UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997 Commission file number 1-996
OR
( ) TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
GENERAL SIGNAL CORPORATION
(Exact name of registrant as specified in its charter)
New York 16-0445660
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
High Ridge Park,
Box 10010, Stamford, Connecticut 06904-2010
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (203) 329-4100
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.
X
(Yes) (No)
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, par value $1.00 50,332,461
(Class) (Outstanding at July 25, 1997)
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
Page No.
PART I - FINANCIAL INFORMATION:
Statement of Earnings -
Three Months Ended June 30, 1997 and 1996 3
Statement of Earnings -
Six Months Ended June 30, 1997 and 1996 4
Balance Sheet -
As of June 30, 1997 and December 31, 1996 5
Condensed Statement of Cash Flow -
Six Months Ended June 30, 1997 and 1996 6
Notes to Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II - OTHER INFORMATION 17
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
Statement of Earnings
(In millions, except per-share data)
(Unaudited)
Three Months Ended June 30,
1997 1996
Net sales $539.6 $515.0
--------- ---------
Cost of sales 375.9 357.3
Selling, general and administrative
expenses 101.7 99.4
--------- ---------
477.6 456.7
--------- ---------
Operating earnings 62.0 58.3
Interest expense, net 4.6 5.6
---------- ---------
Earnings before income taxes 57.4 52.7
Income taxes 23.0 21.1
Net earnings $ 34.4 $ 31.6
----------- -----------
Net earnings per share $ 0.68 $ 0.64
----------- -----------
Dividends declared per share $ 0.255 $ 0.24
----------- -----------
Average shares outstanding 50.3 49.7
----------- -----------
See accompanying notes to financial statements.
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
Statement of Earnings
(In millions, except per-share data)
(Unaudited)
Six Months Ended June 30,
1997 1996
Net sales $1,045.2 $996.7
----------- -----------
Cost of sales 733.2 708.7
Selling, general and administrative
expenses 206.1 201.4
Gain on disposition - - (20.8)
----------- ----------
939.3 889.3
----------- ----------
Operating earnings 105.9 107.4
Interest expense, net 8.0 12.4
----------- ----------
Earnings before income taxes 97.9 95.0
Income taxes 39.2 38.0
----------- ----------
Net earnings $58.7 $57.0
----------- ---------
Net earnings per share $1.15 $1.15
----------- --------
Dividends declared per share $0.51 $0.48
----------- ----------
Average shares outstanding 51.2 49.6
----------- ----------
See accompanying notes to financial statements.
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
Balance Sheet
(In millions)
Unaudited) (Audited)
June 30, December 31,
Assets 1997 1996
Current assets:
Cash and cash equivalents $ 24.3 $ 17.7
Accounts receivable, net 362.4 353.0
Inventories, net 242.6 240.6
Prepaid expenses and other
current assets 22.4 24.7
Deferred income taxes 51.6 55.9
----------- --------
Total current assets 703.3 691.9
Property, plant and equipment, net of
accumulated 305.8 310.0
depreciation and amortization
Intangibles, net of accumulated amortization 366.5 381.3
Other assets 174.3 167.8
----------- ---------
Total assets $1,549.9 $1,551.0
----------- ---------
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings and current
maturities of long-term debt $ 9.1 $ 5.6
Accounts payable 180.9 187.3
Accrued expenses 193.3 214.6
Income taxes 28.0 31.7
----------- ---------
Total current liabilities 411.3 439.2
----------- ---------
Long-term debt, less current maturities 243.2 201.3
Accrued post-retirement and post-employment
obligations 128.1 133.2
Deferred income taxes 28.1 17.3
Other liabilities 16.8 16.2
----------- --------
Total long-term liabilities 416.2 368.0
----------- --------
Shareholders' equity:
Common stock 78.4 78.2
Additional paid-in capital 360.8 337.1
Retained earnings 700.2 667.4
Cumulative translation adjustments (5.5) (1.4)
Common stock in treasury (411.5) (337.5)
----------- --------
Total shareholders' equity 722.4 743.8
----------- --------
Total liabilities and shareholders' equity $1,549.9 $1,551.0
----------- ----------
See accompanying notes to financial statements
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Statement of Cash Flow
(In millions)
(Unaudited)
Six Months Ended June 30,
1997 1996
CASH FLOW FROM OPERATING ACTIVITIES:
Net earnings $ 58.7 $ 57.0
Adjustments to reconcile net earnings
to net cash from operating activities:
Gain on disposition - - (20.8)
Asset write down and other charges - - 19.7
Deferred income taxes 14.8 15.7
Depreciation and amortization 35.6 34.9
Pension credits (6.5) (4.8)
Other, net (1.1) 5.9
Changes in assets and liabilities, net of
effects from acquisitions and divestitures (43.9) (19.2)
----------- --------
Net cash from operating activities 57.6 88.4
----------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Divestitures 7.3 71.6
Capital expenditures (26.3) (28.6)
Other, net 1.5 0.6
----------- --------
Net cash from investing activities (17.5) 43.6
----------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Net change in short and long-term
borrowings 84.7 (102.2)
Dividends paid (26.5) (23.9)
Issuance of common stock 8.3 8.0
Purchase of common stock (100.0) (0.9)
----------- --------
Net cash from financing activities (33.5) (119.0)
----------- -------
Net change in cash and cash
equivalents 6.6 13.0
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 17.7 1.0
----------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 24.3 $ 14.0
----------- --------
See accompanying notes to financial statements.
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Financial Statements
(Unaudited)
1. In the opinion of management, the accompanying unaudited financial
statements reflect all adjustments (consisting of normal,
recurring items) necessary for the fair presentation
of results for these interim periods. These results are
based upon generally accepted accounting principles
consistently applied with those used in the preparation of
the company's 1996 Annual Report on Form 10-K. The results
of operations for the six-month period ended June 30, 1997
are not necessarily indicative of the results of operations
that may be expected for the full year.
The financial information as of June 30, 1997 should be read
in conjunction with the financial statements contained in
the company's 1996 Annual Report on Form 10-K.
2. Certain reclassifications have been made to the 1996
financial statements to conform with the 1997 presentation.
3. Inventories June 30, December 31,
1997 1996
(In millions)
Finished goods $ 82.1 $ 80.8
Work in process 65.3 63.2
Raw material and purchased parts 116.1 117.1
-------- --------
Total FIFO cost 263.5 261.1
Excess of FIFO cost over LIFO
inventory value (20.9) (20.5)
-------- ---------
Net carrying value $ 242.6 $ 240.6
--------- ----------
4. Property, Plant and Equipment June 30, December 31,
1997 1996
(In millions)
Property, plant and equipment, $ 767.1 $ 747.3
at cost
Accumulated depreciation and
amortization (461.3) (437.3)
--------- ----------
Property, plant and equipment,
net $ 305.8 $ 310.0
--------- ----------
5. Capital Stock June 30, December 31,
1997 1996
(In millions)
Common stock:
Shares authorized 150.0 150.0
Shares issued 64.9 64.6
Held in treasury (14.6) (13.2)
6. Business Segment Information Three Months Ended June 30,
1997 1996
Net sales: (In millions)
Process Controls $193.7 $188.8
Electrical Controls 257.0 234.7
Industrial Technology 88.9 91.5
--------- ----------
$539.6 $515.0
--------- ----------
Operating earnings:
Process Controls $ 28.3 $ 27.6
Electrical Controls 26.9 23.9
Industrial Technology 15.4 15.7
--------- ----------
Total operating earnings before
unallocated expenses and interest 70.6 67.2
Net interest expense (4.6) (5.6)
Unallocated expenses (8.6) (8.9)
--------- ----------
Earnings before income taxes $ 57.4 $ 52.7
--------- ----------
Six Months Ended June 30,
1997 1996
(In millions)
Net sales:
Process Controls $368.4 $361.9
Electrical Controls 493.0 457.3
Industrial Technology 183.8 177.5
--------- ----------
$1,045.2 $996.7
--------- ----------
Operating earnings:
Process Controls $45.4 $ 66.1 (a)
Electrical Controls 45.6 34.4 (b)
Industrial Technology 33.7 22.9 (c)
--------- ----------
Total operating earnings before
unallocated expenses and interest 124.7 123.4
Net interest expense (8.0) (12.4)
Unallocated expenses (18.8) (16.0)
--------- ----------
Earnings before income taxes $ 97.9 $ 95.0
--------- ----------
(a) Includes $20.8 of gain on disposition of Kinney Vacuum, and
a charge of $4.0 for product warranty costs.
(b) Includes an $11.1 charge related to plant closure costs,
asset valuations and environmental costs.
(c) Includes $4.6 charge for asset valuations.
7. Supplemental Information - Statement of Cash Flow
Six Months Ended
June 30,
1997 1996
Cash paid for: (In millions)
Interest $ 8.4 $14.3
--------- ----------
Income taxes $ 22.7 $18.2
--------- ---------
The company had the following non-cash
financing activity:
Conversion of convertible debt
into common stock $ 39.3 $ - -
8. Repurchase of Shares
In December 1996, the Board of Directors approved a stock
buy-back program of up to $100.0 million to offset the
shares issued in relation to the call for the redemption of
the 5.75 percent convertible subordinated notes. These
shares were purchased systematically in open market
transactions. On April 17, 1997, the program was completed
with the total of 2.5 million shares repurchased for $100.0
million (see note 12).
9. Medium Term Notes
On April 7, 1997, the company sold $25.0 million 7.114
percent medium-term senior notes that are due on April 8,
2002. On April 18, 1997, the company sold an additional
$25.0 million 7.00 percent medium-term senior notes that are
due on October 18, 2000. The proceeds were used to pay down
floating rate commercial paper.
10. Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings per Share," which changes the
methodology of calculating earnings per share. SFAS No. 128
requires the disclosure of diluted earnings per share
regardless of its difference from basic earnings per share.
The company plans to adopt SFAS No. 128 in December 1997.
Early adoption is not permitted. Had the company adopted
SFAS No. 128 as of June 30, 1997, the related per share
disclosure for both basic and diluted earnings per share
would have been:
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Basic $0.68 $0.64 $1.15 $1.15
Diluted 0.68 0.62 1.14 1.13
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". While
the company is studying the application of the disclosure
provisions, it does not expect either of these statements
to materially affect its financial position or results of
operations.
11. Joint Venture
On June 30, 1997, the company and Emerson Electric Company,
entered into an agreement in principle to form a joint
venture combining Emerson's Appleton Electric division and
the company's Electrical Group. Upon formation of the joint
venture, Emerson would hold a majority interest in the entity
and the company would account for its investment under the
equity method of accounting. The company's Electrical Group
accounts for approximately 15 percent of the company's
consolidated net sales.
12. Sale of Pump Division
On July 21, 1997 the company announced that it had entered
into an agreement to sell substantially all of the assets of
the General Signal Pump Group to Pentair, Inc. for
approximately $200 million. Consummation of the sale is
subject to the satisfaction of customary conditions
including the expiration of the applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended. Subject to closing adjustments, the
company expects to record a gain on the transaction. The
General Signal Pump Group accounts for approximately 10
percent of the company's consolidated sales.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in millions, except per-share data)
Results of Operations - Second Quarter 1997 Compared With Second
Quarter 1996
1997 1996
Reported Reported Change
Net sales $539.6 $515.0 4.8%
Gross profit 163.7 157.7 3.8%
Margin percent 30.3% 30.6%
Selling, general and
administrative 101.7 99.4 2.3%
expenses
Percent of sales 18.8% 19.3%
Operating earnings 62.0 58.3 6.3%
Interest expense, net 4.6 5.6 (17.9%)
Net earnings 34.4 31.6 8.9%
Net earnings per share $0.68 $0.64 6.3%
Net sales: Sales increased 4.8 percent over 1996 levels due
primarily to higher volume in the Electrical Controls sector.
International sales represented approximately 22 percent of total
net sales in 1997 and 1996. Export sales were relatively flat
with the second quarter of 1996. Foreign sales increased
approximately 9 percent versus the same period last year
primarily as a result of improvements of the company's Canadian
and United Kingdom affiliates.
Process Control sector sales were $193.7 in the second quarter of
1997 as compared to $188.8 in the same period in 1996. The
increase was primarily the result of higher demand for industrial
oven and laboratory freezer products. This increase was
partially offset by lower sales volume of crystal growing
furnaces as a result of a cyclical downturn in the semiconductor
equipment market.
Sales in the Electrical Controls sector increased 9.5 percent to
$257.0 from $234.7 in the same period of last year. Sales
increases were reported by all six operating units within the
sector. The largest improvements were in the construction
material, industrial electrical, treadmill motor and medium power
transformer products.
Industrial Technology sector sales decreased to $88.9 versus
$91.5 in the same period in 1996. New networking product sales
of the CD9000TM ESCON Director were offset by a decrease in sales
associated with the discontinuance of a low margin original equipment
manufacturer ("OEM") contract. In addition, worker strikes at North
American automobile manufacturers stemmed the increased demand from
North American automobile producers experienced in the first quarter
of the year.
Gross profit: Gross profit as a percentage of sales decreased to
30.3 percent from 30.6 percent in the second quarter of 1996.
The decrease was due to higher sales of lower margin products and
increased new product development costs partially offset by
productivity improvements and material cost savings.
Selling, general and administrative expenses: Selling, general
and administrative expenses as a percentage of sales decreased to
18.8 percent compared to 19.3 percent in the second quarter of
1996. Second quarter 1997 selling, general and administrative
expenses were positively impacted by a $1.9 insurance settlement
in the Process Controls sector and the reversal of $0.8 of excess
plant closure costs in the Electrical Controls sector. Included
in selling, general and administrative expenses were pension
credits of $2.9 in 1997 and $2.1 in 1996.
Operating earnings: Operating earnings for the Process Controls
sector increased 2.5 percent to $28.3 versus $27.6 in the same
period in 1996. The increase was primarily driven by the
higher volume in the oven and freezer business partially offset
by lower volume in the crystal growing furnace business.
Electrical Controls sector operating earnings increased 12.6
percent to $26.9, versus $23.9 in the same period in 1996. The
increase was driven by higher sales at all six business units and
productivity improvements in the electrical product and medium
power transformers businesses.
Industrial Technology sector operating earnings were relatively
flat at $15.4 versus $15.7 in the same period in 1996. Higher
margins on new telecommunication products offset lower sales
volume.
Unallocated expenses declined 3.4 percent to $8.6 in the second
quarter of 1997 from $8.9 in the same period in 1996. 1996
unallocated expenses were positively impacted by the collection
of a $1.3 previously written off receivable.
Interest expense: Net interest expense decreased 17.9 percent
to $4.6 versus $5.6 in the same period of 1996 due to the
conversion of subordinated notes in late 1996 and early 1997 as
well as lower average debt levels. Cash generated from
operations and divestitures was used to pay down debt incurred in
connection with acquisitions made in 1995.
Net earnings: Net earnings were $34.4 or $0.68 per share in
1997 compared to $31.6 or $0.64 per share in 1996. The company's
effective tax rate was 40.0 percent in both 1997 and 1996.
Results of Operations - Six Months 1997 Compared With Six Months
1996
1997 1996
Reported Reported Change
Net sales $1,045.2 $996.7 4.9%
Gross profit 312.0 288.0 8.3%
Selling, general and
administrative 206.1 201.4 2.3%
expenses
Operating earnings 105.9 107.4 (1.4%)
Interest expense, net 8.0 12.4 (35.5%)
Net earnings 58.7 57.0 (3.0%)
Net earnings per share $ 1.15 $ 1.15 - -
To facilitate a more meaningful comparison of the results of
operations for the first half of 1997 with the same period in
1996, the following items reported in the first half 1996 net
earnings should be excluded.
Gain on disposition: In January 1996, the company disposed of
Kinney Vacuum Company, a unit previously included in the Process
Controls sector, for $29.0 and recorded a pre-tax gain of $20.8.
Included in the gain was a LIFO liquidation of approximately
$1.1 and transaction costs of approximately $0.5.
Product warranty: In March 1996, the company extended warranty
service to certain products sold by the Process Controls sector
which were not covered by warranty. The company recorded $4.0 to
cover the cost of such repairs. Through June 30, 1997, payments
made against this reserve were $3.5. It is anticipated that the
remaining amount will be expended in 1997.
Capitalized software: The company reviews on an ongoing basis
the carrying amount of company assets. As part of this review,
in the first quarter of 1996, the future market potential of
capitalized software in the Industrial Technology sector was
determined to be impaired. Accordingly the company wrote off
$4.6 of such software.
Factory closure and other: As part of the company's ongoing
review of operations, the company decided in March 1996 to close
a factory in the Electrical Controls sector and provided $4.7
primarily for lease termination costs, asset write-downs and
severance. In connection with this review, the company identified
property, plant and equipment that will not be utilized in future
operations, and, therefore, recorded a $4.4 charge to write-off
the assets.
Environmental: During the first quarter of 1996, the company
changed its estimate of environmental costs to be incurred at one
of its facilities in the Electrical Controls sector. The change
in estimate of $2.0 was a result of additional information
received about the method and extent of remediation required.
The following table summarizes the results of operations for the
first half of 1997 and 1996 excluding the items discussed above.
1997 1996
Reported Adjusted Change
Net sales $1,045.2 $996.7 4.9%
Gross profit 312.0 301.0 3.7%
Margin percent 29.9% 30.2%
Selling, general and
administrative 206.1 194.7 5.9%
expenses
Percent of sales 19.7% 19.5%
Operating earnings 105.9 106.3 (0.4%)
Interest expense, net 8.0 12.4 (35.5%)
Net earnings 58.7 56.3 4.3%
Net earnings per share $1.15 $1.14 0.9%
Net sales: Sales in the first half of 1997 increased 4.9 percent
over first half 1996 due primarily to increase in the Electrical
Controls sector and higher first quarter sales in the
telecommunication market. International sales in 1997 increased
7 percent over the same period of 1996 and represented
approximately 23 percent of total net sales versus 22 percent in
the same period of 1996. Export sales increased 3 percent over
the first half of 1996.
Foreign sales increased approximately 10 percent versus the same
period last year primarily as a result of improvements of the
company's Canadian and United Kingdom affiliates.
Process Control sector sales were $368.4 in the first half of
1997 as compared to $361.9 in the same period in 1996. The small
increase was primarily the result of higher industrial oven and
laboratory product sales. The increases were partially offset by
lower sales volume of crystal growing furnaces as a result of a
cyclical downturn in the semiconductor equipment market in late
1996 and continuing into 1997.
Sales in the Electrical Controls sector increased 7.8 percent to
$493.0 from $457.3, as compared to the same period last year.
Sales increases were reported by all six units within the sector.
The largest improvements were in the construction material,
industrial electrical, treadmill motor and medium power
transformer products.
Industrial Technology sector sales increased 3.5 percent to
$183.8 versus $177.5 in the same period in 1996. New networking
product sales of the CD9000TM ESCON Director product as well as
new application sales of an existing networking monitoring
product were the primary reasons for the increase. Increased
demand from North American automotive production also contributed
to the growth but was negatively impacted by North American
automobile worker strikes in the second quarter of 1997.
Gross profit: Gross profit as a percentage of sales decreased
from 30.2 percent to 29.9 percent. The margin decrease was
largely due to higher sales of lower margin products,
higher labor, new product development and new information systems
costs partially offset by productivity and material cost savings.
Selling, general and administrative expenses: Selling, general
and administrative expenses as a percentage of sales increased in
the first half from 19.5 percent in 1996 to 19.7 percent in 1997.
This increase resulted from higher marketing, sales commissions
and information systems costs in the first quarter of 1997. 1997
selling, general and administrative expenses were positively
impacted by a $1.9 insurance settlement in the Process Controls
sector and the reversal of $0.8 of excess plant closure costs in
the Electrical Controls sector. Included in selling, general and
administrative expenses were pension credits of $6.5 in 1997 and
$4.8 in 1996.
Operating earnings: Process controls operating earnings
decreased 7.9 percent to $45.4, versus $49.3 in the same period
in 1996. The decline is primarily due to a shift in mix to lower
margin products in the pump and coal feeder systems businesses
and lower volume in the crystal growing furnace business. 1996
operating earnings of the Process Controls sector included $0.7
of environmental insurance recoveries.
Electrical controls operating earnings were flat at $45.6, versus
$45.5 in the same period in 1996. Included in 1997 operating
earnings is approximately $0.6 of pre-tax gain on the sale of a
product line for approximately $2.4. 1996 operating earnings of
the Electrical Controls sector included $1.3 of environmental
insurance recoveries.
Industrial Technology sector operating earnings increased 22.5
percent to $33.7 versus $27.5 in the same period in 1996. The
increase was due mainly to higher first quarter sales volume, a
shift toward the higher margin CD9000TM ESCON Director product
and productivity improvements in automotive product lines.
Unallocated expenses increased to $18.8 in the first half of 1997
from $16.0 in the same period in 1996. 1996 unallocated expenses
were positively impacted by the collection of a $1.3 previously
written off receivable. The increase is primarily the result of
higher expenses due to divested businesses and higher benefit
cost accruals.
Interest expense: Net interest expense decreased 35.5 percent
to $8.0 versus $12.4 in the same period of 1996 due to the
conversion of subordinated notes in late 1996 and early 1997 as
well as lower average debt levels. Cash generated from
operations and divestitures in 1996 was used to pay down debt
incurred in connection with acquisitions made in 1995.
Net earnings: Net earnings were $58.7 or $1.15 per share in
1997 compared to $56.3 or $1.14 per share in 1996. The company's
effective tax rate was 40.0 percent in both 1997 and 1996.
Financial Condition - June 30, 1997 Compared to December 31, 1996
The following summarizes the cash flow activity for the first six
months of 1997 compared to the first six months of 1996.
1997 1996
Cash flow from operating activities $57.6 $88.4
Divestitures 7.3 71.6
Capital expenditures (26.3) (28.6)
Other investing activities 1.5 0.6
Cash flow from investing activities (17.5) 43.6
Debt borrowings/(repayments) 84.7 (102.2)
Dividends paid (26.5) (23.9)
Purchase of common stock (100.0) (0.9)
Issuance of common stock 8.3 8.0
Cash flow from financing activities (33.5) (119.0)
Included in operating cash flow for 1997 and 1996 were
expenditures of $3.4 and $13.5, respectively, related to
previously divested operations and $3.7 and $3.3, respectively,
for severance pay.
Operating cash flow for the first half of 1997 decreased in
comparison to first half of 1996 primarily due to higher accounts
receivable balances resulting from the higher sales volume and
lower accrued expenses due to the utilization of disposition and
restructuring accruals as well as payment of other non-operating
accruals.
In December 1996, the Board of Directors approved a stock buy-
back program of up to $100.0 to offset the dilutive impact of
shares issued in connection with the convertible subordinated
notes redemption. On April 17, 1997, the company concluded
the buy-back program which resulted in the repurchase of
approximately 2.5 million shares. On June 19, 1997, the Board of
Directors approved a stock buy-back program of up to $150.0 subject
to the consummation of the GS Pump business divestiture (see note 12).
On June 30, 1997, the company entered into an agreement in
principle to form a joint venture with Emerson's Appleton
Electric division (see note 11). The company's contribution to the
joint venture is not expected to significantly affect the company's
liquidity.
Total debt-to-total capitalization was 25.9 percent at June 30,
1997, up from 21.8 percent at year-end, due to higher long-term
debt at the end of the second quarter. The debt level increased
in the second quarter of 1997 in order to repurchase common
shares to offset the impact of the converted debt. The company
is well positioned to finance future working capital requirements
and capital expenditures through current earnings and available
credit facilities.
On April 7, 1997, the company sold $25.0 million 7.114 percent
medium-term senior notes that are due on April 8, 2002. On April
18, 1997, the company sold an additional $25.0 million 7.00
percent medium-term senior notes that are due on October 18,
2000. The proceeds were used to pay down floating rate
commercial paper.
Other Matters
Since the company is a producer of capital goods and equipment,
its results can vary with the relative strength of the economy.
Demand for products in the Process Controls sector follows the
demand for capital goods orders. The Electrical Controls sector
depends upon several markets, principally the nonresidential
construction and computer equipment industries. The Industrial
Technology sector depends on several markets, primarily
automotive, mass transportation, and telecommunications
equipment. Mass transportation depends upon continued federal
and local government spending, andtelecommunications is
dependent upon continued research and development and the
continued success of new products. While no one marketplace
or industry has a significant impact on the company's operations
or results, the inherent pace of technological changes presents
certain risks that the company monitors carefully. Success within
all of the company's businesses is dependent upon the timely
introduction and acceptance of new products.
Forward-looking Statements
The company may from time to time make projections concerning
future operations and earnings. The company's forward-looking
statements are based on the company's current expectations, which
are subject to a number of risks and uncertainties that could
materially affect or reduce such operations and earnings. In
addition to the general factors identified in "Other Matters"
above, the primary factors that could specifically affect the
company's expectations include the failure of: (1) order rates
increasing as expected, (2) productivity improvements meeting or
exceeding budget, and (3) new products under development being
produced and accepted as anticipated.
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.1 364 Day Credit Agreement - Amendment No. 2 among
General Signal Corporation and Various Commercial
Banking Institutions, dated May 29, 1997.
10.2 Four Year Credit Agreement - Amendment No. 3 among
General Signal Corporation and Various Commercial
Banking Institutions, dated May 29, 1997.
10.3 General Signal Corporation Savings and Stock
Ownership Plan as amended and restated
July 1, 1997.
27.0 Financial Data Schedule
(b) Reports on Form 8-K:
The Registrant did not file any reports on Form 8-K during
the quarter covered by this report.
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.
GENERAL SIGNAL CORPORATION
/s/ Raymond L. Arthur
Raymond L. Arthur
Vice President and Controller
Chief Accounting Officer
DATE: July 25, 1997
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.
GENERAL SIGNAL CORPORATION
Raymond L. Arthur
Vice President and Controller
Chief Accounting Officer
DATE: July 25, 1997