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 July 3, 1999
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
July 3, 1999 was 5,568,104 shares.
<PAGE>
BRIDGEPORT MACHINES, INC.
AND SUBSIDIARIES
INDEX
Part I - FINANCIAL INFORMATION
- ------------------------------
Item l. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of
July 3, 1999 and April 3, 1999
Consolidated Statements of Operations for
the three month periods ended July 3,
1999 and June 27, 1998
Consolidated Statements of Stockholders'
Equity for the three month periods ended
July 3, 1999 and June 27, 1998
Consolidated Statements of Cash Flows
for the three month periods ended
July 3, 1999 and June 27, 1998
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-4. OTHER INFORMATION
Item 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)
July 3, April 3,
l999 l999
--------- ---------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 5,764 $ 3,844
Trade accounts receivable,
less allowance of $1,289
and $1,402, respectively 23,661 24,712
Inventories 46,265 52,206
Prepaid income taxes 433 433
Deferred income taxes 2,499 2,499
Prepaid expenses and other current
assets 639 940
--------- ---------
Total current assets 79,261 84,634
PROPERTY, PLANT AND EQUIPMENT:
Land 340 342
Buildings, improvements and
leasehold improvements 4,098 4,116
Machinery and equipment 18,835 19,342
Furniture and fixtures 6,256 6,267
--------- ---------
29,529 30,067
Less: Accumulated depreciation (13,270) (12,684)
--------- ---------
Property, plant and equipment,
net 16,259 17,383
--------- ---------
INVESTMENTS IN AND ADVANCES TO AFFILIATES 535 649
OTHER ASSETS, net of accumulated
amortization of $386
and $357, respectively 241 300
--------- ---------
Total assets $ 96,296 $ 102,966
========= =========
</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)
July 3, April 3,
l999 l999
--------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdrafts $ 372 $ 786
Working capital revolver 7,540 9,770
Accounts payable 7,845 9,366
Accrued expenses 13,492 13,408
Income taxes payable 70 --
Current portion of long-term debt
obligations 614 1,264
--------- ---------
Total current liabilities 29,933 34,594
LONG-TERM DEBT OBLIGATIONS 993 1,086
OTHER LONG-TERM LIABILITIES 120 120
--------- ---------
Total liabilities 31,046 35,800
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 July 3, 1999 and April 3, 1999 57 57
Capital in excess of par value 38,533 38,533
Retained earnings--subsequent to
reclassification of $6,750
deficit as part of the quasi-
reorganization as of January 3,
l993 29,362 30,505
Other comprehensive income:
Cumulative translation adjustment (1,557) (784)
Treasury stock at cost, 136,300 shares
at July 3, 1999 and April 3, 1999 (1,145) (1,145)
--------- ---------
Total stockholders' equity 65,250 67,166
--------- ---------
Total liabilities and stock-
holders' equity $ 96,296 $ 102,966
========= =========
</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 MONTHS ENDED JULY 3, 1999 AND JUNE 27, 1998
(In Thousands, Except Per Share Amounts)
July 3, June 27,
1999 1998
-------- --------
<S> <C> <C>
Net sales $ 35,132 $ 51,086
Cost of sales 27,786 39,943
-------- --------
Gross profit 7,346 11,143
Selling, general and
administrative expenses 7,869 9,567
-------- --------
Operating income (loss) (523) 1,576
Interest expense (178) (630)
Other income (expense), net (40) (82)
-------- --------
Income (loss) before provision
for income taxes (741) 864
Provision for income taxes 402 317
-------- --------
Net income (loss) $ (1,143) $ 547
======== ========
Basic earnings (loss) per share $ (0.21) $ 0.10
======== ========
Diluted earnings (loss) per share $ (0.21) $ 0.10
======== ========
</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 THREE MONTHS ENDED JULY 3, 1999 AND JUNE 27, 1998
(In Thousands)
ACCUMULATED
OTHER
COMPREHENSIVE
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 three
months ended June 27,
l998 -- -- 547 -- -- 547
Other Comprehensive Income:
Translation adjustment
for the three months
ended June 27, 1998 -- -- -- (206) -- (206)
--------
Total Comprehensive
Income 341
--------
Exercise of stock options
for common stock -- 20 -- -- -- 20
-------- -------- -------- -------- -------- --------
BALANCE, June 27, 1998 $ 57 $ 38,533 $ 31,538 $ 65 $ (509) $ 69,684
======== ======== ======== ======== ======== ========
BALANCE, April 3, 1999 $ 57 $ 38,533 $ 30,505 $ (784) $ (1,145) $ 67,166
--------
Comprehensive Income (Loss):
Net (loss) for the three
months ended July 3, 1999 -- -- (1,143) -- -- (1,143)
Other Comprehensive Income:
Translation adjustment
for the three months
ended July 3, 1999 -- -- -- (773) -- (773)
--------
Total Comprehensive
Income (Loss) (1,916)
-------- -------- -------- -------- -------- --------
BALANCE, July 3, 1999 $ 57 $ 38,533 $ 29,362 $ (1,557) $ (1,145) $ 65,250
======== ======== ======== ======== ======== ========
</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 THREE MONTHS ENDED JULY 3, 1999 AND JUNE 27, 1998
(In Thousands)
July 3, June 27,
1999 1998
------- -------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Net income (loss) $(1,143) $ 547
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 902 867
Net (gain) loss on sale of property,
plant and equipment 4 (13)
Changes in operating assets and
liabilities:
(Increase) decrease in net trade
accounts receivable 746 3,217
(Increase) decrease in inventories 5,466 (3,373)
(Increase) decrease in prepaid expenses
and other current assets 288 321
(Increase) decrease in other assets 131 (187)
Increase (decrease) in bank overdrafts (415) (920)
Increase (decrease) in accounts payable
and accrued expenses (1,141) 489
------- -------
Total adjustments 5,981 401
------- -------
Cash flows provided by (used in)
operating activities 4,838 948
------- -------
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES:
Capital expenditures (116) (628)
Proceeds from sale of property,
plant and equipment 17 17
------- -------
Cash flows provided by (used in)
investing activities (99) (611)
------- -------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JULY 3, 1999 AND JUNE 27, 1998
(In Thousands)
July 3, June 27,
1999 l998
------- -------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES:
Sale of common stock -- 20
Borrowings (payments) under working
capital revolver, net (2,141) 813
Payments of other debt and
capitalized lease obligations (622) (661)
------- -------
Cash flows provided by (used in)
financing activities (2,763) 172
------- -------
Effect of exchange rate changes
on cash (56) 8
------- -------
Net change in cash 1,920 517
CASH, beginning of period 3,844 4,892
------- -------
CASH, end of period $ 5,764 $ 5,409
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 243 $ 708
Income taxes paid, net 68 86
</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 July 3, 1999 and the related
consolidated statements of operations, stockholders' equity and cash
flows for the three months ended July 3, 1999 and June 27, 1998 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 July 3, 1999 and June 27, 1998 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").
On April 23, 1999, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Goldman Industrial Group, Inc.
("Goldman") and Bronze Acquisition Corp., a wholly owned subsidiary of
Goldman ("Merger Sub"). Pursuant to the terms and subject to the
conditions of the Merger Agreement, Merger Sub will merge with and into
the Company, with the Company as the surviving corporation (the
"Merger"). As a result of the Merger, each outstanding share of common
stock of the Company (other than shares owned by the Company, Goldman,
Merger Sub or any subsidiary thereof or shares with respect to which
the holders have perfected appraisal rights under Delaware law) will be
converted into the right to receive $10.00 in cash.
At a special meeting of stockholders held on July 14, 1999, the
Company's stockholders approved the Merger Agreement and the Merger
contemplated by that agreement.
On July 20, 1999 and August 2, 1999, the Company announced that the
closing of the Merger had been delayed to allow Goldman to satisfy a
condition to its lenders providing funds for the Merger.
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:
<PAGE>
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.
Basic earnings per common share for the three months ended July 3, 1999
and June 27, 1998 are calculated by dividing net income by weighted
average common shares outstanding during the period. Diluted earnings
per common share for the three months ended July 3, 1999 and June 27,
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>
1999 1998
--------- ---------
<S> <C> <C>
Weighted average common
shares outstanding 5,568,104 5,654,000
Effect of dilutive options
to purchase common stock 0 34,000
Adjusted weighted average
common shares 5,568,104 5,688,000
</TABLE>
Stock options to purchase 301,598 and 88,500 shares of common stock at
July 3, 1999 and June 27, 1998, respectively, at prices ranging from
$9.50 to $16.25 and from $11.00 to $16.25 per share were outstanding at
July 3, 1999 and June 27, 1998, respectively, 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 2003.
<PAGE>
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.
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 months ended July 3, 1999
and June 27, 1998 presented below include foreign currency translation
items. There was no tax expense or tax benefit associated with the
foreign currency translation items.
<TABLE>
<CAPTION>
1999 1998
------- -------
(amounts in thousands)
<S> <C> <C>
Net income (loss) $(1,143) $ 547
Foreign currency translation adjustments (773) (206)
------- -------
Comprehensive income (loss) $(1,916) $ 341
======= =======
</TABLE>
5. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
-----------------------------------------
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, 2000.
<PAGE>
6. SEGMENT AND CUSTOMER INFORMATION
--------------------------------
<TABLE>
<CAPTION>
Three Months Ended
July 3, 1999 June 27, 1998
------------ ------------
<S> <C> <C>
Net Sales:
North America $ 19,001,000 $ 26,127,000
Foreign 15,353,000 23,169,000
Export 778,000 1,790,000
------------ ------------
Total $ 35,132,000 $ 51,086,000
============ ============
Operating Income (Loss):
Domestic and Export $ (293,000) $ 445,000
Foreign (353,000) 1,118,000
Eliminations 123,000 13,000
------------ ------------
Total $ (523,000) $ 1,576,000
============ ============
<CAPTION>
July 3, 1999 April 3, 1999
------------- -------------
<S> <C> <C>
Identifiable Assets:
Domestic and Export $ 70,749,000 $ 71,927,000
Foreign 48,761,000 54,572,000
Eliminations (23,214,000) (23,533,000)
------------- -------------
Total $ 96,296,000 $ 102,966,000
============= =============
Net Assets:
Domestic and Export $ 58,403,000 $ 58,560,000
Foreign 20,969,000 22,807,000
Eliminations (14,122,000) (14,201,000)
------------- -------------
Total $ 65,250,000 $ 67,166,000
============= =============
</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 principally the Company's European operations. No individual customer
accounted for 10% or more of net sales for any of the periods presented.
<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
July 3, 1999 June 27, 1998
------------ -------------
<S> <C> <C>
Net sales 100.0% 100.0%
Gross profit 20.9% 21.8%
Selling, general and adminis-
trative expenses 22.4% 18.7%
Operating income (loss) (1.5%) 3.1%
Interest expense (0.5%) (1.2%)
Other income (expense), net (0.1%) (0.2%)
Income tax expense 1.1% 0.6%
Net income (loss) (3.3%) 1.1%
</TABLE>
COMPARISON OF THE THREE MONTHS ENDED JULY 3, 1999 ("FIRST QUARTER OF FISCAL
2000") TO THE THREE MONTHS ENDED JUNE 27, 1998 ("FIRST QUARTER OF FISCAL 1999")
- --------------------------------------------------------------------------------
Net sales were $35.1 million in the first quarter of fiscal 2000, a
decrease of $16.0 million, or 31.2%, as compared to the first quarter of fiscal
l999. The decrease in sales is primarily due to a $7.1 million or 27.3% decline
in sales in North America and a $8.4 million or 35.3% decline in sales in
Europe. North America and Europe are the Company's two principal markets.
During the first quarter of fiscal 2000, the Company's net incoming
orders in North America and Europe were approximately 28% and 59% less,
respectively, than the incoming orders in the first quarter of fiscal 1999.
These declines appear to represent a cyclical trend in North America and in
parts of Europe, 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
decreased level of customer purchases could continue, whether the level of
customer purchases will decline further, or the level at which incoming orders
will be.
Backlog at July 3, 1999 was approximately $12.3 million compared with
approximately $14.6 million at April 3, 1999. Of the backlog at July 3, 1999,
approximately $5.4 million relates to sales primarily in North America and
approximately $6.9 relates to sales primarily in Europe. The Company's backlog
balances fluctuate as a result of many factors including length of time to
<PAGE>
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. As stated above, during the first
quarter of fiscal 2000, the Company experienced a decline in net incoming orders
in North America and Europe of approximately 28% and 59%, respectively, as
compared to the incoming orders in the first quarter of fiscal 1999.
Gross profit was $7.3 million in the first quarter of fiscal 2000, a
decrease of $3.8 million, or 34.1%, as compared to the first quarter of fiscal
l999. The decline in gross profit is primarily a result of lower sales and
production volumes. Gross profit as a percent of sales was 20.9% in the first
quarter of fiscal 2000 as compared to 21.8% in the first quarter of fiscal 1999.
The decline in gross profit as a percent of sales was predominately due to the
decline in sales which resulted in lower production volumes causing less
absorption of fixed costs.
Selling, general and administrative expenses were $7.9 million in the
first quarter of fiscal 2000, a decrease of $1.7 million, or 17.7%, as compared
to the first quarter of fiscal l999. The decrease in dollar amount consisted
primarily of $0.7 million in compensation and related expenses, $0.6 million in
advertising expenses and $0.3 million in research and development expenses. The
decrease was offset to some extent by approximately $0.5 million of expenses
related to the anticipated merger of the Company with Goldman Industrial Group,
Inc. (as described below). As a percentage of net sales, selling, general and
administrative expenses were 22.4% in the first quarter of fiscal 2000, as
compared to 18.7% for the first quarter of fiscal l999.
Operating loss was $0.5 million in the first quarter of fiscal 2000, as
compared to operating income of $1.6 million in the first quarter of fiscal
l999.
Interest expense was $0.2 million in the first quarter of fiscal 2000
and $0.6 million in the first quarter of fiscal l999.
Provision for income taxes was $0.4 million in the first quarter of
fiscal 2000, as compared to $0.3 million in the first quarter of fiscal 1999.
The provision for income taxes in the first quarter of fiscal 2000 is a result
of taxable income generated in certain tax jurisdictions. Losses were generated
in other tax jurisdictions for which no income tax benefit was established since
such losses cannot currently be utilized for income tax reporting purposes.
RECENT DEVELOPMENTS:
- --------------------
On April 23, 1999, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Goldman Industrial Group, Inc. ("Goldman")
and Bronze Acquisition Corp., a wholly owned subsidiary of Goldman ("Merger
Sub"). Pursuant to the terms and subject to the conditions of the Merger
Agreement, Merger Sub will merge with and into the Company, with the Company as
the surviving corporation (the "Merger"). As a result of the Merger, each
outstanding share of common stock of the Company (other than shares owned by the
Company, Goldman, Merger Sub or any subsidiary thereof or shares with respect to
which the holders have perfected appraisal rights under Delaware law) will be
converted into the right to receive $10.00 in cash.
<PAGE>
At a special meeting of stockholders held on July 14, 1999, the
Company's stockholders approved the Merger Agreement and the Merger contemplated
by that agreement.
On July 20, 1999 and August 2, 1999, the Company announced that the
closing of the Merger had been delayed to allow Goldman to satisfy a condition
to its lenders providing funds for the Merger.
FOREIGN OPERATIONS:
- -------------------
During the three months ended July 3, 1999, net sales outside North
America represented approximately 45.9% of total net sales, as compared to 48.9%
for the three months ended June 27, 1998. A substantial portion of these net
sales were made by the Company's European operations.
At times 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. At July 3, 1999, the Company
did not have any commitments outstanding under forward purchase contracts.
LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
As of July 3, 1999, the Company had working capital of $49.3 million
compared with $50.0 million at April 3, 1999. The Company meets its short-term
financing needs through cash from operations and its revolving credit facility
which provides for maximum borrowings of up to $24.5 million in the United
States and $19.5 million in the United Kingdom. The borrowing availability is
limited to the sum of (a) 80% of eligible accounts receivable plus (b) 40% of
eligible inventory (limited to $13.5 million for domestic inventory and $10.0
million for foreign inventory) minus (x) the aggregate amount of outstanding
letters of credit and (y) any reserves deemed reasonable by the lenders. Based
upon this formula, as of April 3, 1999, the Company could borrow approximately
an additional $21.4 million under the revolving credit facility, as amended,
beyond the balance already borrowed. At July 3, 1999, the Company had term loans
totalling approximately $1.6 million.
The table below presents the summary of cash flow for the periods
indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
July 3, 1999 June 27, 1998
------------ -------------
<S> <C> <C>
Net cash provided by (used in)
operating activities $ 4,838 $ 948
Net cash provided by (used in)
investing activities (99) (611)
Net cash provided by (used in)
financing activities (2,763) 172
</TABLE>
Net cash provided by (used in) operating activities fluctuates between
periods primarily as a result of differences in the level of sales, net income,
the timing of the collection of accounts receivable, purchase of inventory and
payment of accounts payable. The net cash provided by (used in) financing
activities in the three months ended July 3, 1999 and June 27, 1998 represents
primarily repayments or borrowings under the Company's credit facility.
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
July 3, 1999. 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.
<PAGE>
CHANGES IN FINANCIAL POSITION:
- ------------------------------
At July 3, 1999, trade accounts receivable decreased $1.1 million
(4.3%) and inventories decreased $5.9 million (11.4%), as compared to April 3,
1999. These decreases are primarily a result of decreased sales.
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. During the first quarter of fiscal 2000, the Company
experienced a decline in incoming net orders in North America and Europe of
approximately 28% and 59%, respectively, as compared to the first quarter of
fiscal 1999. The declines appear to represent a cyclical trend in the United
States and in parts of Europe, 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 decreased level of customer purchases could continue, whether
the level of customer purchases will decline further, 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.
<PAGE>
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 or will be able to operate after the
date change without having a material adverse impact on the Company's
operations. Part of this belief is based upon third party representations.
Discussions to date with critical and important 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 $200,000. Such
expenses will be expensed as incurred and are exclusive of systems being
replaced or upgraded in the normal course of business.
The risk factors the Company faces include the possibility that it has
not identified one or more internal system which is not Year 2000 compliant and
the failure of such system materially impacts the Company's ability to operate.
In addition, the failure of critical and important suppliers to correct their
material Year 2000 compliance problems could result in serious disruptions in
their normal business activities and operations. Such disruptions could
materially impact the Company's ability to operate.
The Company's contingency plans include identifying alternative
suppliers to current suppliers who are critical and important and are determined
by the Company to be a risk as a result of such supplier's lack of Year 2000
compliance. The Company cannot be assured that alternative suppliers will be
identified.
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 entities with which it transacts business fail to
address this issue, such problems could result in a material adverse impact on
the Company's operations and 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
------------------------
Approve and adopt the Agreement and Plan of Merger, dated
April 23, 1999, by and among Goldman Industrial Group, Inc.,
Bronze Acquisition Corp. ("Merger Sub") and the transactions
contemplated thereby, including the Merger of Merger Sub with
and into the Company.
Votes for 4,505,909
Votes Against 29,257
Abstained 3,905
Non Votes 1,029,033
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
(l8) Not Applicable
(l9) Not Applicable
(22) Not Applicable
(23) Not Applicable
(24) Not Applicable
<PAGE>
(27) Financial Data Schedule Ex-27
(99) Not Applicable
b) A Form 8-K Current Report dated April 23, 1999 was
filed reporting as an other event the execution by
the Company of an Agreement and Plan of Merger with
Goldman Industrial Group, Inc. and Bronze Acquisition
Corp., a wholly owned subsidiary of Goldman
Industrial Group, Inc.
<PAGE>
SIGNATURES
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)
August 13, 1999 /s/ Dan L. Griffith
-------------------
By: Dan L. Griffith
President and
Chief Executive Officer
August 13, 1999 /s/ Walter C. Lazarcheck
------------------------
By: Walter C. Lazarcheck
Vice President and
Chief Financial Officer
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