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 28, 1998
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, 1998 was approximately $64,319,000.
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding on June 18, 1998 was 5,654,404.
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 28, 1998.
<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 any 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,
changes in currency exchange rates, the mix of products sold and the profit
margins thereon, order cancellations or reduced bookings by customers or
distributors, discounting necessitated by price competition, 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 several brand names including "Bridgeport" and "Harig."
The Company is headquartered in Bridgeport, Connecticut and has
additional manufacturing 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.
<PAGE>
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.
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.
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. The purpose of the JV will be to
manufacture machine tools in Indonesia for sale within the Association of
South-East Asian Nations. As of March 1998, the JV had no substantive activities
and development of the JV has been suspended due to the current economic and
political environment in Indonesia.
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
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.
<PAGE>
Recent Developments
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 manufacturing operations in Germany.
In addition, the subsidiary entered into a lease for manufacturing and office
space in Germany. The Company paid approximately 6 million pound sterling
(approximately $9.6 million) for the assets.
(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, micro- processors 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 1998 World Machine Tool Survey,
approximately 73% 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.
<PAGE>
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.
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.
<PAGE>
- Expand International Markets: The Company plans to expand its marketing
efforts in China, 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.
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 28, 1998 March 29, 1997 March 30, 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Machining Centers 44.5% 48.4% 43.2%
CNC Milling Machines 14.7 15.0 17.2
Manual Milling Machines 12.7 10.4 13.1
Lathes 10.8 10.6 10.6
Surface Grinders 4.4 4.6 3.7
Software 1.0 1.0 1.4
After Market Sales & Support 11.9 10.0 10.8
------ ------ ------
Total 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
Machining Centers
The Company currently offers eight models of vertical "bed-type"
machining centers and two bridge type frame model machining centers. 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.
<PAGE>
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.
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 eight sales and
service centers, four of which are located throughout the continental United
States, two in England, one in Germany 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 approximately 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.
<PAGE>
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 1998 and the loss of any one customer would not have a
material adverse effect upon the Company.
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 to two years 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 buyout 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 certain 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. 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 28, 1998,
backlog was approximately $36.5 million, compared with approximately $35.5
million at March 29, 1997. 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 Company expects to ship substantially
all of its current backlog during fiscal year 1999. However, no firm assurance
can be given since many factors which affect 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 Thysen
Inc.) and Haas Automatic Inc., who the Company believes have the leading market
shares, and primarily with Cincinnati Milicron and Haas Automatic Inc. 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 $5,364,000, $5,091,000 and $4,634,000 for the years
ended March 28, 1998, March 29, 1997 and March 30, 1996, respectively.
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,
<PAGE>
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 28, 1998, the Company had 1,184 full-time employees,
consisting of 623 employees based in the United States, 456 employees based in
the United Kingdom, 96 in Germany and 9 employees based in Holland. None of the
United States employees is currently represented by any union. The Company's
United Kingdom employees are covered by annual collective bargaining agreements
which expires on March 28, 1999. A portion of 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 28,
1998, relating to the Company's principal facilities:
<TABLE>
<CAPTION>
Approximate
Location Principal Activities Square Feet Owned/Leased
-------- -------------------- ----------- ------------
<S> <C> <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 1/00 with
Company option to
renew to 12/02)
Bridgeport, Connecticut Distribution 17,000 Leased
(expires 1/03 with
Company option to
renew to 1/08)
Leicester, England Manufacture of Machining 113,000 Owned
Centers and CNC Mills
Leicester, England Warehouse and assembly 50,000 Leased
(expires 1/00)
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 leases two sales and service centers in the
United Kingdom, with an aggregate floor space of approximately 11,000 square
feet, one sales and service center in Holland with floor space of approximately
14,000 square feet and one in Germany with floor space of approximately 12,000
square feet.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is not engaged in any legal proceedings other than ordinary
routine litigation incidental to its business.
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 1997 and 1998 were as follows:
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
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
Fiscal 1998
First Quarter Ended June 28, 1997 $11-1/4 $8-1/2
Second Quarter Ended September 27, 1997 $12-1/4 $9-3/4
Third Quarter Ended December 27, 1997 $13-3/8 $10
Fourth Quarter Ended March 28, 1998 $12-3/4 $10-1/2
</TABLE>
(B) Holders
As of June 18, 1998, as reported by the Company's transfer agent,
shares of Common Stock were held by 85 holders, based upon the number of record
holders, including several holders who are nominees for an undetermined number
of beneficial owners.
(C) Dividends
The Company has not declared or paid a cash dividend during the two
fiscal years ended March 28, 1998, 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
<TABLE>
<CAPTION>
(In thousands, except per share data)
Year Year Year Year Year
Ended Ended Ended Ended Ended
March 28, March 29, March 30, April 1, April 2,
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Net sales $213,770 $227,549 $209,214 $148,783 $107,047
Net income 3,915 8,001 8,424 6,921 2,634(1)
Basic earnings per share $ 0.69 $ 1.41 $ 1.49 $ 1.48 $ 0.63(1)
Basic weighted average shares
outstanding 5,657 5,679 5,665 4,660 4,160
Diluted earnings per share $ 0.69 $ 1.40 $ 1.47 $ 1.48 $ 0.63(1)
Diluted weighted average
shares outstanding 5,672 5,720 5,748 4,673 4,162
March 28, March 29, March 30, April 1, April 2,
1998 1997 1996 1995 1994
Balance Sheet Data:
Working Capital $ 51,600 $ 49,696 $ 39,148 $ 42,810 $ 22,076
Total assets 136,110 131,711 129,156 88,394 67,254
Long-term debt obligations 3,142 5,862 4,475 3,101 3,834
Stockholders' equity 69,323 65,586 57,109 50,209 25,373
</TABLE>
- - ------------------
(1) 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 basic and diluted earnings per
share would have been $3.5 million and $0.85, respectively.
<PAGE>
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 28, 1998 March 29, 1997 March 30, 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Gross profit 22.4 22.4 23.4
Selling, general & administrative
expenses 17.8 15.7 15.5
Operating income 4.6 6.7 7.9
Interest expense (1.2) (1.2) (1.2)
Other income (expense), net - - -
Income before income taxes 3.4 5.5 6.7
Income taxes 1.6 2.0 2.7
Net income 1.8% 3.5% 4.0%
</TABLE>
Year Ended March 28, 1998 ("fiscal 1998") Compared to Year Ended March 29, 1997
("fiscal 1997")
Net sales were $213.8 million in fiscal 1998, a decrease of $13.8
million, or 6.1%, as compared to fiscal 1997. The decrease was primarily a
result of a decline in sales by the Company's European operations of
approximately $16.7 partially offset by an increase in sales by the Company's
U.S. operation of $2.9 million. The decline in sales in the Company's European
operations is primarily a result of difficulties in the Company's ability to
export products built in the Company's United Kingdom facility to other European
countries due to the increased cost of these products to the Company's non
United Kingdom customers as a result of the increased value of the British pound
versus other European currencies.
Backlog at March 28, 1998 was approximately $36.5 million, compared with
approximately $35.5 million at March 29, 1997.
Gross profit was $47.8 million in fiscal 1998, a decrease of $3.3
million, or 6.4% as compared to fiscal 1998. As a percentage of net sales, gross
profit in fiscal 1998 was 22.4% as compared to 22.4% in fiscal 1997. Gross
profit as a percent of sales in the Company's European operations declined
approximately 4.5 percentage points while gross profit in the Company's U.S.
operations increased approximately 2.5 percentage points.
<PAGE>
The decline in European gross profit as a percent of sales is a result
of a drop in unit volume and price discounting. Both of these occurrences were
primarily a result of the increased costs of the Company's United Kingdom built
products to its non United Kingdom customers resulting from the strength of the
British pound versus other European currencies. The net decline in European
gross profit was offset to some extent as a result of the Company's purchasing
its German distributor in August 1997. As a result of this purchase, the
Company's fiscal 1998 gross profit includes the distribution margin for sales
made to end customers in Germany. This new operation contributed approximately
$1.8 million or 0.5 percentage points to consolidated gross profit in fiscal
1998.
The increase in U.S. gross profit as a percentage of sales is a result
of increased margins on the Company's U.S. built machining centers due to cost
reduction initiatives and the elimination of price promotions which existed in
fiscal 1997.
Selling, general and administrative expenses in fiscal 1998 were $38.0
million, an increase of $2.4 million, or 6.7%. Of this increase, $2.0 million
related to the Company's German distribution operation acquired in fiscal 1998.
As a percentage of net sales, selling, general and administrative expenses were
17.8% in fiscal 1998 as compared to 15.7% in fiscal 1997.
Operating income in fiscal 1998 was $9.7 million, a decrease of $5.7
million, or 36.7%, as compared to fiscal 1997. The decrease in operating income
is a result of a decline in the Company's European operation's operating income
of $9.9 million, offset to some extent by an increase of $4.2 million in the
Company's operating income in its U.S. operations.
Interest expense was $2.6 million in fiscal 1998, as compared to $2.9
million in fiscal 1997.
Provision for income taxes was $3.5 million, a decrease of $1.2
million, as compared to fiscal 1997. The effective tax rate was 46.9% in fiscal
1998 as compared to 36.7% in fiscal 1997. The increase in the effective tax rate
was primarily a result of losses incurred in the Company's German operations for
which no tax benefit was recognized since such benefit could not be currently
recognized for income tax reporting purposes. In addition, in fiscal 1997 the
effective tax rate was reduced by utilization of German net operating losses
generated in the prior year.
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.
Foreign Operations
During fiscal 1998, net sales outside North America represented
approximately 41.9% of total net sales, as compared to 46.5% for fiscal 1997. A
substantial portion of these net sales were made by the Company's European
operations.
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 28, 1998, the Company had no
commitments under any forward purchase contracts.
Liquidity and Capital Resources
As of March 28, 1998, the Company had working capital of $51.6 million
compared with $49.7 million at March 29, 1997. 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
<PAGE>
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 $3.1
million as of March 28, 1998. These loans are repayable monthly with total
principal payments of approximately $207,000 per month in the aggregate.
The table below presents the summary of cash flow for the periods
indicated:
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997
----------- -----------
<S> <C> <C>
Net cash provided by (used in)
operating activities $ 8,782,000 $ 5,303,000
Net cash provided by (used in)
investing activities (4,871,000) (3,287,000)
Net cash provided by (used in)
financing activities (2,006,000) (3,848,000)
</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 1998 and 1997, a
decrease in the Company's trade accounts receivable provided $1.7 million and
$3.8 million, respectively, in cash from operations and an increase in inventory
accounted for $0.4 million and $5.5 million, respectively, of cash used in
operations.
The net cash used in investing activities in fiscal 1998 includes the
acquisition of certain assets of the Company's German distributor for $1.8
million.
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 28, 1998. 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.
<PAGE>
Changes in Financial Position
At March 28, 1998, trade accounts receivable increased $0.5 million
(1.4%) and inventories increased $3.6 million (5.8%), respectively, as compared
to March 29, 1997.
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.
Year 2000
The Company is continuing its assessment of the impact on the Year 2000
issue on its operations. Based on the current status of this assessment, the
estimated total costs to be incurred for all Year 2000 related projects are not
expected to be material to the Company's business, results of operations or
financial condition.
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 to 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 25,
1998.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to 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 25, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to 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 25, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to 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 25, 1998.
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
Exhibit
Number
- - ------
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 (j)
10.2.8 Amendment No. 6 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 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>
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)
10.12 Employment Agreement between the Company and Walter C. Lazarcheck
T
11. Statement of Calculation of Earnings Per Share (k)
21. Subsidiaries of the Registrant
23. Consent of Arthur Andersen LLP
27. Financial Data Schedule
- - --------------------
(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) Incorporated by reference from the Company's Annual Report on Form 10-K
for the year ended March 29, 1997
(k) 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, 1998
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, 1998
- - --------------------
Joseph E. Clancy
/s/ Dan L. Griffith President, Chief Executive Officer June 18, 1998
- - ------------------- and Director
Dan L. Griffith (Principal Executive Officer)
/s/ Walter C. Lazarcheck Vice President & Chief Financial Officer June 18, 1998
- - ------------------------
Walter C. Lazarcheck (Principal Financial and Accounting Officer)
/s/ Robert J. Cresci Director June 18, 1998
- - --------------------
Robert J. Cresci
/s/ Eliot M. Fried Director June 18, 1998
- - ------------------
Eliot M. Fried
/s/Bhikhaji M. Maneckji Director June 18, 1998
- - -----------------------
Bhikhaji M. Maneckji
</TABLE>
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Pages
-----
Bridgeport Machines, Inc. and Subsidiaries
Report of Independent Public Accountants F-2
Consolidated Balance Sheets as of March 28, 1998 and
March 29, 1997 F-3 to F-4
Consolidated Statements of Income for the three years
ended March 28, 1998 F-5
Consolidated Statements of Stockholders' Equity for the
three years ended March 28, 1998 F-6
Consolidated Statements of Cash Flows for the three
years ended March 28, 1998 F-7
Notes to Consolidated Financial Statements F-8 to F-22
Schedules to Financial Statements are not required N/A
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 28, 1998
and March 29, 1997 and the related consolidated statements of operations,
stockholders' equity and cash flows for the three years ended March 28, 1998.
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 28, 1998 and March 29, 1997 and the results of
their operations and their cash flows for the three years ended March 28, 1998
in conformity with generally accepted accounting principles.
/s/ARTHUR ANDERSEN LLP
----------------------
ARTHUR ANDERSEN LLP
Stamford, Connecticut
May 11, 1998
F-2
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 28, 1998 AND MARCH 29, 1997
ASSETS 1998 1997
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash ............................................. $ 4,892,000 $ 2,992,000
Trade accounts receivable, less allowance
of $1,551,000 in 1998 and $1,440,000
in 1997 ........................................ 39,236,000 38,691,000
Inventories ...................................... 66,707,000 63,068,000
Deferred income taxes ............................ 3,100,000 3,144,000
Prepaid expenses and other current assets ........ 1,190,000 1,944,000
------------- -------------
Total current assets ..................... 115,125,000 109,839,000
------------- -------------
PROPERTY, PLANT AND EQUIPMENT:
Land ............................................. 351,000 345,000
Buildings, improvements and leasehold improvements 4,081,000 3,908,000
Machinery and equipment .......................... 19,880,000 19,164,000
Furniture, fixtures and computer systems ......... 5,979,000 4,732,000
------------- -------------
30,291,000 28,149,000
Less: Accumulated depreciation ......... (10,586,000) (7,848,000)
------------- -------------
Property, plant and equipment, net ............... 19,705,000 20,301,000
------------- -------------
INVESTMENTS IN AND ADVANCES TO AFFILIATES .......... 859,000 1,008,000
OTHER ASSETS, net of accumulated amortization
of $1,585,000 in 1998 and $1,485,000 in 1997 ..... 421,000 563,000
------------- -------------
Total assets ............................ $ 136,110,000 $ 131,711,000
============= =============
</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 28, 1998 AND MARCH 29, 1997
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Bank overdrafts ................................. $ 2,386,000 $ 2,254,000
Working capital revolver ........................ 23,106,000 21,910,000
Accounts payable ................................ 20,153,000 16,568,000
Accrued expenses ................................ 14,396,000 13,055,000
Income taxes payable ............................ 1,001,000 3,794,000
Current portion of long-term debt obligations ... 2,483,000 2,562,000
------------- -------------
Total current liabilities ............... 63,525,000 60,143,000
LONG-TERM DEBT OBLIGATIONS ........................ 3,142,000 5,862,000
OTHER LONG-TERM LIABILITIES ....................... 120,000 120,000
------------- -------------
Total liabilities ....................... 66,787,000 66,125,000
------------- -------------
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, 5,702,404 shares issued
at March 28, 1998 and 5,679,361 shares
issued at March 29, 1997 ...................... 57,000 57,000
Capital in excess of par value .................. 38,513,000 38,285,000
Retained earnings - subsequent to reclass-
ification of $6,750,000 deficit as part of the
quasi-reorganization as of January 3, 1993 .... 30,991,000 27,076,000
Cumulative translation adjustment ............... 271,000 168,000
Treasury stock at cost, 50,000 shares
at March 28, 1998 ............................. (509,000) --
------------- -------------
Total stockholders' equity .............. 69,323,000 65,586,000
------------- -------------
Total liabilities & stockholders' equity $ 136,110,000 $ 131,711,000
============= =============
</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 INCOME
FOR THE THREE YEARS ENDED MARCH 28, 1998
Year Ended Year Ended Year Ended
March 28, 1998 March 29, 1997 March 30, 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Net sales .................................. $ 213,770,000 $ 227,549,000 $ 209,214,000
Cost of sales .............................. 165,976,000 176,484,000 160,282,000
------------- ------------- -------------
Gross profit ..................... 47,794,000 51,065,000 48,932,000
Selling, general and administrative expenses 38,045,000 35,661,000 32,519,000
------------- ------------- -------------
Operating income ................. 9,749,000 15,404,000 16,413,000
Interest expense ........................... (2,608,000) (2,858,000) (2,546,000)
Other income (expenses), net ............... 225,000 90,000 192,000
------------- ------------- -------------
Income before provision for
income taxes ................... 7,366,000 12,636,000 14,059,000
Provision for income taxes ................. 3,451,000 4,635,000 5,635,000
------------- ------------- -------------
Net income ....................... $ 3,915,000 $ 8,001,000 $ 8,424,000
============= ============= =============
Basic earnings per share ................... $ 0.69 $ 1.41 $ 1.49
============= ============= =============
Diluted earnings per share ................. $ 0.69 $ 1.40 $ 1.47
============= ============= =============
</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 28, 1998
Capital Cumulative
Common Stock in Excess Retained Translation Treasury
Shares Par Value of Par Value Earnings Adjustment Stock
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, April 1, 1995 ............ 5,659,383 $ 57,000 $38,106,000 $10,651,000 $ 1,395,000 $ --
----------- ----------- ----------- ----------- ----------- -----------
Net income for the year ended
March 30, 1996 .................... -- -- -- 8,424,000 -- --
Translation adjustment for the year
ended March 30, 1996 .............. -- -- -- -- (1,677,000) --
Provision in lieu of income taxes . -- -- 4,000 -- -- --
Issuance of stock for exercises of
stock options ..................... 17,314 -- 149,000 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, March 30, 1996 ........... 5,676,697 57,000 38,259,000 19,075,000 (282,000) --
----------- ----------- ----------- ----------- ----------- -----------
Net income for the year ended
March 29, 1997 .................... -- -- -- 8,001,000 -- --
Translation adjustment for the year
ended March 29, 1997 .............. -- -- -- -- 450,000 --
Issuance of stock for exercises of
stock options ..................... 2,664 -- 26,000 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, March 29, 1997 ........... 5,679,361 $ 57,000 $38,285,000 $27,076,000 $ 168,000 --
----------- ----------- ----------- ----------- ----------- -----------
Net income for the year ended
March 28, 1998 .................... -- -- -- 3,915,000 -- --
Translation adjustment for the year
ended March 28, 1998 .............. -- -- -- -- 103,000 --
Issuance of stock for exercises of
stock options ..................... 23,043 -- 228,000 -- -- --
Purchase of treasury stock ........ -- -- -- -- -- (509,000)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, March 28, 1998 ........... 5,702,404 $ 57,000 $38,513,000 $30,991,000 $ 271,000 $ (509,000)
=========== =========== =========== =========== =========== ===========
</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 28, 1998
Year Year Year
Ended Ended Ended
March 28, March 29, March 30,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net Income .................................................. $ 3,915,000 $ 8,001,000 $ 8,424,000
------------ ------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ............................................ 3,341,000 3,166,000 3,100,000
Amortization ............................................ 98,000 128,000 260,000
Provision in lieu of income taxes ....................... -- -- 4,000
(Increase) decrease in deferred income taxes ............ 44,000 (464,000) (1,126,000)
Net gain on sale of property, plant and equipment ....... (6,000) (48,000) (52,000)
Changes in operating assets and liabilities, net of
business acquired:
Decrease (increase) in net trade accounts receivable .... 1,661,000 3,827,000 (14,356,000)
Decrease (increase) in inventories ...................... (482,000) (5,543,000) (14,102,000)
Decrease (increase) in prepaid expenses and other
current assets ....................................... 816,000 (633,000) (131,000)
Decrease (increase) in other assets ..................... 202,000 80,000 (494,000)
Increase (decrease) in bank overdrafts .................. 132,000 279,000 505,000
Increase (decrease) in accounts payable and accrued
expenses ............................................. (939,000) (3,490,000) 9,514,000
------------ ------------ ------------
Total adjustments ................................... 4,867,000 (2,698,000) (16,878,000)
------------ ------------ ------------
Cash flows provided by (used in) operating activities 8,782,000 5,303,000 (8,454,000)
------------ ------------ ------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITIES:
Capital expenditures ........................................ (3,049,000) (3,433,000) (15,666,000)
Proceeds from sale of property, plant and equipment ......... 27,000 146,000 130,000
Purchase of certain assets of a distributor ................. (1,849,000) -- --
------------ ------------ ------------
Cash flows provided by (used in) investing activities (4,871,000) (3,287,000) (15,536,000)
------------ ------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED MARCH 28, 1998
Year Year Year
Ended Ended Ended
March 28, March 29, March 30,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Sale of common stock ........................................ 228,000 26,000 149,000
Borrowings under working capital revolver ................... 10,999,000 11,402,000 30,111,000
Repayments under working capital revolver ................... (10,137,000) (17,995,000) (7,203,000)
Borrowing of other debt ..................................... -- 5,000,000 3,610,000
Payments of other debt and capitalized lease obligations .... (2,587,000) (2,281,000) (999,000)
Purchase of Treasury Stock .................................. (509,000) -- --
------------ ------------ ------------
Cash flows provided by (used in) financing activities (2,006,000) (3,848,000) 25,668,000
------------ ------------ ------------
Effect of exchange rate changes on cash ................... (5,000) (136,000) (524,000)
------------ ------------ ------------
Net change in cash .................................. 1,900,000 (1,968,000) 1,154,000
CASH, beginning of period ..................................... 2,992,000 4,960,000 3,806,000
------------ ------------ ------------
CASH, end of period ........................................... $ 4,892,000 $ 2,992,000 $ 4,960,000
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid ............................................... $ 2,682,000 $ 2,809,000 $ 2,082,000
Income taxes paid, net ...................................... $ 6,667,000 $ 4,960,000 $ 4,265,000
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
F-7
<PAGE>
BRIDGEPORT MACHINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) The Company:
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.
(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 1998, 1997 and 1996 ended on
March 28, March 29 and March 30, 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.
Cash-
Cash consists primarily of uncleared cash deposits. These balances
are periodically invested in overnight cash equivalent investment
alternatives.
F-8
<PAGE>
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 a 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.
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
F-9
<PAGE>
develop software. Research and development expense was $5,364,000,
$5,091,000 and $4,634,000 for the years ended March 28, 1998, March
29, 1997 and March 30, 1996, respectively.
Earnings per share-
In February 1997, Statement of Financial Accounting Standards No.
128, "Earnings Per Share" ("FAS 128"), was issued. FAS 128
established new standards for computing and presenting earnings per
share. The Company adopted the new standard in the third quarter of
fiscal 1998. Previously reported earnings per share amounts have
been restated.
Recently Issued Accounting Pronouncements-
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income," which requires that changes in comprehensive
income be shown in a financial statement that is displayed with the
same prominence as other financial statements. This statement is
effective for periods beginning after December 15, 1997. The
Company does not expect adoption of the statement to have a
significant impact on the presentation of its financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS No.
131"), which changes the way public companies report information
about segments. SFAS No. 131, which is based on the management
approach to segment reporting, includes requirements to report
selected segment information quarterly, and entity-wide disclosures
about products and services, major customers, and the material
countries in which the entity holds assets and reports revenues.
This statement is effective for financial statements for periods
beginning after December 15, 1997. The Company does not expect
adoption of the statement to have a significant impact on the
presentation of its 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-10
<PAGE>
Inventories consisted of the following as of March 28, 1998 and March
29, 1997:
1998 1997
------------ ------------
Raw materials $18,351,000 $21,419,000
Work-in-process 25,217,000 21,412,000
Finished goods 23,139,000 20,237,000
------------ ------------
$66,707,000 $63,068,000
=========== ===========
Had the FIFO method been used for all inventories, inventory would have
been approximately the same value as shown at March 28, 1998 and March
29, 1997. Inventories valued under the LIFO method comprised
approximately 48% and 54% of consolidated inventories before the LIFO
adjustment at March 28, 1998 and March 29, 1997, respectively.
(4) Investments in and Advances to Affiliates:
The Company owns 19.5% of the stock of an entity which designs,
develops and markets customized computer aided manufacturing software.
In addition, Bridgeport Machines has agreed to provide loans to this
entity of up to $250,000. As of March 28, 1998, the Company has a loan
receivable of $180,000 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
$735,000.
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 for
25% ownership if all capital of the joint venture were to be called,
net of certain payments required to be made to Bridgeport Machines by
the joint venture, is approximately $1,000,000. Through March 28, 1998,
the Company has contributed $278,000 for capital. 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. As of March 28, 1998, the joint venture company had
no substantive activities. Development of the joint venture has been
suspended due to the current economic and political environment in
Indonesia.
F-11
<PAGE>
(5) Accrued Expenses:
Accrued expenses consisted of the following as of March 28, 1998 and
March 29, 1997:
1998 1997
------------ ------------
Payroll and related accruals $ 3,563,000 $ 3,655,000
Accrued insurance 2,450,000 2,546,000
Warranty reserves 4,100,000 3,284,000
Other 4,283,000 3,570,000
------------ ------------
$14,396,000 $13,055,000
=========== ===========
(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 28,
1998, the Company has no commitments under forward purchase contracts.
Gains (losses) on foreign currency transactions, which are included in
other expense, net in the consolidated statements of income, were
$(114,000), $61,000 and $40,000 for the years ended March 28, 1998,
March 29, 1997 and March 30, 1996, 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-12
<PAGE>
At March 28, 1998 and March 29, 1997, the amounts outstanding were as
follows:
<TABLE>
<CAPTION>
Borrowings Outstanding
----------------------
1998 1997
----------- -----------
<S> <C> <C>
U.S. Revolver prime based borrowings:
(8.75% at March 28, 1998 and 8.75% at
March 29, 1997) $ 3,876,000 $2,089,000
U.S. Revolver LIBOR based borrowings:
(7.6836%) 5,500,000 -
(7.5938%) - 6,500,000
U.K. Revolver LIBOR based borrowings:
(9.6675%) 7,682,000 -
(9.6875%) 3,528,000 -
(9.7475%) 2,520,000 -
(8.1875%) - 7,453,000
(8.2500%) - 5,868,000
----------- -----------
$23,106,000 $21,910,000
=========== ===========
</TABLE>
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-13
<PAGE>
(8) Debt Obligations:
Debt obligations consisted of the following as of March 28, 1998 and
March 29, 1997:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Variable rate term loan $ 2,931,000 $ 4,606,000
Fixed rate term loan 2,694,000 3,809,000
Other -- 9,000
----------- -----------
5,625,000 8,424,000
Less: current portion (2,483,000) (2,562,000)
----------- -----------
Long-term portion $ 3,142,000 $ 5,862,000
=========== ===========
</TABLE>
The variable rate term loan borrowings are repayable monthly through
December 1999 with total principal 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 28, 1998, the term loans bear
interest at 7.9% through March 31, 1998, 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
principal installments of approximately $67,000 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.
On August 1, 1997, the Company acquired certain assets and assumed
certain liabilities of its German distributor. The acquisition was
accounted for as a purchase. The Company paid approximately $1,800,000
in cash for the assets acquired and assumed approximately $2,500,000 of
liabilities. The purchase price approximated book value. The purchase
did not meet the significant subsidiary rules of SEC reporting
requirements.
F-14
<PAGE>
(10) Segment and Customer Information:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
March 28, 1998 March 29, 1997 March 30, 1996
-------------- -------------- --------------
Net Sales:
<S> <C> <C> <C>
Domestic ............ $ 124,241,000 $ 121,766,000 $ 121,802,000
Foreign ............. 83,031,000 99,669,000 80,281,000
Export .............. 6,498,000 6,114,000 7,131,000
------------- ------------- -------------
Total .......... $ 213,770,000 $ 227,549,000 $ 209,214,000
============= ============= =============
Operating Income:
Domestic and Export . $ 8,360,000 $ 4,194,000 $ 7,272,000
Foreign ............. 1,121,000 11,032,000 10,230,000
Eliminations ........ 268,000 178,000 (1,089,000)
------------- ------------- -------------
Total ... $ 9,749,000 $ 15,404,000 $ 16,413,000
============= ============= =============
Identifiable Assets:
Domestic and Export $ 87,945,000 $ 85,393,000 $ 90,336,000
Foreign ............ 72,803,000 66,740,000 64,019,000
Eliminations ....... (24,638,000) (20,422,000) (25,199,000)
------------- ------------- -------------
Total ... $ 136,110,000 $ 131,711,000 $ 129,156,000
============= ============= =============
Net Assets:
Domestic and Export $ 59,064,000 $ 54,477,000 $ 47,771,000
Foreign ........... 23,256,000 23,260,000 20,861,000
Eliminations ...... (12,997,000) (12,151,000) (11,523,000)
------------- ------------- -------------
Total .......... $ 69,323,000 $ 65,586,000 $ 57,109,000
============= ============= =============
</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-15
<PAGE>
(11) Income Taxes:
The provision for income taxes on earnings consisted of the following:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
March 28, 1998 March 29, 1997 March 30, 1996
----------- -------------- ---------
Current:
<S> <C> <C> <C>
Federal ............. $ 2,591,000 $ 1,655,000 $ 2,629,000
Foreign ............. 49,000 3,052,000 3,458,000
State and local ..... 767,000 392,000 670,000
----------- ----------- -----------
3,407,000 5,099,000 6,757,000
----------- ----------- -----------
Deferred:
Federal ............. 134,000 (287,000) (895,000)
Foreign ............. (88,000) (89,000) (22,000)
State and local ..... (2,000) (88,000) (209,000)
----------- ----------- -----------
44,000 (464,000) (1,126,000)
----------- ----------- -----------
Other: ................ -- -- 4,000
----------- ----------- -----------
$ 3,451,000 $ 4,635,000 $ 5,635,000
=========== =========== ===========
</TABLE>
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 28, 1998 March 29, 1997 March 30, 1996
----------- -------------- ---------
<S> <C> <C> <C>
Federal income
tax expense at
statutory rates .......... $ 2,504,000 $ 4,423,000 $ 4,921,000
State taxes ................ 505,000 198,000 305,000
Foreign provision
on income (loss) of
foreign subsidiaries
different than
statutory rate ........... 330,000 (321,000) 347,000
Other ...................... 112,000 335,000 62,000
----------- ----------- -----------
$ 3,451,000 $ 4,635,000 $ 5,635,000
=========== =========== ===========
</TABLE>
F-16
<PAGE>
Pretax foreign income (loss) was $(1,085,000), $9,384,000, and
$8,826,000 for the years ended March 28, 1998, March 29, 1997 and March
30, 1996, 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:
March 28, 1998 March 29, 1997
----------- -----------
Inventory basis differences .... $ 300,000 $ 53,000
Depreciation and amortization .. (547,000) (476,000)
Liabilities and reserves not
currently tax deductible ..... 3,468,000 3,846,000
Net operating loss carryforwards 450,000 --
Other .......................... (60,000) (218,000)
Valuation reserves ............. (511,000) (61,000)
----------- -----------
$ 3,100,000 $ 3,144,000
=========== ===========
(12) Commitments and Contingencies:
Minimum future operating lease obligations at March 28, 1998, by year
and in the aggregate, are as follows:
1999 $1,690,000
2000 1,407,000
2001 1,006,000
2002 933,000
2003 299,000
Thereafter 339,000
Operating leases relate principally to manufacturing, office and
warehouse facilities with non-cancellable portion expiring on various
dates through the year 2011. Operating lease expense for the years
March 28, 1998, March 29, 1997 and March 30, 1996 approximated
$1,649,000, $1,743,000 and $1,455,000, respectively.
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.
F-17
<PAGE>
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 several employees under
which the Company is required to pay total salaries for these employees
of approximately $735,000 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 28, 1998 of
approximately $1,690,000 principally related to insurance programs.
(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 28, 1998, March
29, 1997 and March 30, 1996, the Company recorded expense of
approximately $808,000, $754,000 and $879,000, 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>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (net of
employee contributions) ... $ 625,000 $ 312,000 $ 60,000
Interest cost ............... 1,833,000 1,555,000 1,377,000
Actual return on plan assets (4,014,000) (1,340,000) (3,529,000)
Net amortization and deferral 2,151,000 (629,000) 2,225,000
Other ....................... 975,000 75,000 --
----------- ----------- -----------
$ 1,570,000 $ (27,000) $ 133,000
=========== =========== ===========
</TABLE>
F-18
<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 28, 1998 and March 29,
1997.
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Actuarial present value of accumulated
benefit obligations:
Vested ................................ $ 26,540,000 $ 20,748,000
Nonvested ............................. 268,000 305,000
------------ ------------
$ 26,808,000 $ 21,053,000
============ ============
Actuarial present value of projected
benefit obligation ...................... $ 27,938,000 $ 21,710,000
Plan assets (primarily equity
securities and fixed interest
deposits) ............................... 25,978,000 20,787,000
------------ ------------
Plan assets less than benefit obligation ... (1,960,000) (923,000)
Unrecognized net losses .................... 980,000 733,000
Other ...................................... 150,000 (75,000)
------------ ------------
Pension liability .......................... $ (830,000) $ (265,000)
============ ============
</TABLE>
Following are the significant assumptions used by the plan's actuary:
1998 1997
---- ----
Discount rate 6.75% 8.25%
Rate of increase in compensation levels 4.25% 5.50%
Long-term rate of return on assets 7.50% 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 86,030 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-19
<PAGE>
In addition, the Company maintains the 1994 Non-Employee Director Stock
Option Plan, as amended, under which 120,000 shares of common stock
were reserved for issuance; 70,000 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 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
Options issued 133,600 10.75
Options exercised (23,043) 9.88
Options cancelled (15,834) 10.40
-------
March 28, 1998 334,843 $11.08
=======
</TABLE>
As of March 28, 1998, of the options outstanding, 137,243, 12,000 and
14,500 are exercisable at a weighted average exercise price of $10.18,
$16.25 and $13.51, respectively, and expire in fiscal 2000, 2001 and
2002, respectively.
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.
The Company used the Black-Scholes model to value the stock options
granted. This model may not be indicative of the actual fair value of
such options were a ready market
F-20
<PAGE>
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:
1998 1997
----- -----
Term (years) 5 5
Volatility 26% 56%
Risk-free interest rate 6.75% 6.75%
Dividend yield 0 0
Weighted average fair value $3.92 $7.73
Had the Company determined compensation cost based upon the fair value
at the date of grant for its stock options under FAS 125, the Company's
net income and earnings per share would have been reduced to the
proforma results below:
1998 1997 1996
---------- ---------- ----------
Proforma net income $3,849,000 $7,953,000 $8,409,000
Proforma basic earnings per share $0.68 $1.40 $1.48
Proforma diluted earnings per share $0.68 $1.39 $1.46
Proforma computations for purposes of FAS 123 only consider the portion
of the estimated fair value of awards earned in the three years ended
March 28, 1998. Additional awards in future years would effect the
computations for future years.
(15) Earnings Per Share
Basic earnings per common share for the three years ended March 28,
1998 are calculated by dividing net income by weighted average common
shares outstanding during the period. Diluted earnings per common share
for the three years ended March 28, 1998 are calculated by dividing net
income by weighted average common shares outstanding during the period
plus dilutive potential common shares which are determined as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Weighted average common shares outstanding 5,657,000 5,679,000 5,665,000
Effect of dilutive options to purchase
common stock ........................... 15,000 41,000 83,000
--------- --------- ---------
Adjusted weighted average common shares .. 5,672,000 5,720,000 5,748,000
========= ========= =========
</TABLE>
Dilutive potential common shares are calculated in accordance with the
treasury stock method which assumes that proceeds from the exercise of
all options are used to repurchase common stock at market value. The
number of shares remaining after the proceeds are exhausted represents
the potentially dilutive effect of the securities.
F-21
<PAGE>
Stock options to purchase 73,000 shares of common stock at prices
ranging from $11.44 to $16.25 per share were outstanding at March 28,
1998 and March 29, 1997, but were not included in the computation of
diluted earnings per share because the options' exercise prices were
greater than the average market price of the common stock. These
options expire in fiscal years 2000 to 2002.
(16) 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 1998
Net sales ................. $ 54,546 $ 44,896 $ 58,728 $ 55,600
Operating income .......... 3,333 (150) 3,322 3,244
Net income ................ 1,501 (757) 1,724 1,447
Basic earnings per share .. $ 0.26 ($ 0.13) $ 0.31 $ 0.26
Diluted earnings per share $ 0.26 ($ 0.13) $ 0.31 $ 0.26
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
Basic earnings per share .. $ 0.48 $ 0.28 $ 0.34 $ 0.30
Diluted earnings per share $ 0.47 $ 0.28 $ 0.34 $ 0.30
</TABLE>
Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share may not
necessarily equal the total computed for the year. In accordance with FAS 128,
earnings per share for previously reported periods have been restated.
F-22
<PAGE>
INDEX TO EXHIBITS
EXHIBITS
Exhibit
Number Description
- - ------ -----------
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 (j)
10.2.8 Amendment No. 6 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 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>
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)
10.12 Employment Agreement between the Company and Walter C. Lazarcheck T
11. Statement of Calculation of Earnings Per Share (k)
21. Subsidiaries of the Registrant
23. Consent of Arthur Andersen LLP
27. Financial Data Schedule
- - --------------------
(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) Incorporated by reference from the Company's Annual Report on Form 10-K
for the year ended March 29, 1997
(k) 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 10.2.8
CONSENT AND AMENDMENT NO. 6
TO
AMENDED AND RESTATED
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 6 ("Consent and Amendment") is entered into
as of May 16, 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, an Amendment No. 4 to Amended and Restated Revolving Credit, Term Loan
and Security Agreement dated as of August 2, 1996 and an Amendment No. 5 to
Amended and Restated Revolving Credit, Term Loan and Security Agreement dated as
of March 21, 1997 (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.
Borrowers have requested that Lenders amend certain provisions
of the Loan Agreement and consent to the purchase by BMI of up to $2,500,000 of
its common stock 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 4 below Section 6.7 shall be
amended in its entirety to provide as follows:
"6.7 Senior Interest Coverage. Cause to be maintained as
of the end of each fiscal quarter with respect to the four
(4) fiscal quarters then ending Senior Interest Coverage
not less than 4.0 to 1.0"
<PAGE>
3. Consent by Lenders. BMI has advised the Lenders that it
desires to repurchase some of its issued and outstanding common stock. Lenders
hereby grant their consent to such repurchases by BMI, provided (i) the purchase
price for such shares, in the aggregate, does not exceed $2,500,000, (ii) the
purchase price for such shares is no greater than the price quoted for such
shares on the NASDAQ National Market at the time of such purchase and (iii) at
the time of any such purchase no Event of Default shall have occurred and be
continuing.
4. Conditions Precedent. This Consent and Amendment shall
become effective upon receipt by Lenders of four (4) copies of this Consent and
Amendment executed by Borrowers.
5. Representations and Warranties.
(a) Borrowers hereby represent and warrant that as of the date
hereof:
(i) This Consent and 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.
(ii) Upon the effectiveness of this Consent and
Amendment, 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 effective date
of this Consent and Amendment.
(iii) No Event of Default or Default has occurred and
is continuing or would exist after giving effect to this
Consent and 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 this Consent and
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.
6. Effect on the Loan Agreement.
(a) Upon the effectiveness of this Consent and Amendment, 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.
<PAGE>
(c) The execution, delivery and effectiveness of this Consent
and 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.
7. Governing Law. This Consent and 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.
8. Headings. Section headings in this Consent and Amendment
are included herein for convenience of reference only and shall not constitute a
part of this Consent and Amendment for any other purpose.
9. Counterparts. This Consent and 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 Consent and Amendment has been duly
executed as of the day and year first written above.
BRIDGEPORT MACHINES INC.,
as Borrower and Guarantor
/s/Yvonne L. Megenis
--------------------
Name: Yvonne L. Megenis
Title: Vice President-Treasurer
BRIDGEPORT MACHINES LIMITED,
as Borrower
/s/Yvonne L. Megenis
--------------------
Name: Yvonne L. Megenis
Title: Attorney In Fact
BRIDGEPORT MACHINESS, GmbH,
as Borrower
/s/Yvonne L. Megenis
--------------------
Name: Yvonne L. Megenis
Title: Attorney In Fact
IBJ SCHRODER BANK & TRUST COMPANY,
as Lender and as Agent
/s/Robert R. Wallace
--------------------
Name: Robert R. Wallace
Title: Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
as Lender
/s/ Martin Greenberg
--------------------
Name: Martin Greenberg
Title: Vice President
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
This AGREEMENT dated as of March 27, 1998 between BRIDGEPORT MACHINES,
INC., a Delaware corporation (the "Company") and Walter C. Lazarcheck (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Executive is the Vice President and Chief Financial
Officer of the Company; and
WHEREAS, it is of the utmost importance to the Company that it continue
to have the benefit of the Executive's services, experience and loyalty, and the
Executive has indicated his willingness to provide his services, experience and
loyalty on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. Employment and Duties
(a) General. The Company hereby employs the Executive and the
Executive agrees upon the terms and conditions herein set forth to serve as Vice
President and Chief Financial Officer of the Company and in such capacity, the
Executive agrees to perform the duties delineated in the by-laws of the Company,
together with such additional duties, commensurate with the Executive's position
as Vice President Finance and Chief Financial Officer as may be assigned to the
Executive from time to time by the Board of Directors (the "Board") of the
Company. Notwithstanding the foregoing, the Executive's position and title may
be changed by the Board; provided that the Executive shall at all times be an
executive of the Company. If elected or appointed, the Executive shall also
serve as a director or officer of any of the Company's subsidiaries or
affiliated companies and, if elected, will serve as a member of the Board or
committees of the Board, without further compensation. The principal location of
the Executive's employment shall be in Fairfield County, Connecticut, although
the Executive understands and agrees that he may be required to travel from time
to time for business reasons.
(b) Exclusive Services. Throughout the Period (as defined in
paragraph 2 below), the Executive shall, except as may from time to time be
otherwise agreed in writing by the Company, devote his full-time working hours
to his duties hereunder, shall faithfully serve the Company, shall in all
respects conform to and comply with the lawful and reasonable directions and
instructions given to him by the Board, and shall use his best efforts to
promote and serve the interests of the Company.
(c) No Other Employment. Throughout the Period, the Executive
shall not, directly or indirectly, render services to any other person or
organization for which he receives compensation without the consent of the Board
or otherwise engage in activities which would interfere significantly with the
faithful performance of his duties thereunder. The Executive may perform
inconsequential services without direct compensation therefor in connection with
the management of personal investments, provided that such activity does not
contravene the provisions of subparagraph 1(b) or paragraph 5 hereof.
<PAGE>
2. Terms of Employment. The Company shall retain the Executive and the
Executive shall serve in the employ of the Company until the earlier of his
retirement, death, disability or voluntary termination. Notwithstanding any of
the foregoing, should the Executive be involuntarily terminated other than for
cause as defined in Subparagraph 4(a)(ii), this Agreement shall remain in full
force and effect for a period of two years from the date of involuntary
termination.
3. Compensation and Other Benefits. Subject to the provisions of this
Agreement, the Company shall pay and provide the following compensation and
other benefits to the Executive during the Period as compensation for services
rendered hereunder:
(a) Base Salary. The Company shall pay to the executive an
annual base salary (the "Base Salary") at the rate of $139,150 per annum,
payable in accordance with the payroll practices of the Company. The Company
shall be entitled to deduct or withhold all taxes and charges which the Company
may be required to deduct or withhold therefrom. The Base Salary will be
reviewed not less than annually by the Board and may be increased, but not
decreased below the amount of this Base Salary set forth in the first sentence
of this subparagraph (a), as adjusted annually for charges in the U.S. City
Average Consumer Price Index for all urban consumers (CPI-U (1967=100)), as
published by the U.S. Department of Labor, Bureau of National Statistics, unless
waived by the Executive.
(b) Employee Benefit Plans. At all times during the Period,
the Executive shall be provided the opportunity to participate in pension and
welfare plans, programs and benefits (the "Plans") offered generally to all
executives of the Company.
(c) Fringe Benefits. The Executive shall be entitled to four
weeks of vacation annually and the use of an automobile, subject to and in
accordance with the policies of the Company currently in effect.
4. Termination of Employment
(a) Termination for Cause: Resignation Without
Substantial Breach.
(i) If, prior to the expiration of the Period, the
Executive's employment is terminated by the Company for Cause, as defined in
subparagraph 4(a)(ii), or if the Executive resigns from his employment
hereunder, other than by reason of a Substantial Breach, as defined in
subparagraph 4(b)(ii), the Executive shall be entitled to payment of the pro
rate portion of the Executive's Base Salary under subparagraph 3(a) through and
including the date of the written notice of termination or resignation delivered
in accordance with subparagraph or resignation delivered in accordance with
subparagraph 4(a)(iii) hereof. The Executive shall not be eligible to receive
Base Salary or to participate in any Plans under subparagraph 3(b), with respect
to future periods after the date of such termination or resignation except for
the right to receive vested benefits under any Plan in accordance with the terms
of such Plan.
<PAGE>
(ii) Termination for "Cause" shall mean termination
of the Executive's employment with the Company by the Board because of (A) any
act or omission which constitutes a material breach by the Executive of his
obligations or agreements under this Agreement or the failure or refusal of the
Executive to satisfactorily perform any duties reasonably required hereunder,
after notification by the Board of such breach, failure or refusal and failure
of the Executive to correct any such breach, failure or refusal within ten
business days of such notification (other than by reason of the incapacity of
the Executive due to physical or mental illness) or (B) the commission of the
Executive of a felony or the perpetration by the Executive of common law fraud
against any of the Company or any affiliate or subsidiary thereof.
(iii) The date of termination of employment by the
Company under this paragraph 4(a) shall be the later of the date, if any, set
forth in the written notice of termination delivered by the Company to the
Executive or the date of receipt by the Executive of written notice of
termination. The date of resignation under this paragraph 4(a) shall be ten
business days after receipt by the Company of written notice of resignation.
(b) Termination Without Cause: Resignation After Substantial
Breach
(i) Subject to the provisions of subparagraph
4(b)(iii), if the Executive's employment is terminated by the Company without
Cause, as defined in subparagraph 4(a)(ii), or if the Executive resigns from his
employment hereunder following a Substantial Breach by the Company, as defined
in subparagraph 4(b)(ii) (such Substantial Breach having not been corrected by
the Company within ten business days of receipt of written notice from the
Executive of the occurrence of such Substantial Breach, which notice shall
specifically set forth the nature of the Substantial Breach which is the reason
for such resignation), the Executive shall be entitled to payment of Severance
Benefits, as such term is defined below in this subparagraph, and subject to the
provision of Subparagraph 4(c), (d) and 4(e) hereof, to coverage for the
Executive and the Executive's immediate family under any life, health,
disability of accident insurance plan (the "Welfare Plans") maintained by the
Company, or to comparable benefits, through the period beginning with the date
of termination or resignation. "Severance Benefits" shall mean an amount equal
to two full years of salary at the rate in effect as of the date of termination
or resignation, as the case may be plus any and all benefits or benefit plans as
described in subparagraphs 3(b) and (c) herein. The amount of any bonus awarded
(but not received) during the year preceding the date of termination (or in the
year of termination if a bonus in respect of such year had been awarded prior to
the date of termination).
(ii) "Substantial Breach" shall mean (a) the
assignment to the Executive of any position or duties or principal office
materially inconsistent with the provisions of paragraph 1 hereof; (b) a
reduction by the Company in the Base Salary; or (c) the failure by the Company
to allow the Executive to participate in the Plans in accordance with
subparagraph 3(b); provided, however, that the term "Substantial Breach" shall
not (x) include an immaterial breach by the Company of any provisions of this
Agreement, including clause (a) or (c) above, which does not result in
substantial detriment to the Executive, or (y) a termination for Cause.
<PAGE>
(iii) If, following a termination of employment
without Cause or a resignation following a substantial Breach, the Executive
materially breaches the provisions of paragraph 5 hereof such that the Company
has or is likely to suffer substantial detriment, the Executive shall not be
eligible, as of the date of such breach, for the payment of Severance Benefits
and all obligations and agreements of the Company to pay Severance Benefits
shall thereupon cease.
(iv) The date of termination of employment by the
Company under the subparagraph 4(b) shall be the later of the date specified in
a written notice of termination to the Executive or the date on which such
notice is given to the Executive. The date of resignation under this
subparagraph 4(b) shall be ten business days after receipt by the Company of
written notice or resignation, provided that the Substantial Breach specified in
such notice shall not have been corrected by the Company during such ten
business day period.
(v) Severance Benefits shall be paid at the time
compensation would otherwise have been paid in accordance with the payroll
policy of the Company in effect immediately preceding the date of termination of
the Executive's employment or the Executive's resignation under subparagraph
4(b).
(c) Death. If the Executive dies his beneficiary or estate
shall be entitled to receive, to the date of death, the case compensation
payable to the Executive (Base Salary, at the rate paid to the Executive
pursuant to subparagraph 3(a) at the date of death plus any bonus or other
accrued compensation). In addition, the Executive's immediate family shall be
entitled to participate in the Welfare Plans for a period of 180 days following
the date of death.
(d) Disability. If the Executive becomes permanently Disabled,
as defined below in this subparagraph 4(d), prior to the expiration of the
Period, the Company shall be entitled to terminate his employment. In the event
of such termination, the Executive shall be entitled to receive a pro rata
portion of the Base Salary, at the rate paid to the Executive at the date of
such termination for a period of 180 days following such dates and such amounts,
if any, as are payable to the Executive under any applicable insurance policies.
In addition, the Executive and the Executive's immediate family shall be
entitled to participate in the Welfare Plans for a period of 180 days following
such date of termination of employment. For the purposes of this subparagraph
4(d), the Executive shall be deemed "Permanently Disabled" when, and only when,
he is deemed permanently disabled in accordance with the disability policy of
the Company as in effect from time to time.
(e) Retirement. If the Executive's employment is terminated
upon his Retirement, as defined below in this subparagraph 4(e), the Executive
shall be entitled to receive Base Salary, bonus and benefits in accordance with
paragraph 3 for and in connection with the period through and including the date
of such termination of employment. The Executive shall have no right under this
Agreement or otherwise to receive any other compensation, or to participate in
employment benefit programs with respect to future periods after such
termination of employment with respect to the year of such termination and later
years. "Retirement" shall mean the voluntary termination of employment by the
Executive after the Executive attains age 62.
<PAGE>
5. Secrecy and Noncompetition.
(a) No Competing Agreement. For so long as the Executive is
employed by the Company and continuing for two years after the termination of
such employment or resignation therefrom (such period being referred to
hereinafter as the "Restricted Period"), the Executive shall not, unless he
receives the prior written consent of the Company, directly or indirectly, (i)
own an interest in, manage, operate, join, control, lend money or render
financial or other assistance to or participate in or be connected with, as an
officer, employee, partner, stockholder, consultant or otherwise, any
individual, partnership, firm, corporation or other business organization or
entity that, at such time, competes with the Company in, or is engaged in, or
(ii) otherwise enter into, the business of developing, manufacturing or selling
machine tools or their accessories anywhere in the United States or Europe (a
"Competitor"); provided, however, that nothing herein shall be deemed to
restrict the Executive from owning an interest in a publicly traded Competitor
which interest does not exceed 2% of the outstanding capital stock of a
Competitor.
(b) Consultation. The Executive agrees that during the
Restricted Period the Executive shall be available to the Company for
consultation up to 15 days per year at such times and locations as are agreed by
both the Executive and the Company. In consideration for the Executive's
consulting and advisory services, the Company agrees to make payments to the
Executive twice monthly at the rate of $500 per day for each day of actual
service as a consultant for the balance of the Restricted Period following the
Executive's termination of employment with the Company, provided that the
Executive continues to comply with the provisions of the paragraph 5. In
addition, the Company will reimburse the Executive for any reasonable
out-of-pocket expenses incurred by the Executive in connection with the
Executive's consulting and advisory services following presentation to the
Company of reasonable documentation evidencing such expenses. The rate of the
Executive's compensation pursuant to this subparagraph 5(b) shall be reviewed
annually and may be increased, but not decreased, by the Board. Upon two weeks
prior written notice to the Executive, the Company may elect to discontinue
payments pursuant to this subparagraph 5(b), and, provided that the Executive
has not failed to comply with the provisions of this subparagraph 5(b), the
Executive shall not be bound by the covenants set forth in subparagraph 5(a)
hereof, effective two weeks after receipt of such notice by the Executive.
(c) No Interference. During the Restricted Period, the
Executive shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization (other
than the Company), intentionally solicit, endeavor to entice away from the
Company, or otherwise interfere with the relationship of the Company with, any
person who is employed by or otherwise engaged to perform services for the
Company including, but not limited to, any independent sales representatives or
organizations) or any person or entity who is, or was within the then most
recent twelve-month period, a customer or client or the Company.
(d) Secrecy. The Executive recognizes that the services to be
performed by him hereunder are special, unique and extraordinary in that, by
reason of his employment hereunder and his past employment with the Company, he
may acquire or has acquired confidential information and trade secrets
concerning the operation of the Company's predecessors, or any of its affiliates
<PAGE>
or subsidiaries, the use of disclosure of which could cause the Company, or any
of its affiliates or subsidiaries, substantial loss and damages which could not
be readily calculated and for which no remedy at law would be adequate.
Accordingly, the Executive covenants and agrees with the Company that he will
not at any time, except in performance of the Executive's obligations to the
Company hereunder or with the prior written consent of the Board, directly or
indirectly, disclose any secret or confidential information that he may learn or
has learned by reason of his association with the Company, or any predecessors.
The term "confidential information" includes, without limitation, information
not in the public domain and not previously disclosed to the public or to the
trade by the Company's management with respect to the Company's affiliates or
subsidiaries' products, facilities and methods, trade secrets and other
intellectual property, systems, procedures, manuals, confidential reports,
(including the revenues, costs or profits associated with any of the Company's
products), business plans, prospects or opportunities. The Executive understands
and agrees that the rights and obligations set forth in this subparagraph 5(d)
are perpetual and, in any case, shall extend beyond the Restricted Period and
the Executive's employment hereunder.
(e) Exclusive Property. The Executive confirms that all
confidential information is and shall remain the exclusive property of the
Company. All business records, papers and documents kept or made by the
Executive relating to the business of the Company shall be and remain with
property of the Company. Upon the termination of his employment with the Company
or upon the request of the Company at any time, the Executive shall promptly
deliver to the Company, and shall not, without the consent of the Company, which
shall not be unreasonably withheld, retain copies of any written materials
prepared by or for the Company not previously made available to the public, or
records and documents ,made by the Executive or coming into his possession and
not in the public domain concerning the business, or affairs of the Company or
any predecessors to its business or any of its affiliates or subsidiaries. The
Executive understands and agrees that the rights and obligations set forth in
this subparagraph 5(e) are perpetual and, in any case, shall extend beyond the
Restricted Period and the Executive's employment hereunder.
(f) Inventions. The Executive hereby sells, transfers and
assigns to the Company or to any person, or entity designated by the Company,
all of the entire right, title and interest of the Executive in and to all
inventions, ideas, disclosures and improvements, whether patented or unpatented,
and copyrightable material, made or conceived by the Executive, solely or
jointly, or in whole or in part, during his employment (including employment
prior to the date hereof) by the Company which are not generally known to the
public or recognized as standard practice and which (i) relate to methods,
apparatus, designs, products, processes or devices sold, leases, used or under
construction or development by the Company or any subsidiary and (ii) arise
(wholly or partly) from the efforts of the Executive during the term hereof (an
"Invention"). The Executive shall communicate promptly and disclose to the
Company, in such form as the Company requests, all information, details and data
pertaining to any such Inventions: and, whether during the term hereof or
thereafter, the Executive shall execute and deliver to the Company such formal
transfers and assignments and such other papers and documents as reasonably may
be required of the Executive to permit the Company or any person or entity
designated by the Company to file and prosecute the patent applications and, as
to copyrightable material, to obtain copyright thereon. Any invention by the
Executive within six months following the termination of this Agreement shall be
deemed to fall within the provisions of this paragraph unless the Executive
bears the burden of proof of showing that the Invention was first conceived and
made following such termination.
<PAGE>
(g) Injunctive Relief. Without intending to limit the remedies
available to the Company, the Executive acknowledges that a breach of any of the
convenants contained in this paragraph 5 may result in material irreparable
injury to the Company or the affiliates or subsidiaries for which there is no
adequate remedy at law, that it will not be possible to measure damages for such
injuries precisely and that, in the event of such a breach of threat thereof,
the Company shall be entitled to obtain a temporary restraining order and/or a
preliminary or permanent injunction restraining the Executive from engaging in
activities prohibited by this Paragraph 5 or such other relief as may be
required to specifically enforce any of the covenants in this paragraph 5. The
Executive hereby agrees and consents that such injunctive relief may be sought
ex parte in any state or federal court of record in the State of Connecticut, or
in the state and county in which such violation may occur, or in any other court
having jurisdiction, at the election of the Company. The Executive agrees to and
hereby does submit to in personam jurisdiction before each and every such court
for that purpose.
(h) Extension of Restricted Period. In addition to the
remedies the Company may seek and obtain pursuant to subparagraph (g) of this
paragraph 5, the Restricted Period shall be extended by any and all periods
during which the Executive shall be found by a court possessing personal
jurisdiction over him to have been in violation of the covenants contained in
this paragraph 5.
6. Nonassignability; Binding Agreement
(a) By the Executive. Neither this Agreement nor any right,
duty, obligation or interest hereunder shall be assignable or delegable by the
Executive without the Company's prior written consent; provided, however, that
nothing in this paragraph shall preclude the Executive from designating any of
his beneficiaries to receive any benefits payable hereunder upon his death, or
his executors, administrators, or their legal representatives, from assigning
any rights hereunder to the person or persons entitled thereto.
(b) By the Company. This Agreement and all of the Company's
right and obligations hereunder may be assigned, delegated or transferred by it
to any business entity which at any time by merger, consolidation or otherwise
acquired all or substantially all of the assets of the Company or to which the
Company transfers all or substantially all of its assets. Upon such assignment,
delegation or transfer, any such affiliate, subsidiary or business entity shall
be deemed to be substituted for all purposes as the Company hereunder.
(c) Binding Effect. This Agreement shall be binding upon the
inure to the benefit of, the parties hereto, any successors to or assigns of the
Company and the Executive's heirs and the personal representatives of the
Executive's estate.
7. Severability. If the final determination of a court to competent
jurisdiction declares, after the expiration of the time within which judicial
review (if, permitted) of such determination may be perfected, that any term of
provision hereof is invalid of unenforceable, (a) the remaining terms of
provision shall be deemed replaced by a term or provision that is valid and
enforeceable and that comes closest to expressing the intention of the invalid
or unenforceable term or provision.
<PAGE>
8. Amendment; Waiver. This Agreement may not be modified, amended or
waived in any manner except by an instrument in writing signed by both parties
hereto; provided, however, that any such modification, amendment or waiver on
the part of the Company shall have been previously approved by the Board. The
waiver by either party of compliance with any provision of this Agreement, or of
any subsequent breach by such party of a provision of this Agreement.
9. Governing Law. All matters affecting this Agreement, including the
validity thereof, are to be governed by interpreted and construed in accordance
with the laws of the State of Connecticut.
10. Notices. Any notice hereunder by either party to the other shall be
given in writing by personal delivery or certified mail, return receipt
requested. If addressed to the Executive, the notice shall be delivered or
mailed to the Executive at the address specified under the Executive's signature
hereto, or if addressed to the Company, the notice shall be delivered or mailed
to the Company at its executive offices to the attention of the Board of
Directors of the Company. A notice shall be deemed given, if by personal
delivery, on the date of such delivery, or if by certified mail, on the date
shown on the applicable return receipt.
11. Supersedes Previous Agreements. This Agreement supersedes all prior
or contemporaneous negotiations, commitments, agreements and writings with
respect to the subject matter hereof, all such other negotiations, commitments,
agreements and writings will have no further force or effect, and the parties to
any such other negotiation, commitment, agreement or writing will have no
further rights or obligations thereunder.
12. Counterparts. This Agreement may be executed by either of the
parties hereto in counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
13. Headings. The headings of paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
<PAGE>
IN WITNESS WHEREAS, the Company has caused this Agreement to be signed
by its members of its Compensation Committee of the Board of Directors pursuant
to the authority of its Board, and the Executive has executed this Agreement as
of the date and year first written above.
BRIDGEPORT MACHINES, INC.
By: /s/Robert Cresci
--------------
Robert Cresci
By: /s/Eliot Fried
--------------
Eliot Fried
EXECUTIVE
/s/Walter C. Lazarcheck
------------------------
Walter C. Lazarcheck
109 Overhill Road
Stormville, NY 12582
EXHIBIT 21
Subsidiaries of Bridgeport Machines, Inc.
Bridgeport Machines Limited (directly wholly owned)
Bridgeport Machines GmbH (indirect wholly owned)
Bridgeport Machines FSC Inc. (directly wholly owned)
Bridgeport Machines Vertriebs GmbH (indirect wholly owned)
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 statements on Form S-8 (File Nos. 33-99006 and 333-42577).
/s/ARTHUR ANDERSEN LLP
----------------------
ARTHUR ANDERSEN LLP
Stamford, Connecticut
June 17, 1998
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