UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarterly Period Ended October 3, 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 000-25l02
BRIDGEPORT MACHINES, INC.
(exact name of registrant as specified in its charter)
Delaware 06-ll69678
(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) 367-365l
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ]
The number of shares of Issuer's Common Stock, $.0l par value, outstanding on
October 3, l998 was 5,634,404 shares.
<PAGE>
BRIDGEPORT MACHINES, INC.
AND SUBSIDIARIES
INDEX
Part I - FINANCIAL INFORMATION
Item l. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of
October 3, 1998 and March 28, 1998
Consolidated Statements of Operations for
the three month and six month periods
ended October 3, 1998 and
September 27, 1997
Consolidated Statements of Stockholders'
Equity for the six month periods ended
October 3, 1998 and September 27, 1997
Consolidated Statements of Cash Flows
for the six month periods ended
October 3, 1998 and September 27, 1997
Notes to Consolidated Financial Statements
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Part II - OTHER INFORMATION
Item l-5. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Signatures
<PAGE>
BRIDGEPORT MACHINES, INC.
FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Quarterly Report on Form 10-Q and the Company's previously filed Annual Reports
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.
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
October 3, March 28,
l998 l998
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash ................................... $ 5,838 $ 4,892
Trade accounts receivable,
less allowance of $1,630
and $1,551, respectively ............. 33,567 39,236
Inventories ............................ 65,420 66,707
Deferred income taxes .................. 3,100 3,100
Prepaid expenses and other current
assets ................................. 1,058 1,190
--------- ---------
Total current assets ............... 108,983 115,125
PROPERTY, PLANT AND EQUIPMENT
Land ................................... 353 351
Buildings, improvements and
leasehold improvements ............... 4,222 4,081
Machinery and equipment ................ 20,970 19,880
Furniture and fixtures ................. 6,154 5,979
--------- ---------
31,699 30,291
Less: Accumulated depreciation ................ (11,785) (10,586)
--------- ---------
Property, plant and equipment,
net ............................... 19,914 19,705
--------- ---------
INVESTMENTS IN AND ADVANCES TO AFFILIATES ...... 1,035 859
OTHER ASSETS, net of accumulated
amortization of $1,634
and $1,585 respectively ...................... 317 421
--------- ---------
Total assets ...................... $ 130,249 $ 136,110
========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
October 3, March 28,
1998 l998
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdrafts ....................... $ 1,057 $ 2,386
Working capital revolver .............. 24,215 23,106
Accounts payable ...................... 13,134 20,153
Accrued expenses ...................... 15,386 14,396
Income taxes payable .................. 762 1,001
Current portion of long-term debt
obligations ......................... 2,571 2,483
------------ ------------
Total current liabilities ........ 57,125 63,525
LONG-TERM DEBT OBLIGATIONS .................... 1,924 3,142
OTHER LONG-TERM LIABILITIES ................... 120 120
------------ ------------
Total liabilities ................ 59,169 66,787
STOCKHOLDERS' EQUITY
Preferred stock, $.0l par value,
2,000,000 shares authorized,
no shares issued .................... -- --
Common stock, $.0l par value,
13,000,000 shares authorized;
5,704,404 shares issued at October 3,
1998 and 5,702,404 shares issued
at March 28, 1998 ................... 57 57
Capital in excess of par value ........ 38,533 38,513
Retained earnings--subsequent to
reclassification of $6,750
deficit as part of the quasi-
reorganization as of January 3,
l993 ................................ 31,597 30,991
Other comprehensive income:
Cumulative translation adjustment ... 1,589 271
Treasury stock at cost, 70,000 shares . (696) (509)
------------ ------------
Total stockholders' equity ....... 71,080 69,323
------------ ------------
Total liabilities and stock-
holders' equity .................. $ 130,249 $ 136,110
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH AND SIX MONTH PERIODS
ENDED OCTOBER 3, 1998 AND SEPTEMBER 27, 1997
(In Thousands, Except Per Share Amounts)
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- ----------------------------
October 3, September 27, October 3, September 27,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales .......... $ 48,447 $ 44,896 $ 99,533 $ 99,442
Cost of sales ...... 38,748 35,393 78,691 77,327
-------- -------- -------- --------
Gross profit ..... 9,699 9,503 20,842 22,115
Selling, general and
administrative
expenses ......... 9,199 9,653 18,766 18,932
-------- -------- -------- --------
Operating income
(loss) .......... 500 (150) 2,076 3,183
Interest expense ... (649) (657) (1,279) (1,301)
Other income
(expense), net ... 87 176 5 46
-------- -------- -------- --------
Income (loss)
before provision
(benefit) for
income taxes .... (62) (631) 802 1,928
Provision (benefit)
for income taxes (121) 126 196 1,184
-------- -------- -------- --------
Net income (loss) $ 59 $ (757) $ 606 $ 744
======== ======== ======== ========
Basic Earnings Per
Share ............. $ 0.01 $ (0.13) $ 0.11 $ 0.13
======== ======== ======== ========
Diluted Earnings Per
Share ............. $ 0.01 $ (0.13) $ 0.11 $ 0.13
======== ======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTH PERIODS ENDED OCTOBER 3, 1998 AND SEPTEMBER 27, 1997
(In Thousands)
ACCUMULATED
OTHER
COMPENHENSIVE
INCOME:
CAPITAL IN CUMULATIVE TOTAL
COMMON EXCESS OF RETAINED TRANSLATION TREASURY STOCKHOLDERS'
STOCK PAR VALUE EARNINGS ADJUSTMENT STOCK EQUITY
-------- -------- -------- -------- ---- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, March 29, 1997 ..... $ 57 $ 38,285 $ 27,076 $ 168 $ -- $ 65,586
--------
Comprehensive Income:
Net income for the six
months ended September
27, 1997 ................ -- -- 744 -- -- 744
Other Comprehensive Income:
Translation adjustment
for the six months
ended September 27,
1997 -- -- -- (540) -- (540)
--------
Total Comprehensive
Income .............. 204
Purchase of Common Stock
for treasury ............ -- -- -- -- (509) (509)
-------- -------- -------- -------- -------- --------
BALANCE, September 27, 1997 . $ 57 $ 38,285 $ 27,820 $ (372) $ (509) $ 65,281
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTH PERIODS ENDED OCTOBER 3, 1998 AND SEPTEMBER 27, 1997
(In Thousands)
(continued)
ACCUMULATED
OTHER
COMPENHENSIVE
INCOME:
CAPITAL IN CUMULATIVE TOTAL
COMMON EXCESS OF RETAINED TRANSLATION TREASURY STOCKHOLDERS'
STOCK PAR VALUE EARNINGS ADJUSTMENT STOCK EQUITY
-------- -------- -------- -------- ---- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, March 28, 1998 ..... $ 57 $ 38,513 $ 30,991 $ 271 $ (509) $ 69,323
--------
Comprehensive Income:
Net income for the six
months ended October 3,
l998 .................... -- -- 606 -- -- 606
Other Comprehensive Income:
Translation adjustment
for the six months
ended October 3, 1998 . -- -- -- 1,318 -- 1,318
--------
Total Comprehensive
Income ............ 1,924
--------
Exercise of stock options
for common stock .......... -- 20 -- -- -- 20
Purchase of Common Stock
for treasury ................ -- -- -- -- (187) (187)
-------- -------- -------- -------- -------- --------
BALANCE, October 3, 1998 .... $ 57 $ 38,533 $ 31,597 $ 1,589 $ (696) $ 71,080
======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED OCTOBER 3, 1998 AND SEPTEMBER 27, 1997
(In Thousands)
October 3, September 27,
1998 1997
------- -------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Net income ..................................... $ 606 $ 744
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization ........... 1,755 1,600
Net (gain) on sale of property,
plant and equipment ................... (124) (3)
Changes in operating assets and
liabilities:
Decrease (increase) in net trade
accounts receivable ...................... 6,089 7,248
Decrease (increase) in inventories ......... 1,699 862
Decrease (increase) in prepaid expenses
and other current assets ................. 172 551
Decrease (increase) in other assets ........ (66) 310
(Decrease) increase in bank overdrafts ..... (1,329) (606)
Increase (decrease) in accounts payable
and accrued expenses ..................... (6,092) (3,667)
------- -------
Total adjustments ........................ 2,104 6,295
------- -------
Cash flows provided by (used in)
operating activities ......................... 2,710 7,039
------- -------
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES:
Capital expenditures ........................... (1,194) (1,505)
Proceeds from sale of property,
plant and equipment .......................... 128 9
Purchase of certain assets of a distributor .... -- (1,245)
Purchase of treasury stock ..................... (187) (509)
------- -------
Cash flows provided by (used in)
investing activities ....................... (1,253) (3,250)
------- -------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED OCTOBER 3, 1998 AND SEPTEMBER 27, 1997
(In Thousands)
October 3, September 27,
1998 1997
------- -------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES:
Sale of common stock ........................... $ 20 $ --
Borrowings (payments) under working
capital revolver, net ........................ 606 17
Borrowings (payments) of other debt and
capitalized lease obligations ................ (1,556) (1,233)
------- -------
Cash flows provided by (used in)
financing activities ....................... (930) (1,216)
------- -------
Effect of exchange rate changes
on cash ...................................... 419 (90)
------- -------
Net change in cash ........................... 946 2,483
CASH, beginning of period ...................... 4,892 2,992
------- -------
CASH, end of period ............................ $ 5,838 $ 5,475
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid .................................. $ 1,332 $ 1,307
Income taxes paid, net ......................... 474 1,093
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
<PAGE>
BRIDGEPORT MACHINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND BASIS OF PRESENTATION
Bridgeport Machines, Inc. and subsidiaries (the "Company") is a
manufacturer and distributor of metal cutting machine tools and
accessories. The Company manufactures its products in the U.S. and
Europe. Sales are principally in North America and Europe. A
substantial portion of the end users of the Company's products are
small and medium sized independent job shops who produce machined parts
for customers in a wide variety of industries.
The consolidated balance sheet as of October 3, 1998 and the related
consolidated statements of operations, stockholders' equity and cash
flows for the six months ended October 3, 1998 and September 27, 1997
have been prepared by the Company without audit. In the opinion of
management, all adjustments necessary to present fairly the financial
position, results of operations and cash flows as of or for the periods
ended October 3, 1998 and September 27, 1997 have been made. The
accounting principles followed during interim periods are generally
consistent with those applied for annual periods and are described in
the Company's financial statements included in its Form 10-K filed with
the Securities and Exchange Commission (the "SEC").
2. INTERIM STATEMENTS
The following accounting policies which are applied in the preparation
of the interim financial statements are different from those applied in
the year-end financial statements:
Inventories:
Inventories are valued at year-end based upon actual inventory
on hand verified by a physical count. Inventories are adjusted
during interim periods for purchases, production and shipments
based upon standard costs for material, labor and overhead.
Income Taxes:
The income tax provision is calculated based upon an estimated
tax rate for the year for each tax jurisdiction.
3. 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 EPS. The Company adopted the new
standard in the third quarter of fiscal 1998. Earnings per share
information for prior periods has been restated using the new
guidelines.
<PAGE>
Basic earnings per common share for the three and six months ended
October 3, 1998 and September 27, 1997 are calculated by dividing net
income by weighted average common shares outstanding during the period.
Diluted earnings per common share for the three and six months ended
October 3, 1998 and September 27, 1997 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>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------- --------------------
Oct. 3, Sept. 27, Oct. 3, Sept. 27,
1998 1997 1998 1997
----- ----- ----- -----
(amounts in thousands)
<S> <C> <C> <C> <C>
Weighted average common
shares outstanding ........... 5,647 5,663 5,651 5,671
Effect of dilutive
options to purchase
common stock ................. 9 0 21 10
Adjusted weighted
average common shares ........ 5,656 5,663 5,672 5,681
</TABLE>
Stock options to purchase 347,510 and 259,620 shares of common stock at
October 3, 1998 and September 27, 1997, respectively, at prices ranging
from $9.50 to $16.25 and from $10.00 to $16.25 per share were
outstanding at October 3, 1998 and September 27, 1997, respectively,
and did not meet the requirements to be included in the computation of
diluted earnings per share for the three month periods. These options
expire in fiscal years 2000 to 2003.
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.
<PAGE>
4. COMPREHENSIVE INCOME
In June 1997, Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("FAS 130") was issued. FAS 130
requires the disclosure of comprehensive income to reflect changes in
equity that result from transactions and economic events from non-owner
sources. Comprehensive income for the three and six months ended
October 3, 1998 and September 27, 1997 presented below include foreign
currency translation items. There was no tax expense or tax benefit
associated with the foreign currency translation items.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------- --------------------
Oct. 3, Sept. 27, Oct. 3, Sept. 27,
1998 1997 1998 1997
------- ------- ------- -------
(amounts in thousands)
<S> <C> <C> <C> <C>
Net income (loss) ............ $ 59 $ (757) $ 606 $ 744
Foreign currency
translation adjustments .... 1,524 (720) 1,318 (540)
------- ------- ------- -------
Comprehensive income ......... $ 1,583 $(1,477) $ 1,924 $ 204
======= ======= ======= =======
</TABLE>
5. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("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. The first disclosure required by this statement will be in
the Company's annual financial statements for the year ending April 3,
1999. The Company does not expect adoption of the statement to have a
significant impact on the presentation of its financial statements.
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" which provides new guidelines for accounting for derivative
instruments. The Company is currently analyzing what, if any, impact
the new guideline will have on the Company. This new statement is
effective for financial periods beginning after June 15, 1999.
6. ACQUISITION
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 in installments
approximately $1.8 million in cash for the assets acquired and assumed
approximately $2.5 million of liabilities. The purchase price
approximated book value. The purchase did not meet the significant
subsidiary rules of SEC reporting requirements.
<PAGE>
BRIDGEPORT MACHINES, INC. AND SUBSIDIARIES
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>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------------- -------------------------------
October 3, September 27, October 3, September 27,
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 20.0 21.2 20.9 22.2
Selling, general and
administrative
expenses 19.0 21.5 18.8 19.0
Operating income (loss) 1.0 (0.3) 2.1 3.2
Interest expense 1.3 1.5 1.3 1.3
Other income 0.2 0.4 0.0 0.0
(expense)
Income tax expense
(benefit) (0.2) 0.3 0.2 1.2
Net income (loss) 0.1 (1.7) 0.6 0.7
</TABLE>
FISCAL CALENDAR
The Company's fiscal year is the 52 or 53 week period ending Saturday
nearest to March 31. Fiscal 1998 was a 52 week year while fiscal 1999 is a 53
week year. The additional week in fiscal 1999 is included in the second quarter
of fiscal 1999. As a result, the second quarter of fiscal 1999 and the six
months ended October 3, 1998 include 14 weeks and 27 weeks, respectively, while
the second quarter of fiscal 1998 and the six months ended September 27, 1997
include 13 weeks and 26 weeks, respectively.
COMPARISON OF THE THREE MONTHS ENDED OCTOBER 3, 1998 ("SECOND QUARTER OF FISCAL
1999") TO THE THREE MONTHS ENDED SEPTEMBER 27, 1997 ("SECOND QUARTER OF FISCAL
1998")
Net sales were $48.4 million in the second quarter of fiscal l999, an
increase of $3.6 million, or 7.9%, as compared to the second quarter of fiscal
l998. The increase in sales consists of an increase in sales in Europe of
approximately $9.3 million offset to some extent by a decrease in sales in North
America of $5.3 million and the Pacific Rim of $0.6 million. The increase in
European sales is predominately a result of better market conditions in
continental Europe. The decrease in sales in North America and the Pacific Rim
is a result of weaker market conditions.
<PAGE>
During the second quarter of fiscal 1999, the Company's incoming orders
in North America and Europe were approximately 25% and 60% less, respectively,
than the incoming orders in the second quarter of fiscal 1998. These declines
appear to represent a cyclical trend in the United States and the United
Kingdom, the Company's two principal markets, of declining purchases by
customers for machine tools in the segment of the machine tool industry in which
the Company participates. The Company cannot predict for what period of time the
low end of the purchasing cycle could continue or the level at which incoming
orders will be.
Backlog at October 3, 1998 was approximately $28.3 million compared
with approximately $38.1 million at June 27, 1998. Of the backlog at October 3,
1998, approximately $6.8 million relates to sales in North America and
approximately $21.5 million relates to sales in Europe and the Middle East. 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. At the current levels of backlog, the Company is more dependent on
future incoming orders than it has been in the recent past. During the second
quarter of fiscal 1999, the Company's incoming orders in North America and
Europe were approximately 25% and 60% less, respectively, than the incoming
orders in the second quarter of fiscal 1998.
Gross profit was $9.7 million in the second quarter of fiscal l999, an
increase of $0.2 million, or 2.1%, as compared to the second quarter of fiscal
l998. Gross profit declined approximately $1.6 million in the Company's U.S.
operations due to decreased North American sales. This decline was offset by an
approximate $1.8 million increase in gross profit in the Company's European
operations due primarily to increased continental European sales. Gross profit
as a percent of net sales was 20.0% compared with 21.2% in the second quarter of
fiscal 1998. The decline in gross profit as a percent of sales was predominately
due to a change in product mix. As sales in Europe increased, machining center
products represented a larger portion of total sales than in the prior year.
These products have a lower gross profit as a percent of sales than some of the
other products the Company sells.
Selling, general and administrative expenses were $9.2 million in the
second quarter of fiscal l999, a decrease of $0.5 million, or 4.7%, as compared
to the second quarter of fiscal l998. As a percentage of net sales, selling,
general and administrative expenses were 19.0% in the second quarter of fiscal
l999, as compared to 21.5% for the second quarter of fiscal l998.
Operating income was $0.5 million for the second quarter of fiscal
l999, as compared to operating loss of $0.1 million for the second quarter of
fiscal l998.
Interest expense was $0.6 million for the second quarter of fiscal l999
as compared to $0.7 million for the second quarter of fiscal l998.
Benefit for income taxes was $0.1 million in the second quarter of
fiscal l999, compared to a provision for income taxes of $0.1 million in the
second quarter of fiscal 1998. The tax benefit in the second quarter of fiscal
1999 is primarily a result of a tax benefit recorded in the Company's United
Kingdom operations. During the second quarter of fiscal 1999 the Company also
utilized net operating loss carryforwards in its German operations. The tax
provision in the second quarter of fiscal 1998 primarily represents a tax
provision for the U.S. operating results offset somewhat by a tax benefit for
the Company's United Kingdom results. Tax benefits for losses incurred in the
Company's German operations were not established in the second quarter of fiscal
1998 because they were not currently recognizable for tax return purposes.
<PAGE>
COMPARISON OF THE SIX MONTHS ENDED OCTOBER 3, 1998 TO THE SIX MONTHS ENDED
SEPTEMBER 27, 1997
Net sales were $99.5 million for the six months ended October 3, 1998,
an increase of $0.1 million, or 0.1%, as compared to the six months ended
September 27, 1997. Net sales in Europe increased by approximately $13.5 million
in the six months ended October 3, 1998 as compared to the six months ended
September 27, 1997. Net sales in North America and the Pacific Rim decreased
approximately $11.2 million and $2.4 million, respectively, in the six months
ended October 3, 1998 as compared to the six months ended September 27, 1997.
The increase in sales in Europe was a result of better market conditions in
continental Europe, while the decrease in sales in North America and the Pacific
Rim is due to weaker market conditions.
Gross profit was $20.8 million for the six months ended October 3,
1998, a decrease of $1.3 million, or 5.8%, as compared to the six months ended
September 27, 1997. Gross profit declined approximately $4.1 million in the
Company's U.S. operations due to decreased North American sales. This decline
was offset somewhat by an approximate $2.8 million increase in gross profit in
the Company's European operations due primarily to increased continental
European sales. The gross profit as a percentage of net sales was 20.9% for the
six months ended October 3, 1998 versus 22.2% for the six months ended September
27, 1997. Gross profit as a percent of sales declined due to a decline in sales
in North America and a change in product mix. As sales in Europe increased,
machining center products represented a larger portion of total sales than in
the prior year. These products have a lower gross profit as a percent of sales
than some of the other products the Company sells.
Selling, general and administrative expenses were $18.8 million for the
six months ended October 3, 1998, a decrease of $0.2 million, or 0.9%, as
compared to the six months ended September 27, 1997. As a percentage of net
sales, selling, general and administrative expenses were 18.8% for the six
months ended October 3, 1998, as compared to 19.0% for the six months ended
September 27, 1997.
Operating income was $2.1 million for the six months ended October 3,
1998, as compared to $3.2 million for the six months ended September 27, 1997.
Interest expense was $1.3 million for the six months ended October 3,
1998 and $1.3 million for the six months ended September 27, 1997.
Provision for income taxes was $0.2 million for the six months ended
October 3, 1998, compared to a tax provision of $1.2 million for the six months
ended September 27, 1997. The tax provision for the six months ended October 3,
1998 reflects a benefit in the Company's German operations for the utilization
of net operating loss carryforwards. The tax provision in the six months ended
September 27, 1997 primarily represents a tax provision for the U.S. operating
results offset by a tax benefit for the Company's United Kingdom results. Tax
benefits for losses incurred in the Company's German operations in the six
months ended September 27, 1997 were not established because they were not
currently recognizable for tax return purposes.
FOREIGN OPERATIONS:
During the six months ended October 3, 1998, net sales outside North
America represented approximately 51% of total net sales, as compared to 40% for
the six months ended September 27, 1997. A substantial portion of these net
sales were made by the Company's European operations.
<PAGE>
Generally, from time to time, the Company enters into forward exchange
contracts to provide economic hedges against foreign currency fluctuations
primarily on its intercompany sales transactions between its U.S. and U.K.
operations. At October 3, 1998, the Company did not have any outstanding
commitments under forward purchase contracts.
LIQUIDITY AND CAPITAL RESOURCES:
As of October 3, 1998, the Company had working capital of $51.9 million
compared with $51.6 million at March 28, 1998. The Company meets its short-term
financing needs through cash from operations and its revolving credit facility
which provides for maximum borrowings, subject to certain limitations, of up to
$24.5 million in the United States and $19.5 million in the United Kingdom.
The table below presents the summary of cash flow for the periods
indicated:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------------------------
October 3, 1998 September 27, 1997
--------------- ------------------
(amounts in thousands)
<S> <C> <C>
Net cash provided by (used in)
operating activities $ 2,710 $ 7,039
Net cash provided by (used in)
investing activities (1,253) (3,250)
Net cash provided by (used in)
financing activities (930) (1,216)
</TABLE>
Net cash provided by (used in) operating activities fluctuates between
periods primarily as a result of differences in net income, the timing of the
collection of accounts receivable, purchase of inventory, level of sales and
payment of accounts payable. Included in net cash provided by (used in)
investing activities in the six months ended September 27, 1997 is a $1.2
million payment for the purchase of certain assets as discussed in Note 6 to the
financial statements. The net cash provided by (used in) financing activities in
the six months ended October 3, 1998 and September 27, 1997, represents
primarily net borrowings or repayments of debt.
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
October 3, 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 other factors, or that future credit facilities will be available.
CHANGES IN FINANCIAL POSITION:
At October 3, 1998, accounts receivable and inventories decreased $5.7
million and $1.3 million, respectively, as compared to March 28, 1998 primarily
due to lower sales.
<PAGE>
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. During the second quarter of fiscal 1999, the Company's
incoming orders in North America and Europe were approximately 25% and 60% less,
respectively, than the incoming orders in the second quarter of fiscal 1998.
These declines appear to represent a cyclical trend in the United States and the
United Kingdom, the Company's two principal markets, of declining purchases by
customers for machine tools in the segment of the machine tool industry in which
the Company participates. The Company cannot predict for which period of time
the low end of the purchasing cycle could continue or the level at which
incoming orders will be.
YEAR 2000 READINESS DISCLOSURE:
Many companies may face potential serious business problems because
software applications and business equipment developed in the past may not
properly recognize future calendar dates due to Year 2000 limitations. These
problems could cause systems to become unstable, stop working or provide
incorrect data based upon dates.
The Company is continuing its assessment of the impact on the Year 2000
issue on its operations. Based upon its assessment to date, the Company believes
that the majority of its significant internal computer operating and date
sensitive systems are Year 2000 compliant. Part of this belief is based upon
third party representations. Discussions to date with third party suppliers have
not indicated that any significant problems will occur as a result of the Year
2000 that would materially effect the Company's ability to operate. Many of the
Company's suppliers are still working on ensuring that they will be Year 2000
compliant. Based on the current status of the Company's Year 2000 compliance
assessment, the estimated total costs to be incurred for all the Company's Year
2000 related projects are not expected to exceed approximately $100,000. Such
expenses will be expensed as incurred and are exclusive of systems being
replaced or upgraded in the normal course of business.
In addition, the Company's customer base may also be facing problems
related to Year 2000. Such problems could affect their spending plans and thus
potentially impact the Company's future sales.
Due to the intricate nature of the Year 2000 problems that could arise
if the Company and other businesses with which it transacts business fail to
address this issue, such problems could result in a material financial risk to
the Company.
<PAGE>
PART II - OTHER INFORMATION
Item l Legal Proceedings None
Item 2 Changes in Securities None
Item 3 Defaults Upon Senior Securities None
Item 4 Submission of Matters to a
Vote of Security Holders
a) Election of Directors:
Bhikhaji M. Maneckji
Votes For 5,478,650
Votes Withheld 17,960
b) Ratification of the selection of Arthur Andersen LLP
as independent public accountants for fiscal 1999.
Votes For 5,483,910
Votes Against 12,065
Abstained 635
Item 5 Other Information None
Item 6 Exhibits and Reports on Form 8-K Exhibit No.
-------------------------------- -----------
a) Exhibits
(2) Not Applicable
(4) Not Applicable
(l0) Not Applicable
(ll) Statement regarding computation
of per share earnings is not
required because the relevant
computation can be determined
from the material contained in
the Financial Statements
included herein.
(l5) Not Applicable
(18) Not Applicable
(l9) Not Applicable
(22) Not Applicable
(23) Not Applicable
(24) Not Applicable
(27) Financial Data Schedule 27
(99) Not Applicable
b) There were no reports or exhibits on Form 8-K filed
during the three months ended October 3, 1998.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of l934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
BRIDGEPORT MACHINES, INC.
(Registrant)
November 13, 1998 /s/ Dan L. Griffith
-------------------
By: Dan L. Griffith
President and
Chief Executive Officer
November 13, 1998 /s/ Walter C. Lazarcheck
------------------------
By: Walter C. Lazarcheck
Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-3-1999
<PERIOD-END> OCT-3-1998
<CASH> 5,838
<SECURITIES> 0
<RECEIVABLES> 33,567
<ALLOWANCES> 1,630
<INVENTORY> 65,420
<CURRENT-ASSETS> 108,983
<PP&E> 31,699
<DEPRECIATION> 11,785
<TOTAL-ASSETS> 130,249
<CURRENT-LIABILITIES> 57,125
<BONDS> 1,924
0
0
<COMMON> 57
<OTHER-SE> 71,023
<TOTAL-LIABILITY-AND-EQUITY> 130,249
<SALES> 99,533
<TOTAL-REVENUES> 99,533
<CGS> 78,691
<TOTAL-COSTS> 78,691
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,279
<INCOME-PRETAX> 802
<INCOME-TAX> 196
<INCOME-CONTINUING> 606
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 606
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
