture agreement
under which it owns 25% of a company in Indonesia. The purpose of this
joint venture is to manufacture machine tools for sale in southeast
Asia. As its contribution to the joint venture, the Company is required
to contribute certain technology and cash. The required investment, net
of certain payments required to be made to Bridgeport Machines by the
joint venture, is approximately $525,000. In fiscal 1997, the Company
agreed to increase its ownership of the joint venture company to 40%.
The increased ownership could result in an additional investment of
$900,000 if all authorized capital of the joint venture company is
called.
F - 12
<PAGE>
(5) Accrued Expenses:
Accrued expenses consisted of the following as of March 29, 1997 and
March 30, 1996:
1997 1996
----------- -----------
Payroll and related accruals ........... $ 3,655,000 $ 3,491,000
Accrued insurance ...................... 2,546,000 2,266,000
Warranty reserves ...................... 3,284,000 2,664,000
Other .................................. 3,570,000 3,197,000
----------- -----------
$13,055,000 $11,618,000
=========== ===========
(6) Financial Instruments:
From time to time, the Company enters into forward exchange contracts
to provide economic hedges against foreign currency fluctuations on its
intercompany payables and future inventory purchases. At March 29,
1997, the Company has no commitments under forward purchase contracts.
Gains on foreign currency transactions, which are included in other
expense, net in the consolidated statements of operations, were
$61,000, $40,000 and $229,000 for the years ended March 29, 1997, March
30, 1996 and April 1, 1995, respectively.
(7) Revolver:
In March 1997, the Company amended its existing revolving credit and
term loan facility. The amended facility provides for maximum
borrowings of $24.5 million by the domestic entity of the Company and
$19.5 million by the U.K. subsidiary of the Company. Loan availability
under the facility is limited to the sum of (a) 80% of eligible
accounts receivable plus (b) 40% of eligible inventory (limited to
$13.5 million for domestic inventory and $10.0 million for foreign
inventory) minus (x) the aggregate amount of outstanding letters of
credit and (y) any reserves deemed reasonable by the lenders.
F - 13
<PAGE>
At March 29, 1997 and March 30, 1996, the amounts outstanding were as
follows:
Borrowings Outstanding
1997 1996
----------- -----------
U.S. Revolver prime based borrowings:
(8.75% at March 29, 1997 and 8.50% at
March 30, 1996) $2,089,000 $ 6,899,000
U.S. Revolver LIBOR based borrowings:
(7.5938%) 6,500,000 -
(7.6523%) - 6,000,000
(8.5000%) - 5,000,000
U.K. Revolver LIBOR based borrowings:
(8.1875%) 7,453,000 -
(8.2500%) 5,868,000 -
(8.4375%) - 5,466,000
(8.5000%) - 4,552,000
----------- -----------
$21,910,000 $27,917,000
=========== ===========
Under the facility, the Company has the option of electing either the
prime rate plus 0.25%, the Eurodollar rate plus 2.0% or the Sterling
rate plus 2.0% when it makes a borrowing. For all prime rate based
borrowings, the interest rate will be adjusted automatically each time
there is a change in the prime rate. The LIBOR (Eurodollar or Sterling
rate) based borrowings' interest rates are fixed for periods of one,
two or three months at the Company's option. At the end of the period,
the Company can change to a different available interest method.
The Company is required to pay an unused line fee of 0.375% per annum
on the average unused facility balance.
The facility requires the Company to, among other things, maintain
minimum levels of net assets, working capital, current ratio and
interest coverage ability. In addition, the facility limits the amount
of capital expenditures the Company can make on an annual basis and
prohibits the payment of cash dividends. Borrowings under the facility
are collateralized by the Company's receivables, equipment, inventory,
real property and other assets. The facility expires in December 1999.
F - 14
<PAGE>
(8) Debt Obligations:
Debt obligations consisted of the following as of March 29, 1997 and
March 30, 1996:
1997 1996
----------- -----------
Variable rate term loan .............. $ 4,606,000 $ 6,142,000
Fixed rate term loan ................. 3,809,000 --
Other ................................ 9,000 21,000
----------- -----------
8,424,000 6,163,000
Less: current ....................... (2,562,000) (1,688,000)
----------- -----------
Long-term portion .................... $ 5,862,000 $ 4,475,000
=========== ===========
The variable rate term loan borrowings are repayable monthly through
December 1999 with total installment payments amounting to
approximately $140,000 per month. The Company has two interest rate
options for the variable rate term loans: prime rate plus 0.50% and
Eurodollar rate plus 2.50%. As of March 29, 1997, the term loans bear
interest at 7.7% through March 31, 1997, at which time a new interest
option election will be made.
In August 1996, the Company borrowed the fixed rate term loan. This
term loan bears interest at 7.345% and is repayable in 39 monthly
installments of approximately $73,000 which began in September 1996 and
a final payment in December 1999 of the remaining unpaid balance.
(9) Acquisition of Assets:
In June 1995, the Company acquired, through a newly formed subsidiary,
for (pound)6,000,000 (approximately $9,600,000) certain assets of a
bankrupt German machine tool manufacturer. The assets acquired consist
of machinery and equipment that have been used by the Company to
establish operations in the Republic of Germany.
In addition, the subsidiary entered into a lease for manufacturing and
office space in Germany. The lease requires minimum annual rental
payments of approximately $525,000. The lease is for a minimum term of
seven years and can be extended at the Company's option up to twenty
years.
F - 15
<PAGE>
(10) Segment and Customer Information:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
March 29, 1997 March 30, 1996 April 1, 1995
-------------- -------------- -------------
<S> <C> <C> <C>
Net Sales:
Domestic ............ $ 121,766,000 $ 121,802,000 $ 99,751,000
Foreign ............. 99,669,000 80,281,000 46,565,000
Export .............. 6,114,000 7,131,000 2,467,000
------------- ------------- -------------
Total .......... $ 227,549,000 $ 209,214,000 $ 148,783,000
============= ============= =============
Operating Income:
Domestic and Export . $ 4,194,000 $ 7,272,000 $ 8,042,000
Foreign ............. 11,032,000 10,230,000 4,665,000
Eliminations ........ 178,000 (1,089,000) (107,000)
------------- ------------- -------------
Total ... $ 15,404,000 $ 16,413,000 $ 12,600,000
============= ============= =============
Identifiable Assets:
Domestic and Export $ 85,393,000 $ 90,336,000 $ 67,103,000
Foreign ............ 66,740,000 64,019,000 37,626,000
Eliminations ....... (20,422,000) (25,199,000) (16,335,000)
------------- ------------- -------------
Total ... $ 131,711,000 $ 129,156,000 $ 88,394,000
============= ============= =============
Net Assets:
Domestic and Export $ 54,477,000 $ 47,771,000 $ 44,173,000
Foreign ........... 23,260,000 20,861,000 12,209,000
Eliminations ...... (12,151,000) (11,523,000) (6,173,000)
------------- ------------- -------------
Total .......... $ 65,586,000 $ 57,109,000 $ 50,209,000
============= ============= =============
</TABLE>
The breakout of domestic and export assets is not available since these
operations use common resources and, as a result, the breakout of
operating income between domestic and export is not available. Foreign
sales represent principally Europe. Foreign identifiable assets and net
assets represent the Company's European operations. No individual
customer accounted for 10% or more of net sales for any of the periods
presented.
F - 16
<PAGE>
(11) Income Taxes:
As of January 3, 1993 (the date of the quasi-reorganization), net
deductible temporary differences of approximately $9,000,000 generated
prior to the quasi-reorganization existed to offset future taxable
income. As a result of the quasi-reorganization, the tax benefits of
any net deductible temporary differences which existed as of the date
of the quasi-reorganization resulted in a charge to the tax provision
(provision in lieu of income taxes) and an increase to capital in
excess of par when realized. For the years ended March 30, 1996 and
April 1, 1995, a provision in lieu of income taxes of $4,000 and
$1,129,000, respectively, was recognized with a corresponding increase
to capital in excess of par value.
The provision for income taxes on earnings consisted of the following:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
March 29, 1997 March 30, 1996 April 1, 1995
-------------- -------------- -------------
<S> <C> <C> <C>
Current:
Federal ........................ $ 1,655,000 $ 2,629,000 $ 1,655,000
Foreign ........................ 3,052,000 3,458,000 781,000
State and local ................ 392,000 670,000 403,000
----------- ----------- -----------
5,099,000 6,757,000 2,839,000
----------- ----------- -----------
Deferred:
Federal ........................ (287,000) (895,000) 513,000
Foreign ........................ (89,000) (22,000) (140,000)
State and local ................ (88,000) (209,000) 56,000
----------- ----------- -----------
(464,000) (1,126,000) 429,000
----------- ----------- -----------
Provision in lieu of income taxes:
Federal ........................ -- 4,000 108,000
Foreign ........................ -- -- 812,000
State and local ................ -- -- 209,000
----------- ----------- -----------
-- 4,000 1,129,000
----------- ----------- -----------
$ 4,635,000 $ 5,635,000 $ 4,397,000
=========== =========== ===========
</TABLE>
F - 17
<PAGE>
The tax provisions differ from amounts computed by applying the U.S.
statutory federal income tax rate due to the following:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
March 29, 1997 March 30, 1996 April 1, 1995
-------------- -------------- -------------
<S> <C> <C> <C>
Federal income
tax expense at
statutory rates ......... $ 4,423,000 $ 4,921,000 $ 3,961,000
State taxes ............... 198,000 305,000 434,000
Foreign provision
on income of
foreign subsidiaries
different than
statutory rate .......... (321,000) 347,000 23,000
Other ..................... 335,000 62,000 (21,000)
----------- ----------- -----------
$ 4,635,000 $ 5,635,000 $ 4,397,000
=========== =========== ===========
</TABLE>
Pretax foreign income was $9,384,000, $8,826,000 and $4,085,000 for the
years ended March 29, 1997, March 30, 1996 and April 1, 1995,
respectively.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and their tax bases. The items which
comprise net deferred income taxes are as follows:
<TABLE>
<CAPTION>
March 29, 1997 March 30, 1996
-------------- --------------
<S> <C> <C>
Inventory basis differences ............ $ 53,000 $ 406,000
Depreciation and amortization .......... (476,000) (397,000)
Liabilities and reserves not
currently tax deductible ............. 3,846,000 3,062,000
Other .................................. (218,000) (130,000)
Valuation reserves ..................... (61,000) (261,000)
----------- -----------
$ 3,144,000 $ 2,680,000
=========== ===========
</TABLE>
F - 18
<PAGE>
(12) Commitments and Contingencies:
Minimum future operating lease obligations at March 29, 1997, by year
and in the aggregate, are as follows:
1998 $1,552,000
1999 1,294,000
2000 1,081,000
2001 737,000
2002 668,000
Thereafter 469,000
----------
$5,801,000
==========
Operating leases relate principally to manufacturing, office and
warehouse facilities with non-cancellable portion expiring on various
dates through the year 2004. Operating lease expense for the years
March 29, 1997, March 30, 1996 and April 1, 1995 approximated
$1,743,000, $1,455,000 and $725,000, respectively.
In January 1996, an action was filed against the Company alleging
patent infringement. Legal counsel representing the Company in this
matter has advised the Company that they do not believe the Company
infringes the patent. Management intends to defend this action and
believes the amount of ultimate liability, if any, with respect to this
action will not materially affect the financial results of operations
or financial position of the Company.
The Company has been named a Potentially Responsible Party related to
contamination which occurred at six offsite disposal sites. The Company
believes that the actions relating to these contaminations occurred
prior to current ownership of the Company and as part of the purchase
agreement, the Company's prior owner, Textron Inc., has retained these
liabilities and has indemnified the Company for these liabilities. In
addition, there exists certain environmental cleanup that must be
performed related to a site owned by the Company. The Company believes
that the cost of this cleanup to the Company will not be significant
and has accrued the estimated cost of this cleanup.
In addition to the matters discussed above, the Company is subject to
various other legal proceedings, claims and liabilities which have
arisen in the ordinary course of its business. In the opinion of
management, the amount of ultimate liability, if any, with respect to
these actions will not materially affect the financial results of
operations or financial position of the Company.
The Company has employment agreements with three employees under which
the Company is required to pay total salaries for these employees of
approximately $650,000 annually. The term of each agreement continues
until the earlier of the employee's retirement, death, disability or
voluntary termination.
The Company has outstanding letters of credit at March 29, 1997 of
approximately $1,600,000 related to insurance programs.
F - 19
<PAGE>
(13) Employee Benefit Plans:
The Company has an employee profit sharing plan which covers
substantially all U.S. employees and allows participants to make
contributions by salary reduction pursuant to Section 401(k) of the
Internal Revenue Code. Company contributions are made at the discretion
of the Board of Directors. For the years ended March 29, 1997, March
30, 1996 and April 1, 1995, the Company recorded expense of
approximately $754,000, $879,000 and $636,000, respectively.
The Company's U.K. subsidiary maintains the Bridgeport Machines Limited
Pension Scheme ("Bridgeport Plan"). The Bridgeport Plan covers
substantially all full-time U.K. employees. The benefits paid are based
on an average final compensation formula. The Company generally funds
the minimum amount as established by its consulting actuary. Employees
generally contribute between 4-6% of their earnings.
The pension cost for each of the last three fiscal years for the
Bridgeport Plan is comprised of the following:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (net of
employee contributions) ... $ 312,000 $ 60,000 $ 187,000
Interest cost ............... 1,555,000 1,377,000 1,259,000
Actual return on plan assets (1,340,000) (3,529,000) (324,000)
Net amortization and deferral (629,000) 2,225,000 (526,000)
Other ....................... 75,000 -- --
----------- ----------- -----------
$ (27,000) $ 133,000 $ 596,000
=========== =========== ===========
</TABLE>
F - 20
<PAGE>
Based on the latest actuarial information available, the following
table shows the funded status of the Bridgeport Plan and amounts
recognized in the balance sheet as of March 29, 1997 and March 30,
1996.
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Actuarial present value of accumulated benefit obligations:
Vested ............................................... $ 20,748,000 $ 15,757,000
Nonvested ............................................ 305,000 166,000
------------ ------------
$ 21,053,000 $ 15,923,000
============ ============
Actuarial present value of projected
benefit obligation ..................................... $ 21,710,000 $ 16,202,000
Plan assets (primarily equity
securities and fixed interest
deposits) .............................................. 20,787,000 17,732,000
------------ ------------
Plan assets in excess of (less than) benefit
obligation ............................................. (923,000) 1,530,000
Unrecognized net (gains) losses ........................... 733,000 (2,188,000)
Other ..................................................... (75,000) 6,000
------------ ------------
Pension liability ......................................... $ (265,000) $ (652,000)
============ ============
</TABLE>
Following are the significant assumptions used by the plan's actuary:
1997 1996
---- ----
Discount rate 8.25% 9.00%
Rate of increase in compensation levels 5.50% 5.50%
Long-term rate of return on assets 9.00% 9.00%
(14) Stock Option Plan and Stock Awards:
The Company maintains the 1994 Stock Option Plan, as amended, pursuant
to which the Company can issue stock options, stock appreciation
rights, stock bonuses, restricted stock awards, performance units and
phantom stock. The Company reserved 409,750 shares of common stock for
issuance under this plan, of which 211,630 are available for future
issuance. Each option granted vests and becomes exercisable over a
period of three years at a rate of one third annually and expires five
years from the date of grant.
F - 21
<PAGE>
In addition, the Company maintains the 1994 Non-Employee Director Stock
Option Plan under which 60,000 shares of common stock were reserved for
issuance; 18,000 shares are available for future issuance under this
plan. This plan has a term of ten years and annually each non-employee
director will be automatically granted an option to purchase 2,000
shares of common stock. Each option granted under this plan vests and
becomes exercisable over a period of three years at a rate of one third
annually and expires five years from the date of grant. The exercise
prices of all future options granted will be the fair market value of
the common stock on the day prior to the date the option is granted.
The following table summarizes the activity under the plans:
<TABLE>
<CAPTION>
Weighted Average
Options Exercise Price
------- ----------------
<S> <C> <C>
April 2, 1994 ........................... 7,810 $ 6.33
Options issued ...................... 216,500 10.22
Options cancelled ................... (7,500) 10.00
------- ---------
April 1, 1995 ........................... 216,810 10.09
Options issued ...................... 28,500 16.18
Options exercised ................... (17,314) 8.65
Options cancelled ................... (12,210) 9.77
------- ---------
March 30, 1996 .......................... 215,786 11.03
Options issued ...................... 40,500 12.12
Options exercised ................... (2,664) 10.00
Options cancelled ................... (13,502) 13.31
------- ---------
March 29, 1997 .......................... 240,120 $ 11.09
======= =========
</TABLE>
The Company applies APB Opinion 25 in accounting for its stock option
plans. Accordingly, no compensation expense has been recognized for
stock options granted. The Company adopted the disclosure only
alternative of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (FAS 123), in fiscal 1997.
Under FAS 123, companies can, but are not required to, elect to
recognize compensation expense for all stock-based awards, using a fair
value methodology.
F - 22
<PAGE>
The Company used the Black-Scholes model to value the stock options
granted in fiscal 1997 and 1996. This model may not be indicative of
the actual fair value of such options were a ready market available.
The weighted average assumptions used to estimate the value of the
options and the weighted average estimated fair value of an option
granted, are as follows:
1997 1996
---- ----
Term (years) 5 5
Volatility 56% 34%
Risk-free interest rate 6.75% 6.75%
Dividend yield 0 0
Weighted average fair value $7.73 $6.73
The effect of the compensation expense for proforma net income and net
income per share was immaterial. Proforma computations for purposes of
FAS 123 only consider the portion of the estimated fair value of awards
earned in fiscal 1997 and 1996. Additional awards in future years would
effect the computations for future years.
(15) Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
------- ------- ------- -------
<S> <C> <C> <C> <C>
Fiscal 1997
Net sales ...................... $62,214 $51,478 $59,779 $54,078
Operating income ............... 4,991 3,246 3,770 3,397
Net income ..................... 2,725 1,609 1,938 1,729
Primary earnings per share ..... $ 0.47 $ 0.28 $ 0.34 $ 0.30
Fiscal 1996
Net sales ...................... $47,273 $47,305 $56,751 $57,885
Operating income ............... 3,758 3,710 5,606 3,339
Net income ..................... 1,950 1,764 2,990 1,720
Primary earnings per share ..... $ 0.34 $ 0.31 $ 0.52 $ 0.30
</TABLE>
Earnings per share for the four quarters may not add to the annual amount due to
rounding.
F - 23
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBITS
Exhibit
Number Description
- - ------ -----------
<S> <C>
Asset Purchase Agreement, dated June 2, 1995, between Schultz &
Braun GmbH, W. P. Werner Schneider and Bridgeport Machines GmbH
2.1.1 a) German version (binding agreement) (d)
2.1.2 b) English translation (d)
3.1 Amended and Restated Certificate of Incorporation (a)
3.2 Amended and Restated Bylaws (a)
4. See Amended and Restated Certificate of Incorporation,
filed as Exhibit 3.1 (a)
10.1.1 Plan and Agreement of Recapitalization for the Company dated as of
December 15, 1992 (with certain exhibits) (a)
10.1.2 Termination Agreement and Waiver of Nominee Rights, effective
March 8, 1995, among the Company and certain stockholders (e)
10.1.3 Termination and Registration Rights Agreement between the Company
and Textron Inc. (b)
10.1.4 Notice and Waiver of Textron Inc. (b)
10.1.5 Notice and Waiver of Kansas Debt Fund, as nominee for Kansas Public
Employees Retirement System (b)
10.1.6 Notice and Waiver of State of Delaware Employees Retirement Fund (b)
10.2.1 Revolving Credit and Security Agreement dated as of December 18, 1992,
as amended (a)
10.2.2 Amendment No. 4 to Revolving Credit and Security Agreement dated
as of December 18, 1992 (a)
10.2.3 Amended and Restated Revolving Credit, Term Loan and Security
Agreement dated as of December 23, 1994 (c)
10.2.4 Consent and Amendment No. 2 to Amended and Restated Revolving
Credit, Term Loan and Security Agreement (d)
10.2.5 Amendment No. 3 to Amended and Restated Revolving
Credit, Term Loan and Security Agreement (g)
10.2.6 Amendment No. 4 to Amended and Restated Revolving Credit, Term
Loan and Security Agreement (i)
10.2.7 Amendment No. 5 to Amended and Restated Revolving Credit, Term
Loan and Security Agreement
10.3.1 Company's 1994 Stock Incentive Plan (a)T
10.3.2 Form of Stock Option Grant under Company's 1994 Stock Incentive Plan (e) T
10.4.1 Company's 1994 Non-Employee Director Stock Option Plan (a)T
10.4.2 Form of Stock Option Grant under Company's 1994 Non-Employee
Director Stock Option Plan (e) T
10.5 Employment Agreement between the Company and Joseph E. Clancy (f)T
10.6 Employment Agreement between the Company and Dan L. Griffith (f)T
<PAGE>
<CAPTION>
Exhibit
Number Description
- - ------ -----------
<S> <C>
10.7 Employment Agreement between Bridgeport Machines Limited and
Malcolm Taylor (h)T
10.8 Purchase and Sale Agreement dated as of May 7, 1986 between the
Company and Textron Inc. (a)
10.9 Settlement Agreement dated June 22, 1994 between the Company and
Textron Inc. (a)
10.10.1 Management Subscription Agreements dated June 30, 1986 (a)
10.10.2 Termination Agreement among the Company and Management Purchasers (b)
10.10.3 Notice and Waiver of Lehman Brothers Holdings, Inc. (b)
Lease Agreement, dated June 2, 1995, between Alu-Billets Produktions
GmbH and Bridgeport Machines GmbH
10.11.1 a) German version (binding agreement) (d)
10.11.2 b) English translation (d)
11. Statement of Calculation of Earnings Per Share (j)
21. Subsidiaries of the Registrant
23. Consent of Arthur Andersen LLP
27. Financial Data Schedule
</TABLE>
- - --------------------
(a) Incorporated by reference from the Company's Registration on Form S-1
(Registration No. 33-84820), as filed with the Commission on October 6,
1994.
(b) Incorporated by reference from Amendment No. 1 to the Company's
Registration on Form S-1 (Registration No. 33-84820), as filed with the
Commission on October 26, 1994.
(c) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended December 31, 1994.
(d) Incorporated by reference from the Company's Current Report on Form 8-K
dated as of June 2, 1995.
(e) Incorporated by reference from the Company's Annual Report on Form 10-K
for the year ended April 1, 1995.
(f) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1995.
(g) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended December 30, 1995.
(h) Incorporated by reference from the Company's Annual Report on Form 10-K
for the year ended March 30, 1996.
(i) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 28, 1996.
(j) Not included because computation can be determined from material
contained in the Consolidated Financial Statements included in this
Annual Report on Form 10-K.
T A management contract or compensatory plan or arrangement required to
be filed pursuant to Item 14(c) of this report.
Exhibit 10.2.7
AMENDMENT NO. 5
TO
AMENDED AND RESTATED
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 5 ("Amendment") is entered into as of March
21, 1997, by and among BRIDGEPORT MACHINES, INC. ("BMI"), BRIDGEPORT MACHINES
LIMITED ("BML") and BRIDGEPORT MACHINES GmbH ("BMG") (BMI, BML and BMG each, a
"Borrower" and jointly and severally, the "Borrowers"); IBJ SCHRODER BANK &
TRUST COMPANY ("IBJS"), GENERAL ELECTRIC CAPITAL CORPORATION ("GECC") (IBJS and
GECC each, a "Lender" and jointly and severally, the "Lenders"); and IBJS, as
agent for the Lenders (in such capacity, the "Agent").
BACKGROUND
BMI, BML, Lenders and Agent are parties to an Amended and
Restated Revolving Credit, Term Loan and Security Agreement, dated as of
December 23, 1994, as amended by Amendment No. 1 to Amended and Restated
Revolving Credit, Term Loan and Security Agreement, dated as of March 31, 1995,
Consent and Amendment No. 2 to Amended and Restated Revolving Credit, Term Loan
and Security Agreement dated as of May 31, 1995, an Amended and Restated Consent
and Amendment No. 2 to Amended and Restated Revolving Credit, Term Loan and
Security Agreement dated as of June 28, 1995, an Amendment No. 3 to Amended and
Restated Revolving Credit, Term Loan and Security Agreement dated as of November
30, 1995 and an Amendment No. 4 to Amended and Restated Revolving Credit, Term
Loan and Security Agreement dated as of August 2,1996 (as same may be further
amended, supplemented or otherwise modified from time to time, the "Loan
Agreement"), pursuant to which Lenders provide BMI and BML with certain
financial accommodations.
BMI and BML have requested that Lenders increase the Maximum
Loan Amount, the BMI Sublimit and the BML Sublimit, among other things and
Lenders are willing to do so on the terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or
grant of credit heretofore or hereafter made to or for the account of Borrowers
by Lenders, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. All capitalized terms not otherwise
defined herein shall have the meanings given to them in the Loan Agreement.
2. Amendments to Loan Agreement. Subject to
satisfaction of the conditions precedent set forth in Section 3 below:
(a) The following definitions are hereby added to
Section 1.2 of the Loan Agreement in appropriate alphabetical order:
"Fifth Amendment" shall mean Amendment No. 5 to
Amended and Restated Revolving Credit, Term Loan and Security Agreement dated as
of March 21, 1997 among Borrowers, Lenders and Agent.
"Fifth Amendment Effective Date" shall mean March 21,
1997 or such other date on which the conditions set forth in Section 3 of the
Fifth Amendment shall have been satisfied in the reasonable opinion of the
Lenders.
<PAGE>
(b) The following definitions in Section 1.2 of the
Loan Agreement are hereby amended in their entirety to read as follows:
(i) "BMI Sublimit" shall mean $24,500,000.
(ii) "BML Sublimit" shall mean $19,500,000.
(c) The definition of "Maximum Loan Amount" is hereby
amended by deleting "Forty Nine Million Five Hundred Eighty Three Thousand Three
Hundred Thirty Six Dollars ($49,583,336)" and inserting "Fifty Three Million
Twenty Two Thousand Nine Hundred Twenty Two Dollars ($53,022,922)" in its place
and stead.
(d) Section 2.1(a)(iii)(x) of the Loan Agreement is
hereby amended by deleting "$11,000,000" and inserting "$13,500,000" in its
place and stead.
(e) Section 2.1(a)(iv)(x) of the Loan Agreement is
hereby amended by deleting "$7,000,000" and inserting "$10,000,000" in its place
and stead.
3. Conditions Precedent. This Amendment shall become
effective upon satisfaction of the following conditions precedent:
(a) (i) This Amendment shall have been executed by
the Lenders, the Borrowers, and the Guarantor, in four counterparts, with
executed counterparts delivered to each of the parties;
(ii) Each Fifth Amended and Restated Revolving Credit
Note shall have been executed by BMI with each executed Note delivered to the
respective Lender; and
(iii) Each of the Mortgage, Assignment of Rents and
Security Agreement Modification Agreement and the Open End Mortgage, Assignment
of Rents and Security Agreement Modification Agreement shall have been executed
by BMI with each such executed agreement delivered to the Agent.
(b) Agent shall have received opinions of counsel to
BMI and BML indicating that the transactions contemplated by this Amendment have
been properly authorized, and that the documents executed and delivered in
connection therewith are the legal, valid, and binding obligations of the
respective signatories.
(c) Agent shall have received an amendment fee of
$18,750 to be shared equally by the Lenders.
4. Representations and Warranties.
(a) Borrowers hereby represent and warrant that as of
the Fifth Amendment Effective Date:
(i) This Amendment and the Loan Agreement, as amended
hereby, constitute legal, valid and binding obligations of
Borrowers and are enforceable against Borrowers in accordance
with their respective terms.
<PAGE>
(ii) Borrowers hereby reaffirm their respective
covenants, representations and warranties made in the Loan
Agreement to the extent the same are not amended hereby and
agree that all such covenants, representations and warranties
shall be deemed to have been remade as of the Fifth Amendment
Effective Date.
(iii) No Event of Default or Default has occurred and
is continuing or would exist after giving effect to this
Amendment.
(iv) Borrowers have no knowledge of any facts which
would form the basis for any defense, counterclaim or offset
with respect to the Loan Agreement.
(b) Lenders hereby represent and warrant that as of
the Fifth Amendment Effective Date this Amendment and the Loan Agreement, as
amended hereby, constitute legal, valid and binding obligations of Lenders and
are enforceable against Lenders in accordance with their respective terms.
5. Effect on the Loan Agreement.
(a) On the Fifth Amendment Effective Date, each
reference in the Loan Agreement to "this Agreement," "hereunder," "hereof,"
"herein" or words of like import shall mean and be a reference to the Loan
Agreement as amended hereby.
(b) Except as specifically amended herein, the Loan
Agreement, and all other documents, instruments and agreements executed and/or
delivered in connection therewith, shall remain in full force and effect, and
are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of
Lenders, nor constitute a waiver of any provision of the Loan Agreement, or any
other documents, instruments or agreements executed and/or delivered under or in
connection therewith.
6. Governing Law. This Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns and shall be governed by and construed in accordance with
the laws of the State of New York.
7. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose.
8. Counterparts. This Amendment may be executed by
the parties hereto in one or more counterparts, each of which shall be deemed to
be an original and all of which taken together shall be deemed to constitute one
and the same agreement.
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first written above.
BRIDGEPORT MACHINES, INC.,
as Borrower and Guarantor
By: /s/ Yvonne L. Megenis
------------------------------------
Name: Yvonne L. Megenis
Title: Vice President-Treasurer
BRIDGEPORT MACHINES LIMITED,
as Borrower
By: /s/ Yvonne L. Megenis
------------------------------------
Name: Yvonne L. Megenis
Title: Attorney in Fact
BRIDGEPORT MACHINES, GmbH,
as Borrower
By: /s/ Yvonne L. Megenis
------------------------------------
Name: Yvonne L. Megenis
Title: Attorney in Fact
IBJ SCHRODER BANK & TRUST COMPANY,
as Lender and as Agent
By: /s/ Robert R. Wallace
------------------------------------
Name: Robert R. Wallace
Title: Vice President
GENERAL ELECTRIC CAPITAL CORPORATION,
as Lender
By: /s/ Martin Greenberg
------------------------------------
Name: Martin Greenberg
Title: Duly Authorized Signatory
Exhibit 21
Subsidiaries of Bridgeport Machines, Inc.
-----------------------------------------
Bridgeport Machines Limited
Bridgeport Machines GmbH
Bridgeport Machines FSC Inc.
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
registration statement on Form S-8.
ARTHUR ANDERSEN LLP
Stamford, Connecticut
June 18, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-29-1997
<PERIOD-END> MAR-29-1997
<CASH> 2,992
<SECURITIES> 0
<RECEIVABLES> 38,691
<ALLOWANCES> 1,440
<INVENTORY> 63,068
<CURRENT-ASSETS> 109,839
<PP&E> 28,149
<DEPRECIATION> 7,848
<TOTAL-ASSETS> 131,711
<CURRENT-LIABILITIES> 60,143
<BONDS> 5,862
0
0
<COMMON> 57
<OTHER-SE> 65,529
<TOTAL-LIABILITY-AND-EQUITY> 131,711
<SALES> 227,549
<TOTAL-REVENUES> 227,549
<CGS> 176,484
<TOTAL-COSTS> 176,484
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 258
<INTEREST-EXPENSE> 2,858
<INCOME-PRETAX> 12,636
<INCOME-TAX> 4,635
<INCOME-CONTINUING> 8,001
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,001
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.40
</TABLE>
