-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ViI+QjLeeRSt283rkmP3sbCSFXv4prpw+55rSZuT8pfcmuf9v4ojMRoof20uxL4i GqRmtlnQwQ4WXpm9/zbBoA== 0000944209-97-001584.txt : 19971117 0000944209-97-001584.hdr.sgml : 19971117 ACCESSION NUMBER: 0000944209-97-001584 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED STATES FILTER CORP CENTRAL INDEX KEY: 0000318025 STANDARD INDUSTRIAL CLASSIFICATION: REFRIGERATION & SERVICE INDUSTRY MACHINERY [3580] IRS NUMBER: 330266015 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10728 FILM NUMBER: 97720486 BUSINESS ADDRESS: STREET 1: 40-004 COOK ST CITY: PALM DESERT STATE: CA ZIP: 92211 BUSINESS PHONE: 7603400098 MAIL ADDRESS: STREET 1: 40-004 COOK STREET CITY: PALM DESERT STATE: CA ZIP: 92211 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN TOXXIC CONTROL INC DATE OF NAME CHANGE: 19910401 FORMER COMPANY: FORMER CONFORMED NAME: NOVAN ENERGY INC DATE OF NAME CHANGE: 19871227 10-Q 1 FORM 10-Q FOR PERIOD ENDED 9/30/97 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTION, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 and 15 (d) of the Securities Exchange Act of 1934 For the quarterly period ended SEPTEMBER 30, 1997 ------------------ or [_] Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the transition period from to ----------- ----------- Commission file number 1-10728 ------- UNITED STATES FILTER CORPORATION -------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 33-0266015 ---------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification No.) 40-004 COOK STREET, PALM DESERT, CA 92211 ------------------------------------------ (Address of principle executive offices) (Zip Code) Registrant's telephone number, including area code (760) 340-0098 -------------- 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 ----- ----- The number of shares of common stock, $.01 par value, outstanding as of November 7, 1997 was 93,974,355 shares. Total number of pages 20 ---- THERE ARE THREE EXHIBITS FILED WITH THIS REPORT PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS UNITED STATES FILTER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1997 AND MARCH 31, 1997 (UNAUDITED)
September 30, 1997 March 31, 1997 ------------------ -------------- (in thousands) ASSETS Current assets: Cash and cash equivalents $ 32,622 $ 126,237 Short-term investments 483 2,158 Accounts receivable, net 618,256 481,015 Costs and estimated earnings in excess of billings on uncompleted contracts 121,494 107,537 Inventories 303,960 242,483 Prepaid expenses 13,677 8,040 Deferred taxes 38,969 38,589 Other current assets 41,247 17,086 ---------- ---------- Total current assets 1,170,708 1,023,145 ---------- ---------- Property, plant and equipment, net 597,987 296,840 Investment in leasehold interests, net 22,916 23,230 Costs in excess of net assets of businesses acquired, net 903,982 788,096 Other assets 109,373 97,017 ---------- ---------- $2,804,966 $2,228,328 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 278,233 $ 237,895 Accrued liabilities 272,633 239,337 Current portion of long-term debt 10,699 10,806 Billings in excess of costs and estimated earnings on uncompleted contracts 58,012 42,183 Other current liabilities 43,997 21,327 ---------- ---------- Total current liabilities 663,574 551,548 ---------- ---------- Notes payable 6,346 8,876 Long-term debt, excluding current portion 60,521 12,286 Convertible subordinated debentures 554,000 554,000 Deferred taxes 13,110 11,521 Other liabilities 43,679 61,247 ---------- ---------- Total liabilities 1,341,230 1,199,478 ---------- ----------
(Continued) SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. UNITED STATES FILTER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1997 AND MARCH 31, 1997 (CONTINUED) (UNAUDITED)
September 30, 1997 March 31, 1997 ------------------ -------------- (in thousands) Shareholders' equity: Common stock, par value $.01. Authorized 300,000 shares; 92,897 and 74,530 shares issued and outstanding at September 30, 1997 and March 31, 1997, respectively 929 745 Additional paid-in capital 1,384,570 990,004 Currency translation adjustment (34,579) (19,491) Retained earnings 112,816 57,592 ---------- ---------- Total shareholders' equity 1,463,736 1,028,850 ---------- ---------- Commitments and contingencies $2,804,966 $2,228,328 ========== ==========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. UNITED STATES FILTER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
Three Months Six Months Ended Ended September 30, September 30, ----------------------- ---------------------- 1997 1996 1997 1996 --------- --------- ---------- --------- (in thousands, except per share data) Revenues $691,488 $247,854 $1,289,722 $470,813 Costs of sales 520,690 181,430 971,117 345,236 -------- -------- ---------- -------- Gross profit 170,798 66,424 318,605 125,577 Selling, general and administrative expenses 125,325 47,850 234,676 92,331 Merger expenses -- 5,581 -- 5,581 -------- -------- ---------- -------- 125,325 53,431 234,676 97,912 -------- -------- ---------- -------- Operating income 45,473 12,993 83,929 27,665 Other income (expense): Interest expense (9,530) (3,750) (18,389) (8,286) Other 162 369 1,087 971 -------- -------- ---------- -------- (9,368) (3,381) (17,302) (7,315) -------- -------- ---------- -------- Income before taxes 36,105 9,612 66,627 20,350 Income taxes 11,561 2,643 21,357 5,686 -------- -------- ---------- -------- Net income $ 24,544 $ 6,969 $ 45,270 $ 14,664 ======== ======== ========== ======== Net income per common share $ 0.29 $ 0.13 $ 0.55 $ 0.28 ======== ======== ========== ======== Weighted average number of shares outstanding 85,246 52,637 82,968 52,158 ======== ======== ========== ========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. UNITED STATES FILTER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
Six Months Ended September 30, ---------------------- 1997 1996 -------- -------- (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 45,270 $ 14,664 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision for bad debts 3,982 1,049 Depreciation and amortization 44,200 21,034 (Gain) loss on sale of assets 402 (11) Change in operating assets and liabilities: (Increase) decrease in accounts receivable (64,961) 8,015 Increase in costs and estimated earnings in excess of billings on uncompleted contracts (6,347) (19,227) Increase in inventories (35,149) (13,603) Increase in other assets (16,499) (15,292) Increase in accounts payable and accrued expenses 11,585 7,673 Increase in billings in excess of costs and estimated earnings on uncompleted contracts 12,349 3,834 Increase (decrease) in other liabilities 3,137 (6,072) -------- ------- Net cash provided by (used in) operating activities (2,031) 2,064 -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Payment for purchase of property, plant & equipment (34,387) (30,381) Payment for purchase of acquisitions, net of cash acquired (44,389) (7,369) Proceeds from disposal of equipment 1,055 210 Purchase of investments (9,550) (751) -------- -------- Net cash used in investing activities $(87,271) $(38,291) -------- --------
(Continued) SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. UNITED STATES FILTER CORPORATION AND SUSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (CONTINUED) (UNAUDITED)
Six Months Ended September 30, -------------------- 1997 1996 ---- ---- (in thousands) CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock 2,574 1,215 Principal payments on debt (4,307) (5,342) Net (payments) proceeds from borrowings on notes payable (2,530) 43,600 Dividends paid (50) (2,234) -------- -------- Net cash provided by (used in) financing activities (4,313) 37,239 -------- -------- Net increase (decrease) in cash and cash equivalents (93,615) 1,012 Cash and cash equivalents at March 31, 1997 and 1996 126,237 18,886 -------- -------- Cash and cash equivalents at September 30, 1997 and 1996 $ 32,622 $ 19,898 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 17,290 $ 8,958 ======== ======== Cash paid during the period for income taxes $ 5,414 $ 4,553 ======== ========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. UNITED STATES FILTER CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1. Operations and Significant Accounting Policies ---------------------------------------------- The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such regulations. The condensed consolidated financial statements reflect all adjustments and disclosures which are, in the opinion of management, necessary for a fair presentation of the information contained therein. All such adjustments are of a normal recurring nature. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto that are contained in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1997. The results of operations for the interim periods are not necessarily indicative of the results of the full fiscal year. Income per Common Share - ----------------------- Income per common share is computed based on the weighted average number of shares outstanding. Common stock equivalents, consisting of options, are included in the computation of income per share when their effect is dilutive. Primary and fully diluted income per common share for the three and six months ended September 30, 1997 and 1996, respectively, were calculated as follows:
Three Months Ended Six Months Ended September 30, September 30, ------------------ ------------------ 1997 1996 1997 1996 ------ ------ ------ ------ (in thousands, except per share data) Net income $24,544 $ 6,969 $45,270 $14,664 ------- ------- ------- ------- Weighted average shares outstanding 83,016 50,473 80,909 50,200 Add: Exercise of stock options reduced by the number of shares purchased with proceeds 2,230 2,164 2,059 1,958 ------- ------- ------- ------- Adjusted weighted average shares outstanding 85,246 52,637 82,968 52,158 ======= ======= ======= ======= Income per common share $ 0.29 $ 0.13 $ 0.55 $ 0.28 ======= ======= ======= =======
Note 2. Inventories ----------- Inventories at September 30, 1997 and March 31, 1997 consist of the following:
September 30, 1997 March 31, 1997 ------------------ -------------- (in thousands) Raw Material $ 79,621 $ 54,112 Work in Progress 70,056 58,619 Finished Goods 154,283 129,752 -------- -------- $303,960 $242,483 ======== ========
Note 3. Property, Plant and Equipment ----------------------------- On September 17, 1997, the Company acquired more than 47,000 acres of agricultural land in Imperial County, California and other parts of the Southwestern United States in exchange for 8.0 million shares and warrants to acquire 1.2 million shares of common stock, par value $0.01 per share, of the Company. These shares and warrants are subject to certain restrictions and limitations more fully described in agreements among the Company and the holders of such securities. The recorded value of the acquired land is approximately $210.0 million. Note 4. Notes Payable ------------- As of September 30, 1997, the Company had a multicurrency bank line-of-credit of up to $400.0 million, of which $6.3 million was outstanding (see note 5). This line-of-credit was scheduled to expire December 2001 and had interest at variable rates of up to 2.25% above certain Eurocurrency rates or 0.50% above The First National Bank of Boston's base rate. At September 30, 1997, $44.2 million of standby letters of credit were outstanding under this line-of-credit. Note 5. Commitments and Contingencies ----------------------------- On September 17, 1997, a wholly owned subsidiary of the Company (the "Purchaser") announced its intention to offer to purchase (the "Offer") all outstanding ordinary shares, par value A$2.50 per share (the "Shares"), including American Depositary Shares representing Shares, of Memtec Limited, a corporation incorporated under laws of the State of New South Wales, Australia ("Memtec"), at a price of US$30.00 per Share in cash. On November 11, 1997, the Purchaser announced that it had increased the price of the Offer to US$34.50 per Share in cash. As of September 15, 1997, Memtec had approximately 10,989,984 Shares outstanding on a fully diluted basis. The Offer is made upon the terms and subject to the conditions described in the Statement on Schedule 14D-1 filed with the United States Securities and Exchange Commission on October 24, 1997 and amended on October 27, 1997, November 7, 1997 and November 11, 1997. The Offer is scheduled to expire on November 26, 1997, unless extended. The maximum amount payable by the Purchaser under the Offer for the Shares including American Depositary Shares representing Shares to which the Company does not already own will be approximately US$360.0 million. The Purchaser will obtain such amount by borrowing the amount required from the Company, as it's parent entity. The Company will obtain the amount required from its current credit facilities. On October 20, 1997, the Company entered into an Amended and Restated Multicurrency Credit Agreement which provides credit facilities to the Company of up to US$750.0 million (the "Credit Facilities") to refinance existing debt and for working capital and other corporate purposes, including acquisitions. The line-of-credit consists of a five year US$600.0 million multicurrency revolving credit facility and a US$150.0 million revolving credit facility and bears interest at variable rates. The Credit Facilities permit the Company to make loans to the Purchaser for the purpose of paying the consideration payable under the Offer. The Credit Facilities are subject to customary and usual terms and conditions. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- Revenues for the three months ended September 30, 1997 were $691.5 million, an increase of $443.6 million or 179.0% from the $247.9 million for the three months ended September 30, 1996. Revenues for the six months ended September 30, 1997 were $1.3 billion, an increase of $818.9 million or 173.9% from the $470.8 million for the six months ended September 30, 1996. These increases were due primarily to acquisitions completed by the Company subsequent to September 30, 1996. For the six months ended September 30, 1997, revenues from capital equipment sales represented 36.5% of total revenues, while revenues from services, operations, replacement parts and consumables represented 25.8% of total revenues, revenues from distribution represented 36.0% of total revenues and revenues from consumer products represented 1.7% of total revenues. Gross profit as percentage of revenue ("gross margin") was 24.7% for the three months ended September 30, 1997 compared to 26.8% in the corresponding period in the prior year. Gross margin was 24.7% for the six months ended September 30, 1997 compared to 26.7% in the corresponding period in the prior year. These decreases in gross margin for the three and six months ended September 30, 1997 were due primarily to the effect of adding the results of operations from the Company's acquisitions of The Utility Supply Group, Inc. and WaterPro Corporation in October 1996, each of which are in the waterworks distribution business. Selling, general and administrative expenses for the three months ended September 30, 1997 were $125.3 million, an increase of $77.5 million or 161.9% from the $47.9 million for the three months ended September 30, 1996. During this period, selling, general and administrative expenses were 18.1% of revenues compared to 19.3% (before merger expenses described below) for the comparable period. For the six months ended September 30, 1997, selling, general and administrative expenses increased $142.4 million to $234.7 million as compared to the $92.3 million in the comparable period in the prior year. During this period, selling, general and administrative expenses were 18.2% of revenues compared to 19.6% (before merger expenses) for the comparable period in the prior year. The decrease in the percentage of selling, general and administrative expenses to revenue for the three months and six months ended September 30, 1997 was due primarily to the increase in the Company's revenues from the distribution business and to a lesser extent from economies of scale resulting from growth in total revenues. Merger expenses were incurred during the three and six months ended September 30, 1996 relating to the Company's acquisition of Davis Water and Waste Industries, Inc. which was accounted for as a pooling of interests. These merger expenses, which totaled $5.6 million, consisted primarily of investment banking fees, printing, stock transfer fees, accounting fees, legal fees, governmental filing fees and certain other costs related to existing Davis pension plans and change of control payments. Interest expense increased to $9.5 million for the three months ended September 30, 1997 from $3.8 million for the corresponding period in the prior year. Interest expense increased to $18.4 million for the six months ended September 30, 1997 from $8.3 million for the corresponding period in the prior year. Interest expense for the three and six months ended September 30, 1997 consisted primarily of interest on the Company's (i) 6% Convertible Subordinated Notes issued on September 18, 1995 due 2005, (ii) 4.5% Convertible Subordinated Notes issued on December 11, 1996 due 2001, (iii) other long-term debt bearing interest at rates ranging from 2.0% to 9.2% and (iv) borrowings under the Company's bank line-of-credit. At September 30, 1997, the Company had cash and short-term investments of $33.1 million. Income tax expense increased to $21.4 million for the six months ended September 30, 1997, from $5.7 million in the corresponding period in the prior year. The Company's effective tax rate for the three and six months ended September 30, 1997 was 32.1%. Net income for the three months ended September 30, 1997 was $24.5 million, an increase of $17.5 million from the $7.0 million for the three months ended September 30, 1996. Net income for the six months ended September 30, 1997 was $45.3 million, an increase of $30.6 million from the $14.7 million for the six months ended September 30, 1996. Excluding Davis merger expenses, net income for the six months ended September 30, 1997 increased $26.5 million from the corresponding period in the prior year. Net income per common share for the three and six months ended September 30, 1997 and 1996 were as follows:
Three Months Ended Six Months Ended September 30, September 30, ------------------ ---------------- 1997 1996 1997 1996 ---- ---- ---- ---- Before merger expenses $0.29 0.21 0.55 0.36 After merger expenses $0.29 0.13 0.55 0.28
Liquidity and Capital Resources - ------------------------------- The Company's principal sources of funds are cash and other working capital, cash flow generated from operations and borrowings under the Company's bank line-of-credit. At September 30, 1997, the Company had working capital of $507.1 million including cash and short-term investments of $33.1 million. The Company's long-term debt at September 30, 1997, was $554.0 million consisting of $140.0 million of 6.0% Convertible Subordinated Notes due 2005 and $414.0 million of 4.5% Convertible Subordinated Notes due 2001. The Company also had other long-term debt totaling $71.2 million and bearing interest at rates ranging from 2.0% to 9.2%. As of September 30, 1997, the Company had a multicurrency bank line-of-credit of up to $400.0 million, of which there were outstanding borrowings of $6.3 million and outstanding letters of credit of $44.2 million. Borrowings under this credit facility bear interest at variable rates of up to 2.25% above certain Eurocurrency rates or 0.50% above The First National Bank of Boston's base rate and have a five year maturity. On September 17, 1997, a wholly owned subsidiary of the Company (the "Purchaser") announced its intention to offer to purchase (the "Offer") all outstanding ordinary shares, par value A$2.50 per share (the "Shares"), including American Depositary Shares representing Shares, of Memtec Limited, a corporation incorporated under laws of the State of New South Wales, Australia ("Memtec"), at a price of US$30.00 per Share in cash. On November 11, 1997, the Purchaser announced that it had increased the price of the Offer to US$34.50 per Share in cash. As of September 15, 1997, Memtec had approximately 10,989,984 Shares outstanding on a fully diluted basis. The Offer is made upon the terms and subject to the conditions described in the Statement on Schedule 14D-1 filed with the United States Securities and Exchange Commission on October 24, 1997 and amended on October 27, 1997, November 7, 1997 and November 11, 1997. The Offer is scheduled to expire on November 26, 1997, unless extended. The maximum amount payable by the Purchaser under the Offer for the Shares including American Depositary Shares representing Shares to which the Company does not already own will be approximately US$360 million. The Purchaser will obtain such amount by borrowing the amount required from the Company, as it's parent entity. The Company will obtain the amount required from its current credit facilities. On October 20, 1997, the Company entered into an Amended and Restated Multicurrency Credit Agreement which provides credit facilities to the Company of up to US$750 million (the "Credit Facilities") to refinance existing debt and for working capital and other corporate purposes, including acquisitions. The line-of-credit consists of a five year US$600.0 million multicurrency revolving credit facility and a US$150.0 million revolving credit facility and bears interest at variable rates. The Credit Facilities permit the Company to make loans to the Purchaser for the purpose of paying the consideration payable under the Offer. The Credit Facilities are subject to customary and usual terms and conditions. The Company believes its current cash position, cash flow from operations, and available borrowings under the Company's line-of-credit will be adequate to meet its anticipated cash needs from working capital, revenue growth, scheduled debt repayment and capital investment objectives for at least the next twelve months. CERTAIN TRENDS AND UNCERTAINTIES The Company and its representatives may from time to time make written or oral forward-looking statements, including statements contained in the Company's filings with the United States Securities and Exchange Commission and in its reports to stockholders. In connection with the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995, the Company is hereby identifying important factors that could cause actual results to differ materially from those contained in any forward-looking statement made by or on behalf of the Company; any such statement is qualified by reference to the following cautionary statements. Acquisition Strategy In pursuit of its strategic objective of becoming the leading global single-source provider of water and wastewater treatment systems and services, U.S. Filter has, since 1991, successfully acquired and integrated more than 100 United States based and international businesses with strong market positions and substantial water and wastewater treatment expertise. U.S. Filter plans to continue to pursue acquisitions that expand the segments of the water and wastewater treatment and water-related industries in which it participates, complement its technologies, products or services, broaden its customer base and geographic areas served and/or expand its global distribution network, as well as acquisitions which provide other opportunities to further and implement U.S. Filter's one-stop-shop approach in terms of technology, distribution or service. U.S. Filter's acquisition strategy entails the potential risks inherent in assessing the value, strengths, weaknesses, contingent or other liabilities and potential profitability of acquisition candidates and in integrating the operations of acquired companies. Although U.S. Filter generally has been successful in pursuing these acquisitions, there can be no assurance that acquisition opportunities will continue to be available, that U.S. Filter will have access to the capital required to finance potential acquisitions, that U.S. Filter will continue to acquire businesses or that any business acquired will be integrated successfully or prove profitable. International Transactions U.S. Filter has made and expects it will continue to make acquisitions and obtain contracts in markets outside the United States. While these activities may provide important opportunities for U.S. Filter to offer its products and services internationally, they also entail the risks associated with conducting business internationally, including the risk of currency fluctuations, slower payment of invoices, nationalization and possible social, political and economic instability. Reliance On Key Personnel U.S. Filter's operations are dependent on the continued efforts of senior management, in particular Richard J. Heckmann, U.S. Filter's Chairman of the Board, President and Chief Executive Officer. U.S. Filter does not have employment agreements with most members of senior management, including Mr. Heckmann. Should any of the senior managers with whom U.S. Filter does not have a contract be unable or choose not to continue in their present roles, U.S. Filter's prospects could be adversely affected. Profitability Of Fixed Price Contracts A significant portion of U.S. Filter's revenues are generated under fixed price contracts. To the extent that original cost estimates are inaccurate, costs to complete increase, delivery schedules are delayed or progress under a contract is otherwise impeded, revenue recognition and profitability from a particular contract may be adversely affected. U.S. Filter routinely records upward or downward adjustments with respect to fixed price contracts due to changes in estimates of costs to complete such contracts. There can be no assurance that future downward adjustments will not be material. Cyclicality And Seasonality The sale of capital equipment within the water treatment industry is cyclical and influenced by various economic factors including interest rates and general fluctuations of the business cycle. A significant portion of U.S. Filter's revenues is derived from capital equipment sales. While U.S. Filter sells capital equipment to customers in diverse industries and in global markets, cyclicality of capital equipment sales and instability of general economic conditions could have an adverse effect on U.S. Filter's revenues and profitability. The sale of water and wastewater distribution equipment and supplies is also cyclical and influenced by various economic factors including interest rates, land development and housing construction industry cycles. Sales of such equipment and supplies are also subject to seasonal fluctuation in northern climates. The sale of water and wastewater distribution equipment and supplies is a significant component of U.S. Filter's business. Cyclicality and seasonality of water and wastewater distribution equipment and supplies sales could have an adverse effect on U.S. Filter's revenues and profitability. Potential Environmental Risks U.S. Filter's business and products may be significantly influenced by the constantly changing body of environmental laws and regulations, which require that certain environmental standards be met and impose liability for the failure to comply with such standards. U.S. Filter is also subject to inherent risks associated with environmental conditions at facilities owned, and the state of compliance with environmental laws, by businesses acquired by U.S. Filter. While U.S. Filter endeavors at each of its facilities to assure compliance with environmental laws and regulations, there can be no assurance that U.S. Filter's operations or activities, or historical operations by others at U.S. Filter's locations, will not result in cleanup obligations, civil or criminal enforcement actions or private actions that could have a material adverse effect on U.S. Filter. In that regard, United States federal and state environmental regulatory authorities have issued certain notices of violation related to alleged multiple violations of applicable wastewater pretreatment standards by a wholly owned subsidiary of U.S. Filter at a Connecticut ion exchange resin regeneration facility acquired by U.S. Filter in October 1995 from Anjou International Company ("Anjou"). A grand jury investigation is pending which is believed to relate to the same conditions that were the subject of the notices of violation. U.S. Filter has certain rights of indemnification from Anjou which may be available with respect to these matters. In addition, U.S. Filter's activities as owner and operator of certain hazardous waste treatment and recovery facilities are subject to stringent laws and regulations and compliance reviews. Failure of one of these facilities to comply with those regulations could result in substantial fines and the suspension or revocation of the facility's hazardous waste permit. In other matters, U.S. Filter has been notified by the United States Environmental Protection Agency that it is a potentially responsible party under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") at certain sites to which U.S. Filter or its predecessors allegedly sent waste in the past. It is possible that U.S. Filter could receive other such notices under CERCLA or analogous state laws in the future. U.S. Filter does not believe that its liability, if any, relating to such matters will be material. However, there can be no assurance that such matters will not be material. In addition, to some extent, the liabilities and risks imposed by environmental laws on U.S. Filter's customers may adversely impact demand for certain of U.S. Filter's products or services or impose greater liabilities and risks on U.S. Filter, which could also have an adverse effect on U.S. Filter's competitive or financial position. Competition All of the markets in which U.S. Filter competes are highly competitive. Due to the nature of these markets, many of which are fragmented and include an array of different sources of competition, U.S. Filter knows of no reliable statistics that provide a basis from which to estimate U.S. Filter's relative competitive position. There are competitors of U.S. Filter in certain markets that are divisions or subsidiaries of large companies that have significantly greater resources than U.S. Filter. In connection with the marketing of water distribution equipment and supplies, U.S. Filter competes not only with a large number of independent wholesalers and with other distribution chains similar to U.S. Filter, but also with manufacturers who sell directly to customers. In the residential water market, U.S. Filter competes with companies with national distribution networks, businesses with regional scope and local product assemblers or service companies, as well as retail outlets. U.S. Filter believes that there are thousands of participants in the household water market. Potential Risks Of Water Rights And Water Transfers U.S. Filter recently acquired more than 47,000 acres of agricultural land (the "Properties"), situated in the Southwestern United States, the substantial majority of which are in Imperial County, California (the "IID Properties") located within the Imperial Irrigation District (the "IID"). Substantially all of the Properties are currently leased to third party agricultural tenants, including prior owners of the Properties. U.S. Filter acquired the Properties with appurtenant water rights, and is actively seeking to acquire additional properties with water rights, primarily in the Southwestern and Western United States. U.S. Filter may seek in the future to transfer water attributable to water rights appurtenant to the Properties, particularly the IID Properties (the "IID Water"). However, since the IID holds title to all of the water rights within the IID in trust for the landowners, the IID would control the timing and terms of any transfers of IID Water by U.S. Filter. The circumstances under which transfers of water can be made and the profitability of any transfers are subject to significant uncertainties, including hydrologic risks of variable water supplies, risks presented by allocations of water under existing and prospective priorities, and risks of adverse changes to or interpretations of United States federal, state and local laws, regulations and policies. Transfers of water attributable to water rights appurtenant to the IID Properties (the "IID Water Rights") are subject to additional uncertainties. Allocations of Colorado River water, which is the source of all water deliveries to the IID Properties, are subject to limitations under complex international treaties, interstate compacts, United States federal and state laws and regulations, and contractual arrangements and, in times of drought, water deliveries could be curtailed by the United States government. Further, any transfers of IID Water would require the approval of the United States Secretary of the Interior. Even if a transfer were approved, other California water districts and users could assert claims adverse to the IID Water Rights including but not limited to, claims that IID has failed to satisfy United States federal law and California constitutional requirements that IID Water must be put to reasonable and beneficial use. A finding that IID's water use is unreasonable or nonbeneficial could adversely impact title to IID Water Rights and the ability to transfer IID Water. Water transferred by the IID to metropolitan areas of Southern California, such as San Diego, would be transported through aqueducts owned or controlled by the Metropolitan Water District, a quasi-governmental agency (the "MWD"). The transportation cost for any transfer of IID Water and the volume of water which the MWD can be required to transport at any time are subject to California laws of uncertain application, some aspects of which are currently in litigation. Technological And Regulatory Change The water and wastewater treatment business is characterized by changing technology, competitively imposed process standards and regulatory requirements, each of which influences the demand for U.S. Filter's products and services. Changes in regulatory or industrial requirements may render certain of U.S. Filter's treatment products and processes obsolete. Acceptance of new products may also be affected by the adoption of new government regulations requiring stricter standards. U.S. Filter's ability to anticipate changes in technology and regulatory standards and to develop successfully and introduce new and enhanced products on a timely basis will be a significant factor in U.S. Filter's ability to grow and to remain competitive. There can be no assurance that U.S. Filter will be able to achieve the technological advances that may be necessary for it to remain competitive or that certain of its products will not become obsolete. In addition, U.S. Filter is subject to the risks generally associated with new product introductions and applications, including lack of market acceptance, delays in development or failure of products to operate properly. Municipal And Wastewater Market A significant percentage of U.S. Filter's revenues is derived from municipal customers. While municipalities represent an important market in the water and wastewater treatment industry, contractor selection processes and funding for projects in the municipal sector entail certain additional risks not typically encountered with industrial customers. Competition for selection of a municipal contractor typically occurs through a formal bidding process which can require the commitment of significant resources and greater lead times than industrial projects. In addition, demand in the municipal market is dependent upon the availability of funding at the local level, which may be the subject of increasing pressure as local governments are expected to bear a greater share of the cost of public services. A company acquired by U.S. Filter, Zimpro Environmental, Inc. ("Zimpro"), is party to certain agreements (entered into in 1990 at the time Zimpro was acquired from unrelated third parties by the entities from which it was later acquired by U.S. Filter), pursuant to which Zimpro agreed, among other things, to pay the original sellers a royalty of 3.0% of its annual consolidated net sales of certain products in excess of $35.0 million through October 25, 2000. Under certain interpretations of such agreements, with which U.S. Filter disagrees, Zimpro could be liable for such royalties with respect to the net sales attributable to products, systems and services of certain defined wastewater treatment businesses acquired by Zimpro or U.S. Filter or U.S. Filter's other subsidiaries after May 31, 1996. The defined businesses include, among others, manufacturing machinery and equipment, and engineering, installation, operation and maintenance services related thereto, for the treatment and disposal of waste liquids, toxic waste and sludge. One of the prior sellers has revealed in a letter to U.S. Filter an interpretation contrary to that of U.S. Filter. U.S. Filter believes that it would have meritorious defenses to any claim based upon any such interpretation and would vigorously pursue the elimination of any threat to expand what it believes to be its obligations pursuant to such agreements. Impact of Recently Issued Accounting Standards. In February 1997, the Financial Accounting Standards Board issued a new statement titled "Earnings Per Share." The new statement is effective for fiscal years and interim periods ending after December 15, 1997. The Company does not believe that adoption of this new standard will have a material effect on the consolidated financial statements. In June 1997, the Financial Accounting Standards Board issued a new statement titled "Reporting Comprehensive Income." The new statement is effective for fiscal years beginning after December 15, 1997. The Company is currently evaluating its options for disclosure under this new standard and will implement the statement during its fiscal year ending March 31, 1999. In June 1997, The Financial Accounting Standards Board issued a new statement titled "Disclosures about Segments of an Enterprise and Related Information." The new statement is effective for fiscal years beginning after December 15, 1997. The Company is currently evaluating its options for disclosure under this standard and will implement the statement during its fiscal year ending March 31, 1999. PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS N/A Item 2. CHANGES IN SECURITIES Privately Placed Securities On September 17, 1997, the Company issued 8,000,000 shares (the "Shares") of its common stock, par value $.01 per share (the "Common Stock"), and non- transferable warrants (the "Warrants") to purchase the aggregate of 1,200,000 shares of the Common Stock, as consideration for the acquisition, by wholly owned subsidiaries, of all of the partnership interests in Western Farms, L.P., a California limited partnership, and FW Ranchlands L.P., a Texas limited partnership. The Shares and Warrants were issued in a transaction exempt from registration pursuant to Section 4(2) of the United States Securities Act of 1933 as amended (the "Securities Act"). Item 3. DEFAULTS UPON SENIOR SECURITIES N/A Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS (i) The following directors were elected to terms expiring in 2000: Class I Directors: For Withheld --- -------- John L. Diederich 64,146,745 630,619 Nicholas C. Memmo 64,194,753 582,611 C. Howard Wilkins, Jr. 64,193,202 584,162 (ii) To approve the Company's 1991 Employee Stock Option Plan as amended and restated: For Against Withheld - ---------------- ----------------- --------------- 63,264,827 1,237,265 275,272 (iii) An amendment to the Company's Articles of Incorporation to increase the number of total authorized shares to 300,000,000 common shares: For Against Withheld - ---------------- ----------------- --------------- 62,615,454 1,932,866 229,044 (iv) Ratification of the appointment of KPMG Peat Marwick LLP as independent accountants for the Company: For Against Withheld - ---------------- ----------------- --------------- 64,529,462 84,318 163,584 Item 5. OTHER INFORMATION On September 17, 1997, a wholly owned subsidiary of the Company (the "Purchaser") announced its intention to offer to purchase (the "Offer") all outstanding ordinary shares, par value A$2.50 per share (the "Shares"), including American Depositary Shares representing Shares, of Memtec Limited, a corporation incorporated under laws of the State of New South Wales, Australia ("Memtec"), at a price of US$30.00 per Share in cash. On November 11, 1997, the Purchaser announced that it had increased the price of the Offer to US$34.50 per Share in cash. As of September 15, 1997, Memtec had approximately 10,989,984 Shares outstanding on a fully diluted basis. The Offer is made upon the terms and subject to the conditions described in the Statement on Schedule 14D-1 filed with the United States Securities and Exchange Commission on October 24, 1997 and amended on October 27, 1997, November 7, 1997 and November 11, 1997. The Offer is scheduled to expire on November 26, 1997, unless extended. Item 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibits The following exhibits are filed herewith or incorporated herein by reference: 3.01 Certificate of Amendment of Certificate of Incorporation of United States Filter Corporation (filed herewith) 4.01 Amended and Restated Multicurrency Credit Agreement dated as of October 20, 1997 by and among United States Filter Corporation and various lenders, with BankBoston, N.A. as Managing Agent (incorporated by referenced to Registration Statement on Form S-4 dated November 6, 1997 (File No. 333-39711) 4.02 United States Filter Corporation 1991 Employee Stock Option Plan, as amended through June 12, 1997 (filed herewith) 27.0 Financial Data Schedule Reports on Form 8-K The Company filed three Current Reports on Form 8-K during the quarter ended September 30, 1997, as follows (1) August 4, 1997, reporting the execution of definitive agreement for the acquisition of partnership interests pursuant to that certain Sale and Purchase of Partnership Interests dated as of August 3, 1997, by and among Western Farm & Cattle Company, California Land & Cattle Company, N.N. Investors, L.P., ST Ranch GenPar, Inc., FW Ranch Partners, L.P., and the Company, and related press release. (2) September 17, 1997, reporting the consummation of the partnership interests pursuant to that certain Sale and Purchase of Partnership Interests dated as of August 3, 1997, by and among Western Farm & Cattle Company, California Land & Cattle Company, N.N. Investors, L.P., ST Ranch GenPar, Inc., FW Ranch Partners, L.P., and the Company, and related press release. (3) September 19, 1997, reporting the tender offer by USFC Acquisition Inc., a wholly owned subsidiary of the Company to purchase any and all outstanding ordinary shares of Memtec Limited, a corporation incorporated under the laws of New South Wales, Australia, and related press releases. EXHIBIT INDEX
Exhibit Sequential Number Description Page Number - ---------- ----------- ----------- 3.01 Certificate of Amendment of Certificate of Incorporation of United States Filter Corporation (filed herewith) 23 4.02 United States Filter Corporation 1991 Employee Stock Option Plan, as amended through June 12, 1997 (filed herewith) 24 27.0 Financial Data Schedule 32
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UNITED STATES FILTER CORPORATION By: /s/Kevin L. Spence - ------------------------ ------------------ Dated: November 13, 1997 Kevin L. Spence Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer) EX-3.01 2 CERTIFICATE OF AMENDMENT EXHIBIT 3.01 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF UNITED STATES FILTER CORPORATION UNITED STATES FILTER CORPORATION, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: FIRST: That Section 1 of Article V of the Restated Certificate of Incorporation of the Corporation is hereby amended to read in its entirety as follows: "Section 1: Authorized Stock. The Corporation shall be authorized to issue ---------------- two classes of shares to be designated, respectively, "Preferred Stock" and "Common Stock"; the total number of shares which the Corporation shall have the authority to issue is three hundred three million (303,000,000) shares; the total number of authorized shares of Preferred Stock shall be three million (3,000,000) and each share shall have a par value of ten cents ($.10); and the total number of authorized shares of Common Stock shall be three hundred million (300,000,000) and each share shall have a par value of one cent ($.01)." SECOND: The amendment set forth has been duly approved by the Board of Directors of the Corporation and by the Stockholders entitled to vote thereon. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, I, the undersigned, president of the Corporation, for the purpose of amending the Restated Certificate of Incorporation of the Corporation pursuant to Section 242 of the Delaware General Corporation Law, do make and file this Certificate of Amendment, hereby declaring and certifying that the facts herein stated are true and accordingly have hereunto set my hand, as of this 14th day of August, 1997. UNITED STATES FILTER CORPORATION BY: /s/Damian C. Georgino ---------------------- Damian C. Georgino Senior Vice President Attest: /s/Michael E. Hulme, Jr. - ------------------------ Michael E. Hulme, Jr. Assistant Secretary EX-4.02 3 EMPLOYEE STOCK OPTION PLAN EXHIBIT 4.02 UNITED STATES FILTER CORPORATION 1991 EMPLOYEE STOCK OPTION PLAN 1. Purpose. The United States Filter Corporation 1991 Employee Stock ------- Option Plan (the "Plan") is hereby established to grant to officers, directors and key employees of United States Filter Corporation and its Subsidiaries (individually and collectively, the "Company") a favorable opportunity to acquire Common Stock of United States Filter Corporation (the "Stock"), and to create an incentive for such persons to remain in the employ of the Company and to contribute to its success. As used in the Plan, the term "Code" shall mean the Internal Revenue Code of 1986, as amended, and any successor statute, and the terms "Parent" and "Subsidiary" shall have the meaning set forth in Sections 424(e) and (f) of the Code. 2. Administration. The Plan shall be administered by the Compensation -------------- Committee of the Board of Directors of the Company (the "Committee"). The Committee shall determine the meaning and application of the provisions of the Plan and all option agreements executed pursuant thereto, and its decisions shall be conclusive and binding upon all interested persons. The Committee may not grant an option to any member of the Committee. An option may be granted to a member of the Committee only by action of the Board of Directors of the Company. Subject to the provisions of the Plan, the Committee shall have the sole authority to determine: (a) The persons to whom options to purchase Stock shall be granted; (b) The number of options to be granted to each person; (c) The price to be paid for the Stock upon the exercise of each option; (d) The period within which each option shall be exercised; and (e) The terms and conditions of each stock option agreement entered into between the Company and persons to whom the Company has granted an option. 3. Eligibility. Officers, directors and key employees of the Company, as ----------- determined by the Committee, shall be eligible to receive grants of options under the Plan. No individual may be granted, in any calendar year, options under the Plan to purchase more than 150,000 shares of Common Stock. 4. Stock Subject to Plan. There shall be reserved for issue upon the --------------------- exercise of options granted under the Plan 6,131,250 shares of Common Stock or the number of shares of Stock, which, in accordance with the provisions of Section 9 hereof, shall be substituted therefor. Such shares may be authorized but unissued shares or treasury shares. If an option granted under the _________________ /1/ As amended by the Board of Directors through June 12, 1997. Plan shall expire or terminate for any reason without having been exercised in full, unpurchased shares subject thereto shall again be available for the purposes of the Plan. 5. Terms of Options. ---------------- (a) Incentive Stock Options. It is intended that options granted ----------------------- pursuant to this Section 5(a) qualify as incentive stock options as defined in Section 422 of the Code. Incentive stock options shall be granted only to employees of the Company. Each stock option agreement evidencing an incentive stock option shall provide that the option is subject to the following terms and conditions and to such other terms and conditions not inconsistent therewith as the Committee may deem appropriate in each case: (1) Option Price. The price to be paid for each share of Stock ------------ upon the exercise of each incentive stock option shall be determined by the Committee at the time the option is granted, but shall in no event be less than 100% of the fair market value of the shares on the date the option is granted, or not less than 110% of the fair market value of such shares on the date such option is granted in the case of an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or of its Parent or Subsidiaries. As used in this Plan the term "date the option is granted" means the date on which the Committee authorizes the grant of an option hereunder or any later date specified by the Committee. Fair market value of the shares shall be (i) the mean of the high and low prices of shares of Stock sold on a national stock exchange on the date the option is granted (or if there was no sale on such date, the highest asked price for the Stock on such date), or (ii) if the Stock is not listed on any national stock exchange on the date the option is granted, the mean between the "bid" and "asked" prices of the Stock in the National Over- The-Counter Market on the date the option is granted, or (iii) if the Stock is not traded in any market, that price determined by the Committee to be fair market value, based upon such evidence as it may think necessary or desirable. (2) Period of Option. The period or periods within which an ---------------- option may be exercised shall be determined by the Committee at the time the option is granted, but in no event shall any option granted hereunder be exercised more than ten years from the date the option was granted, nor more than five years from the date the option was granted in the case of an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or of its Parent or Subsidiaries. (3) Payment for Stock. The option exercise price for each share ----------------- of Stock purchased under an option shall be paid in full at the time of purchase. The Committee may provide that the option price be payable, at the election of the holder of the option and with the consent of the Committee, in whole or in part either in cash or by delivery in transferable form of shares of Stock which have been held by the Optionee for at least six months prior to the date of exercise or such shorter period as qualifies as the measurement period for "mature shares" under applicable generally accepted accounting rules. Such delivered shares of Stock shall be valued for such purpose at their fair market value on the date on which the option is exercised. In the discretion of the Committee, the delivery of shares of Stock in full or partial payment of the option exercise price may be accomplished without the actual delivery by the Optionee of stock certificates representing the delivered shares under a procedure whereby the Optionee attests in 2 writing, on a form acceptable to the Committee, to ownership of the subject shares and the Company delivers to the Optionee certificates representing the net shares issuable upon such option exercise. Payment may also be made, in the discretion of the Committee, by delivery (including by fax) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions to a broker-dealer to sell or margin a sufficient portion of the shares and deliver the sale or margin loan proceeds directly to the Company to pay for the exercise price. No share of Stock shall be issued until full payment therefor has been made, and no employee shall have any rights as an owner of Stock until the date of issuance to him of the stock certificate evidencing such Stock. (4) Limitation on Amount. Subject to the overall limitations of -------------------- Section 4 hereof (relating to the aggregate shares subject to the Plan), the aggregate fair market value (determined as of the time the option is granted) of the Common Stock with respect to which incentive stock options are exercisable for the first time by the Optionee during any calendar year (under the Plan and all other incentive stock option plans of the Company, any Parent or Subsidiaries) shall not exceed $100,000. (b) Nonqualified Stock Options. Each nonqualified stock option -------------------------- granted under the Plan shall be evidenced by a stock option agreement between the person to whom such option is granted and the Company. Such stock option agreement shall provide that the option is subject to the following terms and conditions and to such other terms and conditions not inconsistent therewith as the Committee may deem appropriate in each case: (1) Option Exercise Price. The exercise price to be paid for --------------------- each share of Stock upon the exercise of an option shall be determined by the Committee at the time the option is granted, but shall in no event be less than 100% of the fair market value of the shares on the date the option is granted. As used in this Plan, the term "date the option is granted" means the date on which the Committee authorizes the grant of an option hereunder or any later date specified by the Committee. Fair market value of the shares shall be (i) the mean of the high and the low prices of shares of Stock sold on a national stock exchange on the date the option is granted (or if there was no sale on such date, the highest asked price for the Stock on such date), or (ii) if the Stock is not listed on a national stock exchange on the date the option is granted the mean between the "bid" and "asked" prices of the Stock in the National Over-The-Counter market on the date the option is granted, or (iii) if the Stock is not traded in any market, that price determined by the Committee to be fair market value, based upon such evidence as it may think necessary or desirable. (2) Period of Option. The period or periods within which an ---------------- option may be exercised shall be determined by the Committee at the time the option is granted, but shall in no event exceed ten years from the date the option is granted. (3) Payment for Stock. The option exercise price for each share ----------------- of Stock purchased under an option shall be paid in full at the time of purchase. The Committee may provide that the option price be payable, at the election of the holder of the option and with the consent of the Committee, in whole or in part either in cash or by delivery in transferable form of shares of Stock which have been held by the Optionee for at least six months prior to the date of exercise or such shorter period as qualifies as the measurement period for "mature shares" under applicable generally accepted accounting rules. Such delivered shares of Stock shall be valued for 3 such purpose at their fair market value on the date on which the option is exercised. In the discretion of the Committee, the delivery of shares of Stock in full or partial payment of the option exercise price may be accomplished without the actual delivery by the Optionee of stock certificates representing the delivered shares under a procedure whereby the Optionee attests in writing, on a form acceptable to the Committee, to ownership of the subject shares and the Company delivers to the Optionee certificates representing the net shares issuable upon such option exercise. Payment may also be made, in the discretion of the Committee, by delivery (including by fax) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions to a broker-dealer to sell or margin a sufficient portion of the shares and deliver the sale or margin loan proceeds directly to the Company to pay for the exercise price. No share of Stock shall be issued until full payment therefor has been made, and no employee shall have any rights as an owner of Stock until the date of issuance to him of the stock certificate evidencing such Stock. 6. Nontransferability. The options granted pursuant to the Plan shall be ------------------ nontransferable except by will or the laws of descent and distribution, and shall be exercisable during the optionee's lifetime only by him and after his death, by his personal representative or by the person entitled thereto under his will or the laws of intestate succession. 7. Termination of Employment. Upon termination of the optionee's ------------------------- employment, except as the Committee shall otherwise authorize at the time of grant and any time thereafter, his rights to exercise options then held by him shall be only as follows: (a) Death or Disability. Upon the death of any person holding options ------------------- granted under this Plan, his options shall be exercisable, by the holder's representative or by the person entitled thereto under his will or the laws of intestate succession, only if and to the extent they are exercisable on the date of his death, and such options shall terminate twelve months after the date of his death (or such shorter period as the Committee may prescribe in his option agreement). Upon the disability of an optionee his options shall be exercisable only if and to the extent they are exercisable on the date of his disability, and such options shall terminate twelve months after the date of his disability (or such shorter period as the Committee may prescribe in his option agreement). Notwithstanding the foregoing, with respect to options granted on or after June 12, 1997, if, upon the disability of an optionee, the optionee's age plus years of continuous service with the Company and its affiliates and predecessors (as combined and rounded to the nearest month) equal 65 or more, then all of his options shall be exercisable, whether or not they were exercisable on the date of such disability, for the exercise period stated above. However, in no event shall any option be exercised more than ten years from the date the option was granted. For purposes of this Section 7(a), an individual is disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. (b) Retirement. Upon the retirement of an officer, director or ---------- employee or the cessation of services provided by a nonemployee (either pursuant to a Company retirement plan, if any, or pursuant to the approval of the Committee) or if any officer, director, employee or non-employee optionee leaves the Company, a Parent or a Subsidiary, for any reason other than as set forth in Section 7(a), 7(c) or 7(d) hereof, his options shall be exercisable only if and to the extent 4 they are exercisable on the date of his retirement or cessation of services and such options shall terminate three months after the date of his retirement or cessation of services as the case may be (or such shorter period as the Committee may prescribe in his option agreement). The optionee's option shall terminate upon the expiration of such period unless the holder of the options dies prior thereto, in which event he shall be deemed to have died on the date of his retirement or cessation of services. Notwithstanding the foregoing, with respect to options granted on or after June 12, 1997 , if, upon the retirement of an optionee, the optionee's age plus years of continuous service with the Company and its affiliates [and predecessors] (as combined and rounded to the nearest month) equal 65 or more, then all of his options shall be exercisable, whether or not they were exercisable on the date of such retirement, for the exercise period stated above. However, in no event shall such options be exercised more than ten years from the date they are granted. (c) Transfer to Related Corporation. In the event that an officer, ------------------------------- director or employee leaves the employ of the Company to become an officer, director or employee of any Subsidiary, or an officer, director or employee ceases to serve as an officer or director or leaves the employ of a Subsidiary to become an officer, director or employee of the Company or another Subsidiary, such officer, director or employee shall be deemed to continue as an officer, director or employee for all purposes of this Plan. (d) Other Termination. In the event an officer, director or ----------------- employee ceases to serve as an officer or director or leaves the employ of the Company, a Parent or a Subsidiary, or a nonemployee ceases to provide services to the Company, of his own volition, or if his relationship with the Company, a Parent or a Subsidiary is terminated by the Company for cause, his options shall terminate at the earlier of the date his employment terminates or he ceases providing services to the Company, a Parent or a Subsidiary, or the date he receives written notice that his employment or rendering of services is or will be terminated. 8. Acceleration upon Termination or Sale of Company. The Committee may ------------------------------------------------ determine to accelerate the exercisability of any or all options after termination of employment. In the event the Parent or its stockholders enter into an agreement to dispose of all or substantially all of the assets or capital stock of the Parent by means of a sale, merger, consolidation, reorganization, liquidation or otherwise, an option granted under the Plan will, in the discretion of the Committee, if so authorized by the Board of Directors and conditioned upon consummation of such disposition of assets or stock, become immediately exercisable during the period commencing as of the date of the execution of such agreement and ending as of the earlier of the stated termination date of the option or the date on which the disposition of assets or stock contemplated by the agreement is consummated. 5 9. Adjustment of Shares. -------------------- (a) In the event of changes in the outstanding Stock by reason of stock dividends, stock splits, reverse stock splits, split-ups, consolidations, recapitalizations, reorganizations or like events (as determined by the Committee), an appropriate adjustment shall be made by the Committee in the number of shares reserved under the Plan, in the number of shares set forth in Section 4 hereof, and in the number of shares and the option price per share specified in any stock option agreement with respect to any unpurchased shares. The determination of the Committee as to what adjustments shall be made shall be conclusive. Adjustments for any options to purchase fractional shares shall also be determined by the Committee. The Committee shall give prompt notice to all optionees of any adjustment pursuant to this Section. (b) Section 9(a) above to the contrary notwithstanding, in the event of any merger, consolidation or other reorganization of United States Filter Corporation in which United States Filter Corporation is not the surviving or continuing corporation (as determined by the Committee) or in the event of the liquidation or dissolution of United States Filter Corporation, all options granted hereunder shall terminate on the effective date of the merger, consolidation, reorganization, liquidation, or dissolution unless the agreement with respect thereto provides for the assumption of such options by the continuing or surviving corporation. Any other provision of this Plan to the contrary notwithstanding, all outstanding options granted hereunder shall be fully exercisable for a period of 30 days prior to the effective date of any such merger, consolidation, reorganization, liquidation, or dissolution unless such options are assumed by the continuing or surviving corporation. 10. Securities Law Requirements. The Committee may require prospective --------------------------- optionees, as a condition of either the grant or the exercise of an option, to represent and establish to the satisfaction of the Committee that all shares of Stock acquired upon the exercise of such option will be acquired for investment and not for resale. The Company may refuse to permit the sale or other disposition of any shares acquired pursuant to any such representation until it is satisfied that such sale or other disposition would not be in contravention of applicable state or federal securities law. 11. Tax Withholding. The Company may require an optionee to pay to the --------------- Company all applicable federal, state and local taxes which the Company is required to withhold with respect to the exercise of an option granted hereunder. 12. Amendment. The Board of Directors may amend the Plan at any time, --------- except that without shareholder approval: (a) The number of shares of Stock which may be reserved for issuance under the Plan shall not be increased except as provided in Section 9 hereof; (b) The option price per share of Stock may not be fixed at less than 100% of the fair market value of a share of Stock on the date the option was granted; (c) The maximum period of ten years during which the options may be exercised may not be extended; 6 (d) The class of persons eligible to receive options under the Plan as set forth in Section 3 shall not be changed; and (e) This Section 12 may not be amended in a manner that limits or reduces the amendments which require shareholder approval. 13. Termination. The Plan shall terminate automatically on February 27, ----------- 2001. The Board of Directors may terminate the Plan at any earlier time. The termination of the Plan shall not affect the validity of any option agreement outstanding at the date of such termination, but no option shall be granted after such date. 14. Effective Date. The Plan shall be effective upon its adoption by the -------------- Board of Directors of the Company. Options may be granted but not exercised prior to stockholder approval of the Plan. If any options are so granted and stockholder approval shall not have been obtained on or before February 27, 1992, such options shall terminate retroactively as of the date they were granted. 7 EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENTS OF INCOME OF UNITED STATES FILTER CORPORATION AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS 6-MOS MAR-31-1998 MAR-31-1998 JUL-01-1997 APR-01-1997 SEP-30-1997 SEP-30-1997 32,622 0 483 0 646,067 0 (27,811) 0 303,960 0 1,170,708 0 737,707 0 (139,720) 0 2,804,966 0 663,574 0 625,220 0 0 0 0 0 929 0 1,462,807 0 1,463,736 0 691,488 1,289,722 691,488 1,289,722 520,690 971,117 520,690 971,117 0 0 2,051 3,982 9,530 18,389 36,105 66,627 11,561 21,357 24,544 45,270 0 0 0 0 0 0 24,544 45,270 0.29 0.55 0.29 0.55
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