- - -------------------------------------------------------------------------------
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
1996 FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-996
GENERAL SIGNAL CORPORATION
BOX 10010 HIGH RIDGE PARK, STAMFORD, CONNECTICUT 06904-2010
TELEPHONE NUMBER (203) 329-4100
IRS EMPLOYER IDENTIFICATION NO. 16-0445660
STATE OF INCORPORATION: NEW YORK
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH
TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED
- - -------------------------------------------------------------------------------
Common Stock par value $1.00 New York Stock Exchange
(Par value reduced from $6.67 effective April 21, Pacific Stock Exchange
1969)
5.75% Convertible Subordinated Debentures New York Stock Exchange
due June 1, 2002
- - -------------------------------------------------------------------------------
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates as of
February 28, 1997 was approximately $2.2 billion. As of February 28, 1997,
there were 52.2 million shares of General Signal Corporation common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE--PART III
Portions of the Proxy Statement for 1997 Annual Meeting
Page 1 of 293
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TABLE OF CONTENTS
ITEM PAGE
---- ----
1 Business........................................................... 3
2 Properties......................................................... 8
3 Legal Proceedings.................................................. 8
4 Submission of Matters to a Vote of Security Holders................ 8
5 Market for the Registrant's Common Stock and Related Shareholder
Matters........................................................... 9
6 Selected Financial Data............................................ 9
7 Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 10
8 Financial Statements and Supplementary Data........................ 15
9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.............................................. 15
10 Directors and Executive Officers................................... 15
11 Executive Compensation............................................. 15
12 Security Ownership of Certain Beneficial Owners and Management..... 15
13 Certain Relationships and Related Transactions..................... 15
14 Exhibits, Financial Statements, Schedules and Reports on Form 8-K.. 16
Signatures......................................................... 18
Index to Financial Statements, Schedule and Exhibits............... F-1
2
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENTS: General Signal Corporation (the company), incorporated
in New York in 1904, is a manufacturer of equipment for the Process Controls,
Electrical Controls and Industrial Technology industries. The company's key
Process industry products include pumps, mixers, and valves for municipal
water supply and wastewater treatment, pulp, paper, food, pharmaceutical and
chemical manufacturing and ultra low-temperature freezers for life science
research. In the Electrical industry, key products include uninterruptible
power supply and conditioning equipment, power transformers, and fire
detection systems. Products serving the Industrial Technology industry include
auto and bicycle components, data networking equipment, and fare collection
and vending equipment.
During the last five years, the company invested approximately $440.7
million in cash and 4.4 million shares of common stock to acquire 20
businesses and/or product lines. The notes to the financial statements on
pages F-18 through F-19 of this 10-K provide additional information for
significant acquisitions during the last three years.
Additionally, during the last five years, the company disposed of two units,
accounted for as discontinued operations. Information regarding these
dispositions is on page F-19 of this 10-K.
FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS: Selected business segment
information for the last five fiscal years is summarized on page F-21 of this
10-K. Net sales from the uninterruptible power systems (UPS) class of product
accounted for 11.2%, 8.2% and 3.5% of consolidated net sales in 1996, 1995 and
1994, respectively.
A summary of information by geographic area for the last five fiscal years
is included on page F-22 of this 10-K.
NARRATIVE DESCRIPTION OF BUSINESS
MAJOR MARKETS AND PRODUCTS AND METHOD OF DISTRIBUTION: A description of the
registrant's business follows:
TOP COMPETITORS BY
PRINCIPAL BUSINESS MAJOR PRODUCTS TOP MARKETS MARKET
------------------ -------------- ----------- ------------------
PROCESS CONTROLS
DEZURIK Industrial valves for Water supply and McWane; Mueller/Pratt;
Sartell, Minnesota gases, liquids, slurries wastewater treatment Keystone; AMRI
and dry solids
Pulp and paper Neles-Jamesbury; Velan;
manufacturing Fisher
Chemical processing Fisher; Neles-Jamesbury;
Velan; Duriron;
Masonelian
- - --------------------------------------------------------------------------------------------------
GENERAL SIGNAL Centrifugal, Municipal water supply ITT/Flygt
PUMP GROUP submersible, and wastewater treatment
North Aurora, regenerative turbine,
Illinois and vertical turbine Commercial heating, Bell & Gossett
pumps ventilation, and air
conditioning
Residential (wholesale Zoeller
sump and ejector pumps)
- - --------------------------------------------------------------------------------------------------
KAYEX Crystal growing furnaces Semiconductor wafer Ferrofluidics;
Rochester, New York manufacturers Mitsubishi Machine
- - --------------------------------------------------------------------------------------------------
LIGHTNIN Industrial fluid mixers Chemical process Robbins & Meyers
Rochester, New York and agitators industries (Chemineer brand);
Ekato; Philadelphia
Mixers
Water supply and Philadelphia Mixers;
wateswater treatment Robbins & Meyers
(Chemineer brand)
Minerals processing Philadelphia Mixers;
Robbins & Meyers
(Prochem brand); Ekato
- - -------------------------------------------------------------------------------
3
TOP COMPETITORS BY
PRINCIPAL BUSINESS MAJOR PRODUCTS TOP MARKETS MARKET
------------------ -------------- ----------- ---------------------
REVCO/LINDBERG Ultra-low temperature Life science research Forma Scientific; Sybron
Asheville, North laboratory freezers, laboratories, clinical PLC
Carolina specialty refrigerators, laboratories, and
and CO2 incubators industrial research
laboratories
Industrial and Transportation equipment Despatch; Surface
laboratory ovens manufacturing Combustion
- - --------------------------------------------------------------------------------------------------
STOCK EQUIPMENT Coal feed systems Electrical utilities Merrick; Ramsey
COMPANY
Chagrin Falls, Ohio Paper manufacturers; Ramsey
industrial steam
generators
Feed systems and flow Waste supply and Wallace and Tiernan
measurement devices for wastewater treatment
water and wastewater
- - --------------------------------------------------------------------------------------------------
ELECTRICAL CONTROLS
BEST POWER Uninterruptible power OEM computer Exide/Deltec
Dallas, Texas systems manufacturers
PCs, workstations, American Power
internetworking Conversion Corp.
Telecommunications Melin Gerin
- - --------------------------------------------------------------------------------------------------
DIELECTRIC Radio frequency Television and FM Andrew Corp.; Harris
COMMUNICATIONS transmission equipment broadcasters Corp.
Raymond, Maine
Cable pressurization Telecommunication Puregas
providers
-------------------------------------------------------------------------------------------------
EDWARDS SYSTEMS Fire detection products, Commercial, industrial Simplex; Cerberus;
TECHNOLOGY systems and services and institutional Pittway Corp.
Cheshire, Connecticut facilities
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GS ELECTRIC Universal, blower, and Floor care appliance Ametek/Lamb Electric
Carlisle, permanent magnet manufacturers
Pennsylvania fractional horsepower
electric motors Yard and garden MAMCO
appliance manufacturers
Fitness equipment United Technologies
manufacturers, tubs,
pools, spas
- - --------------------------------------------------------------------------------------------------
GS ELECTRICAL GROUP Fittings, enclosures, Industrial and Crouse-Hinds; Appleton
Farmington, industrial lighting, commercial construction
Connecticut firestop, heat trace
Power conditioning, DC Factory automation MRO Square D
power supplies, low- and OEM
voltage general-purpose
transformers
Industrial signaling Industrial and Federal Signal Corp.
commercial facilities
Emergency lighting and Industrial, commercial Lithonia
exit signs and institutional
facilities
- - --------------------------------------------------------------------------------------------------
4
TOP COMPETITORS BY
PRINCIPAL BUSINESS MAJOR PRODUCTS TOP MARKETS MARKET
------------------ -------------- ----------- ------------------
WAUKESHA ELECTRIC Medium power Investor-owned and ABB
Waukesha, Wisconsin transformers public power utilities
Industrial and ABB; GE/Prolec
commercial sector
Transformer Investor-owned and Solomon; S.D. Meyers
remanufacturing and public power utilities
decommissioning services
- - -----------------------------------------------------------------------------------------------
INDUSTRIAL TECHNOLOGY
GENERAL SIGNAL Wide-area network matrix Financial services, Bytek; DMS; Dynatech;
NETWORKS switching systems common carriers, Cornet
Mount Laurel, business services
New Jersey
Host networking products Common carriers, IBM; CNT; Network
and fiber management financial services, Systems
systems transportation
Telecommunications Regional Bell operating Hekimian; ADA
performance measurement companies, long-distance
systems carriers, international
telephone companies
- - -----------------------------------------------------------------------------------------------
GFI GENFARE Automatic fare Bus and rail mass Cubic Corporation
Elk Grove Village, collection passenger transportation
Illinois processing, and
information systems for U.S. Postal Service National Vendors;
the mass transportation Westinghouse
market, including
electronic fareboxes and
faregates, magnetic
ticket processing
systems and high-
security vending
equipment, stamp vending
machines and audio
products
- - -----------------------------------------------------------------------------------------------
METAL FORGE Cold-forged solid and Automotive OEM Thompson Products
Dublin, Ohio tubular metal components
and assemblies for Bicycle OEM Arvin; Walker
automobiles and bicycles
Automotive OEM service
- - -----------------------------------------------------------------------------------------------
The company's products are sold by its own sales organization and through
distributors and manufacturers' representatives.
MATERIALS AND SUPPLIES: The company manufactures many of the components used
in its products. It also purchases a variety of basic materials and component
parts. Although some basic materials and components have been and may be in
short supply from time to time, the company believes that it will generally be
able to obtain adequate supplies of major items or reasonable substitutes.
PATENTS: The company holds many patents and has continued to secure other
patents that cover many of its products. While patents are important in the
aggregate to the company's competitive position, the loss of any single
patent, patent application or patent license agreement, or group thereof,
would not materially affect the conduct of its business as a whole. The
company is both a licensor and licensee of patents.
WORKING CAPITAL: A discussion of working capital is included on pages 13 and
14 of this 10-K.
BACKLOG: The amount of unfilled orders was approximately $444.6 million as
of December 31, 1996 and $435.8 million as of December 31, 1995. All unfilled
orders are expected to be filled within the next succeeding year.
5
COMPETITION: Although the businesses of the company are highly competitive,
the competitive position cannot be determined accurately in the aggregate or
by segment since none of its competitors offer all of the same product lines
or serve all of the same markets, nor are reliable comparative figures
available for its competitors. In most product groups, competition comes from
numerous concerns, both large and small. The principal methods of competition
are price, service, product performance and technical innovation. These
methods vary with the type of product sold. The company believes that it can
compete effectively on the basis of each of these factors as they apply to the
various products offered.
RESEARCH AND DEVELOPMENT: Research and development information for the last
three years is included on page F-22 of this 10-K.
ENVIRONMENTAL MATTERS: The company is involved in various stages of
investigation and remediation relative to environmental protection matters,
arising from its own initiative, from indemnification of purchasers of
divested operations, or from legal or administrative proceedings, some of
which involve waste disposal sites. The company has a comprehensive
environmental compliance program which includes environmental audits conducted
by internal and outside independent environmental professionals and regular
communications with the company's operating units, regarding environmental
compliance requirements and anticipated regulations.
The company has been notified that it has been named as a potentially
responsible party or has received other notices of potential liability
pursuant to various federal and state environmental laws (including, without
limitation, the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980 and similar state legislation) at approximately 65
multi-party sites which are not present or former facilities of the company
and for which the company may be jointly and severally liable. It is alleged
that the company generated hazardous substances, pollutants or contaminants
which are present at those sites. The company has resolved its liability by
entering into de minimis settlements or other buyout agreements with
governmental authorities or other parties at 20 of these sites and believes
that it has no liability with respect to 9 of these sites. The company is of
the opinion, based on information currently available, that its aggregate
probable remaining liability at the other 36 sites is less than $3 million,
since the company would probably qualify for future de minimis settlements at
many of these sites.
The company is engaged in site investigation and/or remediation at the
following sites presently or formerly owned by the company and has accrued for
its expected future costs, as detailed below. It is the company's policy not
to offset expected insurance recoveries against expected obligations when
determining the amount of environmental accruals.
New York Air Brake Landfill/Kelsey Creek Site: In February 1990, the company
entered into a consent order with the New York State Department of
Environmental Conservation (NYSDEC) to conduct an investigation and
remediation at the company's discontinued New York Air Brake facility in
Watertown, New York. On March 30, 1994, NYSDEC issued a Record of Decision
with respect to site remediation. The remedial action will consist of
consolidation of contamination in the existing industrial landfill, capping
the landfill, collecting contaminated groundwater downgradient of the
landfill, and the removal of certain sediments in Kelsey Creek and a tributary
creek. The future cost estimated by the company for site remediation is
approximately $11.2 million. The company has filed litigation against the City
of Watertown to challenge an increase in sewer discharge fees for leachate at
the landfill and believes that it will ultimately prevail in such litigation.
Hevi-Duty Facility: In August 1990, the EPA placed this manufacturing
facility of the company, located in Goldsboro, North Carolina, on the National
Priorities List (NPL); subsequently, the company challenged the listing and
the EPA delisted the facility in June 1993. Following the delisting, the
company investigated site contamination at this facility and conducted limited
initial remediation. The company is participating in a voluntary clean-up
program sponsored by the state of North Carolina and has entered into an
Administrative Order on Consent with the North Carolina Department of
Environmental Health and Natural Resources. The company currently believes
that the probable aggregate remaining liability for clean-up of this site will
be approximately $4.8 million.
Fairbanks Morse Facility: On December 2, 1994, the company acquired
Fairbanks Morse Pump Corporation (Fairbanks). Based on the company's pre-
acquisition environmental assessment and site testing performed at the
Fairbanks facility located in Kansas City, Kansas, the company determined that
there is soil and groundwater contamination at the site. The company has
entered into an Interim Agreement with the Kansas Department of Environment
and Health with respect to additional site investigation. The company believes
that up to $4.8 million could be required to investigate and remediate
contaminated soil and groundwater at the site. The accrual to cover the
expected costs was established at the time of acquisition.
6
The company is conducting investigation and remedial activities due to
contamination at six present or former facilities of the company. Site
contamination has been alleged with respect to two other former facilities.
Based on information currently available, the company believes that the
probable aggregate remaining liability for investigation and remediation at
these eight sites will not exceed approximately $2.0 million.
The potential costs related to the matters described above and the possible
impact on future operations are uncertain due in part to the complexity of
government laws and regulations and their interpretations, the varying costs
and effectiveness of clean-up technologies, the uncertain level of insurance
or other types of recovery and the questionable level of the company's
responsibility. In management's opinion, after considering reserves
established for such purposes, remedial actions for compliance with the
present laws and regulations governing the protection of the environment are
not expected to have a material adverse impact on the company's results of
operations or financial position.
EMPLOYEES: At December 31, 1996, the company had approximately 13,000
employees. Approximately 2,600 employees are represented by 31 different
collective bargaining units. The company has generally experienced
satisfactory labor relations at its various locations.
EXECUTIVE OFFICERS OF THE REGISTRANT
NAME, POSITION, AGE AT DECEMBER 31 AND OTHER INFORMATION AGE
- - -------------------------------------------------------- ---
Michael D. Lockhart........................................................ 47
Chairman and Chief Executive Officer since October 19, 1995. Previously,
President and Chief Operating Officer since October 3, 1994. Prior to
joining the company, Vice President and General Manager of General
Electric's Commercial Engines and Services division, following several
other key executive positions at GE since 1981. Prior to joining GE,
served as Vice President and Director, The Boston Consulting Group.
Terence D. Martin.......................................................... 53
Executive Vice President and Chief Financial Officer since February 2,
1995. Previously, Chief Financial Officer of American Cyanamid Company
since 1991 and Treasurer since 1988.
Joanne L. Bober............................................................ 44
Senior Vice President, General Counsel, and Secretary since January 2,
1997. Previously, Partner at Jones, Day, Reavis & Pogue since 1989.
Elizabeth D. Conklyn....................................................... 49
Senior Vice President--Human Resources since December 14, 1995.
Previously, Senior Vice President, Human Resources and Organization for
Mobile Telecommunications Technologies since 1994. Served in various human
resource management positions with IBM from 1977 to 1994.
Ernest R. Verebelyi........................................................ 49
Senior Vice President--Operations since November 1, 1996. Previously,
Executive Vice President of Special Products Division of Emerson Electric
since 1994, and Vice President of Operations since 1991. Prior to joining
Emerson, served in various executive and management positions with
Hussmann and General Electric.
Raymond L. Arthur.......................................................... 37
Vice President and Controller since March 20, 1997. Formerly, Assistant
Vice President, Director of Compliance, following several other positions,
for American Home Products Corporation since 1994 and American Cyanamid
Company since 1986.
William W. Clark........................................................... 55
Vice President--Sourcing since June 15, 1995. Previously, Vice President--
Operations of Tau-tron business, a division of General Signal Networks,
since 1992. Served in various management positions with Eastman Kodak
Company from 1968 to 1992.
Nino J. Fernandez.......................................................... 55
Vice President--Investor Relations since May 1, 1987. Previously, Director
of Communications since April 1, 1974.
Terry J. Mortimer.......................................................... 51
Vice President and Treasurer since March 20, 1997. Previously, Vice
President and Controller since May 25, 1990. Previously Director Finance
and Chief Accountant for Apple Computer since June, 1988. Previously with
Becton Dickinson and Company since 1981, most recently as Medical Sector
Controller.
7
EXECUTIVE OFFICERS OF THE REGISTRANT
NAME, POSITION, AGE AT DECEMBER 31 AND OTHER INFORMATION AGE
- - -------------------------------------------------------- ---
Donald J. Noonan.......................................................... 56
Vice President--Asia Pacific Development since September 11, 1996.
Formerly, Vice President and General Manager of Southern Pacific Aircraft
Engine Operations of General Electric Aircraft Engines since 1981.
Thomas E. Taylor.......................................................... 50
Vice President--Taxes since September 1, 1993. Previously with Elf
Aquitaine, Inc. as Vice President--Taxes since 1985.
The executive officers are elected annually by the Board of Directors.
There are no family relationships between any of the directors or executive
officers of the company.
ITEM 2. PROPERTIES
The following is a list of the company's principal properties, classified by
sector:
APPROXIMATE PERCENT
NO. OF SQUARE ------------
LOCATION FACILITIES FOOTAGE OWNED LEASED
-------- ---------- ------------- ----- ------
(IN MILLIONS)
Process Controls 11 states and 7 foreign 26 3.1 92% 8%
Sector................. countries
Electrical Controls 15 states, Puerto Rico 40 3.3 79% 21%
Sector................. and 5 foreign countries
Industrial Technology 8 states 11 0.9 87% 13%
Sector.................
In addition to manufacturing plants, the company as lessee occupies
executive offices in Stamford, Connecticut, and various sales and service
locations throughout the world. All of these properties, as well as the
related machinery and equipment, are considered to be well maintained and
suitable and adequate for their intended purposes. Assets subject to lien are
not significant.
ITEM 3. LEGAL PROCEEDINGS
The company and certain of its subsidiaries are defendants in legal
proceedings incidental to their businesses. Although the ultimate disposition
of these proceedings is not presently determinable, management does not expect
the outcome to have a material adverse impact on the company's financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
8
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The company's common stock is listed on the New York and Pacific stock
exchanges under the symbol "GSX." Information as to quarterly prices for the
last two years, and dividends paid, is included on page F-23 of this 10-K.
There were approximately 10,400 holders of record of the company's common
stock on February 28, 1997.
ITEM 6. SELECTED FINANCIAL DATA
ELEVEN-YEAR FINANCIAL SUMMARY
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER-SHARE DATA)
SUMMARY OF
OPERATIONS
Net sales........ $2,065.0 $1,863.2 $1,527.7 $1,354.2 $1,477.8 $1,424.1 $1,497.3 $1,522.4 $1,397.7 $1,249.2 $1,210.2
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Cost of sales.... 1,435.7 1,308.0 1,109.5 959.0 1,070.2 1,015.7 1,061.8 1,075.7 983.6 885.0 846.1
Selling, general
and
administrative
expenses........ 406.2 354.4 292.3 259.3 287.7 282.7 304.9 326.7 335.8 276.0 263.2
Other charges and
(credits)....... (20.8) 20.1 (46.2) (19.8) 85.6 -- 83.3 (8.7) 24.1 -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total operating
costs and
expenses........ 1,821.1 1,682.5 1,355.6 1,198.5 1,443.5 1,298.4 1,450.0 1,393.7 1,343.5 1,161.0 1,109.3
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Operating
earnings........ 243.9 180.7 172.1 155.7 34.3 125.7 47.3 128.7 54.2 88.2 100.9
Interest expense
(income), net... 21.5 24.3 11.8 16.6 24.8 28.3 31.8 38.7 (1.9) (1.7) 2.3
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Earnings from
continuing
operations
before income
taxes........... 222.4 156.4 160.3 139.1 9.5 97.4 15.5 90.0 56.1 89.9 98.6
Income taxes..... 89.0 56.3 56.2 41.0 3.2 28.2 7.3 23.4 25.9 25.5 36.0
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Earnings from
continuing
operations...... 133.4 100.1 104.1 98.1 6.3 69.2 8.2 66.6 30.2 64.4 62.6
Earnings (loss)
from
discontinued
operations, net
of income
taxes........... -- -- 2.4 (31.5) 6.1 (5.2) (26.9) 11.9 (5.0) 5.1 12.0
Loss on disposal
of discontinued
operations, net
of income
taxes........... -- (64.0) (25.8) -- -- (9.8) (14.2) -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Earnings (loss)
before
extraordinary
charges and
cumulative
effect of
accounting
changes......... 133.4 36.1 80.7 66.6 12.4 54.2 (32.9) 78.5 25.2 69.5 74.6
Extraordinary
charges......... -- -- -- (6.6) (0.3) -- -- -- -- -- --
Cumulative effect
of accounting
changes......... -- -- -- (25.3) (92.4) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net earnings
(loss).......... $ 133.4 $ 36.1 $ 80.7 $ 34.7 $ (80.3) $ 54.2 $ (32.9) $ 78.5 $ 25.2 $ 69.5 $ 74.6
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
PER-SHARE DATA
Earnings (loss)
per share of
common stock
Continuing
operations..... $ 2.68 $ 2.03 $ 2.20 $ 2.17 $ 0.15 $ 1.80 $ 0.21 $ 1.75 $ 0.55 $ 1.14 $ 1.09
Discontinued
operations..... -- (1.30) (0.49) (0.70) 0.15 (0.40) (1.07) 0.31 (0.09) 0.09 0.21
Extraordinary
charges........ -- -- -- (0.14) (0.01) -- -- -- -- -- --
Cumulative
effect of
accounting
changes........ -- -- -- (0.56) (2.21) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net earnings
(loss).......... $ 2.68 $ 0.73 $ 1.71 $ 0.77 $ (1.92) $ 1.40 $ (0.86) $ 2.06 $ 0.46 $ 1.23 $ 1.30
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Cash dividends
per share....... 0.975 0.96 0.915 0.90 0.90 0.90 0.90 0.90 0.90 0.90 0.90
Book value per
share........... 14.96 11.71 11.64 11.09 8.90 12.32 11.69 13.25 12.09 16.51 16.16
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
SUMMARY OF
FINANCIAL
POSITION
Working
capital........ 252.7 289.3 349.2 268.8 347.8 243.9 310.6 328.8 496.3 540.8 536.3
Property, plant
and equipment.. 310.0 312.7 280.5 263.4 246.9 263.7 283.0 325.1 312.5 310.6 345.6
Total assets.... 1,551.0 1,613.2 1,357.9 1,224.9 1,258.4 1,180.2 1,294.6 1,324.3 1,396.6 1,397.4 1,458.1
Total long-term
liabilities.... 368.0 603.0 442.0 373.9 537.7 345.7 440.8 373.1 539.9 163.3 179.8
Shareholders'
equity......... 743.8 578.1 547.9 525.2 374.8 476.4 450.3 506.1 461.0 907.2 927.4
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
FINANCIAL RATIOS
Working capital
to sales....... 12.2% 15.5% 22.9% 19.8% 23.5% 17.1% 20.7% 21.6% 35.5% 43.3% 44.3%
Selling, general
and
administrative
expenses to
sales.......... 19.7% 19.0% 19.1% 19.1% 19.5% 19.9% 20.4% 21.5% 24.0% 22.1% 21.7%
Operating
margin......... 11.8% 9.7% 11.3% 11.5% 2.3% 8.8% 3.2% 8.5% 3.9% 7.1% 8.3%
After-tax return
on net sales... 6.5% 5.4% 6.8% 7.2% 0.4% 4.9% 0.5% 4.4% 2.2% 5.1% 5.2%
9
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- -------- --------- ---------
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER-SHARE DATA)
Return on
average
shareholders'
equity......... 20.2% 6.3% 15.0% 7.7% (18.9%) 11.7% (6.9%) 16.2%
Current ratio... 1.6 1.7 1.9 1.8 2.0 1.7 1.8 1.7
Total debt to
capitalization.. 21.8% 43.1% 33.1% 27.6% 49.7% 38.9% 47.6% 40.2%
--------- --------- --------- --------- --------- -------- --------- ---------
SUPPLEMENTAL
INFORMATION
Capital
expenditures... 59.3 49.0 74.8 55.1 49.9 48.1 68.8 62.0
Depreciation of
property, plant
and equipment.. 52.6 50.3 41.7 35.4 40.6 42.1 44.5 44.7
Research and
development.... 47.5 46.9 49.7 53.1 56.2 87.3 93.4 92.8
Common stock
price range:
High............ 44 1/2 42 1/2 38 37 7/8 32 5/8 26 7/8 29 5/8 28 7/8
Low............. 32 28 30 1/8 30 25 7/8 17 5/8 15 5/8 22 7/8
Price-earnings
ratio range--
continuing
operations..... 12.1-16.4 20.9-13.8 17.3-13.7 17.5-13.8 21.1-16.8(/1/) 14.9-9.8 21.7-11.5(/1/) 16.5-13.1
Average common
shares
outstanding.... 49.7 49.2 47.3 45.2 41.8 38.6 38.4 38.1
Employees (in
thousands)..... 13.0 12.9 12.2 11.2 12.1 12.6 11.6 16.9
--------- --------- --------- --------- --------- -------- --------- ---------
YEAR ENDED DECEMBER 31,
----------------------------------------
1988 1987 1986
-------------- ------------ ------------
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER-SHARE DATA)
Return on
average
shareholders'
equity......... 3.7% 7.6% 8.1%
Current ratio... 2.3 2.7 2.5
Total debt to
capitalization.. 52.2% 11.5% 12.5%
-------------- ------------ ------------
SUPPLEMENTAL
INFORMATION
Capital
expenditures... 38.8 34.0 45.7
Depreciation of
property, plant
and equipment.. 42.1 42.4 41.4
Research and
development.... 93.7 84.1 74.4
Common stock
price range:
High............ 28 1/8 30 5/8 27 1/8
Low............. 20 16 5/8 19 5/8
Price-earnings
ratio range--
continuing
operations..... 36.1-25.7(/1/) 26.9-14.6 24.9-18.0
Average common
shares
outstanding.... 55.4 56.5 57.5
Employees (in
thousands)..... 16.6 16.6 17.5
-------------- ------------ ------------
- - -------
(1) Excludes the impact of after-tax charges related to dispositions of
businesses.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS(DOLLARS IN MILLIONS, EXCEPT PER-SHARE DATA)
The following discussion should be read in conjunction with the company's
consolidated financial statements and notes thereto.
RESULTS OF OPERATIONS
The amounts in the table below were derived from the Consolidated Financial
Statements.
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
REPORTED REPORTED REPORTED
-------- -------- --------
Net sales........................................ $2,065.0 $1,863.2 $1,527.7
Gross profit..................................... 629.3 555.2 418.2
Selling, general and administrative expenses..... 406.2 354.4 292.3
Gain on disposition, transaction and
consolidation charges, merger break-up fee and
other special items............................. (20.8) 20.1 (46.2)
Operating earnings............................... 243.9 180.7 172.1
Earnings from continuing operations.............. 133.4 100.1 104.1
Net earnings..................................... 133.4 36.1 80.7
Earnings per share from continuing operations.... $ 2.68 $ 2.03 $ 2.20
Earnings per share............................... $ 2.68 $ 0.73 $ 1.71
Over the last three years, the company included the following items in
reported net earnings. To facilitate a more meaningful discussion of results
of operations, these items are excluded from the discussion of comparative
results of operations in the table which follows these items.
ROYALTY INCOME: In July 1996, the company negotiated a royalty payment
related to one of its previously divested semiconductor businesses. The
company received $4.2 in connection with this agreement and has recognized
this amount in the Industrial Technology sector's net sales.
INSURANCE SETTLEMENT ON DESTROYED ASSETS: In May 1996, a fire at a supplier
facility destroyed assets of a business in the Process Controls sector. In
September 1996, the company received $1.8 in insurance proceeds, net of
related expenses, and recognized a gain on the involuntary conversion of these
assets. This amount is included as an offset to selling, general and
administrative expenses.
GAIN ON DISPOSITION: In January 1996, the company sold Kinney Vacuum
Company, a unit of 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.
10
PRODUCT WARRANTY: In March 1996, the company decided to correct defects in
certain products sold in prior years in the Process Controls sector for which
the warranty period had expired, and provided $4.0 to cover the cost of
repairs. Through December 31, 1996, the company made payments against this
reserve of $1.7. It is anticipated that the remaining amount will be expended
in 1997.
CAPITALIZED SOFTWARE: Based on an assessment of future market potential made
during the first quarter of 1996, the company decided to write-off $4.6 of
capitalized software related to a product in the Industrial Technology sector.
FACTORY CLOSURE AND OTHER: As part of the company's ongoing review of
facilities, product lines and 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. Also 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 costs to be incurred related to environmental matters at one of
its Electrical Controls sector facilities. The additional accrual of $2.0 was
based on additional information received about the method and extent of
remediation required. A more detailed discussion of environmental matters
appears on pages 6 and 7 of this 10-K.
TRANSACTION AND CONSOLIDATION CHARGES: During 1995, the company recorded
charges of $20.1 for the acquisition of Best Power Technology Inc. (Best
Power) and the merger with Data Switch Corporation (Data Switch). The Best
Power charge of $7.4 was primarily for severance and other consolidation costs
related to the combination of General Signal and Best Power locations. The
Data Switch charge of $12.7 was primarily for severance and balance sheet
valuation adjustments.
DISCONTINUED OPERATIONS: The company adopted a plan to sell Leeds & Northrup
(L&N) and Dynapower/Stratopower (Dynapower) in November 1994. In 1995, the
company recorded after-tax net losses totaling $64.0 ($1.30 per share) in
connection with the divestiture of these businesses. During 1994, the company
recorded a net loss of $23.4 ($0.49 per share) for loss on the expected
disposal and operating losses of these operations. A more detailed discussion
of discontinued operations appears on page F-19 of this 10-K.
RELIANCE MERGER BREAK-UP FEE: During the fourth quarter of 1994, the
company's planned merger with Reliance Electric was not successfully
concluded, and, as a result, the company received a break-up fee of $50.0. The
company also incurred $3.8 of net expenses related to the merger.
CONSOLIDATION OF OPERATIONS, ASSET VALUATIONS AND OTHER CHARGES: During the
fourth quarter of 1994, the company recorded $46.2 of charges for the
consolidation of certain operations ($11.8), asset valuations ($24.1) and
environmental and other issues ($10.3).
The following table summarizes the results of operations for the three years
ended December 31, excluding the items discussed above.
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994
ADJUSTED ADJUSTED ADJUSTED
-------- -------- --------
Net sales....................................... $2,060.8 $1,863.2 $1,527.7
Gross profit.................................... 638.1 555.2 445.9
Gross margin.................................... 31.0% 29.8% 29.2%
Selling, general and administrative expenses.... 401.3 354.4 276.2
Selling, general and administrative expenses as
a percent of sales............................. 19.5% 19.0% 18.1%
Operating earnings.............................. 236.8 200.8 169.7
Earnings from continuing operations............. 129.1 113.0 104.1
Earnings per share from continuing operations... $ 2.60 $ 2.30 $ 2.20
11
1996 COMPARED WITH 1995
REVENUES: Sales increased 10.6 percent over 1995 levels, approximately half
of which was due to the acquisitions of Best Power and MagneTek Electric Inc.
(Waukesha Electric) in June and July of 1995, respectively. Adjusted for
acquisitions and dispositions, sales improved approximately 5 percent. Foreign
and export sales in 1996 totaled approximately 23 percent of the company's net
sales. Export sales increased approximately 8 percent and foreign sales
increased approximately 18 percent, primarily reflecting the European sales of
Best Power as well as an improvement in international mixer sales. Price
changes, volume changes and acquisitions, net of dispositions, accounted for
approximately 1 percent, 51 percent and 48 percent of the revenue increase,
respectively.
Process Controls sector sales improved 4.5 percent to $752.4 on strong
second half volume activity in pumps, mixers and crystal growing furnaces.
These increases were partially offset by the disposition of Kinney Vacuum,
sold in January 1996, which generated revenues of $25.4 in 1995.
Sales in the Electrical Controls sector increased 21.7 percent to $945.3.
The addition of Best Power and Waukesha Electric accounted for approximately
75 percent of the increase. A strong UPS market and North American market
share gains in electrical fittings also contributed to the improvement.
Industrial Technology sector sales decreased 0.5 percent to $363.1. Sales
from new products introduced in the fourth quarter of 1996 as well as higher
product sales of matrix switch systems to the telecommunication and
datacommunication industries were offset by the completion of several large
farebox contracts in 1995.
COSTS AND EXPENSES: Gross profit as a percentage of sales increased from
29.8 percent to 31.0 percent. Improved cost structures at several operating
units was the primary reasons for the increase. Margin improvements were
strongest for mixer, coal feeder, broadcast antenna, electrical fitting, power
transformer and automotive products. Gross profit in 1996 included $1.7
related to liquidations of LIFO inventory quantities. Research and development
spending ranged from two to three percent in both years.
Selling, general and administrative expenses as a percentage of sales
increased from 19.0 percent to 19.5 percent. The inclusion of a full year's
operating expenses related to Best Power, which has a higher rate of operating
expenses than the rest of the company, as well as lower credits in connection
with the settlement of insured matters, were the primary reasons for the
increase. 1996 operating expenses were positively impacted by $3.1 of
environmental insurance recoveries and the collection of a $1.3 previously
written off receivable. 1995 operating expenses were positively impacted by
$6.8 of environmental insurance recoveries and gains on the sale of assets of
$4.1. Also included in selling, general and administrative expenses were
pension credits of $8.8 in 1996 and $9.3 in 1995. These credits resulted from
the company's overfunded pension plans and favorable long-term investment
results.
Net interest expense decreased 11.5 percent due to lower average debt
levels. Cash generated from operations and divestitures was used to pay down
the debt incurred in connection with 1995 acquisitions.
The 1996 effective tax rate rose to 40 percent from 36 percent in 1995, due
largely to reductions in the deferred tax valuation allowance recorded in the
prior year.
1995 COMPARED WITH 1994
REVENUES: Sales improved 22.0 percent over 1994 levels to $1,863.2,
primarily related to acquisitions, with the remainder reflecting improved
order activity. Foreign and export sales in 1995 totaled 22.3 percent of the
company's net sales as compared to 19.4 percent in 1994. Export sales
increased 59 percent to $199.1, reflecting greater export activity in Process
and Electrical Controls and the acquisitions of Fairbanks Morse Pump
Corporation (Fairbanks), Best Power and Data Switch. Price changes, volume
changes and acquisitions accounted for approximately 10 percent, 6 percent and
84 percent of the revenue increase, respectively.
Process Controls sector sales increased 18.7 percent to $719.7 from
increased shipments of pumps, valves, industrial mixers, crystal growing
furnaces and laboratory equipment. The increased pump sales resulted primarily
from the acquisition of Fairbanks. The increased mixer business sales were
primarily a result of higher domestic sales.
12
Sales in the Electrical Controls sector rose 25.6 percent to $777.0. The
acquisitions of Best Power and Waukesha Electric accounted for approximately
80 percent of the sector's increase. The remainder resulted from improved
volume in building and life safety products, broadcast equipment and power
transformers. These improvements were offset by lower volume as a result of a
major floor care customer's production curtailments.
Industrial Technology sector sales increased 21.1 percent to $366.5 due
mainly to the Data Switch merger, recorded effective January 1, 1995, which
added $97.8 in revenue. This addition was partially offset by decreases in
sales due to the completion of the U.S. Postal Service stamp vending machine
contract in early 1995, as well as declines in the telecommunications and OEM
bicycle and automotive component products.
COSTS AND EXPENSES: Gross profit as a percentage of sales improved from 29.2
percent to 29.8 percent. Higher margins at acquired companies, as well as
improved cost structures at several operating units, were the primary reasons
for the improvement. Margin improvements were strongest for valve, broadcast
equipment and telecommunication products. Margin improvements also were
realized as a result of the completion of the lower margin U.S. Postal Service
contract. Spending on research and development ranged from two to three
percent of sales in both years.
Selling, general and administrative expenses as a percentage of sales
increased from 18.1 percent to 19.0 percent, primarily due to higher operating
expenses-to-sales of acquired companies, as well as incremental spending
related to acquisitions. These higher expenses were offset by insurance
recoveries of $6.8 and gains on asset sales of $4.1. Selling, general and
administrative expenses included pension credits of $9.3 in 1995 and $9.7 in
1994. These credits resulted from the company's overfunded pension plans and
favorable long-term investment results.
Net interest expense increased as a result of higher average debt levels
resulting from acquisitions, the addition of higher-rate debt from Data
Switch, and an overall increase in borrowing rates.
The 1995 effective tax rate rose to 36 percent from 35 percent in 1994 for a
number of reasons, including an increase in non-deductible goodwill and a $7.0
reduction in the deferred tax valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
The following information was derived from the Consolidated Financial
Statements.
YEAR ENDED
DECEMBER 31,
------------------
1996 1995
REPORTED REPORTED
-------- --------
Cash flow from operating activities........................ $ 191.7 $ 160.7
------- -------
Acquisitions, primarily Best Power and Waukesha Electric... -- (272.4)
Disposition of discontinued operations and Kinney Vacuum... 94.4 53.4
Capital expenditures....................................... (59.3) (49.0)
Other investing activities................................. (2.8) 15.3
------- -------
Cash flow from investing activities........................ 32.3 (252.7)
------- -------
Debt repayments, net of borrowings......................... (173.2) 139.2
Dividends paid............................................. (47.6) (45.6)
Other financing activities................................. 13.5 (0.9)
------- -------
Cash flow from financing activities........................ (207.3) 92.7
------- -------
Total debt to capitalization............................... 21.8% 43.1%
======= =======
The 1996 operating cash flow improvement was driven by higher earnings,
lower spending in connection with divested operations and the utilization of
deferred tax assets. Included in operating cash flows for 1996 and 1995 were
expenditures of $24.6 and $40.8, respectively, related to previously divested
operations and $6.0 and $7.5, respectively, for severance pay.
1996 capital expenditures were primarily comprised of upgrades to
manufacturing facilities and purchases of management information systems (MIS)
equipment. The company anticipates capital expenditures in 1997 will
approximate depreciation.
1996 dispositions included $65.4 related to discontinued operations and
$29.0 on the sale of Kinney. During 1995, the company acquired Best Power for
$206.3 and Waukesha Electric for $73.9. Included in 1995 cash flow from
investing activities were long-term receivable collections and fixed asset
sales totaling approximately $14.5.
13
On December 12, 1996, the company called for the redemption of its $100.0
5.75% convertible subordinated notes. As of December 31, 1996, notes with a
face value of $57.4 had been converted into 1.5 million shares of the
company's common stock, with an additional $39.3 converted into 1.0 million
shares on January 2, 1997. The balance of the notes of $3.3 was redeemed for
cash. Also on December 12, 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 notes redemption.
Total debt to capitalization decreased as cash generated from operations and
divestitures was used to pay down debt incurred in connection with 1995
acquisitions. The partial conversion of the 5.75% subordinated notes also
contributed to the decrease.
At the end of 1996, the company had credit agreements of $603.9, consisting
primarily of committed revolving credit agreements of $180.0 and $360.0 that
expire in May 1997 and May 2001, respectively. The company also has $300.0 of
unissued securities under a universal shelf registration with the Securities
and Exchange Commission, providing the flexibility to issue a broad variety of
securities. The company expects that cash provided from operations will be
sufficient to provide for the company's 1997 financing needs, although the
company may use available borrowing facilities to finance, in whole or in
part, its buy-back of common stock.
At December 31, 1996, the company's balance sheet reflected deferred tax
assets of $178.7 that are reduced by deferred tax liabilities of $110.1 and a
valuation allowance of $30.0. The carrying amount of the net deferred tax
asset was based on management's assessment of the realizability of the net
operating loss and credit carry-forwards and deductible items through future
taxable earnings or alternative tax planning strategies.
The company enters into forward foreign exchange contracts to mitigate the
risks of doing business in foreign currencies. The company hedges currency
exposures of firm commitments and specific assets and liabilities denominated
in non-functional currencies to protect against the possibility of diminished
cash flow and adverse impact on earnings. The company's currency exposures
vary, but are primarily concentrated in the Canadian dollar, British pound,
Australian dollar, German mark, French franc and Singapore dollar. Translation
exposures generally are not hedged.
ENVIRONMENTAL MATTERS
The company is involved in various stages of investigation and remediation
relative to environmental protection matters. A more detailed discussion of
environmental matters appears on pages 6 and 7 of this 10-K. In October 1996,
the Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants issued SOP 96-1, Environmental Remediation
Liabilities, the effect of which is not expected to be material to the
operating results of the company.
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, and telecommunications
is dependent upon continued research and development and the continued success
of new products. While no one marketplace or industry has a major 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) a continuation of the increased order
rate experienced during 1996, (2) productivity improvements meeting or
exceeding budget and (3) new products under development being produced and
accepted as anticipated.
14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted in a separate section of this report.
See page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
This information is incorporated herein by reference to the Board of
Directors section of the Proxy Statement for the 1997 annual meeting of
shareholders. Also see pages 7 through 8 of this 10-K as to information
related to executive officers.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated herein by reference to the Executive
Compensation section of the Proxy Statement for the 1997 annual meeting of
shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is incorporated herein by reference to the Security
Ownership of Certain Beneficial Holders and Security Ownership of Management
sections of the Proxy Statement for the 1997 annual meeting of shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) The response to these portions of Item 14 are submitted as a
separate section of this report. See page F-1.
All other schedules are omitted as the required information is not applicable
or the information is presented in the financial statements or related notes.
(3) Listing of Exhibits.
3.1 Restated Certificate of Incorporation of General Signal Corporation,
as amended through April 21, 1994 incorporated herein by reference
to Exhibit 3.1 of the registrant's 1994 Form 10-K filed March 21,
1995.
3.2 By-laws of General Signal Corporation, as amended through February
1, 1996 incorporated herein by reference to Exhibit 3.2 of the
registrant's 1995 Form 10-K filed March 22, 1996.
4.1 Copies of the instruments with respect to the company's long-term
debt are available upon request to the Securities and Exchange
Commission.
10.1 Description of General Signal Corporation Incentive Compensation
Plan.
10.2 General Signal Corporation Senior Executive Incentive Compensation
Plan, as approved by shareholders on April 20, 1995.
10.3 Retirement Plan for Directors of General Signal Corporation is
incorporated herein by reference to Exhibit 10.7 of the registrant's
1988 Form 10-K filed March 17, 1989.
10.4 General Signal Corporation Deferred Compensation Plan for Directors,
as amended and restated through December 12, 1996.
10.5 General Signal Corporation Change in Control Severance Pay Plan, as
amended and restated through June 20, 1996.
10.6 General Signal Corporation Deferred Compensation Plan, dated October
14, 1993, is incorporated herein by reference to Exhibit 10.4 of the
registrant's 1993 Form 10-K filed March 21, 1994.
10.7 General Signal Corporation Benefit Equalization Plan as amended and
restated October 14, 1993, is incorporated herein by reference to
Exhibit 10.5 of the registrant's 1993 Form 10-K filed March 21,
1994.
10.8 General Signal Corporation 1996 Stock Incentive Plan as approved by
shareholders on April 18, 1996.
10.9 General Signal Corporation 1992 Stock Incentive Plan as amended and
restated July 7, 1993, is incorporated herein by reference to
Exhibit 10.6 of the registrant's 1993 Form 10-K filed March 21,
1994.
10.10 General Signal Corporation 1989 Stock Option and Incentive Plan as
amended July 7, 1993, is incorporated herein by reference to Exhibit
10.7 of the registrant's 1993 Form 10-K filed March 21, 1994.
10.11 General Signal Corporation 1985 Stock Option Plan as amended and
restated July 7, 1993, is incorporated herein by reference to
Exhibit 10.8 of the registrant's 1993 Form 10-K filed
March 21, 1994.
10.12 Employment agreement between Michael D. Lockhart and the registrant
dated October 3, 1994 is incorporated herein by reference to Exhibit
10.12 of the registrant's 1994 Form 10-K filed March 21, 1995.
10.13 Employment agreement between Terence D. Martin and the registrant
dated February 2, 1995 is incorporated herein by reference to
Exhibit 10.13 of the registrant's 1994 Form 10-K filed March 21,
1995.
16
10.14 Employment agreement between Joanne L. Bober and the registrant
dated October 29, 1996.
10.15 Employment agreement between Elizabeth D. Conklyn and the registrant
dated November 2, 1995.
10.16 Employment agreement between Ernest R. Verebelyi and the registrant
dated September 12, 1996.
10.17 Employment agreement between Donald J. Noonan and the registrant
dated June 5, 1996.
10.18 Employment agreement between Raymond L. Arthur and the registrant
dated January 28, 1997.
10.19 Severance agreement between Edgar J. Smith, Jr. and the registrant
dated August 5, 1996.
10.20 Severance agreement between Edmund M. Carpenter and the registrant
dated October 19, 1995 is incorporated herein by reference to
Exhibit 10.12 of the registrant's 1995 Form 10-K filed March 22,
1996.
10.21 Severance agreement between Joel S. Friedman and the registrant
dated December 21, 1995 is incorporated herein by reference to
Exhibit 10.13 of the registrant's 1995 Form 10-K filed March 22,
1996.
10.22 Severance agreement between George Falconer and the registrant dated
November 7, 1995 is incorporated herein by reference to Exhibit
10.14 of the registrant's 1995 Form 10-K filed March 22, 1996.
10.23 Shareholder Rights Plan dated February 1, 1996 is incorporated
herein by reference to Exhibit 10.15 of the registrant's 1995 Form
10-K filed March 22, 1996.
10.24 Copies of the Credit Agreements among General Signal Corporation and
Various Commercial Banking Institutions, dated through May 31, 1996,
as described in the Notes to Financial Statements.
11.0 Computation of Earnings per Share. See page F-25 of this report.
12.0 Calculation of Ratios of Earnings to Fixed Charges. See page F-26 of
this report.
21.0 Subsidiaries. See pages F-27 through F-29 of this report.
23.0 Consent of Ernst & Young LLP. See page F-30 of this report.
27.0 Financial Data Schedule.
(b) Reports on Form 8-K filed in the fourth quarter of 1996
No reports were filed on Form 8-K.
(c) Exhibits
The response to this portion of Item 14 is submitted as a separate section of
this report.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a separate section of
this report.
17
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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/ Michael D. Lockhart
By: ________________________________________
(MICHAEL D. LOCKHART,
CHAIRMAN)
MARCH 20, 1997
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Michael D. Lockhart Chairman and March 20,
- - ------------------------------- Director 1997
(MICHAEL D. LOCKHART) (Principal
Executive
Officer)
/s/ Terence D. Martin Executive Vice March 20,
- - ------------------------------- President and 1997
(TERENCE D. MARTIN) Chief Financial
Officer
/s/ Raymond L. Arthur Vice President March 20,
- - ------------------------------- and Controller 1997
(RAYMOND L. ARTHUR) (Chief
Accounting
Officer)
/s/ Ralph E. Bailey Director March 20,
- - ------------------------------- 1997
(RALPH E. BAILEY)
/s/ H. Kent Bowen Director March 20,
- - ------------------------------- 1997
(H. KENT BOWEN)
/s/ Van C. Campbell Director March 20,
- - ------------------------------- 1997
(VAN C. CAMPBELL)
/s/ Michael A. Carpenter Director March 20,
- - ------------------------------- 1997
(MICHAEL A. CARPENTER)
/s/ Ursula F. Fairbairn Director March 20,
- - ------------------------------- 1997
(URSULA F. FAIRBAIRN)
/s/ Ronald E. Ferguson Director March 20,
- - ------------------------------- 1997
(RONALD E. FERGUSON)
/s/ John P. Horgan Director March 20,
- - ------------------------------- 1997
(JOHN P. HORGAN)
/s/ Robert D. Kennedy Director March 20,
- - ------------------------------- 1997
(ROBERT D. KENNEDY)
/s/ Roland W. Schmitt Director March 20,
- - ------------------------------- 1997
(ROLAND W. SCHMITT)
/s/ John R. Selby Director March 20,
- - ------------------------------- 1997
(JOHN R. SELBY)
18
FORM 10-K--ITEMS 14(A)(1) AND (2)
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS, SCHEDULE AND EXHIBITS
Management's Responsibility for Financial Statements..................... F-2
Report of Independent Auditors........................................... F-3
Statement of Earnings for the Years Ended December 31, 1996, 1995 and
1994.................................................................... F-4
Balance Sheet as of December 31, 1996 and 1995........................... F-5
Statement of Shareholders' Equity for the Years Ended December 31, 1996,
1995 and 1994........................................................... F-6
Statement of Cash Flow for the Years Ended December 31, 1996, 1995 and
1994.................................................................... F-7
Notes to the Financial Statements.............................F-8 through F-23
Schedule:
II--Valuation and Qualifying Accounts.................................. F-24
All other schedules required by Regulation S-X have been omitted because they
are not applicable or because the required information is included in the
financial statements or notes thereto.
Exhibits:
11.0--Computation of Earnings Per Share................................ F-25
12.0--Calculations of Ratios of Earnings to Fixed Charges.............. F-26
21.0--Subsidiaries of Registrant...........................F-27 through F-29
23.0--Consent of Ernst & Young LLP..................................... F-30
F-1
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
Management is responsible for the preparation of the company's consolidated
financial statements and related information appearing in this 10-K.
Management considers that the consolidated financial statements fairly reflect
the form and substance of transactions and that the financial statements
reasonably present the company's financial position and results of operations
in conformity with generally accepted accounting principles. Management also
has included in the company's financial statements amounts that are based on
estimates and judgments which it views as reasonable under the circumstances.
The independent auditors perform an audit of the company's consolidated
financial statements in accordance with generally accepted auditing standards
and provide an objective, independent review of the fairness of reported
operating results and financial position.
The Board of Directors of the company has an Audit Committee composed of
five non-management Directors. The Committee meets at least three times
annually with financial management, the internal auditors and the independent
auditors to review accounting, control, auditing and financial reporting
matters.
/s/ Michael D. Lockhart
-----------------------
Michael D. Lockhart
Chairman and Chief Executive Officer
/s/ Terence D. Martin
---------------------
Terence D. Martin
Executive Vice President and Chief
Financial Officer
/s/ Raymond L. Arthur
---------------------
Raymond L. Arthur
Vice President and Controller
F-2
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
General Signal Corporation
We have audited the accompanying balance sheet of General Signal Corporation
and consolidated subsidiaries as of December 31, 1996 and 1995, and the
related statements of earnings, shareholders' equity, and cash flow for each
of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule listed in Item 14(a). These
financial statements and schedule are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of General Signal Corporation
and consolidated subsidiaries at December 31, 1996 and 1995, and the results
of their operations and their cash flow for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects, the information set
forth therein.
/s/ Ernst & Young LLP
Stamford, Connecticut
January 24, 1997
F-3
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
(IN MILLIONS, EXCEPT PER-
SHARE DATA)
Net sales....................................... $2,065.0 $1,863.2 $1,527.7
-------- -------- --------
Cost of sales................................... 1,435.7 1,308.0 1,109.5
Selling, general and administrative expenses.... 406.2 354.4 292.3
Gain on disposition............................. (20.8) -- --
Transaction and consolidation charges........... -- 20.1 --
Merger break-up fee and other special items..... -- -- (46.2)
-------- -------- --------
Total operating costs and expenses.............. 1,821.1 1,682.5 1,355.6
-------- -------- --------
Operating earnings.............................. 243.9 180.7 172.1
Interest expense, net........................... 21.5 24.3 11.8
-------- -------- --------
Earnings from continuing operations before
income taxes................................... 222.4 156.4 160.3
Income taxes.................................... 89.0 56.3 56.2
-------- -------- --------
Earnings from continuing operations............. 133.4 100.1 104.1
Earnings (loss) from discontinued operations,
net of income taxes:
Operations.................................... -- -- 2.4
Disposal...................................... -- (64.0) (25.8)
-------- -------- --------
Net earnings.................................... $ 133.4 $ 36.1 $ 80.7
======== ======== ========
Earnings (loss) per share of common stock:
Continuing operations......................... $ 2.68 $ 2.03 $ 2.20
Discontinued operations....................... -- -- 0.05
Disposal of discontinued operations........... -- (1.30) (0.54)
-------- -------- --------
Net earnings.................................... $ 2.68 $ 0.73 $ 1.71
======== ======== ========
Average common shares outstanding............... 49.7 49.2 47.3
======== ======== ========
See accompanying notes to the financial statements.
F-4
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
DECEMBER 31,
------------------
1996 1995
-------- --------
(IN MILLIONS)
ASSETS
------
Current assets:
Cash and cash equivalents................................ $ 17.7 $ 1.0
Accounts receivable...................................... 353.0 323.6
Inventories.............................................. 240.6 234.7
Prepaid expenses and other current assets................ 19.8 30.1
Assets held for sale at estimated realizable value....... 4.9 60.4
Deferred income taxes.................................... 55.9 71.6
-------- --------
Total current assets................................... 691.9 721.4
Property, plant and equipment.............................. 310.0 312.7
Intangibles................................................ 381.3 406.0
Other assets............................................... 167.8 161.6
Deferred income taxes...................................... -- 11.5
-------- --------
Total assets........................................... $1,551.0 $1,613.2
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Short-term borrowings and current maturities of long-term
debt.................................................... $ 5.6 $ 9.0
Accounts payable......................................... 187.3 158.1
Accrued expenses......................................... 214.6 233.8
Income taxes............................................. 31.7 31.2
-------- --------
Total current liabilities.............................. 439.2 432.1
Long-term debt, less current maturities.................... 201.3 428.6
Accrued post-retirement and post-employment obligations.... 133.2 146.9
Deferred income taxes...................................... 17.3 --
Other liabilities.......................................... 16.2 27.5
-------- --------
Total long-term liabilities............................ 368.0 603.0
Shareholders' equity:
Common stock............................................. 78.2 77.9
Additional paid-in capital............................... 337.1 304.2
Retained earnings........................................ 667.4 582.9
Cumulative translation adjustments....................... (1.4) (3.9)
-------- --------
1,081.3 961.1
Common stock in treasury................................. (337.5) (383.0)
-------- --------
Total shareholders' equity............................. 743.8 578.1
-------- --------
Total liabilities and shareholders' equity............. $1,551.0 $1,613.2
======== ========
See accompanying notes to the financial statements.
F-5
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF SHAREHOLDERS' EQUITY
ADDITIONAL CUMULATIVE COMMON
COMMON PAID-IN RETAINED TRANSLATION STOCK IN
STOCK CAPITAL EARNINGS ADJUSTMENTS TREASURY
------ ---------- -------- ----------- --------
(IN MILLIONS, EXCEPT PER-SHARE DATA)
Balance at December 31, 1993... $77.1 $272.0 $583.1 $(8.5) $(398.5)
Net earnings................. -- -- 80.7 -- --
Dividends declared ($0.915
per share).................. -- -- (43.3) -- --
Purchase of common stock..... -- -- -- -- (18.5)
Exercise of stock options and
savings
and stock ownership plan
funding..................... 0.3 9.1 -- -- (2.0)
Translation adjustments...... -- -- -- (3.6) --
----- ------ ------ ----- -------
Balance at December 31, 1994... 77.4 281.1 620.5 (12.1) (419.0)
Restatement for Data Switch
merger...................... -- 4.8 (27.7) (0.1) 45.7
Net earnings................. -- -- 36.1 -- --
Dividends declared ($0.96 per
share)...................... -- -- (46.0) -- --
Purchase of common stock..... -- -- -- -- (18.0)
Exercise of stock options and
savings
and stock ownership plan
funding..................... 0.5 18.3 -- -- 8.3
Discontinued operations...... -- -- -- 7.4 --
Translation adjustments...... -- -- -- 0.9 --
----- ------ ------ ----- -------
Balance at December 31, 1995... 77.9 304.2 582.9 (3.9) (383.0)
Net earnings................. -- -- 133.4 -- --
Dividends declared ($0.975
per share).................. -- -- (48.9) -- --
Purchase of common stock..... -- -- -- -- (1.2)
Exercise of stock options and
savings
and stock ownership plan
funding..................... 0.3 12.4 -- -- 9.4
Conversion of 5.75%
convertible
subordinated notes.......... -- 20.5 -- -- 37.3
Translation adjustments...... -- -- -- 2.5 --
----- ------ ------ ----- -------
Balance at December 31, 1996... $78.2 $337.1 $667.4 $(1.4) $(337.5)
===== ====== ====== ===== =======
See accompanying notes to the financial statements.
F-6
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CASH FLOW
INCREASE (DECREASE)
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
(IN MILLIONS)
CASH FLOW FROM OPERATING ACTIVITIES:
Earnings from continuing operations................ $ 133.4 $ 100.1 $ 104.1
Adjustments to reconcile earnings from continuing
operations to net cash from operating activities:
Gain on disposition.............................. (20.8) -- --
Asset write down and other charges............... 19.7 -- --
Transaction and consolidation charges............ -- 20.1 --
Deferred income taxes............................ 43.7 32.0 36.8
Depreciation..................................... 52.6 50.3 41.7
Amortization..................................... 16.6 12.5 6.7
Pension credits.................................. (8.8) (9.3) (9.7)
Other, net....................................... 5.5 4.4 2.2
Changes in assets and liabilities, net of effects
from acquisitions and divestitures:
Accounts receivable............................ (30.8) (15.4) (25.2)
Inventories.................................... (10.4) 21.4 (26.8)
Prepaid expenses and other current assets...... 11.0 18.1 (1.0)
Accounts payable............................... 28.8 (14.2) 29.5
Accrued expenses and other..................... (49.0) (71.6) (50.5)
Income taxes................................... 0.2 12.3 7.9
------- ------- -------
Net cash from operating activities................. 191.7 160.7 115.7
------- ------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Divestitures....................................... 94.4 53.4 26.2
Capital expenditures............................... (59.3) (49.0) (74.8)
Acquisitions, net of cash acquired................. -- (272.4) (83.3)
Other, net......................................... (2.8) 15.3 0.5
------- ------- -------
Net cash from investing activities................. 32.3 (252.7) (131.4)
------- ------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of long-term debt......................... 115.3 273.2 77.9
Redemption of long-term debt....................... (288.5) (134.0) (7.0)
Purchase of common stock........................... (1.2) (18.0) (18.5)
Issuance of common stock........................... 14.7 17.1 4.9
Dividends paid..................................... (47.6) (45.6) (42.6)
------- ------- -------
Net cash from financing activities................. (207.3) 92.7 14.7
------- ------- -------
Net changes in cash and cash equivalents........... 16.7 0.7 (1.0)
------- ------- -------
Cash and cash equivalents at beginning of year..... 1.0 0.3 1.3
------- ------- -------
Cash and cash equivalents at end of year........... $ 17.7 $ 1.0 $ 0.3
======= ======= =======
Interest paid...................................... $ 25.7 $ 27.3 $ 12.4
Income taxes paid.................................. $ 44.0 $ 15.7 $ 21.5
See accompanying notes to the financial statements.
F-7
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in millions, except per-share data)
ACCOUNTING POLICIES
CONSOLIDATION: The financial statements include the accounts of General
Signal Corporation and consolidated subsidiaries after elimination of
intercompany accounts and transactions. Investments in unconsolidated
companies where management exercises significant influence are accounted for
using the equity method.
CASH EQUIVALENTS: The company considers its highly liquid money market
investments with original maturities of three months or less to be cash
equivalents.
INVENTORIES: Inventories are stated at the lower of cost or market. Cost is
primarily determined using the first-in, first-out (FIFO) method. All other
inventories are valued using the last-in, first-out (LIFO) method.
PROPERTY: Property, plant and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization are provided
using the straight-line method over the estimated useful lives of assets,
which are not to exceed 40 years for buildings and range from three to 10
years for machinery and equipment. Leasehold improvements are amortized over
the life of the related asset or the life of the lease, whichever is shorter.
INTANGIBLES: Intangible assets (primarily the excess of purchase price over
the fair value of net assets acquired) are amortized on a straight-line basis
over periods not exceeding 40 years. The company periodically reviews the
carrying value of intangibles for recoverability in relation to future
undiscounted cash flow.
REVENUE RECOGNITION: Revenues are primarily recognized as products are
shipped and services are rendered. The percentage-of-completion method of
accounting is followed for long-term contracts. Under this method, earnings
accrue as contracts progress toward completion, generally based on the
percentage of costs incurred or the units of product delivered.
ENVIRONMENTAL: The company's environmental accruals cover all anticipated
costs, including capital expenditures, investigation, remediation, and
operation and maintenance of clean-up sites. Environmental obligations
generally are not discounted and are not reduced by anticipated insurance
recoveries.
STOCK COMPENSATION: The company accounts for the options granted under its
stock incentive program by recognizing as compensation any excess of quoted
market price over exercise price at the date of grant. The exercise price of
General Signal stock options granted equals the market value on the date of
grant.
EARNINGS PER SHARE: Earnings per share of common stock was calculated by
dividing net earnings by the weighted average number of common shares
outstanding. There was no dilutive impact from stock options or convertible
debt securities outstanding during the periods.
MERGER AND ACQUISITION INCOME AND EXPENSES: The company recognizes costs
associated with potential mergers and acquisitions, along with proceeds from
break-up fee provisions, as components of operating income.
ACCOUNTING CHANGES: Effective January 1, 1996, the company adopted Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
the effect of which was not material to the consolidated financial statements.
USE OF ESTIMATES: The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
RECLASSIFICATIONS: Certain reclassifications were made to conform prior
years' data to the current presentation.
F-8
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
ACCOUNTS RECEIVABLE
Accounts receivable were net of allowances for doubtful accounts of $10.0
and $10.6 at December 31, 1996 and 1995, respectively.
INVENTORIES
DECEMBER 31,
--------------
1996 1995
------ ------
Finished goods............................................. $ 80.8 $ 73.9
Work in process............................................ 63.2 66.5
Raw material and purchased parts........................... 117.1 117.6
------ ------
Total FIFO cost............................................ 261.1 258.0
Excess of FIFO cost over LIFO inventory value.............. (20.5) (23.3)
------ ------
$240.6 $234.7
====== ======
Inventories valued using LIFO were approximately $61.9 and $69.4 at December
31, 1996 and 1995, respectively. In 1996, the company recorded a LIFO
liquidation, which increased net income by $1.0. Additionally, included in the
gain on sale of the Kinney Vacuum Company was a LIFO liquidation of
approximately $1.1. Progress payments, netted against work in process at year
end, were $11.0 in 1996 and $8.7 in 1995.
CONTRACTS IN PROGRESS
Prepaid expenses and other current assets include contracts in progress of
$7.8 and $20.5 at December 31, 1996 and 1995, respectively. Contracts in
progress represent revenue recognized on a percentage-of-completion basis over
related progress billings of $36.0 and $83.7 at December 31, 1996 and 1995,
respectively. Substantially all contracts in progress at year end are billed
during the subsequent year.
PROPERTY, PLANT AND EQUIPMENT
DECEMBER 31,
----------------
1996 1995
------- -------
Land..................................................... $ 12.2 $ 14.1
Buildings and leasehold improvements..................... 173.7 167.6
Machinery and equipment.................................. 561.4 536.1
------- -------
747.3 717.8
Accumulated depreciation and amortization................ (437.3) (405.1)
------- -------
$ 310.0 $ 312.7
======= =======
INTANGIBLES
DECEMBER 31,
----------------
1996 1995
------- -------
Excess of cost over net assets acquired.................. $ 465.3 $ 474.3
Other intangibles........................................ 40.4 42.9
------- -------
505.7 517.2
Accumulated amortization................................. (124.4) (111.2)
------- -------
$ 381.3 $ 406.0
======= =======
F-9
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
ACCRUED EXPENSES
DECEMBER 31,
-------------
1996 1995
------ ------
Payroll and compensation.................................... $ 62.5 $ 64.4
Environmental and legal..................................... 26.9 24.1
Dispositions and special items.............................. 23.0 32.7
Other....................................................... 102.2 112.6
------ ------
$214.6 $233.8
====== ======
INCOME TAXES
For financial reporting purposes, earnings from continuing operations before
income taxes includes the following components:
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
Pretax income:
United States............................... $ 205.6 $ 151.5 $ 159.3
Foreign..................................... 16.8 4.9 1.0
------- ------- -------
$ 222.4 $ 156.4 $ 160.3
======= ======= =======
The reconciliation of income tax from continuing operations computed at the
U.S. federal statutory tax rate to the company's effective income tax rate is
as follows:
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
Tax at U.S. federal statutory rate............ 35.0% 35.0% 35.0%
State and local income taxes, net of U.S. fed-
eral benefit................................. 4.2 5.5 3.4
Foreign sales corporation..................... (1.3) (1.7) (1.4)
Goodwill amortization......................... 1.9 2.1 1.0
Income from Puerto Rican operations........... (0.2) (0.7) (0.8)
Foreign rates and foreign dividends........... 0.4 (1.4) (1.1)
Reduction in valuation allowance.............. -- (4.5) --
Other......................................... -- 1.7 (1.1)
------- ------- -------
40.0% 36.0% 35.0%
======= ======= =======
The components of the provision for income taxes are as follows:
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
Current:
Federal..................................... $ 32.8 $ 14.2 $ 11.5
Foreign..................................... 4.9 3.4 4.6
State....................................... 7.6 6.7 3.3
------- ------- -------
Total current............................. 45.3 24.3 19.4
------- ------- -------
Deferred:
Federal..................................... 34.2 (6.5) 51.5
Foreign..................................... 1.9 (2.6) 0.4
State....................................... 7.6 5.2 9.5
------- ------- -------
Total deferred............................ 43.7 (3.9) 61.4
------- ------- -------
$ 89.0 $ 20.4 $ 80.8
======= ======= =======
F-10
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
Income tax expense is included in the financial statements as follows:
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- -------- -------
Continuing operations........................... $ 89.0 $ 56.3 $ 56.2
Discontinued operations......................... -- (35.9) 24.6
------- -------- -------
Total income tax expense........................ $ 89.0 $ 20.4 $ 80.8
======= ======== =======
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the company's deferred tax assets and liabilities are as follows:
DECEMBER 31,
--------------
1996 1995
------ ------
Deferred tax assets:
Acquired tax benefits and basis differences.............. $ 29.0 $ 45.1
Other post-retirement and post-employment benefits....... 58.3 63.6
Losses on dispositions and restructuring................. 11.7 22.4
Inventories.............................................. 14.8 15.7
NOL and credit carry-forwards............................ 32.9 42.9
Other.................................................... 32.0 34.2
------ ------
Total deferred tax assets.............................. 178.7 223.9
Valuation allowance........................................ (30.0) (33.6)
------ ------
Net deferred tax assets................................ 148.7 190.3
Deferred tax liabilities:
Accelerated depreciation................................. 35.7 32.5
Pension credits.......................................... 39.0 36.2
Reliance gain............................................ 19.8 19.8
Other.................................................... 15.6 18.7
------ ------
Total deferred tax liabilities......................... 110.1 107.2
------ ------
$ 38.6 $ 83.1
====== ======
Realization of deferred tax assets associated with the net operating loss
(NOL) and credit carry-forwards is dependent upon generating sufficient
taxable income prior to their expiration. Management believes that there is a
risk that certain of these NOL and credit carry-forwards may expire unused
and, accordingly, has established a valuation allowance against them. Although
realization is not assured for the remaining deferred tax assets, management
believes it is more likely than not that the net deferred tax assets will be
realized through future taxable earnings or alternative tax strategies.
However, the net deferred tax assets could be reduced in the near term if
management's estimates of taxable income during the carry-forward period are
significantly reduced or alternative tax strategies are no longer viable. The
valuation allowance decreased by $9.6 in 1995, affecting net income by $7.0.
At December 31, 1996, the following net federal operating loss and tax
credit carry-forwards were available:
EXPIRATION OPERATING TAX
DATES LOSSES CREDITS
---------- --------- -------
1997-1998............................................... $ 4.2 $17.1
1999-2000............................................... 2.0 5.1
2001-2002............................................... 16.6 --
F-11
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
Undistributed earnings of the company's foreign subsidiaries amounted to
approximately $74.1 at December 31, 1996. Those earnings are considered to be
indefinitely reinvested and, accordingly, no provision for U.S. federal and
state income taxes or foreign withholding taxes has been made. Upon
distribution of those earnings, the company would be subject to U.S. income
taxes (subject to a reduction for foreign tax credits) and withholding taxes
payable to the various foreign countries. Determination of the amount of
unrecognized deferred U.S. income tax liability is not practicable; however,
unrecognized foreign tax credit carry-overs would be available to reduce some
portion of the U.S. liability. Withholding taxes of approximately $5.0 would
be payable upon remittance of all previously unremitted earnings at December
31, 1996.
Debt DECEMBER 31,
-------------
1996 1995
------ ------
5.75% Convertible Subordinated Notes due 2002
(convertible at approximately $39.50 per share)............ $ 42.6 $100.0
Commercial paper 1996, 5.6%, 1995, 5.9%..................... 114.5 249.0
Industrial Revenue Bonds due 2000-2014;
no stipulated principal repayments prior to
maturity (primarily variable rate)......................... 36.0 44.5
Other long-term borrowings.................................. 12.8 39.9
------ ------
205.9 433.4
Less current maturities..................................... 4.6 4.8
------ ------
$201.3 $428.6
Short-term notes payable to banks........................... $ 1.0 $ 4.2
====== ======
On December 12, 1996, the company called for the redemption of its 5.75%
convertible subordinated notes. Through December 31, 1996, notes with a face
value of $57.4 had been converted into 1.5 million shares of the company's
common stock, with an additional $39.3 converted into 1.0 million shares on
January 2, 1997. The balance of the notes of $3.3 was redeemed for cash.
Maturities of long-term debt through 2001 are: 1997-$4.6; 1998-$1.1; 1999-
$1.1; 2000-$10.5; and 2001-$121.5.
The company maintains credit arrangements with banks in the U.S. and abroad
which aggregated $603.9 and $621.6 at December 31, 1996 and 1995,
respectively. At December 31, 1996, the company had a committed revolving
credit agreement of $180.0 that matures on May 30, 1997, and a committed
revolving credit agreement of $360.0 that matures on May 30, 2001. The
agreements permit domestic and Eurodollar borrowings at interest rates offered
to investment grade customers. The agreements also are convertible into one-
year term loans at maturity.
Commercial paper is classified as long-term debt as the company maintains
long-term committed credit agreements to support these borrowings and intends
to refinance them on a long-term basis, either through continued commercial
paper borrowings or the issuance of medium-term notes.
The company has a $300.0 financing program under a universal shelf
registration that permits the issuance of junior or senior debt, convertible
securities, equity warrants and preferred shares under one filing without
specifying any dollar amounts for any security. On April 30, 1996, the company
filed a prospectus supplement which allows the company to issue up to $300.0
in medium-term senior notes or medium-term subordinated notes. As of December
31, 1996, no amounts had been issued under the shelf registration.
The company entered into an interest rate exchange agreement, expiring in
March 2000, with a financial institution to limit exposure to interest rate
volatility. The agreement involved a transaction with a notional principal
amount of $25.0 at December 31, 1996 and 1995. The company monitors the risk
of default by the swap counterparty and does not anticipate non-performance.
At December 31, 1996, termination of this agreement would result in a $1.9
loss.
F-12
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
FOREIGN EXCHANGE CONTRACTS
The company conducts its business in various foreign currencies.
Accordingly, the company is subject to the typical currency risks and
exposures that arise as a result of changes in the relative value of
currencies. The risks are often referred to as transactional, commitment,
translational and economic currency exposures. The company's policy stresses
risk reduction and specifically prohibits speculation. The policy's three
basic objectives are to reduce currency risk on a consolidated basis, to
protect the functional currency value of foreign currency-denominated cash
flows and to reduce the volatility that changes in foreign exchange rates may
present to operating income.
The company utilizes natural hedges and offsets to reduce exposures and also
combines positions to reduce the cost of hedging. The company entered into
forward foreign exchange contracts and purchased currency options to hedge net
consolidated currency transaction exposure for periods consistent with the
terms of the underlying transactions, extending through November 28, 1997.
Foreign currency forward or option contracts are not used for trading
purposes, and these contracts do not subject the company to currency risk from
exchange rate movements. Gains and losses related to forward foreign exchange
and option contracts that qualify for hedge accounting treatment are deferred
and offset against losses and gains when the underlying transaction occurs. At
December 31, 1996, the company had approximately $33.0 of such contracts
outstanding.
The company purchased a currency option contract with a notional value at
December 31, 1996 of $1.1. The option contract matures June 26, 1997. Premiums
on purchased option contracts are amortized on a straight-line basis over the
life of the contracts.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents, short- and long-term debt, and foreign currency
contracts had fair values, based upon quoted prices or discounted cash flow
analyses, that approximated their carrying amounts. Financial guarantees and
letters of credit were issued by the company in the ordinary course of
business, and had a fair value of approximately $35.5 as of December 31, 1996.
The fair values of financial guarantees and letters of credit were based on
the face value of the underlying instruments, after deducting the amount
related to those instruments that are booked as liabilities, and the related
amounts accrued.
CONTINGENCIES AND COMMITMENTS
LITIGATION: The company and certain of its subsidiaries are defendants in
legal proceedings incidental to its business. Although the ultimate
disposition of these proceedings is not presently determinable, management
does not expect the outcome to have a material adverse impact on the company's
financial position or results of operations.
LEASES: The future minimum rental payments under leases with remaining
noncancelable terms in excess of one year are:
Year ending December 31,
1997.............................................................. $10.9
1998.............................................................. 8.8
1999.............................................................. 7.3
2000.............................................................. 6.0
2001.............................................................. 4.7
Subsequent to 2001................................................ 6.7
-----
Total minimum payments.......................................... $44.4
=====
Total rent expense in 1996, 1995 and 1994 was $20.3, $21.1 and $17.4,
respectively.
F-13
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
ENVIRONMENTAL MATTERS
The company is involved in various stages of investigation and remediation
relative to environmental protection matters, arising from its own initiative,
from indemnification of purchasers of divested operations, or from legal or
administrative proceedings, some of which include waste disposal sites. In
certain instances, the company may be exposed to joint and several liability
for remedial action or damages. The company, along with several other
entities, has been named as a potentially responsible party for remedial costs
at certain third-party sites listed on the National Priorities List under
CERCLA and state counterpart statutes.
The potential costs related to such matters and the possible impact on
future operations are uncertain due in part to the complexity of government
laws and regulations and their interpretations, the varying costs and
effectiveness of clean-up technologies, the uncertain level of insurance or
other types of recovery, and the questionable level of the company's
responsibility. The company estimates that costs of investigation and
remediation will be approximately $25 and has included this amount in accrued
expenses in the accompanying balance sheet. It is at least reasonably
possible, however, that a change in this estimate will occur. In management's
opinion, after considering reserves established for such purposes, remedial
actions for compliance with the present laws and regulations governing the
protection of the environment are not expected to have a material adverse
impact on the company's results of operations or financial position.
CAPITAL STOCK
PREFERRED STOCK: 10 million shares of cumulative preferred stock, par value
$1.00 per share, are authorized but unissued.
COMMON STOCK: 150 million shares are authorized, with 64.6 issued in 1996
and 64.3 issued in 1995. The 1.96 million shares issued through 1969 have a
par value of $6.67 per share. Shares issued since then have a par value of
$1.00 per share.
Treasury Stock:
NUMBER OF SHARES
1996 1995 1994
----- ----- -----
(IN MILLIONS)
Balance at beginning of year......................... 15.0 16.6 16.0
Restatement for Data Switch merger................... -- (1.8) --
Common stock reacquired.............................. -- 0.5 0.6
Common stock issued under the company's incentive
compensation and savings and stock ownership plans.. (0.3) (0.3) --
Conversion of convertible subordinated notes......... (1.5) -- --
----- ----- -----
Balance at end of year............................... 13.2 15.0 16.6
===== ===== =====
On December 12, 1996 the Board of Directors approved a stock buy-back
program of up to $100.0 to offset any shares issued as a result of the call
for the redemption of the 5.75% convertible subordinated notes. Through
January 24, 1997, approximately 169,000 shares have been repurchased under
this program.
In March 1994, the company's Board of Directors approved a program, which
concluded in March 1996, to repurchase up to 3.4 percent or 1.6 million shares
of the common stock outstanding at that time. These shares were purchased
systematically in open market transactions since the Board's approval and were
used to offset dilution from the increased exercise of employee stock options
arising from the company's executive stock ownership program. Approximately
1.1 million shares were repurchased under this program.
WARRANTS: In connection with the Data Switch merger, the company
assumed 1,452 warrants that are redeemable at $34.83 per share and 14,357
warrants that are redeemable at $16.54 per share. In 1996, 13,639 of these
warrants were redeemed for shares of common stock.
F-14
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
SHAREHOLDER RIGHTS PLAN: On February 1, 1996, the Board of Directors
declared a dividend distribution of one common stock purchase right for each
share of common stock. The rights trade with the common stock and are not
currently exercisable. Each right entitles the shareholder to buy the
company's or the acquiring company's stock valued at $300 per share for a
price of $150 per share upon the occurrence of specific events. The company
may redeem the rights for 10 days (subject to a further 20-day extension) for
one cent per right, after a person or entity acquires 20 percent or more of
the common stock. The provisions do not apply to rights that are beneficially
owned by the acquirer.
EMPLOYEE BENEFIT PLANS
PENSION PLANS: The company's pension plans cover substantially all salaried
and hourly paid employees, including certain employees in foreign countries.
The plans generally provide benefit payments using a formula based on an
employee's compensation and length of service or, in some cases, stated
amounts for each year of service. The company funds United States pension
plans in amounts equal to the minimum funding requirements of the Employee
Retirement Income Security Act of 1974, plus additional amounts that may be
approved from time to time. Substantially all plan assets are invested in cash
and short-term investments or listed stocks and bonds and real estate. Plan
assets and obligations of non-U.S. subsidiaries are not material. The periodic
net pension income related to continuing operations is comprised of the
following:
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
Service cost - benefits earned during the
period...................................... $ 14.6 $ 8.9 $ 10.0
Interest cost on projected benefit
obligation.................................. 32.7 32.6 23.6
Actual return on assets...................... (77.4) (45.7) 9.6
Net amortization and deferral................ 21.3 (5.1) (52.9)
------- ------- -------
Net pension income......................... $ (8.8) $ (9.3) $ (9.7)
======= ======= =======
The actuarial assumptions used were:
Discount rate................................ 7.60% 7.00% 8.75%
Rate of increase in compensation levels...... 5.00% 5.00% 5.00%
Expected long-term rate of return on assets.. 9.50% 9.50% 9.50%
The following table sets forth the plans' funded status and amounts
recognized in the balance sheet:
DECEMBER 31,
---------------------------------
1996 1995
--------------- ----------------
OVER UNDER OVER UNDER
FUNDED FUNDED FUNDED FUNDED
------- ------ ------- -------
Actuarial present value of benefit
obligations:
Vested benefit obligation........... $(343.0) $(71.2) $(314.2) $(123.6)
------- ------ ------- -------
Accumulated benefit obligation........ (361.2) (73.7) (333.6) (127.7)
------- ------ ------- -------
Fair value of plan assets............. 522.9 62.4 449.9 108.8
Projected benefit obligation.......... (377.7) (76.1) (355.2) (130.8)
------- ------ ------- -------
Plan assets in excess of (less than)
projected benefit obligation......... 145.2 (13.7) 94.7 (22.0)
Unrecognized net (gain) loss.......... (10.5) 4.0 28.8 16.9
Prior service cost not yet recognized
in net pension cost.................. 6.0 3.1 5.7 3.3
Unrecognized net asset................ (24.5) (4.7) (28.1) (17.1)
------- ------ ------- -------
Prepaid (accrued) pension............. $ 116.2 $(11.3) $ 101.1 $ (18.9)
======= ====== ======= =======
F-15
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
Under the Savings and Stock Ownership Plan and other supplemental plans, the
company matches employee contributions in cash and common stock equal to a
percentage of certain amounts contributed by employees. The company's
contributions under these plans amounted to $6.4 in 1996, $8.2 in 1995 and
$7.9 in 1994, and were invested in shares of the company's common stock. At
December 31, 1996, the plans held 2.6 million shares and 0.7 million shares
were reserved for issuance.
NON-PENSION RETIREMENT BENEFITS: The company and its U.S. subsidiaries have
post-retirement plans that provide health and life insurance benefits for
retirees. Some of these plans require employee contributions at varying rates.
Not all employees are eligible to receive these benefits, with eligibility
governed by the plan(s) in effect at a particular location.
The accumulated post-retirement benefit obligation at December 31, 1996 was
determined using the terms of the company's various plans, together with
relevant actuarial assumptions and health care cost - trend rates projected at
estimated annual rates ranging from 7.1 percent in 1996 and 6.6 percent in
1997, to 5.0 percent through the year 2005, and a weighted average discount
rate of 7.6 percent. Generally, where applicable, the discount rate and the
actuarial assumptions used for pension plans also apply to the non-pension
retirement plans. A one-percent annual increase in these assumed cost - trend
rates would increase the accumulated post-retirement benefit obligation by
approximately $1.3, and annual service costs by approximately $0.1. Certain of
the company's non-U.S. subsidiaries have similar plans for retirees. The
company's obligations for such plans are not material.
The net periodic post-retirement benefit cost related to continuing
operations is composed of the following:
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
Service cost for benefits attributed to serv-
ice during the period........................ $ 0.6 $ 0.4 $ 0.6
Interest cost on the accumulated post-retire-
ment benefit obligation...................... 6.0 4.5 4.7
Net amortization and deferral................. (4.5) (5.5) (6.2)
------- ------- -------
Net periodic post-retirement benefits....... $ 2.1 $ (0.6) $ (0.9)
======= ======= =======
The following table shows the plans' funded status and amounts recognized in
the balance sheet:
DECEMBER 31,
--------------------------------
1996 1995
--------------- ---------------
HEALTH LIFE HEALTH LIFE
------- ------ ------- ------
Accumulated post-retirement benefit
obligation:
Retirees............................ $ (55.8) $(15.3) $ (59.5) $(15.6)
Fully-eligible active plan partici-
pants.............................. (1.3) (0.2) (3.5) (0.3)
Other active plan participants...... (8.2) (3.1) (10.6) (4.0)
------- ------ ------- ------
Total............................. (65.3) (18.6) (73.6) (19.9)
Unrecognized net (gain) loss.......... (20.4) (1.7) (16.3) (0.5)
Unrecognized prior service cost....... (19.5) -- (26.6) 0.1
------- ------ ------- ------
Accrued post-retirement benefit cost.. (105.2) (20.3) (116.5) (20.3)
Less amounts classified as current.... 7.3 1.3 7.3 1.3
------- ------ ------- ------
$ (97.9) $(19.0) $(109.2) $(19.0)
======= ====== ======= ======
The accumulated post-retirement benefit obligation decreased from 1995 to
1996 as a result of a curtailment of benefits due to the sale of Leeds and
Northrup, resulting in a net curtailment gain of $4.5. This gain was credited
to the discontinued operations reserve in 1996.
The unrecognized prior service cost at December 31, 1996 and 1995 represents
unamortized amounts for plan amendments, resulting from revisions to company-
sponsored health plans, which reduced benefit levels.
F-16
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
STOCK INCENTIVE PROGRAM: The company has a stock incentive program whereby
executive officers and designated employees have been or may be granted
restricted stock and options to purchase shares of company common stock.
Restricted stock awards were granted during 1996 and 1995 for 11,568 shares
and 172,529 shares of company common stock with a weighted-average price of
$40.31 per share and $32.87 per share, respectively. The shares covered by the
restricted stock award granted in 1996 vest at certain rates over a three-to-
five-year period. The awards granted in 1995 vest at certain rates over a
three-to-five-year period, or are based on performance criteria and time over
a period from September 1, 1995 to March 25, 2014. Non-employee directors may
elect to defer all or part of their cash compensation as directors and to
receive in lieu thereof restricted stock. In 1996, of the 11,568 shares
granted, 3,068 shares of company common stock were received by three non-
employee directors, subject to a five-year restriction period. In 1995, four
non-employee directors received 3,829 shares of company common stock, subject
to a five-year restriction period. Total compensation expense for restricted
stock for 1996 and 1995 was $1.2 and $1.8, respectively.
Options are exercisable during specified dates at prices at least equal to
100 percent of the fair market value on the date of grant. All options granted
have 10-year terms, and vest and become fully exercisable at the end of four
years of continued employment. As of December 31, 1996 and 1995, 4.6 million
and 2.7 million shares, respectively, of company common stock were reserved
for issuance.
The company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of the company's employee stock options equals the
market price of the underlying stock on the date of the grant, no compensation
expense is recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS 123, "Accounting for Stock-Based Compensation", which also
requires that the information be determined as if the company had accounted
for its employee stock options granted subsequent to December 31, 1994, under
the fair-value method of SFAS 123. The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing model with
the following assumptions:
1996 1995
------- -------
Risk-free interest rate................................ 4.77% 5.39%
Dividend yield......................................... 2.54% 2.76%
Expected volatility of market price of company's common
stock................................................. 0.235 0.20
Expected option life................................... 5 years 5 years
The risk-free interest rate is based on short-term treasury bill rates. For
the purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The company's pro
forma information is as follows:
1996 1995
------ -----
Pro forma net income......................................... $132.5 $35.7
Pro forma earnings per share................................. $ 2.67 $0.73
These pro forma effects may not be representative of the effects on future
years because of the prospective application required by SFAS No. 123, and the
fact that options vest over several years and new grants generally are made
each year.
F-17
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
OPTION ACTIVITY: The following table shows the option activity for the
three years ended December 31, 1996. Options granted and exercised by Data
Switch prior to the merger date are included in the 1995 activity.
WEIGHTED-
OPTION PRICE AVERAGE
SHARES PER SHARE EXERCISE PRICE
------------- ------------- --------------
(IN MILLIONS)
Options outstanding at
December 31, 1993........... 1.9 $19.44-$36.20 $27.00
Options granted.............. 0.6 $31.88-$37.25 $33.56
Options exercised............ (0.3) $19.44-$32.25 $23.66
---- ------------- ------
Options outstanding at
December 31, 1994........... 2.2 $19.44-$37.25 $29.32
Restatement for Data Switch
merger...................... 0.2 $13.94-$56.63 $27.46
Options granted.............. 0.7 $21.80-$38.25 $35.82
Options exercised............ (0.5) $13.94-$35.38 $25.03
Options terminated........... (0.2) $13.94-$53.98 $32.71
---- ------------- ------
Options outstanding at
December 31, 1995........... 2.4 $13.94-$56.63 $31.30
Options granted.............. 0.4 $36.50-$42.63 $41.26
Options exercised............ (0.3) $13.94-$39.64 $26.71
Options terminated........... (0.1) $13.94-$53.98 $31.42
---- ------------- ------
Options outstanding at
December 31, 1996........... 2.4 $13.94-$56.63 $33.73
==== ============= ======
Options exercisable:
1996....................... 1.4 $13.94-$56.63 $31.13
1995....................... 1.1 $13.94-$56.63 $29.16
1994....................... 1.0 $19.44-$34.88 $25.72
The weighted-average fair value of options granted during 1996 and 1995 was
$9.08 per share and $7.36 per share, respectively.
The following table summarizes information concerning currently outstanding
and exercisable options:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------- ---------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
-------- ----------- ----------- --------- ----------- ---------
(NUMBER OF SHARES IN THOUSANDS)
$10-$20........... 40 5.46 $17.03 29 $17.12
$20-$30........... 432 2.99 $25.89 415 $26.04
$30-$40........... 1,479 5.72 $34.04 964 $33.48
$40-$50........... 455 9.57 $41.33 6 $43.21
$50-$60........... 8 1.26 $53.63 8 $53.63
----- -----
2,414 1,422
===== =====
BUSINESS COMBINATIONS
During the three-year period ended December 31, 1996, the company acquired
seven entities for cash and common stock valued at $423.0 plus the assumption
of liabilities. The acquisitions, except Data Switch, were accounted for as
purchases, and, accordingly, the results of operations of the acquired
companies are included in the statement of earnings for the periods during
which they were owned by the company. Data Switch was accounted for as pooling
of interests. The following paragraphs discuss significant mergers and
acquisitions made during the three years ended December 31, 1996.
F-18
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
On June 13, 1995, the company completed a cash-tender offer for Best Power
Technology, Inc. (Best Power). Best Power is a manufacturer of uninterruptible
power supply products, which provide backup power to protect computers,
information networks and other critical systems from power line disturbances.
The aggregate purchase price was $206.3, creating goodwill of $167.1. The
purchase price was financed through the issuance of commercial paper. The
company recorded a $7.4 before-tax charge ($4.8 after-tax) during the second
quarter of 1995, primarily for severance and other consolidation costs
relating to the combination of General Signal and Best Power locations.
On July 27, 1995, the company acquired MagneTek Electric Inc. (Waukesha
Electric) for $73.9, creating goodwill of $46.2. Waukesha Electric designs,
manufactures and installs medium-power transformers and related products. The
purchase price was financed through the issuance of commercial paper.
Unaudited pro forma data giving effect to the acquisitions of Best Power and
Waukesha Electric as if they had been acquired at the beginning of 1994 are
shown below:
YEAR ENDED DECEMBER 31,
-----------------------
1995 1994
----------- -----------
Net sales.......................................... $1,974.3 $1,773.4
Net earnings....................................... $ 36.2 $ 90.3
Earnings per share................................. $ 0.74 $ 1.91
On November 9, 1995, the company merged with Data Switch Corporation by
exchanging 1.8 million shares of company common stock and 0.2 million rights
to receive company common stock for all of the outstanding common stock and
related options and warrants of Data Switch. Data Switch designs, develops,
manufactures, markets and services products for large-scale data center
networks. As a result of the merger, the company incurred transaction and
consolidation costs of $12.7 ($8.1 after-tax). The transaction costs included
investment banker and other professional fees. The consolidation costs
included severance pay primarily for Data Switch and asset valuation
adjustments.
DISCONTINUED OPERATIONS
In November 1994, the company adopted a plan to sell Leeds & Northrup
Company (L&N), formerly a part of the Process Controls sector, and
Dynapower/Stratopower (Dynapower), formerly a part of the Industrial
Technology sector. These operations have been accounted for as discontinued
operations, and the consolidated financial statements have reported separately
their net assets and operating results.
The 1994 loss on disposal of these operations of $25.8 included $23.4 of tax
charges primarily resulting from differences in carrying values for financial
reporting and tax purposes, and from adjustments related to tax planning
strategies that will not be utilized as a result of the planned disposal of
the operations. From the measurement date to the end of the year, the
operations incurred after-tax operating losses of $1.6. Sales of the
discontinued operations from January 1, 1994 to the measurement date were
$155.2. In the second and third quarters of 1995, the company recorded a total
of $99.9 before-tax charges ($64.0 after-tax) for additional expected losses
relating to the disposal of L&N and Dynapower. Through December 31, 1996,
substantially all related assets were sold.
Certain residual operations continue in some foreign jurisdictions. The
ultimate disposition of these operations is not expected to have a material
effect on the operating results of the company.
During 1994, the company recognized as part of earnings from discontinued
operations $6.1 of before-tax curtailment gains related to L&N's non-pension
post-retirement benefits plan.
F-19
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
DISPOSITION OF BUSINESS AND OTHER SPECIAL ITEMS
In January 1996, the company sold Kinney Vacuum Company, a unit of the
Process Controls sector, for $29.0 and recognized 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.
During the first quarter of 1996, the company recognized $19.7 of pre-tax
charges for asset write-downs, lease termination costs and severance ($13.7),
remediation for products for which the warranty period had expired ($4.0) and
environmental matters ($2.0). The charges were included in cost of sales
($13.0) and selling, general and administrative expenses ($6.7), with an
associated income tax benefit of $7.9.
In August 1994, the company negotiated an agreement to merge with Reliance
Electric Company. However, after entering into this agreement, Reliance was
acquired by another corporation in a cash tender offer, with the result that
the company was deprived of the benefits of the planned merger. Under the
terms of the merger agreement, the company received $50.0 for break-up fees
and $5.2 for partial reimbursement of expenses. The company incurred $9.0 of
transaction costs in connection with the merger.
During the fourth quarter of 1994, the company recognized $46.2 of charges
for the consolidation of operations ($11.8), asset valuations ($24.1),
environmental matters ($4.9) and other issues ($5.4), all related to the
continuing operations of the company. The charges were included in cost of
sales ($27.7), selling, general and administrative expenses ($16.1) and income
taxes ($2.4).
In 1994, the company completed the sale of the semiconductor businesses and
incurred an additional $13.8 for operating losses, severance payments, idle
facility costs and restructuring costs.
F-20
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
BUSINESS SECTOR INFORMATION
The company manufactures industrial products and components in the Process
Control, Electrical Control and Industrial Technology (primarily
transportation and telecommunication) industries. See pages 3 through 5 of
this 10-K for a description of major products and markets served.
PRODUCT SECTORS 1996 1995 1994 1993 1992
- - --------------- -------- -------- -------- -------- --------
NET SALES:
Process Controls........ $ 752.4 $ 719.7 $ 606.4 $ 545.8 $ 548.7
Electrical Controls..... 945.3 777.0 618.6 547.1 567.5
Industrial Technology... 367.3(/1/) 366.5 302.7 261.3 226.7
Dispositions............ -- -- -- -- 134.9
-------- -------- -------- -------- --------
$2,065.0 $1,863.2 $1,527.7 $1,354.2 $1,477.8
-------- -------- -------- -------- --------
OPERATING EARNINGS:
Process Controls........ $ 128.9(/2/) $ 92.0 $ 66.8(/7/) $ 45.1(/8/) $ 60.5
Electrical Controls..... 86.4(/3/) 62.1(/5/) 30.7(/7/) 29.2(/8/) 43.1
Industrial Technology... 62.5(/4/) 51.1(/6/) 47.4(/7/) 44.8 33.1
Other charges and
credits................ -- -- 46.2 48.0(/9/) (93.0)
-------- -------- -------- -------- --------
277.8 205.2 191.1 167.1 43.7
Equity income........... 1.1 0.9 1.0 0.2 1.9
Interest expense, net... (21.5) (24.3) (11.8) (16.6) (24.8)
Unallocated expenses.... (35.0) (25.4) (20.0) (11.6) (11.3)
-------- -------- -------- -------- --------
Earnings from continuing
operations before
income taxes........... $ 222.4 $ 156.4 $ 160.3 $ 139.1 $ 9.5
-------- -------- -------- -------- --------
IDENTIFIABLE ASSETS:
Process Controls........ $ 434.9 $ 420.9 $ 391.4 $ 474.3 $ 477.0
Electrical Controls..... 700.7 692.0 399.4 326.5 330.8
Industrial Technology... 205.9 209.0 181.3 167.2 181.7
-------- -------- -------- -------- --------
1,341.5 1,321.9 972.1 968.0 989.5
General corporate
assets................. 183.1 210.3 211.8 213.1 160.3
Assets held for sale at
estimated realizable
value.................. 4.9 60.4 153.6 25.7 91.1
Investments in and
advances to
affiliates............. 21.5 20.6 20.4 18.1 17.5
-------- -------- -------- -------- --------
Total assets.......... $1,551.0 $1,613.2 $1,357.9 $1,224.9 $1,258.4
-------- -------- -------- -------- --------
DEPRECIATION OF
PROPERTY, PLANT AND
EQUIPMENT(/1//0/):
Process Controls........ $ 17.8 $ 17.9 $ 16.6 $ 12.4 $ 12.9
Electrical Controls..... 22.1 19.0 14.5 13.0 12.3
Industrial Technology... 12.7 13.4 6.4 6.4 6.7
CAPITAL
EXPENDITURES(/1//0/):
Process Controls........ $ 21.8 $ 15.0 $ 28.7 $ 23.1 $ 19.7
Electrical Controls..... 25.1 21.1 21.8 22.3 19.5
Industrial Technology... 12.4 12.9 11.4 7.7 5.0
- - -------
(1) Includes $4.2 of royalty income.
(2) Includes a $20.8 gain on disposition of Kinney Vacuum, a charge of $4.0
for product warranty costs and a $1.8 insurance gain on the recovery of
destroyed assets.
(3) Includes an $11.1 charge related to plant closure costs, asset valuations
and environmental costs.
(4) Includes a $4.6 charge for asset valuations and $4.2 of royalty income.
(5) Includes $7.4 of one-time charges related to the acquisition of Best
Power.
(6) Includes $12.7 of one-time charges related to the merger with Data
Switch.
(7) Includes 1994 charges in Process Controls ($11.9), Electrical Controls
($19.2) and Industrial Technology ($9.9) for the consolidation of
operations, asset valuations, environmental and other.
(8) Includes 1993 charges in Process Controls ($22.1) and Electrical Controls
($10.5) for asset valuations, restructuring and transaction and
consolidation charges related to Revco.
(9) Represents credits for the divested semiconductor operations ($53.2) and
charges for the transportation businesses ($5.2).
(10) Excludes discontinued operations.
F-21
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
GEOGRAPHIC AREAS
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
NET SALES:
United States............... $1,901.0 $1,699.8 $1,390.0 $1,218.9 $1,290.4
Foreign..................... 274.6 239.9 180.7 173.7 238.5
Intergeographic............. (110.6) (76.5) (43.0) (38.4) (51.1)
-------- -------- -------- -------- --------
$2,065.0 1,863.2 $1,527.7 $1,354.2 $1,477.8
-------- -------- -------- -------- --------
OPERATING EARNINGS(/1/):
United States............... $ 234.7 $ 212.0 $ 135.7 $ 113.4 $ 118.5
Other charges and credits... 20.8 (20.1) 46.2 48.0 (85.6)
Foreign..................... 22.3 13.3 9.2 5.7 10.8
-------- -------- -------- -------- --------
$ 277.8 $ 205.2 $ 191.1 $ 167.1 $ 43.7
-------- -------- -------- -------- --------
IDENTIFIABLE ASSETS:
United States............... $1,201.0 $1,175.6 $ 875.8 $ 822.5 $ 769.2
Foreign..................... 140.5 146.3 96.3 145.5 220.3
-------- -------- -------- -------- --------
$1,341.5 $1,321.9 $ 972.1 $ 968.0 $ 989.5
-------- -------- -------- -------- --------
Export sales to unaffiliated
customers(/2/)............. $ 215.2 $ 199.1 $ 125.4 $ 110.9 $ 131.9
- - -------
(1) Excludes equity income, net interest expense and unallocated expenses.
(2) Included in United States sales.
SUPPLEMENTARY INFORMATION
YEAR ENDED
DECEMBER 31,
--------------------
1996 1995 1994
----- ------ ------
Liabilities assumed in conjunction with acquisitions:
Fair value of assets acquired.......................... $ -- $332.1 $105.4
Cash paid.............................................. -- (280.2) (83.3)
----- ------ ------
$ -- $ 51.9 $ 22.1
----- ------ ------
Research and development................................. $47.5 $ 46.9 $ 49.7
Advertising expense...................................... $17.9 $ 14.1 $ 10.1
F-22
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
FIRST SECOND THIRD FOURTH
------------------ ------------- ------------------ -------------
1996 1995 1996 1995 1996 1995 1996 1995
------ ------ ------ ------ ------ ------ ------ ------
Net sales............... $481.7 $434.1 $515.0 $446.3 $521.6 $481.1 $546.7 $501.7
Gross profit............ 130.3 125.2 157.7 132.6 165.4 144.7 175.9 152.7
Earnings from continuing
operations............. 25.4 28.1 31.6 24.6 37.4 27.2 39.0 20.2
Disposal of discontinued
operations............. -- -- -- (49.6) -- (14.4) -- --
------ ------ ------ ------ ------ ------ ------ ------
Net earnings (loss)..... $ 25.4 $ 28.1 $ 31.6 $(25.0) $ 37.4 $ 12.8 $ 39.0 $ 20.2
------ ------ ------ ------ ------ ------ ------ ------
Earnings (loss) per
share of common stock:
Continuing
operations........... $ 0.51(/1/) $ 0.57(/3/) $ 0.64 $ 0.50(/4/) $ 0.75(/2/) $ 0.55 $ 0.78 $ 0.41(/5/)
Disposal of
discontinued
operations........... -- -- -- (1.01) -- (0.29) -- --
------ ------ ------ ------ ------ ------ ------ ------
Net earnings (loss)... $ 0.51 $ 0.57 $ 0.64 $(0.51) $ 0.75 $ 0.26 $ 0.78 $ 0.41
------ ------ ------ ------ ------ ------ ------ ------
Common stock price range
High.................. 37 3/4 36 3/8 40 1/8 40 44 1/4 42 1/2 44 1/2 33 7/8
Low................... 32 31 35 1/4 35 1/8 36 1/4 28 39 3/4 28
Dividends declared per
share.................. $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $0.255 $ 0.24
Dividends paid per
share.................. $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24
- - -------
Note: The sum of the quarters' earnings per share may not equal the full year
per-share amounts.
(1) Includes $0.25 of credit related to the gain on disposition of Kinney
Vacuum and $0.24 of charges related to product warranty costs, plant
closure costs, asset valuations and environmental costs.
(2) Includes $0.05 of credit related to royalty income and $0.02 of credit
related to insurance gain on the recovery of destroyed assets.
(3) Includes $0.08 of credits related to non-recurring items, primarily cash
settlements of royalty and insured matters.
(4) Includes $0.10 of charges related to the acquisition of Best Power and
$0.04 of credits related to accrual adjustments.
(5) Includes $0.17 of transaction and consolidation charges related to the
merger with Data Switch.
F-23
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
----------------------------------------------------------
ADDITIONS
CHARGED
BALANCE AT (CREDITED) BALANCE AT
BEGINNING TO COSTS AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
---------- ------------ ---------- ----------
(IN MILLIONS)
-------------
1996
Reserves deducted from
assets:
Allowance for doubtful
accounts............. $10.6 $ 2.1 $ (2.7) $10.0
Assets held for sale.. $67.9 -- (67.9)(/1/) $ --
Dispositions and special
items:
Consolidation of oper-
ations and other..... $24.7 -- (13.9)(/1/) 10.8
Acquisition related... 4.1 -- (3.3) 0.8
Semiconductor......... 3.2 -- (2.6) 0.6
Restructuring and
product repairs...... 0.7 7.9 (2.6) 6.0
----- ----- ------ -----
$32.7 $ 7.9 $(22.4) $18.2
1995
Reserves deducted from
assets:
Allowance for doubtful
accounts............. $10.7(/7/) $ 4.9 $ (5.0)(/2/) $10.6
Assets held for sale.. $ 8.6 59.5 (0.2)(/3/) $67.9
Dispositions and special
items:
Consolidation of oper-
ations and other..... $15.9 40.4 (31.6)(/2/) 24.7
Acquisition related... 0.6 5.6 (2.1)(/5/) 4.1
Semiconductor......... 18.1 -- (14.9)(/5/) 3.2
Restructuring......... 2.5 -- (1.8)(/5/) 0.7
----- ----- ------ -----
$37.1 $46.0 $(50.4) $32.7
1994
Reserves deducted from
assets:
Allowance for doubtful
accounts............. $10.5 $ 4.5 $ (4.9)(/2/) $10.1
Assets held for sale.. $14.4 8.6 (14.4)(/4/) $ 8.6
Dispositions and special
items:
Consolidation of oper-
ations and other..... $ -- 19.3 (3.4)(/5/) 15.9
Acquisition related... 8.8 (1.5) (6.7)(/5/) 0.6
Semiconductor......... 13.3 (0.6) 5.4 (/5/),(/6/) 18.1
Restructuring......... 13.0 (3.5) (7.0)(/5/) 2.5
----- ----- ------ -----
$35.1 $13.7 $(11.7) $37.1
===== ===== ====== =====
- - -------
(1) Includes reclassification of $4.8 credit balance from assets held for sale
reserve to discontinued operations reserve.
(2) Write-off of bad debts, net of recoveries. Includes reclassifications in
1994 of discontinued operations to assets held for sale.
(3) Reflects reclassification to accruals.
(4) Charges to reserve related to businesses divested during 1994.
(5) Charges to reserve for related costs incurred during the year.
(6) Includes reclassification of $8.4 credit balance of GS Japan's cumulative
translation adjustment as of December 31, 1994.
(7) Includes $0.6 of reserves recorded by Data Switch which were consolidated
effective January 1, 1995.
F-24
EXHIBIT (11.0)
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
YEAR ENDED DECEMBER 31,
------------------------
1996 1995 1994
------- ------- -------
(IN MILLIONS, EXCEPT
PER-SHARE DATA)
I. Earnings (loss) per share of common stock (used
for financial reporting):
Continuing operations.............................. $ 133.4 $ 100.1 $ 104.1
Earnings (loss) from discontinued operations....... -- -- 2.4
Loss on disposal of discontinued operations........ -- (64.0) (25.8)
------- ------- -------
Net earnings (loss)................................ $ 133.4 $ 36.1 $ 80.7
Average number of common shares outstanding(/1/)... 49.7 49.2 47.3
Earnings (loss) per average share of common stock:
Continuing operations............................ $ 2.68 $ 2.03 $ 2.20
Earnings (loss) from discontinued operations..... -- -- 0.05
Loss on disposal of discontinued operations...... -- (1.30) (0.54)
------- ------- -------
$ 2.68 $ 0.73 $ 1.71
II. Primary earnings per share (including common
stock equivalents):
Average number of common shares outstanding........ 49.7 49.2 47.3
Dilutive effect of outstanding options (as
determined by application of the treasury stock
method)........................................... 0.2 0.2 0.3
------- ------- -------
Total shares used in calculation of primary
earnings per share................................ 49.9 49.4 47.6
Primary earnings (loss) per share:
Continuing operations............................ $ 2.67 $ 2.03 $ 2.19
Earnings (loss) from discontinued operations..... -- -- 0.05
Loss on disposal of discontinued operations...... -- (1.30) (0.54)
------- ------- -------
$ 2.67 $ 0.73 $ 1.70
III. Fully diluted earnings per share:
Earnings (loss) from continuing operations......... $ 133.4 $ 100.1 $ 104.1
Interest expense recorded on 5.75% convertible
notes............................................. 3.5 3.8 3.8
------- ------- -------
Earnings (loss) from continuing operations used in
the calculation of fully diluted earnings per
share............................................. 136.9 103.9 107.9
Earnings (loss) from discontinued operations....... -- -- 2.4
Loss on disposal of discontinued operations........ -- (64.0) (25.8)
------- ------- -------
Net earnings (loss) used in the calculation of
fully diluted earnings per share.................. 136.9 39.9 84.5
Average number of shares used in calculation of
primary earnings per share above.................. 49.9 49.4 47.6
Additional dilutive effect of outstanding options
(as determined by application of the treasury
stock method)..................................... 0.1 -- --
Incremental shares from assumed conversion of 5.75%
convertible notes................................. 2.5 2.5 2.5
------- ------- -------
Total shares used in calculation of fully diluted
earnings per share................................ 52.5 51.9 50.1
Fully diluted earnings (loss) per share:
Continuing operations............................ $ 2.61 $ 2.00 $ 2.15
Earnings (loss) from discontinued operations..... -- -- 0.05
Loss on disposal of discontinued operations...... -- (1.23) (0.51)
------- ------- -------
$ 2.61 $ 0.77 $ 1.69
======= ======= =======
- - -------
(1) Excludes common stock equivalents in accordance with provisions of APB
Opinion No. 15 because such equivalent shares result in dilution of less
than 3%.
F-25
EXHIBIT (12.0)
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
CALCULATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ -----
(DOLLARS IN MILLIONS)
Earnings:
Earnings from continuing operations before
income taxes.............................. $222.4 $156.4 $160.3 $139.1 $ 9.5
Fixed charges.............................. 30.9 34.7 20.2 22.6 35.3
------ ------ ------ ------ -----
$253.3 $191.1 $180.5 $161.7 $44.8
Fixed charges:
Interest expense (gross)................... $ 24.1 $ 27.7 $ 14.4 $ 18.0 $28.6
One-third of rent expense.................. 6.8 7.0 5.8 4.6 6.7
------ ------ ------ ------ -----
$ 30.9 $ 34.7 $ 20.2 $ 22.6 $35.3
------ ------ ------ ------ -----
Ratio........................................ 8.20 5.51 8.94 7.15 1.27
------ ------ ------ ------ -----
F-26
EXHIBIT (21.0)
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUBSIDIARIES OF REGISTRANT
1. CONSOLIDATED SUBSIDIARIES
PERCENT ORGANIZED UNDER
OWNED THE LAWS OF
------- ---------------
Aurora/Hydromatic Pumps, Inc............................ 100 Delaware
Best Power Technology AG................................ 100 Switzerland
Subsidiary of Best Power Technology AG:
Sola Electric GmbH..................................... 100 Germany
Borri Elettronica Industriale S.r.L..................... 100 Italy
DeZurik of Australia Proprietary Ltd.................... 100 Australia
DeZurik Vertriebs GmbH.................................. 100 Austria
Fairbanks Morse Pump Corporation........................ 100 Kansas
Subsidiary of Fairbanks Morse Pump Corporation:
Fairbanks Morse Limited (India)........................ 35 India
GCA International Corporation........................... 100 New Jersey
GSR Merger Sub., Inc.................................... 100 Delaware
G.S. Building Systems Corporation....................... 100 Connecticut
Subsidiary of G.S. Building Corporation:
Dual Lite Manufacturing, Inc........................... 100 Delaware
General Signal (China) Co., Ltd......................... 100 China
General Signal FSC, Inc................................. 100 Virgin Islands
General Signal Holding Company.......................... 100 Delaware
Subsidiary of General Signal Holding Company:
General Signal Networks, Inc........................... 100 Delaware
Subsidiaries of General Signal Networks, Inc.:
Data Switch Intellectual Property, Inc................ 100 Delaware
Data Switch Subsidiary Stock Corporation.............. 100 Delaware
Data Switch Collections, Inc.......................... 100 Delaware
Data Switch (UK) Limited.............................. 50 England
(balance of 50% held by Data Switch Subsidiary
Stock Corporation)
General Signal Networks Italia S.r.L.................. 100 Italy
General Signal Networks Limited....................... 100 England
General Signal Technology Corporation.................. 100 Delaware
Subsidiary of General Signal Technology Corporation:
General Farebox of Atlanta, Inc....................... 100 Delaware
General Signal International Corporation................ 100 Delaware
General Signal Limited.................................. 100 Canada
General Signal Mauritius, Inc........................... 100 Mauritius
General Signal S.E.G.--Asia, Ltd........................ 100 Hong Kong
General Signal S.E.G. SARL.............................. 100 France
General Signal Power Systems, Inc....................... 100 Wisconsin
Subsidiaries of General Signal Power Systems, Inc.:
Best Power Technology SARL (France).................... 100 France
Best Power Technology Mexico SA. de C.V................ 100 Mexico
Best Power Technology Export Corp...................... 100 Barbados
Best Power Technology Limited.......................... 100 Taiwan
Subsidiary of Best Power Technology Limited:
Best Power Taiwan Trading Co. Ltd..................... 100 Taiwan
Best Power Technology Pte. Limited..................... 100 Singapore
India Best Power Technology Pvt. Limited............... 100 India
F-27
PERCENT ORGANIZED UNDER
OWNED THE LAWS OF
------- ---------------
General Signal UK Limited............................... 100 England
Subsidiaries of General Signal UK Limited:
Best Power Technology Limited.......................... 100 England
Subsidiary of Best Power Technology Limited:
Sola (UK) Ltd......................................... 100 England
DeZurik International Limited.......................... 100 England
GCA Limited............................................ 100 England
G.S. Iona Ltd.......................................... 100 England
General Signal Europe Limited.......................... 100 England
Subsidiaries of General Signal Europe Limited:
General Signal Verwaltaugsgesellschaft mbH............ 100 Germany
General Signal GmbH & Co. KG.......................... 99 Germany
Subsidiaries of General Signal GmbH & Co. KG:
Best Power Technology GmbH........................... 100 Germany
General Signal Networks GmbH......................... 100 Germany
Data Switch Elektronik GmbH.......................... 100 Germany
General Signal SEG, Ltd................................ 100 England
Leeds & Northrup Limited............................... 100 England
Lightnin (Europe) Limited.............................. 100 England
Lightnin Mixers Limited................................ 100 England
Tau-Tron (UK) Limited.................................. 100 England
Telenex Europe Limited................................. 100 England
Leeds & Northrup Company................................ 100 Delaware
Subsidiaries of Leeds & Northrup Company:
Leeds & Northrup GmbH.................................. 100 Germany
Leeds & Northrup Mexicanna, S.A........................ 100 Mexico
Leeds & Northrup S.A................................... 100 Spain
LDN, Ltd............................................... 100 Delaware
Subsidiaries of LDN, Ltd.:
Leeds & Northrup S.A.R.L.............................. 100 France
L.D.N. Netherlands, B.V............................... 100 Netherlands
Subsidiary of L.D.N. Netherlands, B.V.:
High Ridge Ireland Ltd............................... 100 Ireland
Subsidiary of High Ridge Ireland Ltd.:
General Signal Enterprises.......................... 99 Ireland
Leeds & Northrup Singapore, Pte., Ltd................. 100 Singapore
L&N Products Pty Ltd.................................. 100 Australia
Subsidiary of L&N Products Pty Ltd.:
Leeds & Northrup (New Zealand) Ltd................... 100 New Zealand
Leeds & Northrup Italy, S.p.A........................... 53 Italy
(Remaining 47% owned by Leeds & Northrup Company)
Lightnin Mixers Pty. Ltd................................ 60 Australia
(Remaining 40% owned by General Signal Ltd.)
Lightnin Private Limited................................ 100 Singapore
Metal Forge Company, Inc................................ 100 Delaware
Shenyang Stock Electric Power Equipment
Company, Limited........................................ 50 China
Sola Australia, Limited................................. 100 Australia
Stock Japan, Ltd........................................ 100 Japan
F-28
2. OTHER SUBSIDIARIES
The following minor foreign subsidiaries and the investment of 50 percent or
less owned companies, which are not material individually or in the aggregate
in relation to the financial statements, are carried at cost plus equity in
undistributed earnings since acquisition.
PERCENT ORGANIZED UNDER
OWNED THE LAWS OF
------- ---------------
Subsidiaries of General Signal Corporation:
DeZurik--India.......................................... 40 India
DeZurik Japan Co., Ltd.................................. 48 Japan
DeZurik Mexico, S.A. de C.V............................. 49 Mexico
General Signal Corporation.............................. 100 Delaware
HMS Ventures Ltd........................................ 14 California
High Ridge Company, Limited............................. 100 Bermuda
Industrias Sola Basic, S.A.............................. 49 Mexico
Koyo Lindberg Ltd....................................... 50 Japan
New Signal, Inc......................................... 100 Delaware
Solamex, S.A. de C.V.................................... 48 Mexico
Subsidiaries of Solamex S.A. de C.V.:
Inmobiliaria S-Tres, S.A. de C.V....................... 99 Mexico
Inmobiliaria S-Dos, S.A. de C.V........................ 99 Mexico
Inmobiliaria Solamex, S.A. de C.V...................... 99 Mexico
Productora Y Maquiladora Queretana
S.A. de C.V............................................ 99 Mexico
Teraski Nelson Ltd...................................... 50 Japan
Maquiladora Solamex S.A. de C.V......................... 48 Mexico
F-29
EXHIBIT (23.0)
CONSENT OF ERNST & YOUNG LLP
The Board of Directors and Shareholders General Signal Corporation
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 33-33929) pertaining to the universal shelf registration dated
May, 1994, (Form S-8 No. 33-46613) pertaining to the General Signal
Corporation Savings and Stock Ownership Plan, (Form S-8 No. 33-05181)
pertaining to General Signal Corporation's stock incentive plans, (Form S-4
No. 33-62437) pertaining to the merger agreement with Data Switch Corporation,
(Form S-8 to Form S-4 No. 33-62437-01) pertaining to stock options assumed as
a result of the merger with Data Switch Corporation (Form S-3 to Form S-4 No.
33-62437-02) pertaining to the outstanding stock warrants as a result of the
merger with Data Switch Corporation and related prospectuses of our report
dated January 24, 1997, with respect to the financial statements and schedules
of General Signal Corporation included in this Annual Report (Form 10-K) for
the year ended December 31, 1996.
/s/ Ernst & Young LLP
Stamford, Connecticut
March 20, 1997
F-30