SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For Quarterly Period Ended April 3, 1994
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 0-17873
GIDDINGS & LEWIS, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1643189
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
142 Doty Street, Fond du Lac, Wisconsin 54935
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 921-9400
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.
Common Stock Outstanding as of April 3, 1994: 34,287,526 shares
GIDDINGS & LEWIS, INC.
Form 10-Q Index
For Quarter Ended April 3, 1994
Page
PART I. Financial Information
Item 1. Condensed Consolidated Statements of Income 3
Condensed Consolidated Statements of Cash Flows 4
Condensed Consolidated Balance Sheets 5
Condensed Consolidated Statement of Changes in
Shareholders' Equity 6
Notes to Condensed Consolidated Financial
Statements 7 - 9
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial
Condition 10 - 11
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
GIDDINGS & LEWIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Share and Per Share Data)
(Unaudited)
Three months ended
April 3, April 4,
1994 1993
Net sales $123,030 $140,251
Costs and expenses:
Cost of sales 94,839 98,698
Selling, general and
administrative expenses 12,885 18,616
Depreciation and amortization 4,084 3,801
------- -------
Total operating expenses 111,808 121,115
------- -------
Operating income 11,222 19,136
Interest (income)/expense, net (325) 1,827
Other expense 91 448
------- -------
Income before provision for income taxes 11,456 16,861
Provision for income taxes 4,586 6,627
------- -------
Net income $ 6,870 $ 10,234
======= =======
Per common share amounts:
Net income available to common
shareholders:
Primary $ .20 $ .33
======= =======
Fully diluted $ .20 $ .32
======= =======
Dividends declared $ .03 $ .03
======= =======
Average number of common shares outstanding 34,264,485 31,484,738
See accompanying notes.
GIDDINGS & LEWIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three months ended
April 3, April 4,
1994 1993
Operating activities:
Net income $ 6,870 $ 10,234
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Depreciation and amortization 4,084 3,801
Net changes in working capital items 16,519 1,919
Other 333 (391)
------- ------
Net cash provided by operating activities 27,806 15,563
------- -------
Investing activities:
Additions to property, plant, and equipment (4,501) (4,571)
Other (278) 2,833
------- -------
Net cash used by investing activities (4,779) (1,738)
------- -------
Financing activities:
Net decrease in notes payable - (10,990)
Payments on debenture redemptions and
conversions - (108)
Proceeds from stock options exercised 440 114
Cash dividends (1,028) (1,005)
------- -------
Net cash used by financing activities (588) (11,989)
------- -------
Effect of exchange rate changes on cash 577 -
------- -------
Net increase in cash and cash equivalents 23,016 1,836
Cash and cash equivalents - beginning of
period 53,877 8,501
------- -------
Cash and cash equivalents - end of period $ 76,893 $ 10,337
======= =======
See accompanying notes.
GIDDINGS & LEWIS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
April 3, December 31,
1994 1993
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 76,893 $ 53,877
Accounts receivable 217,836 246,130
Inventories (Note 2) 58,578 57,393
Deferred income taxes 23,770 23,770
Other current assets 7,529 6,304
------- -------
Total current assets 384,606 387,474
Fixed assets - net 103,073 101,269
Costs in excess of net acquired assets 90,781 91,386
Other assets 12,572 12,897
Deferred income taxes 20,990 20,990
------- -------
TOTAL ASSETS $612,022 $614,016
======= =======
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 33,327 31,059
Accrued expenses and other liabilities 87,250 98,337
------- -------
Total current liabilities 120,577 129,396
Long-term employee benefits and other
long-term liabilities 47,676 48,610
------- -------
Total liabilities 168,253 178,006
Contingencies (Note 3)
Shareholders' equity:
Class A preferred stock - -
Common stock 3,429 3,425
Capital in excess of par 324,357 323,679
Retained earnings 120,534 114,692
Cumulative translation adjustment (2,562) (3,444)
Unamortized compensation expense (1,989) (2,342)
------- -------
Total shareholders' equity 443,769 436,010
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $612,022 $614,016
======= =======
See accompanying notes.
GIDDINGS & LEWIS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED APRIL 3, 1994
(In Thousands, Except Share Amounts)
(Unaudited)
Capital in Cumulative Unamortized Total
Common Stock Excess of Retained Translation Compensation Shareholders'
Shares Amount Par Earnings Adjustment Expense Equity
Balance, December 31, 1993 34,254,068 $ 3,425 $ 323,679 $114,692 $ (3,444) $ (2,342) $ 436,010
Issuance of shares under
restricted stock awards 6,000 1 149 (149) 1
Cancellation of shares under
restricted stock awards (16,000) (1) (179) 84 (96)
Issuance of shares for options
exercised under stock
option plan 43,458 4 436 440
Tax benefit related to
exercise of stock options 272 272
Net income 6,870 6,870
Amortization of compensation
expense 418 418
Cash dividends (1,028) (1,028)
Translation adjustment 882 882
Other -
__________ _______ _________ ________ _______ _______ __________
Balance, April 3, 1994 34,287,526 $ 3,429 $ 324,357 $120,534 $(2,562) $(1,989) $ 443,769
========== ======= ========= ======== ======= =======
See accompanying notes.
GIDDINGS & LEWIS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 3, 1994
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended
April 3, 1994 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1994. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K
for the year ended December 31, 1993.
The Company is organized into four major operating groups: Automation
Technology, Integrated Automation, Automation Measurement and Control,
and European Operations. The Automation Technology Group is
responsible for the manufacture of cellular and smart manufacturing
systems, automated standalone machine tools, tooling and fixtures, and
remanufacturing. The Integrated Automation Group produces assembly
automation products and systems and flexible transfer lines.
Programmable industrial computers, servo systems, controls, and
measurement products are offered by the Automation Measurement and
Control Group. The European Operations Group offers the Company's
complete product lines through its sales, engineering, manufacturing,
and service facilities in Scotland, England and Germany.
2. Inventories
April 3, December 31,
1994 1993
(in thousands)
Raw materials $ 29,187 $ 29,613
Work-in-process 17,884 16,594
Finished goods 11,507 11,186
---------- --------
$ 58,578 $ 57,393
========== ========
3. Contingencies
The Company is involved in various environmental matters, including
matters in which the Company and certain of its subsidiaries have
either been named as potentially responsible parties under the
Comprehensive Environmental Response Compensation and Liability Act
("CERCLA") or are involved with state environmental authorities. The
sites involved include facilities acquired by the Company in
connection with the acquisition of Cross & Trecker, including a soil
and water contamination matter at the Company's West Allis, Wisconsin
facility that is held for sale. The Company has developed and
submitted plans which will lead to the remediation of this site.
The Michigan Department of Natural Resources is investigating
alleged environmental violations at the Company's Menominee,
Michigan facility. The investigation focuses on air emissions,
and their potential impact on surrounding soil and waste disposal
practices. Two related civil lawsuits have also been filed regarding
this matter. Information presently available to the Company does
not enable it to reasonably estimate potential civil or criminal
penalties, or remediation costs, if any, related to the Menominee
matter.
The Company has established accruals for all environmental
contingencies of which management is currently aware in accordance
with generally accepted accounting principles. In establishing these
accruals, management considered (a) reports of environmental
consultants retained by the Company, (b) the costs incurred to date
by the Company at sites where clean-up is presently ongoing and the
estimated costs to complete the necessary remediation work remaining
at such sites, (c) the financial solvency, where appropriate, of
other parties that have been identified as responsible for effecting
remediation at specified sites, and (d) the experience of other
parties who have been involved in the remediation of comparable
sites. The accruals recorded by the Company with respect to
environmental matters have not been reduced by potential insurance
recoveries or other recoveries and are not discounted. Although the
Company has and will continue to pursue such claims against insurance
carriers and other responsible parties, future potential recoveries
remain uncertain and, therefore, were not recorded as a reduction to
the estimated gross environmental liabilities. Based on the
foregoing and given current information, management believes that
future costs in excess of the amounts accrued on all presently known
and quantifiable environmental contingencies will not be material to
the Company's financial position or results of operations.
The Company is also involved in other litigation and proceedings,
including product liability claims. In the case of product
liability, the Company is partially self-insured and accrues for
estimated claim exposures determined to be probable. The Company
does not believe that the outcome of such litigation will have a
material adverse effect upon the Company.
As part of the Cross & Trecker Corporation acquisition in October,
1991, the Company acquired two contracts with customers located in
the former Soviet Union (Russian contracts). These contracts,
totalling approximately $48.2 million, were entered into by
Cross & Trecker Corporation prior to the acquisition. In light of
the political and economic instability in the former Soviet Union,
the Company was unable to predict when or if effective guarantees
(see below) would be obtained or additional payments would be
received under these contracts. Accordingly, at the time of the
acquisition, the Company wrote off the uncollected receivables and
reserved for the costs committed to be incurred with respect to these
contracts.
In August, 1992, Export-Import Bank of the United States issued a
conditional guarantee for one of the Russian contracts. At April 3,
1994, all of the specified procedures needed to activate this
guarantee had not yet been satisfied. However, in November, 1993,
the Company received the remaining contractual downpayment relating
to this contract. Since the related receivable had previously been
written off, the downpayment was recorded as income in 1993. For the
other Russian contract, no payments have been received and no credit
guarantee has been issued. The Company continues to pursue
collection of the remaining amounts outstanding under these
contracts.
GIDDINGS & LEWIS, INC.
Management's Discussion and Analysis of Results of Operations
and Financial Condition
Results of Operations for the First Three Months
of 1994 Compared to 1993
The following table sets forth the Company's bookings by operating group
in the period and consolidated backlog at period-end on a quarterly basis
for the period January 1, 1993 through April 3, 1994.
April 4, July 4, Oct. 3, Dec. 31, April 3,
1993 1993 1993 1993 1994
(In Thousands)
Operating
group:
Automation
Technology $ 36,987 $ 31,716 $ 36,561 $ 39,857 $ 32,034
Integrated
Automation 26,612 59,723 39,837 79,270 117,610
European
Operations 52,367 28,543 55,404 8,433 6,138
Automation
Measurement
and Control 13,328 11,954 13,818 14,511 13,647
------- ------- ------- ------- -------
Consolidated
bookings $129,294 $131,936 $145,620 $142,071 $169,429
======== ======= ======= ======= =======
Consolidated
backlog $349,070 $342,605 $367,857 $382,694 $431,448
======== ======= ======= ======= =======
Bookings in the first three months of 1994 were $169.4 million compared to
bookings in the first three months of 1993 of $129.3 million. Automation
Technology first quarter bookings for 1994 of $32.0 million decreased
13.4% from $37.0 million in the first quarter of 1993 reflecting continued
weakness in the demand for large machine tools and sophisticated cells and
systems. Integrated Automation bookings of $117.6 million increased
341.9% in the first quarter of 1994 from $26.6 million in the first
quarter of 1993. Substantially all of the increase in Integrated
Automation's first quarter 1994 bookings relates to large orders placed by
the domestic automotive industry. European Operations bookings decreased
88.3% from $52.4 million in the first quarter of 1993 to $6.2 million in
the first quarter of 1994. During the first quarter of 1993, the European
Operations Group received several large orders from European automotive
companies and one large order from a Korean automotive company; whereas
first quarter 1994 orders declined due to depressed economic conditions in
Europe. Automation Measurement and Control bookings of $13.6 million for
the first quarter of 1994 increased 2.4% from $13.3 million in the first
quarter of 1993.
Consolidated net sales in the first three months of 1994 totalled $123.0
million compared to $140.3 million in the year earlier period. The
decrease in net sales reflects the lower bookings levels experienced in
the latter half of 1992 and first half of 1993. In the 1994 period, net
sales for Automation Technology of $41.9 million decreased 12.9% from
$48.1 million in the year earlier period. Integrated Automation net sales
of $49.3 million decreased 8.2% from $53.7 million. European Operations
sales in the first three months of 1994 were $16.4 million, a decrease of
28.4% from $22.9 million in the year earlier period. Automation
Measurement and Control net sales decreased .5% to $15.5 million in the
1994 period compared to $15.6 million in the 1993 period.
The consolidated gross margin (before depreciation and amortization)
decreased to 22.9% of sales in the first quarter of 1994, from 29.6% in
the first quarter of 1993. The decrease in the gross margin percentage is
primarily attributable to competitive pressures on bookings starting in
the last half of 1992.
Selling, general, and administrative expenses (before depreciation and
amortization) decreased as a percentage of sales to 10.5% in the first
three months of 1994 from 13.3% in the year earlier period. The
percentage decrease is the result of cost reduction and improved
engineering and technical services efficiency.
Other expense of $91,000 in the first three months of 1994 is primarily
made up of foreign currency gains and amortization of foreign currency
exchange contracts costs.
Net interest expense/(income) decreased from $1.8 million in the first
quarter of 1993 to ($.3) million in the first quarter of 1994. The
decrease in net interest expense is attributable to the conversion into
common stock in March, 1993 of substantially all of the Company's 10%
convertible subordinated debentures and the repayment of all remaining
outstanding debt in the second quarter of 1993.
The provision for income taxes of $4.6 million for the first quarter of
1994 is based on the estimated annual effective tax rate for 1994. The
Company's effective tax rate for the first three months of 1994 amounted
to 40.0% as compared to 39.3% for the year earlier period.
Liquidity and Capital Resources at April 3, 1994
On April 3, 1994, the Company had $76.9 million of cash and cash
equivalents on hand which was an increase of $23.0 million from the
balance on hand at the beginning of the year. For the first three months
of 1994, operating activities generated $27.8 million of cash. Cash
provided from working capital changes totaled $16.5 million due primarily
to improved receivable collections, offset by a decrease in accrued
expenses and other liabilities. The payment of year-end accruals was the
primary reason for the decrease in accrued expenses and other liabilities.
Investing activities used $4.8 million which included $4.5 million in
capital expenditures. Financing activities used cash of $.6 million
including dividend payments of $1.0 million.
The Company believes its cash flows from operations and funds available
under domestic and foreign credit agreements will be adequate to finance
capital expenditures and working capital requirements for the foreseeable
future.
Part II - OTHER INFORMATION
Giddings & Lewis, Inc.
Form 10-Q
April 3, 1994
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
The Company filed no current reports on Form 8-K during
the quarter ended April 3, 1994.
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.
Giddings & Lewis, Inc.
Date: May 11, 1994 JOSEPH R. COPPOLA
Joseph R. Coppola
Chairman and Chief Executive
Officer
Date: May 11, 1994 RICHARD C. KLEINFELDT
Richard C. Kleinfeldt
Vice-President - Finance and
Secretary (Chief Financial and
Accounting Officer)