Item 1. Business
General
Giddings & Lewis, Inc. (the "Company") is a leading global designer and producer of highly-engineered, high-precision, industrial automation systems, including automated machine tools, smart manufacturing systems, flexible transfer lines, assembly automation systems, measuring systems, industrial controls, and related products and services. The Company's products are supplied primarily to the automotive, construction, aerospace, defense, appliance, energy and electronics industries and are manufactured at the Company's thirteen facilities located in the United States, Canada, England and Germany.
The Giddings & Lewis name has been continuously present in the Company's domestic markets for over 100 years. The Company was a public company from 1937 until 1982, when its businesses were acquired by United Dominion Industries, Inc. ("United Dominion"). In July 1989, United Dominion sold its interest in the Company through a public offering. On October 31, 1991, the Company acquired Cross & Trecker Corporation ("Cross & Trecker"), a manufacturer of machine tools and related factory equipment. The acquisition was accounted for as a purchase and the operations of Cross & Trecker have been included in the Company's financial statements since the date of acquisition. On April 24, 1995, the Company acquired through a wholly owned subsidiary all of the issued and outstanding shares of capital stock of Fadal Engineering Company, Inc. ("Fadal") and the land and building in Chatsworth, California used by Fadal in the operation of its business. The net cash consideration paid by the Company in this transaction was $179,579,000, which amount includes $1,550,000 of direct acquisition costs. The acquisition was accounted for as a purchase and the operations of Fadal have been included in the Company's financial statements since the date of acquisition. The operations of Fadal are included in the Company's Automation Technology Group.
The Company's overall business strategy is to continue to strengthen its position within the global industrial automation marketplace by providing customers with a creative, single source for a broad range of manufacturing products and services. The key ongoing elements of the Company's business strategy are to (i) continue to implement a focused customer-oriented marketing approach, (ii) expand and extend the Company's product lines, and (iii) aggressively expand its international franchise.
The Company operates in a single business segment, industrial automation products, and is organized into four major operating groups: Automation Technology, Integrated Automation, Automation Measurement and Control, and European Operations. Net sales attributed to each of the Company's operating groups for each of the last three years are shown in the following table:
Products
The Automation Technology Group, the Integrated Automation Group and the Automation Measurement and Control Group sell products from the automation technology, integrated automation and automation measurement and control product lines, respectively. The European Operations Group sells products from all three product lines. Each of the Company's product lines is described below.
Automation Technology. The Company's automation technology product line consists of highly-engineered, high-precision, computer numerically controlled machine tools and associated products and services. Revenues from this product line were 41.2%, 32.0% and 35.6% of total revenues for 1995, 1994 and 1993, respectively. The following are the most significant products in this product line:
Horizontal and Vertical Machining Centers, which, through the use of automatic tool changers, can mill, drill, bore, tap and ream primarily metal parts of various shapes and sizes, in programmable sequences;
Horizontal and Vertical Lathes, which cut round parts from metal and other materials;
Horizontal Boring, Drilling, and Milling Machines, which perform the same functions as horizontal machining centers, but do not have automatic tool changers;
Cellular and Flexible Manufacturing Systems, which utilize material handling systems and Company-produced computer numerical controls and software, and prefixtured pallets to integrate several machine tools to form a cellular system or to integrate many machine tools to form a flexible manufacturing system;
Fixtures and Cutting Tools, which are used to hold and to cut, drill, or bore metal and other parts; and
Drill Point Grinders, which grind specialized drill points including a helical point which has superior drilling capabilities.
With the exception of the Fadal product line, substantially all of the Company's major machine tools and fixtures are custom engineered to meet specific customer requirements and, accordingly, have a high engineering component in their selling prices. Although these products are produced in a variety of sizes, the historic focus and strength of this product line has been large, highly-engineered, high-precision metal-cutting machine tools such as those used to manufacture major parts for jet engines and construction equipment. Trading on the Company's name and reputation, these products occupy the premium-priced segment of the market. Fadal's product line includes eleven models of small computer numerically controlled vertical machining centers for use in industrial machine shops. The Company produces the majority of the computer numerical controls and related software incorporated into its products. The Company's cutting tools and drill point grinders are primarily sold to standard specifications.
Virtually all of the Company's automated machine tools are computer numerically controlled. They are designed to operate largely unattended and are programmable to perform machining functions on a wide variety of metal parts and other materials. Such standalone machines may be combined with several pallets (on which parts in process are positioned for machining) and pallet changers to increase production flow. The next step in automation is to permit a part to be processed by one machine and automatically transferred to another machine for further work. The Company provides this capability through cellular and flexible manufacturing systems that integrate the functions of several standalone machines with the use of automated transport systems and Company-produced cell managers and software. Since 1982, the Company has designed its machine tools and their pallets to be compatible with each other so that its established customer base can integrate new machines with existing machines.
Standalone machines have historically dominated the Company's machine tool sales, accounting for approximately 65%, 37% and 48% of automation technology product line revenues in 1995, 1994 and 1993, respectively. Cellular and flexible manufacturing systems accounted for approximately 5%, 21% and 14% of automation technology product line revenues in the same respective years. Included in such cellular and flexible manufacturing percentages is a certain volume of standalone sales to customers which create or enlarge machining cells by integrating the new machines with existing machines.
The Company's revenues from post-sale services and parts are primarily associated with its automation technology product line. Services include training, maintenance, repair, remanufacturing and retrofitting, and accounted for approximately 23%, 33% and 32% of automation technology product line sales in 1995, 1994 and 1993, respectively. Sales of such services and parts are at higher gross margins than the machine tools themselves and have historically been less sensitive to industry cyclicality than the sale of new equipment.
The other products in the automation technology product line primarily consist of gray iron and ductile castings which are produced for the Company's requirements as well as for sales to outside customers. Through its foundry in Menominee, Michigan, the Company produces gray iron and ductile castings of up to 35 tons, typically cast from unique patterns supplied by the Company and its customers and maintained at the foundry.
Integrated Automation. The Company engineers, manufactures and sells flexible transfer lines, flexible machining systems and special machining systems. The Company is also a leading domestic designer and manufacturer of custom automated assembly systems, including dials, synchronous and non-synchronous transport systems and special handling, testing and measuring systems and complete multi-unit automatic production systems. These products are for use in the automotive industry, as well as the major appliance and other high volume industries. Integrated automation product line revenues for 1995, 1994 and 1993 accounted for 49.9%, 57.9% and 53.5%, respectively, of total revenues for the Company.
The Company's flexible transfer lines are a combination of individual work stations arranged in the required sequence, connected by work transfer devices and integrated with interlocked controls. All types of machining operations, such as drilling, tapping, reaming, boring and milling are efficiently and economically combined on transfer machines. Dial, rotary, in-line and pallet-type are among the different types of flexible transfer line equipment supplied by the Company. Flexible transfer lines have traditionally been used in the automotive industry for producing identical components at high production rates with minimal manual part handling and are applicable to other industries with high volume requirements. Flexible transfer lines accounted for approximately 63.9%, 65.9% and 64.2% of integrated automation product line revenues in 1995, 1994 and 1993, respectively.
The Company's automated assembly systems are used to assemble a variety of products, including automotive airbags, household appliances, wing spars for commercial airlines, and automotive engines and transmissions. The nonsynchronous assembly systems are used to integrate independent self-powered assembly stations with a continuous conveyor line and consist of three principal types of stations: manual stations, which only require that a part be placed on a pallet; dedicated stations, which perform multiple actions on a family of parts; and robotic stations, which can be programmed to perform many functions on a number of parts. Robotics incorporated in the Company's automated assembly systems are not produced by the Company. Each automated assembly system is custom engineered by the Company to meet a customer's specific requirements, with standardized components normally accounting for only 10% to 15% of any system. Automated assembly systems accounted for approximately 22.4%, 27.2% and 23.1% of integrated automation product line revenues in 1995, 1994 and 1993, respectively.
The integrated automation product line also includes broach and piston turning machines. Both are metalcutting machines. Broach machines are used to push or pull a multi-tooth cutting tool or the workpiece in relation to each other to remove material. Broach machines have the ability to rough and finish in one pass thereby increasing productivity. As the name implies, piston turning machines are used to manufacture pistons. The machine is unique in that it is capable of producing the complex shapes required in piston manufacturing.
Automation Measurement and Control. The Company designs and manufactures a comprehensive line of dimensional measurement products. These include coordinate measurement machines, gaging products and metrological instruments. The Company is a leader in the implementation of flexible measurement systems, which can be supplied either on a standalone basis or as an integral part of manufacturing systems. The Company also provides a wide range of services, including gage certification services. In addition, the Company supplies a broad range of industrial control products, including programmable industrial computers, computer numerical controls, servo drive systems, operator interface systems and specialized software solutions. These products are designed for use both with the Company's products and the products of other manufacturers. Automation measurement and control product line revenues were 8.9%, 10.1% and 10.9% of total revenues for the Company in 1995, 1994 and 1993, respectively.
Customers, Sales, and Distribution
The Company's products and manufacturing systems are sold primarily to the automotive, construction, aerospace, defense, appliance, energy and electronics industries. Typically, the ten largest customers are large multi-national companies that account for approximately 50% to 60% of the Company's total sales, although the composition of these customers varies from year to year. One customer, Ford Motor Company, accounted for approximately 6.3%, 15.9% and 29.7% of the Company's sales in 1995, 1994 and 1993, respectively. For the same periods, Chrysler Corporation accounted for approximately 23.2%, 14.2% and 4.4% of sales, respectively.
A network of sales representatives/distributors is used to sell the Company's products on a worldwide basis. The sales representative/distributor network is assisted and supervised by Company sales managers located in key market areas. The Company's direct sales force is paid a salary plus commission and its distributors are paid on a commission-only basis.
Sales Arrangements
The Company sells substantially all of its products under fixed price contracts. These contracts are priced after the Company analyzes, among other things, material, labor, overhead and custom engineering costs involved in the contract.
Fixed price contracts entail the risk of cost overruns. The risk of such overruns typically increases in proportion to the complexity and uniqueness of the engineering and manufacturing tasks involved under any particular contract. There can be no assurance that the Company will not be adversely affected by significant cost overruns on its fixed price contracts.
A substantial portion of the products manufactured by the Company involves long lead times from receipt of a customer order to the shipment of a completed machine. Under the terms of its sales contracts, and consistent with industry practice, the Company receives most of its sales price upon shipment of the product.
Manufacturing Capacity
The Company manufactures its products at thirteen facilities with its primary facilities located in Fond du Lac and Janesville, Wisconsin; Fraser and Port Huron, Michigan; Dayton, Ohio; Chatsworth, California; Knowsley, England; and Wendlingen, Germany. The Fond du Lac facility currently operates three shifts a day, five days a week. The Janesville facility is currently operating three shifts, six days a week. The Fraser and Port Huron facilities are currently operating two shifts a day, six days a week. The Dayton facility is currently operating three shifts, five days a week. The Chatsworth facility is currently operating two shifts, six days a week. The Knowsley and Wendlingen facilities are currently operating two shifts a day, five days a week. Overtime charges at the Company's facilities are not material.
Product Line Competition
Automation Technology. The market for machine tools is highly competitive, with substantial competition from both U.S. and foreign manufacturers. Competition is mainly from manufacturers of the same types of machines produced by the Company. However, manufacturers of different machine types, certain customers, and third party integrators are also competitors. Principal competitive factors for machine tools include product performance, delivery, price and service. The Company's Menominee, Michigan foundry competes with a number of foundries in its respective market area.
Integrated Automation. The traditional customer base for domestic flexible transfer line sales has been the major automobile manufacturers. This limited customer base and the large scope of the projects involved have made this a very competitive market. The size of the projects has resulted in a competitive environment where the major competitors are large and often have established relationships with their customers. Foreign competitors have obtained limited business in this market which had been traditionally dominated by domestic suppliers. The international customer base for flexible transfer lines includes all major European, Asian and U.S. transplant automobile manufacturers. This market exhibits the same competitive characteristics as the U.S. market. However, the Company believes that its established presence in the European flexible transfer line market and its manufacturing capabilities in Germany and England leave the Company favorably positioned to compete effectively in this market.
The domestic market for automated assembly systems is also competitive. Competitive factors for automated assembly systems include engineering concepts, pricing, product performance and delivery. Approximately 70 North American companies have been identified as competitors for the type of automated assembly systems supplied by the Company. Many of these competitors specialize in a specific type of assembly system and compete mainly on a regional basis. The automated assembly systems manufactured by the Company are substantially custom engineered products and are purchased largely by both major corporations and small independent companies based in the U.S. Due to the nature of its products and its customer base, the Company believes that to date it has not faced significant foreign competition in automated assembly systems. In the international market, the Company believes that the relationships already established in the European automotive market will provide new opportunities for sales of automated assembly systems.
Automation Measurement and Control. The markets for the automation measurement and control product line is highly competitive. Currently, the Company believes that it is among the top five coordinate measurement producers in the world. This market has become increasingly global in nature with significant competition coming from foreign producers. Principal competitive factors for coordinate measurement systems include quality, delivery time, service and price.
Established customer relationships and customer preference for a standardized control produced by one manufacturer has hindered the Company's ability to penetrate some of the larger segments in the market for industrial control products. The Company believes that it has successfully pursued niche and non-traditional markets in the broad motion control marketplace as exemplified by sales to robotics, photographic equipment and packaging equipment manufacturers.
Raw Materials
Because the Company manufactures most of the parts used in its products, the basic raw materials used in the Company's production are iron and steel. The Company's foundry produces gray iron and ductile castings which are major parts in its machine tools. Certain components are purchased, such as sheet metal, robotics, electric motors, bearings, steel castings and electronic and electrical components. All such materials and components used are available from a number of sources. The Company is not dependent on any supplier that cannot be readily replaced and has not experienced difficulty in obtaining necessary purchased materials.
Patents and Trademarks
The Company possesses rights under a number of domestic and foreign patents and trademarks relating to its products and business. While the Company considers that patents and trademarks are important in the operation of its business, its business is not dependent on any single patent or trademark or group of patents or trademarks.
Research, Development and Custom Engineering
As of December 31, 1995, the Company had 48 employees in its engineering departments engaged, wholly or partly, in activities relating to Company-sponsored research, 37 of whom have college engineering degrees. Another 450 employees were actively involved in product development, custom engineering and software development. Of these, 172 have college degrees in engineering. A summary of research and product development expenditures for the last three years is shown in the following table:
Research, Development and Custom Engineering Expenditures (in thousands)
1995 1994 1993 Research and development expense pertaining to new products or significant improvements to existing products . . . . . . . . $ 3,183 $ 3,857 $ 4,064
All other product development and engineering expenditures related to ongoing refinements, improvements of existing products, and custom engineering . . . . . 57,212 63,541 53,349 ------ ------ ------ Total expenditures for research, product development, and engineering . . . . . . . . . . . $60,395 $67,398 $57,413 ====== ====== ======
Employees
As of December 31, 1995, the Company had 3,967 employees, of whom 2,106 were hourly employees and 1,861 were salaried employees. At the Company's Dayton, Ohio facility, 104 employees are covered by a collective bargaining agreement expiring in June 1996. Also, at the facility in Tecumseh, Canada, 16 employees are covered by a collective bargaining agreement expiring in September 1996. The Company's remaining collective bargaining agreements expire at various times from 1997 through 1998. The Company considers its employee relations to be good.
Executive Officers
The following table sets forth certain information, as of March 1, 1996, regarding the executive officers of the Company. All executive officers serve at the pleasure of the Board of Directors.
Name Age Position
Joseph R. Coppola 65 Chairman, Chief Executive Officer and Director
Richard C. Kleinfeldt 54 Vice President - Finance, Secretary and Director Heinz G. Anders 62 Group Vice President and General Manager-European Operations
Douglas E. Barnett 36 Vice President and Corporate Controller Carmine F. Bosco 49 Group Vice President and General Manager - Automation Measurement and Control Group
Name Age Position
Philip N. Ciarlo 44 Group Vice President and General Manager - Integrated Automation Group Todd A. Dillmann 40 Corporate Counsel and Assistant Secretary
Robert N. Kelley 45 Vice President - Administration
Michael R. Melzer 50 Treasurer
Stephen M. Peterson 46 Group Vice President and General Manager - Fadal Engineering Company, Inc.
James B. Simon 54 Group Vice President and General Manager - Automation Technology Group
Joseph R. Coppola has served as Chairman of the Board and Chief Executive Officer of the Company since July 1993. From 1983 to 1993, Mr. Coppola was Senior Vice President of Manufacturing Services for Cooper Industries, Inc.
Richard C. Kleinfeldt has served as Vice President-Finance of the Company since May 1989 and as Secretary since July 1989. Mr. Kleinfeldt has been employed by the Company since 1964.
Heinz G. Anders has served as Group Vice President and General Manager of the Company's European Operations since February 1994. From 1981 until assuming his current position, Mr. Anders was Managing Director for Deutsche Gardner-Denver GmbH & Co. in Westhausen, Germany.
Douglas E. Barnett has served as Vice President and Corporate Controller since January 1996. Prior thereto, Mr. Barnett had been Treasurer of the Company since February 1991. Prior to joining the Company in 1991, Mr. Barnett had been an investment banker with The First Boston Corporation since 1989.
Carmine F. Bosco has served as Group Vice President and General Manager - Automation Measurement and Control since joining the Company in June 1995. Prior thereto he spent twenty years working for Ingersoll-Rand Company where he served as Vice President and General Manager of the Aro Fluid Products division since 1990.
Philip N. Ciarlo has served as Group Vice President and General Manager - Integrated Automation since December 1995. Prior thereto he served as Vice President and General Manager of the Company's Assembly Automation Operations from June 1994 to December 1995. Prior to joining the Company in June 1994, Mr. Ciarlo was Manager Plant Operations for Martin Marietta from April 1993 to June 1994. He served in various management positions with General Electric Corporation for twenty years prior to that.
Todd A. Dillmann has served as Corporate Counsel and Assistant Secretary of the Company since January 1, 1995 and as Corporate Counsel since November 1, 1991. Prior to that he was Director of Legal Services for Kearney & Trecker Corporation.
Robert N. Kelley has served as Vice President - Administration of the Company since July 1991. Prior thereto, Mr. Kelley was Vice President of Human Resources and Administration of Premier Refractories & Chemicals, Inc. since June 1989.
Michael R. Melzer has served as Treasurer of the Company since January 1996. Prior thereto he served as Vice President of Financial Services of the Company since September 1993. From February 1993 until August 1993, Mr. Melzer served as Vice President of Technical Services - Automation Technology. From November 1991 until January 1993, Mr. Melzer served as Vice President - West Allis Operations for the Automation Technology Group. Prior to the Company's acquisition of Cross & Trecker in 1991, Mr. Melzer had served in various financial and operations positions with Kearney & Trecker Corporation.
Stephen M. Peterson has served as Group Vice President and General Manager - Fadal Engineering Company, Inc. since May 1995. Prior thereto he served as Vice President - Worldwide Sales of the Company since December 1990. He has been an employee of the Company since 1969.
James B. Simon has served as Group Vice President - Automation Technology since December 1994 and prior thereto Mr. Simon had been Vice President - Engineering/Total Quality of the Company since 1989. Mr. Simon has been an employee of the Company since 1965.
Backlog
Information about backlog is contained under "Management's Discussion and Analysis" on pages 14 to 18 of the Company's 1995 Annual Report to Shareholders and such information is hereby incorporated herein by reference. In some instances involving automotive customers, bookings are awarded and included in the backlog with the formal purchase orders obtained at a later time. Such practice is standard in the industry and the Company has historically experienced no significant cancellation of such bookings. At December 31, 1995, these bookings amounted to $14 million.
Foreign Operations and Export Sales
Information about the Company's foreign operations and export sales is contained in Note 11 of Notes to Consolidated Financial Statements on page 33 of the Company's 1995 Annual Report to Shareholders and such information is hereby incorporated herein by reference.
Environmental Matters
The Company and the industry in which it competes are subject to environmental laws and regulations concerning emissions to the air, discharges to waterways and the generation, handling, storage, transportation, treatment and disposal of waste materials. It is the Company's policy to comply with all applicable environmental, health and safety laws and regulations. These
laws and regulations are constantly evolving and it is difficult to predict accurately the effect they will have on the Company in the future. The Company does not presently anticipate that compliance with currently applicable environmental regulations and controls will significantly affect its competitive position, capital spending or earnings during 1996. For further information on environmental matters, see Item 3 of this Annual Report on Form 10-K.
Item 2.

Item 2. Properties
The following table sets forth certain information, as of December 31, 1995, relating to the Company's principal facilities. See "Manufacturing Capacity." All of the real property listed is owned by the Company.
Properties
Approximate Approximate Floor Area Land Area in Square Location in Acres Feet Principal Uses
Chatsworth, CA 6.8 206,000 Design and manufacture of automated machine tools
Fond du Lac, WI 24.3 457,000 General offices and design and manufacture of automated machine tools, tools and accessories
Fond du Lac, WI 15.4 102,000 Design and manufacture of computer-based electronic control units and production of related software
Janesville, WI 12.3 227,000 Design and manufacture of automated assembly systems
Janesville, WI 5.5 82,000 Design and manufacture of automated assembly systems
Dayton, OH 19.8 294,000 Design and manufacture of measurement systems
Fraser, MI 31.1 244,000 Design and manufacture of machining systems
Warren, MI 1.9 24,000 Manufacture of machine components
Port Huron, MI 12.5 143,000 Design and manufacture of special machine tools
Approximate Approximate Floor Area Land Area in Square Location in Acres Feet Principal Uses
Menominee, MI 7.0 142,000 Manufacture of castings
Tecumseh, Canada 9.0 70,000 Manufacture of machining systems
Wendlingen, Germany 11.5 257,000 Design and manufacture of machining systems
Knowsley, England 5.7 125,000 Design and manufacture of machining systems
The Company also owns one other facility with floor space of approximately 23,000 square feet. The Company is currently in the process of selling this facility.
Item 3.

Item 3. Litigation
The Company is involved in various environmental matters, including matters in which the Company and certain of its subsidiaries have been named as potentially responsible parties under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"). These matters include a soil and water contamination matter at the Company's former West Allis, Wisconsin facility. In 1992, the Company was notified by the Wisconsin Department of Natural Resources ("WDNR") of contamination at the West Allis site. In 1994, the Company sold most of the site, including the manufacturing facility. The Company has made substantial progress on the implementation of a WDNR approved clean-up plan on the nine acre portion of the site that was not sold.
The Company has established accruals for all environmental contingencies of which management is currently aware in accordance with generally accepted accounting principles. In establishing these accruals, management considered (a) reports of environmental consultants retained by the Company, (b) the costs incurred to date by the Company at sites where clean-up is presently ongoing and the estimated costs to complete the necessary remediation work remaining at such sites, (c) the financial solvency, where appropriate, of other parties that have been responsible for effecting remediation at specified sites, and (d) the experience of other parties who have been involved in the remediation of comparable sites. The accruals recorded by the Company with respect to environmental matters have not been reduced by potential insurance or other recoveries and are not discounted. Although the Company has and will continue to pursue such claims against insurance carriers and other responsible parties, future potential recoveries remain uncertain and, therefore, were not recorded as a reduction to the estimated gross environmental liabilities. Based on the foregoing and given current information, management believes that future costs in excess of the amounts accrued on all presently known and quantifiable environmental contingencies will not be material to the Company's financial position or results of operations.
In another matter, a Michigan Department of Natural Resources (now known as the Michigan Department of Environmental Quality) investigation into alleged environmental violations at the Company's Menominee, Michigan facility resulted in the issuance of criminal complaints against the Company and two of its employees in November 1994. The complaints, which are
pending in Menominee County, Michigan district and circuit courts, generally focus on alleged releases of hazardous substances and the alleged illegal treatment and disposal of hazardous waste. In these actions, the State of Michigan is seeking, among other relief, monetary sanctions as specified by applicable law. Two civil lawsuits are also pending which seek unspecified damages based on allegations of improper disposal and emissions at this facility. The Company is vigorously defending itself against all charges and allegations. Information presently available to the Company does not enable it to reasonably quantify potential civil or criminal penalties, or remediation costs, if any, related to these matters.
The Company is also involved in other litigation and proceedings, including product liability claims. In the case of product liability, the Company is partially self-insured and has accrued for all claim exposure for which a loss is probable and reasonably estimable. Based on current information, management believes that future costs in excess of the amounts accrued for all such existing litigation will not be material to the Company's financial position or results of operations.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of shareholders during the quarter ended December 31, 1995.
PART II
Item 5.

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
The portion of page 18 under the caption "Market Prices and Dividends" which describes the market for the Company's Common Stock, $.10 par value, and Note 5 of Notes to Consolidated Financial Statements on pages 26 and 27 which describes restrictions on dividends and which are contained in the Company's 1995 Annual Report to Shareholders are hereby incorporated herein by reference in response to this Item.
Item 6.

Item 6. Selected Financial Data
The information set forth in the table on page 13 of the Company's 1995 Annual Report to Shareholders under the caption "Five-Year Summary" is hereby incorporated herein by reference in response to this Item.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The information set forth on pages 14 through 18 in the Company's 1995 Annual Report to Shareholders under the caption "Management's Discussion and Analysis" is hereby incorporated herein by reference in response to this Item.
Item 8.

Item 8. Financial Statements and Supplementary Data
The consolidated statements of income, cash flows and changes in shareholders' equity for each of the years in the three-year period ended December 31, 1995, and the related consolidated balance sheets of the Company as of December 31, 1995 and 1994, together with the related notes thereto and the report of independent auditors, all set forth on pages 19 through 34 of the Company's 1995 Annual Report to Shareholders, are hereby incorporated herein by reference in response to this Item.
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There have been no changes in or disagreements with the Company's independent auditors regarding accounting and financial disclosure required to be reported pursuant to this Item.
PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant
Pursuant to Instruction G, the information required by this Item with respect to directors and Section 16 compliance is hereby incorporated herein by reference from the information under the captions entitled "Election of Directors" and "Miscellaneous-Other Matters" set forth in the Company's definitive Proxy Statement for its 1996 Annual Meeting of Shareholders ("Proxy Statement")*. Information with respect to the executive officers of the Company appears in Part I, pages 9 through 11, of this Annual Report on Form 10-K.
* The Proxy Statement will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the Company's fiscal year.
Item 11.

Item 11. Executive Compensation
Pursuant to Instruction G, the information required by this Item is hereby incorporated herein by reference from the information under the captions entitled "Board of Directors-Director Compensation" and "Executive Compensation" set forth in the Proxy Statement; provided, however, that the subsection entitled "Executive Compensation - Report on Executive Compensation" shall not be deemed to be incorporated herein by reference.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management
Pursuant to Instruction G, the information required by this Item is hereby incorporated herein by reference from the information under the caption entitled "Principal Shareholders" set forth in the Proxy Statement.
Item 13.

Item 13. Certain Relationships and Related Transactions
Pursuant to Instruction G, the information required by this Item is hereby incorporated by reference herein from the information under the caption entitled "Election of Directors" set forth in the Proxy Statement.
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial statements - The financial statements listed in the accompanying index to financial statements and financial statement schedules are incorporated by reference in this Annual Report on Form 10-K.
2. Financial statement schedules - The financial statement schedule listed in the accompanying index to financial statements and financial statement schedules is filed as part of this Annual Report on Form 10-K.
3. Exhibits - The exhibits listed in the accompanying index to exhibits are filed as part of this Annual Report on Form 10-K.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter ended December 31, 1995.
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, on March 15, 1996.
GIDDINGS & LEWIS, INC.
By /s/ Joseph R. Coppola Joseph R. Coppola Chairman and Chief Executive Officer
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 indicated on March 15, 1996.
Name Title
/s/ Joseph R. Coppola Chairman, Chief Executive Joseph R. Coppola Officer and Director (Principal Executive Officer)
/s/ Richard C. Kleinfeldt Vice President - Finance, Richard C. Kleinfeldt Secretary and Director (Principal Financial and Accounting Officer)
/s/ Albert J. Baciocco, Jr. Director Albert J. Baciocco, Jr.
/s/ John A. Becker Director John A. Becker
/s/ Ruth M. Davis Director Ruth M. Davis
Name Title
/s/ Clyde H. Folley Director Clyde H. Folley
/s/ Benjamin F. Garmer, III Director Benjamin F. Garmer, III
/s/ John W. Guffey, Jr. Director John W. Guffey, Jr.
/s/ Ben R. Stuart Director Ben R. Stuart
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Page
Annual Report Form 10-K to Shareholders
Consolidated statements of income for each of the three years in the period ended December 31, 1995 - 19 Consolidated statements of cash flows for each of the three years in the period ended December 31, 1995 - 20
Consolidated balance sheets at December 31, 1995 and 1994 - 21 Consolidated statements of changes in shareholders' equity for each of the three years in the period ended December 31, 1995 - 22
Notes to consolidated financial statements - 23-33
Report of Independent Auditors - 34 Consolidated financial statement schedule:
II - Valuation and qualifying accounts 20 -
All other financial statement schedules are omitted because the required information is not present or is not present in amounts sufficient to require submission of the schedules, or because the information required is included in the consolidated financial statements and notes thereto.
Schedule II
GIDDINGS & LEWIS, INC.
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1995, 1994 and 1993 (in thousands)
Balance Balance at Additions at beginning charged to end of Classification of year expense Deductions year
Receivables - Allowance for doubtful accounts:
1995 $ 922 $ 999 $ (85) $1,836
1994 973 172 (223) 922
1993 1,115 334 (476) 973
Inventories - Allowance for obsolescence and loss:
1995 $7,378 $2,913 $(2,815) $7,476
1994 5,900 2,553 (1,075) 7,378
1993 5,003 2,730 (1,833) 5,900
E-1
INDEX TO EXHIBITS
Exhibit No. Exhibit Description
(2.1) Stock Purchase Agreement by and among Giddings & Lewis, Inc., Bike Corp., Fadal Engineering Company, Inc., David E. de Caussin and Myrtle Rosalie de Caussin, trustees of the David and Myrtle de Caussin Family Trust - 1988, and Larry F. de Caussin and Elsie Margaret de Caussin, trustees of the Larry and Elsie de Caussin Family Trust - 1988, dated as of April 24, 1995 [Incorporated by reference to Exhibit 2.1 to Giddings & Lewis, Inc.'s Current Report on Form 8-K, dated April 24, 1995]
(2.2) Agreement of Purchase and Sale by and between Giddings & Lewis, Inc., Bike Corp. and 20701 Plummer Street, Ltd., dated as of April 24, 1995 [Incorporated by reference to Exhibit 2.2 to Giddings & Lewis, Inc.'s Current Report on Form 8-K, dated April 24, 1995]
(3.1) Restated Articles of Incorporation of Giddings & Lewis, Inc., as amended to date [Incorporated by reference to Exhibit 3.2 to Giddings & Lewis, Inc.'s Quarterly Report on Form 10-Q for the quarter ended October 1, 1995]
(3.2) By-Laws of Giddings & Lewis, Inc., as amended to date [Incorporated by reference to Exhibit 3.2 to Giddings & Lewis, Inc.'s Quarterly Report on Form 10- Q for the quarter ended July 4, 1993]
(4.1) Article IV of the Restated Articles of Incorporation of Giddings & Lewis, Inc., as amended to date [Incorporated by reference to Exhibit 3.2 to Giddings & Lewis, Inc.'s Quarterly Report on Form 10- Q for the quarter ended October 1, 1995]
(4.2) Credit Agreement among Giddings & Lewis, Inc., Giddings & Lewis GmbH, Giddings & Lewis AG, the Institutions from time to time party thereto as Lenders, the Institutions from time to time party thereto as Issuing Banks, Citicorp North America, Inc., as Agent, and Citicorp Investment Bank Limited, as London Agent, dated as of December 21, 1992. [Incorporated by reference to Exhibit 4.2 to Giddings & Lewis, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1992]
(4.3) Amendment to Credit Agreement among Giddings & Lewis, Inc., Giddings & Lewis GmbH, Giddings & Lewis Ltd., the Institutions from time to time party thereto as Lenders, the Institutions from time to time party thereto as Issuing Banks, Citicorp North America, Inc., as Retiring Agent, Citibank N.A., as Agent, Citicorp Investment Bank Limited, as Retiring London Agent, and Citibank International plc, as an Agent, dated as of December 21, 1994 [Incorporated by reference to Exhibit 4.3 to Giddings & Lewis, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1994]
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(4.4) Amendment No. 2 and Consent to Credit Agreement among Giddings & Lewis, Inc., Giddings & Lewis GmbH, Giddings & Lewis Ltd. and the Institutions from time to time party thereto as Agent and Lenders, dated as of April 24, 1995 [Incorporated by reference to Exhibit 4.3 to Giddings & Lewis, Inc.'s Current Report on Form 8-K, dated April 24, 1995]
(4.5) Indenture between Giddings & Lewis, Inc. and Firstar Trust Company, as Trustee, dated as of August 7, 1995 [Incorporated by reference to Exhibit 4.1 to Amendment No. 1 to Giddings & Lewis, Inc.'s Registration Statement on Form S-3 (Registration No. 33-61237)]
(4.6) Officer's Certificate, dated as of September 26, 1995, relating to Giddings & Lewis, Inc.'s 7-1/2% Notes due 2005 [Incorporated by reference to Exhibit 4 to Giddings & Lewis, Inc.'s Current Report on Form 8-K, dated September 26, 1995]
(4.7) Rights Agreement, dated as of August 23, 1995, between Giddings & Lewis, Inc. and Firstar Trust Company [Incorporated by reference to Exhibit 4.1 to Giddings & Lewis, Inc.'s Current Report on Form 8-K, dated August 23, 1995]
(10.1)* Giddings & Lewis, Inc. 1989 Stock Option Plan [Incorporated by reference to Exhibit 4.1 to Giddings & Lewis, Inc.'s Form S-8 Registration Statement (Registration No. 33-31951)]
(10.2)* Giddings & Lewis, Inc. 1989 Restricted Stock Plan [Incorporated by reference to Exhibit 4.1 to Giddings & Lewis, Inc.'s Form S-8 Registration Statement (Registration No. 33-31950)]
(10.3)* Giddings & Lewis, Inc. Independent Director Stock Based Incentive Plan [Incorporated by reference to Exhibit 10.4 to Giddings & Lewis, Inc.'s Form S-4 Registration Statement (Registration No. 33-43061)]
(10.4)* Giddings & Lewis, Inc. 1993 Stock and Incentive Plan [Incorporated by reference to Exhibit 4.1 to Giddings & Lewis, Inc.'s Form S-8 Registration Statement (Registration Statement No. 33-64936)]
(10.5)* Form of Key Executive Employment and Severance Agreement (covering officers other than Joseph R. Coppola) [Incorporated by reference to Exhibit 10.5 to Giddings & Lewis, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1993]
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(10.6)* Employment Agreement, dated June 30, 1993, by and between Giddings & Lewis, Inc. and Joseph R. Coppola [Incorporated by reference to Exhibit 10.1 to Giddings & Lewis, Inc.'s Quarterly Report on Form 10- Q for the quarter ended October 3, 1993]
(10.7)* Key Executive Employment and Severance Agreement, dated as of October 27, 1993, by and between Giddings & Lewis, Inc. and Joseph R. Coppola [Incorporated by reference to Exhibit 10.6 to Giddings & Lewis, Inc.'s Quarterly Report on Form 10-Q for the quarter ended October 3, 1993]
(10.8)* Employment Agreement by and between Heinz Anders and Giddings & Lewis GmbH, dated as of January 12, 1994 [Incorporated by reference to Exhibit 10.8 to Giddings & Lewis, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1994]
(10.9)* Management Incentive Compensation Program [Incorporated by reference to Exhibit 10.9 to Giddings & Lewis, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1993]
(10.10)* Supplemental Executive Retirement Plan (covering officers of the Company other than Joseph R. Coppola) [Incorporated by reference to Exhibit 10.10 to Giddings & Lewis, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1993]
(10.11)* Supplemental Retirement Program for Joseph R. Coppola [Incorporated by reference to Exhibit 10.12 to Giddings & Lewis, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1993]
(10.12)* Giddings & Lewis, Inc. Deferred Compensation Plan for Non-Employee Directors [Incorporated by reference to Exhibit 10.13 to Giddings & Lewis, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1993]
(10.13)* Giddings & Lewis, Inc. Deferred Compensation Plan and Trust Agreement [Incorporated by reference to Exhibit 10.14 to Giddings & Lewis, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1993]
(13) Portions of the 1995 Annual Report to Shareholders that are incorporated by reference herein
(21) List of Subsidiaries of Giddings & Lewis, Inc.
(23) Consent of Ernst & Young LLP
(27) Financial Data Schedule
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(99) Proxy Statement for the 1996 Annual Meeting of Shareholders
[The Proxy Statement for the 1996 Annual Meeting of Shareholders will be filed with the Securities and Exchange Commission under Regulation 14A within 120 days after the end of the Company's fiscal year; except to the extent incorporated by reference, the Proxy Statement for the 1996 Annual Meeting of Shareholders shall not be deemed to be filed with the Securities and Exchange Commission as part of this Annual Report on Form 10-K]
____________ * A management contract or compensatory plan or arrangement.