1
                                   FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

               For the quarterly period ended March 31,September 29, 1996

                                       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 1-1370
                      -------------

                         BRIGGS & STRATTON CORPORATION
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             (Exact name of registrant as specified in its charter)

     A Wisconsin Corporation                                    39-0182330
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(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)


              12301 West Wirth Street, Wauwatosa, Wisconsin 53222
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             (Address of Principal Executive Offices)    (Zip Code)

                                  414/259-5333
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              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes   X     No
    ---       --------     -----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

                                                       Outstanding at
     Class                                            May 8,November 7, 1996
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COMMON STOCK, par value $0.01 per share               28,927,000 Shares





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                 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

                                     INDEX





                                                                   Page No.
                                                                   --------
PART I - FINANCIAL INFORMATION

     Item 1.   Financial Statements:

              Consolidated Condensed Balance Sheets -
               March 31,September 29, 1996, July 2, 1995June 30, 1996 and
               April 2,October 1, 1995                                         3
              
              Consolidated Condensed Statements of IncomeEarnings -
               Three Months and Nine Months Ended March 31,September 29, 1996
               and April 2,October 1, 1995                                     4
              
              Consolidated Condensed Statements of Cash FlowsFlow -
               NineThree Months Ended March 31,September 29, 1996 and
               April 2,October 1, 1995                                         5
              
              Notes to Consolidated Condensed Financial
               Statements                                              6

     Item 2.   Management's Discussion and Analysis of Results
               of Operations and Financial Condition                   7


PART II - OTHER INFORMATION
                                                                     
     Item 4.  Submission of Matters to a Vote of Security Holders      9

     Item 6.  Exhibits and Reports on Form 8-K                        910




















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                 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                     CONSOLIDATED CONDENSED BALANCE SHEETS

                           (In thousands of dollars)
ASSETS
March 31 July 2 April 2ASSETS Sept. 29 June 30 Oct. 1 1996 1996 1995 1995--------- -------- ------ ---------------- CURRENT ASSETS: (Unaudited) (Unaudited) Cash and cash equivalents $ 59,158 $170,648 $114,24759,520 $150,639 $ 37,019 Short-term investments 15,183 - - Receivables, net 273,310 94,116 265,432105,179 119,346 118,098 Inventories - Finished products and parts 94,840 96,540 87,881164,563 96,078 157,873 Work in process 31,206 40,107 34,77347,127 36,932 42,035 Raw materials 4,229 4,027 3,8635,240 4,393 5,257 -------- -------- -------- Total inventories 130,275 140,674 126,517216,930 137,403 205,165 Future income tax benefits 34,964 31,376 34,47929,339 29,589 30,599 Prepaid expenses 14,539 16,516 13,74617,938 19,410 15,182 -------- -------- -------- Total current assets 512,246 453,330 554,421444,089 456,387 406,063 PREPAID PENSION COST 1,8984,612 4,682 - 12,406 DEFERRED INCOME TAX ASSET 5,907 1,866 -3,595 2,883 4,076 PLANT AND EQUIPMENT - Cost 769,731 726,331 670,867788,552 776,638 751,496 Less - Accumulated depreciation and unamortized investment tax credit 395,212 383,034 376,472411,498 402,426 384,976 -------- -------- -------- Total plant and equipment, net 374,519 343,297 294,395377,054 374,212 366,520 -------- -------- -------- $894,570 $798,493 $861,222$829,350 $838,164 $776,659 ======== ======== ======== LIABILITIES & SHAREHOLDERS' INVESTMENT CURRENT LIABILITIES: Accounts payable $ 72,99657,220 $ 63,91365,642 $ 80,24860,672 Domestic notes payable 5,000 5,000 10,000 6,750 1,750 Foreign loans 23,959 19,653 24,76414,294 14,922 17,513 Current maturities on long-term debt 15,000 15,000 - Accrued liabilities 104,504 108,817 129,93090,887 82,932 90,729 Dividends payable 7,5217,810 - 7,2327,521 Federal and state income taxes 31,611 (1,878) 21,4873,619 6,683 (2,108) -------- -------- -------- Total current liabilities 250,591 197,255 265,411 DEFERRED INCOME TAX LIABILITY - - 7,383193,830 190,179 184,327 ACCRUED EMPLOYEE BENEFITS 17,676 16,447 15,96618,944 18,431 16,851 ACCRUED PENSION COST - 1,606 - 2,021 ACCRUED POSTRETIREMENT HEALTH CARE OBLIGATION 69,577 68,707 63,56669,185 69,049 69,615 LONG-TERM DEBT 75,000 75,00060,000 60,000 75,000 SHAREHOLDERS' INVESTMENT: Common stock- Authorized 60,000,000 shares, $.01 par value Issued and outstanding 28,927,000 shares 289 289 289 Additional paid-in capital 41,001 41,698 41,77540,818 40,898 41,672 Retained earnings 440,914 397,627 392,521446,594 459,666 386,806 Cumulative translation adjustments (478) (136) (689)(310) (348) 78 -------- -------- -------- Total shareholders' investment 481,726 439,478 433,896487,391 500,505 428,845 -------- -------- -------- $894,570 $798,493 $861,222$829,350 $838,164 $776,659 ======== ======== ========
The accompanying notes are an integral part of these statements. -3- 4 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOMEEARNINGS (In thousands of dollars except amounts per share) (Unaudited)
Three MonthsFirst Quarter Ended Nine Months Ended ------------------ ------------------ March 31 April 2 March 31 April 2 1996 1995----------------------- Sept. 29 Oct. 1 1996 1995 -------- ------- -------- ------- NET SALES $460,201 $450,163 $979,035 $1,044,725$161,731 $189,477 COST OF GOODS SOLD 356,119 344,725 790,049 815,964143,762 170,336 -------- -------- -------- ---------- Gross profit on sales $104,082 $105,438 $188,986 $ 228,76117,969 $ 19,141 ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 30,055 27,742 79,339 76,71526,061 24,483 -------- -------- -------- ---------- IncomeLoss from operations $ 74,027(8,092) $ 77,696 $109,647 $ 152,046(5,342) INTEREST EXPENSE (2,879) (2,195) (7,855) (6,407)(1,952) (2,057) OTHER INCOME, net 1,798 2,100 4,418 5,9591,562 2,079 -------- -------- -------- ---------- IncomeLoss before provisioncredit for income taxes $ 72,946(8,482) $ 77,601 $106,210 $ 151,598 PROVISION(5,320) CREDIT FOR INCOME TAXES 27,720 30,270 40,360 59,130(3,220) (2,020) -------- -------- -------- ---------- Net incomeloss $ 45,226(5,262) $ 47,331 $ 65,850 $ 92,468(3,300) ======== ======== ======== ========== PER SHARE DATA* - Net incomeloss $ 1.57(.18) $ 1.64 $ 2.28 $ 3.20 ====== ======(.11) ====== ====== Cash dividends $ .26.27 $ .25 $ .78 $ .73 ====== ======.26 ====== ======
* Based on 28,927,000 shares outstanding. The accompanying notes are an integral part of these statements. -4- 5 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWSFLOW Increase(Decrease) in Cash and Cash Equivalents (In thousands of dollars) (Unaudited)
Nine MonthsFirst Quarter Ended ----------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: March 31,Sept. 29, 1996 April 2,Oct. 1, 1995 -------------- ------------------------- Net incomeloss $ 65,850(5,262) $ 92,468(3,300) Adjustments to reconcile net incomeloss to net cash provided by operating activities - Depreciation 31,704 33,84810,698 9,882 Loss on disposition of plant and equipment 1,318 608515 353 (Increase)decrease in operating assets - Accounts receivable (179,194) (160,191)14,167 (23,982) Inventories 10,399 (48,596)(79,527) (64,491) Other current assets (1,611) (5,053)1,722 2,111 Other assets (5,939) 1,252(642) (2,210) Increase(decrease) in liabilities - Accounts payable and accrued liabilities 45,780 59,8254,279 (14,038) Other liabilities 493 (2,004)649 1,727 --------- --------- Net cash used byin operating activities $ (31,200)(53,401) $ (27,843)(93,948) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to plant and equipment $ (65,341)(14,171) $ (70,709)(33,684) Proceeds received on sale of plant and equipment 1,006 2,075 Decrease in cash due to spin-off129 188 Purchase of lock businessshort-term investments (15,183) - (174) --------- --------- Net cash used in investing activities $ (64,335)(29,225) $ (68,808)(33,496) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowingsborrowings(repayments) from domestic and foreign loans $ 7,556(628) $ 12,1911,110 Dividends (22,563) (21,117)(7,810) (7,521) Purchase of common stock for treasury (1,032) (784)(120) (40) Proceeds from exercise of stock options 335 34540 14 --------- --------- Net cash used byin financing activities $ (15,704)(8,518) $ (9,365)(6,437) --------- --------- EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS $ (251)25 $ (838)252 --------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS $(111,490) $(106,854)$ (91,119) $(133,629) CASH AND CASH EQUIVALENTS, beginning 150,639 170,648 221,101 --------- --------- CASH AND CASH EQUIVALENTS, ending $ 59,15859,520 $ 114,24737,019 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ 7,9051,952 $ 6,3512,128 ========= ========= Income taxes paid $ 15,795422 $ 53,271797 ========= =========
The accompanying notes are an integral part of these statements. -5- 6 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. However, in the opinion of the Company, adequate disclosures have been presented to make the information not misleading, and all adjustments necessary to present fair statements of the results of operations and financial position have been included. All of these adjustments are of a normal recurring nature. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. DuringThe short-term investments caption represents money market mutual fund investments that can be readily purchased or sold using established markets. These investments are stated at cost plus accrued income which equals market value. The sale of the secondCompany's Menomonee Falls, Wisconsin facility for $16.3 million was completed just after the first fiscal quarter ended. The provisions of fiscal 1996,the contract state that the Company recorded a change in an accounting estimate originally made in the last quarter of fiscal 1995. During the last quarter of fiscal 1995, a charge totaling $19,059,000 was added to pension and postretirement health care expenses to reflect the costs of early retirement windows that were offered and accepted at the end of fiscal 1995. In October 1995, when the retirements were to occur, a number of those employees who had accepted the offer canceled their acceptance, and thus a credit totaling $3,477,000 was recorded as a change in the original accounting estimate. The Financial Accounting Standards Board issued SFAS No. 123 "Accounting for Stock-Based Compensation" in October 1995, which establishes financial accounting and reporting standards for stock-based employee compensation. The Company plans to adopt only the pro forma disclosure requirements of this statement, and will continue to applyown and occupy the accountingwarehouse portion of the facility for a period of up to ten years (the "Reservation Period"). The contract also contains a buyout clause, at the buyer's option, of the remaining Reservation Period under certain circumstances. Given the provisions of APB Opinion No. 25 to stock-based employee compensation arrangements, as is allowed by the statement. This disclosurecontract, the Company will be effectiverequired to account for this as a financing transaction and, therefore, any cash received will be reflected as a liability and the financial statements ending in June 1997.net book value of the facility will continue to be shown as an asset with depreciation expense recorded each period. Imputed interest expense will be recorded and added to the deferred liability. Offsetting this will be fair value imputed lease income on the manufacturing portion of the facility. The pre-tax gain, which will be recognized at the earlier of the exercise of the buyout option or the expiration of the Reservation Period, is estimated to be $10 million to $12 million. -6- 7 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following is Management's discussion and analysis of certain significant factors which have affected the Company's results of operations and financial condition during the periods included in the accompanying consolidated condensed financial statements. RESULTS OF OPERATIONS SALES Net salesSales for the thirdfirst fiscal quarter ending in September 1996 were 15% or $27,746,000 lower than in the same period of fiscal 1996 increased 2% or $10,038,000.the preceding year. The primary reason for this decline in dollars was a 20% decrease in engine units shipped. This was the net resultcaused by customers planning to schedule their production of lawn and garden equipment later this year than last year. Partially offsetting this decrease was a $26,420,000 increase in engine sales, partially offset by the lack of lock salessmall improvement in the current quarter in the amount of $16,382,000 included in last year's third quarter before that business was spun off to shareholders at the end of February 1995. The increase in engine sales was due to a 9% increase in engine unit shipments which occurred in the Company's lower selling price small engine line. Larger engine unit sales remained steady between years. The largest portion of this increase was in the domestic market, although the export markets had small improvements. Service sales showed a decline in the current year. Net sales for the nine months ended March 1996 decreased 6% to $979,035,000. This decrease is almost entirely attributable to the absence of lock sales in the current year. Total engine units sold, however, showed a 3% decrease. There was not a corresponding sales dollar decrease because there were larger decreases in salesand mix ratio of the Company's lower selling price engines than higher selling price engines. Decreases in the domestic market and in service sales were offset by increases in export markets.sold. GROSS PROFIT Gross profit decreased 1% or $1,356,000 between comparable third quarter periods. The gross profit rate decreased less than 1%. Gross profit was generated from the net increase in sales; small reductionsincreased to 11% in the costcurrent fiscal year from 10% last year principally due to lower new plant start-up costs this year. The amount of aluminum, the major raw material used in the manufacture of engines; and lower profit sharing accruals. The favorable effect of these items was offset by the expected costs associated with the transition to new plants and the spreading of fixed costs over fewer engines produced. Nine-month gross profit decreased 17%,6% or $39,775,000. The gross profit rate$1,172,000 between years because of reduced sales. ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES This category increased 6% or $1,578,000 between years. This was due to increases in salaries and planned increases in manpower and other costs relating to new venture activities. Partially offsetting this was a reduction in marketing costs due to timing during the year. INTEREST EXPENSE Interest expense decreased from 22%$105,000 between years due to lower borrowings offset, in the previous year to 19% in the current year. The same factors described above were in effect except that lower sales had a negative impact over the nine-month period. There was also the absence of gross profit related to the spun-off lock business.part, by higher average interest rates. -7- 8 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION (Continued) ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES This category increased $2,313,000 or 8% between comparable quarters. This was due to planned increases in manpower costs related to the Company's service operations and increases in professional services, offset in part by reduced profit sharing accruals and the lack of engineering and selling expenses from the spun-off lock business. The 3% increase in the nine-month comparison is also due to the factors described above. INTEREST EXPENSE Interest expense for the third fiscal quarter increased 31% over the comparable period in the preceding year. The nine- month amount increased 23%. These increases were the result of the use of domestic short-term borrowing to finance increases in accounts receivable and inventories. Substantially all of the current year domestic borrowings were paid off by the end of the quarter. The preceding year had a minimal amount of short-term borrowing. OTHER INCOME This category decreased between years$517,000 or 25% because of increases in bothlosses on the quarterlydisposition of plant and nine-month comparisons. These decreases were caused by a reduction in investable funds during the current year for the same reasons described in Interest Expense.equipment and reduced equity income on joint ventures. PROVISION FOR INCOME TAXES The effective tax rate used forin both the quarter and nine-month periodsyears was 38%38.0%. This rate is management's estimate of what the rate will be for the entire fiscal year. OUTLOOK A late springThe sale of the Company's Menomonee Falls, Wisconsin plant was completed just after the quarter ended. Because the Company retains an interest in the eastern halfwarehouse portion of the United States has cloudedfacility, the gain on the sale will be postponed until this interest ends. The majority of the expense of moving the Menomonee Falls manufacturing operations to available space in the Company's Wauwatosa plant will be recognized in the second quarter and should not significantly affect the results of operations. The outlook is little changed from that previously reported. Many retailers have made their sourcing decisions for the fourth quarter. Incoming season; management knows of no changes that will have a significant effect on the few placesbusiness. Management is concerned that, have enjoyed warm, wet weather,despite good late season retail sales, inventories are somewhat higher than they were a year ago. Nevertheless, they continue to believe that, if the weather cooperates, the Company should have a good year. The Company will offer a final early retirement window in late fiscal 1997, in accordance with the union contract with its Milwaukee hourly employees. It is unknown how many employees will accept this offer. All elections under this window must be completed in June 1997. If all eligible employees elect to take this window, the charge to earnings could total a maximum of outdoor power equipment have been good, which is encouraging. Where winter has refused to make a timely departure, retail sales have been poor, which is what would be expected. The question for which an answer is awaited: Will warm weather return$53 million before consumers decide to postpone purchases until next spring? Until this question is answered, no predictiontaxes. FINANCIAL CONDITION Cash, cash equivalents and short-term investments decreased $75,936,000 since the end of fourth quarter results can be made. Company management believes that earnings for the full year will be lower than for lastprevious fiscal year. This normal seasonal use of available funds and the amounts generated from depreciation and the decrease in accounts receivable financed the $79,527,000 increase in inventories and $14,171,000 in capital expenditures. -8- 9 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION (Continued) FINANCIAL CONDITION Cash and cash equivalents decreased $111,490,000 since the endThe increase in inventories is a result of the previous fiscal year. This reductionCompany's maintenance of a stable rate of production in cash andanticipation of a strong demand which is expected to occur in the increase in accounts payable and accrued liabilities were used to finance the $179,194,000 seasonal increase in accounts receivable, capital expenditures totaling $65,341,000, and the payment of dividends totaling $22,563,000. Inventories decreased $10,399,000 since the endsecond half of the fiscal year. The high levelCompany management believes that the fiscal year-end inventory levels will be similar to the preceding year. Accounts receivable decreased because of finished goods inventories carried during most of fiscal 1996 was reduced by shipments late in the third fiscal quarter. A major part of the $65,341,000 in capital expenditures during the first nine months oflower sales. Additions to plant and equipment are $19,513,000 less than last fiscal year 1996 was for previously announced projects involvingat this time. This reduction is because the preceding year included the completion of construction of three new engine plants, plant expansions and a foundrynew foundry. Management expects capital expenditures for reinvestment in equipment and plant expansions. These projects were substantially completed duringnew products to total approximately $65,000,000 in the December quartercurrent fiscal year--all to be financed from internal resources and manufacturing operations have begun at these locations.the Company's lines of credit. The Company plans to spend approximatelywill make the first of five annual installments on its long-term debt in June 1997. These payments will total $15,000,000 and are shown as Current Maturities on additional capital expenditures duringLong-Term Debt in the final fiscal quarter.accompanying balance sheet. CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS Certain statements in thisthe Outlook section of Management's Discussion and Analysis and the Notes to Consolidated Condensed Financial Statements may contain forward-looking information (as defined in the Private Securities Litigation Reform Act of 1995) that involveinvolves risk and uncertainty. The words "anticipate", "believe", "estimate", "expect", "objective", and "think" or similar expressions are intended to identify forward-looking statements. Company results may differ materially from those projected in the forward-looking statements. Any forward-looking statements are based on management's current views and assumptions and involve risks and uncertainties that could significantly affect final results. These uncertainties could include, among other things, the effects of weather; actions of competitors; changes in laws and regulations, including accounting standards; customer demand; prices of purchased raw materials and parts; domestic economic conditions;conditions, including housing starts;starts and changes in consumer disposable income; and foreign economic conditions, including currency rate fluctuations. Some or all of the factors are beyond the Company's control. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Annual Meeting of Shareholders on October 16, 1996, the only item of business was the election of directors. (a) Election of three directors: The following schedule indicates the votes cast for and withheld with respect to each nominee for director.
Name of Nominee* For Withheld ---------------- --- -------- Michael E. Batten 25,199,586 438,987 Robert H. Eldridge 25,226,151 412,422 Peter A. Georgescu 25,225,842 412,731
*Nominees were elected to a three-year term expiring in 1999. -9- 10 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION (Continued) Directors whose terms of office continue past the Annual Meeting of Shareholders include: John L. Murray, Clarence B. Rogers, Jr., John S. Shiely, Charles I. Story, Frederick P. Stratton, Jr. and Elwin J. Zarwell. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Exhibit Number Description ------- ----------- 11 Computation of Earnings Per Share of Common Stock (Filed herewith) 27 Financial Data Schedule (Filed herewith) -9- 10 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION (Continued) (b) Reports on Form 8-K. There were no reportsOn August 7, 1996, the Company filed a report on Form 8-K regarding (as disclosed in Item 5. thereof) the declaration of a dividend of one common share purchased right for each outstanding share of common stock and the third quarter ended March 31, 1996.entering into of a Rights Agreement on August 7, 1996 with the Firstar Trust Company. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BRIGGS & STRATTON CORPORATION ----------------------------- (Registrant) Date: May 8,November 7, 1996 /s/ R. H. Eldridge --------------------------------------------------------------------------------- R. H. Eldridge Executive Vice President & Chief Financial Officer, Secretary-Treasurer Date: May 8,November 7, 1996 /s/ J. E. Brenn --------------------------------------------------------------------------------- J. E. Brenn Vice President and Controller -10-