-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, aGyg7wjmDTgme7e8VZmyGddE1PDQjdnb9QR6a5RKt6uSkXgPJB6ZWg5SuK3exeim 2WPbVgR4HBiEmLxaqjHEcA== 0000051200-94-000007.txt : 19940503 0000051200-94-000007.hdr.sgml : 19940503 ACCESSION NUMBER: 0000051200-94-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL CONTROLS CORP CENTRAL INDEX KEY: 0000051200 STANDARD INDUSTRIAL CLASSIFICATION: 3715 IRS NUMBER: 540698116 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05599 FILM NUMBER: 94525637 BUSINESS ADDRESS: STREET 1: 2016 N PITCHER ST CITY: KALAMAZOO STATE: MI ZIP: 49007 BUSINESS PHONE: 6163436121 FORMER COMPANY: FORMER CONFORMED NAME: CRYOGENICS INC DATE OF NAME CHANGE: 19690819 FORMER COMPANY: FORMER CONFORMED NAME: WILLKIE FARR GALLAGHER WALTON & FITZGIBB DATE OF NAME CHANGE: 19680904 10-Q 1 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the period ended MARCH 31, 1994 -------------------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the transition period from to ------------------ ------------------ Commission file number 1-5599 ------------------------ INTERNATIONAL CONTROLS CORP. - ------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) FLORIDA 54-0698116 - ------------------------------------------------------------------------ (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 2016 North Pitcher Street, Kalamazoo, Michigan 49007 - ------------------------------------------------------------------------ (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (616) 343-6121 ---------------- - ------------------------------------------------------------------------ Indicate by check mark whether Registrant (1) 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 Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- There were 9,036,700 shares of Registrant's only class of common stock outstanding as of May 2, 1994. INDEX INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES Page Number ----------- PART I FINANCIAL INFORMATION Item 1 Consolidated Financial Statements (Unaudited): Consolidated Balance Sheets at March 31, 1994, and December 31, 1993 2-3 Consolidated Statements of Operations for the Three Months Ended March 31, 1994, and March 31, 1993 4 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1994, and March 31, 1993 5-6 Notes to Consolidated Financial Statements 7-11 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 12-14 PART II OTHER INFORMATION Item 1 Legal Proceedings 15 Item 6 Exhibits and Reports on Form 8-K 15 SIGNATURE 16
CONSOLIDATED BALANCE SHEETS INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES (in thousands, except share and per share amounts) March 31, 1994 December 31, (unaudited) 1993 ----------- ------------ ASSETS Cash and cash equivalents $ 32,608 $ 40,078 Accounts receivable, less allowance for doubtful accounts of $883 (1993--$748) 100,819 75,701 Inventories 86,060 94,112 Other current assets 13,344 11,823 ---------- ---------- Total current assets 232,831 221,714 Property, plant and equipment, net 123,111 122,355 Insurance Subsidiary's investments 89,134 90,838 Insurance Subsidiary's reinsurance receivable 11,405 11,378 Cost in excess of net assets acquired, net of accumulated amortization of $6,565 (1993--$6,252) 43,430 43,743 Trademark, net of accumulated amortization of $1,838 (1993-$1,750) 11,608 11,696 Other assets 15,639 15,612 ---------- ---------- Total Assets $ 527,158 $ 517,336 ========== ==========
March 31, 1994 December 31, (unaudited) 1993 ----------- ------------ LIABILITIES AND SHAREHOLDERS' DEFICIT: Accounts payable $ 77,932 $ 77,876 Notes payable 5,000 5,000 Income taxes payable 12,466 7,726 Accrued compensation 16,435 15,838 Accrued interest 6,018 11,746 Other accrued liabilities 37,647 38,071 Current portion of long-term debt 46,994 14,321 ---------- ---------- Total current liabilities 202,492 170,578 Long-term debt, excluding current portion: Shareholders 30,000 30,000 Other 210,119 246,952 ---------- ---------- 240,119 276,952 Insurance Subsidiary's unpaid losses and loss adjustment expenses 72,077 71,179 Unearned insurance premiums 16,239 9,547 Deferred income taxes 9,950 9,803 Postretirement benefits other than pensions 50,012 49,609 Other noncurrent liabilities 39,909 39,053 Minority interest 39,898 40,132 ---------- ---------- Total liabilities 670,696 666,853 Shareholders' deficit: Common stock, par value $0.01: Authorized 15,000,000 shares Outstanding 9,036,700 shares 90 90 Additional paid-in capital 14,910 14,910 Retained earnings deficit (29,831) (36,217) Unrealized appreciation (depreciation) on Insurance Subsidiary's invest- ments in certain debt and equity securities--Note E (334) 73 Notes receivable from shareholders (625) (625) Amount paid in excess of Checker's net assets (127,748) (127,748) ---------- ---------- Total shareholders' deficit (143,538) (149,517) ---------- ---------- Total Liabilities and Shareholders' Deficit $ 527,158 $ 517,336 ========== ==========
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES (in thousands, except per share amounts) (unaudited) Three Months Ended March 31, 1994 1993 ---------- ---------- Revenues $ 271,680 $ 204,933 Cost of revenues (230,835) (175,631) ---------- ---------- Gross profit 40,845 29,302 Selling, general and administrative expense (21,454) (19,986) Interest expense (10,044) (10,465) Interest income 1,660 2,018 Other income, net 604 991 ---------- ---------- Income before income taxes and accounting changes 11,611 1,860 Income tax expense (5,225) (2,604) ---------- ---------- Income (loss) before accounting changes 6,386 (744) Accounting changes, net of income taxes --- (46,626) ---------- ---------- Net income (loss) $ 6,386 $ (47,370) ========== ========== Weighted average number of shares used in per share computations 9,037 9,037 ========== ========== Income (loss) per share: Before accounting changes $ 0.71 $ (0.08) Accounting changes --- (5.16) ---------- ---------- Net income (loss) per share $ 0.71 $ (5.24) ========== ==========
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES (in thousands) (unaudited) Three Months Ended March 31, 1994 1993 ---------- ---------- Cash flows from operating activities: Net income (loss) $ 6,386 $ (47,370) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Accounting changes --- 46,626 Depreciation and amortization 5,631 5,571 Deferred income tax benefit (581) (1,834) Amortization of cost in excess of net assets acquired 313 312 Amortization of debt discount 393 324 Net (gain) loss on sale of property, plant and equipment --- (18) Investment gains (274) (103) Other noncash charges 2,626 1,446 Changes in operating assets and liabilities: Accounts receivable (25,281) (21,933) Inventories 8,052 (7,084) Insurance Subsidiary's reinsurance receivable (27) 5,101 Other assets (1,149) (3,477) Accounts payable 56 8,533 Income taxes 5,840 1,523 Unpaid losses and loss adjustment expenses 897 (4,898) Unearned insurance premiums 6,692 2,999 Postretirement benefits other than pension 403 --- Other liabilities (7,791) (433) ---------- ---------- Net cash flow provided by (used in) operating activities 2,186 (14,715)
CONSOLIDATED STATEMENTS OF CASH FLOWS--CONTINUED INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES (in thousands) (unaudited) Three Months Ended March 31, 1994 1993 ---------- ---------- Cash flows from investing activities: Purchases of property, plant and equipment $ (6,903) $ (7,843) Proceeds from disposal of property, plant and equipment and other productive assets 516 1,466 Purchase of investments available for sale (3,901) --- Purchase of investments held to maturity (20,493) (6,789) Proceeds from sale of investments available for sale 346 --- Proceeds from maturities and redemption of investments held to maturity 25,423 13,845 Other 143 54 ---------- ---------- Net cash flow provided by (used in) investing activities (4,869) 733 Cash flows from financing activities: Proceeds from borrowings --- 15,091 Repayments of borrowings (4,553) (4,755) Return of limited partner's capital (234) (217) ---------- ---------- Net cash flow provided by (used in) financing activities (4,787) 10,119 ---------- ---------- Decrease in cash and cash equivalents (7,470) (3,863) Beginning cash and cash equivalents 40,078 42,199 ---------- ---------- Ending cash and cash equivalents $ 32,608 $ 38,336 ========== ==========
See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES MARCH 31, 1994 (unaudited) NOTE A--BASIS OF PRESENTATION The accompanying consolidated financial statements of International Controls Corp. and Subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information, the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In Management's opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 1994, are not necessarily indicative of the results that may be expected for the year ending December 31, 1994. For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1993. NOTE B--PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of International Controls Corp. and its subsidiaries, including a wholly-owned trailer leasing company, Checker Motors Co., L.P. ("Partnership") and the Partnership's wholly-owned subsidiaries, including American Country Insurance Company ("Insurance Subsidiary"). NOTE C--INVENTORIES Inventories are summarized below (dollars in thousands):
March 31, December 31, 1994 1993 ---------- ---------- Raw materials and supplies $ 53,457 $ 53,105 Work-in-process 12,619 10,956 Finished goods 19,984 30,051 ---------- ---------- $ 86,060 $ 94,112 ========== ==========
NOTE D--INCOME TAXES The Company's estimated effective tax rate differs from the statutory rate because of state income taxes as well as the impact of the reporting of certain income and expense items in the financial statements which are not taxable or deductible for income tax purposes. The values of assets and liabilities acquired in a transaction accounted for as a purchase are recorded at estimated fair values which result in an increase in the net asset value over the tax basis for such net assets. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES (unaudited) NOTE E--ACCOUNTING CHANGES Effective January 1, 1994, the Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." In accordance with this statement, prior period financial statements have not been restated to reflect the change in accounting principle. The opening balance of shareholders' deficit was decreased by $1.4 million (net of $0.8 million in deferred income taxes) to reflect the net unrealized holding gains on securities classified as available-for-sale previously carried at amortized cost or lower of cost or market. Insurance company management evaluated the investment portfolio and, based on the Insurance Subsidiary's ability and intent, has classified securities between the held-to-maturity and available-for-sale categories. Held-to- maturity securities are stated at amortized cost. Debt securities not classified as held-to-maturity and marketable equity securities are classified as available-for-sale. Available-for-sale securities are stated at fair value, with the unrealized gains and losses, net of tax, reported as a separate component of shareholders' deficit. Following is a summary of held-to-maturity and available-for-sale securities as of March 31, 1994:
Held-To-Maturity -------------------------------------------- Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value -------- -------- -------- -------- U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 4,297 $ 154 $ 35 $ 4,416 Obligations of states and political sub- divisions 11,338 144 178 11,304 Mortgage-backed securities 3,659 28 35 3,652 Corporate and other debt securities 25,178 592 381 25,389 -------- -------- -------- -------- Total held to maturity $ 44,472 $ 918 $ 629 $ 44,761 ======== ======== ======== ========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES (unaudited) NOTE E--ACCOUNTING CHANGES--Continued. . .
Available-For-Sale -------------------------------------------- Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value -------- -------- -------- -------- Obligations of states and political sub- divisions $ 10,287 $ 29 $ 279 $ 10,037 Corporate and other debt securities 19,253 1,023 499 19,777 -------- -------- -------- -------- Total debt securities 29,540 1,052 778 29,814 Equity securities 15,773 371 1,296 14,848 -------- -------- -------- -------- Total available for sale $ 45,313 $ 1,423 $ 2,074 $ 44,662 ======== ======== ======== ========
The amortized cost and estimated market value of debt and marketable equity securities at March 31, 1994, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Held-To-Maturity -------------------------- Estimated Fair Cost Value -------- --------- Due in one year or less $ 5,448 $ 5,508 Due after one year through five years 24,904 25,178 Due after five years through ten years 8,032 8,062 Due after ten years 2,429 2,360 -------- -------- 40,813 41,108 Mortgage-backed securities 3,659 3,653 -------- -------- $ 44,472 $ 44,761 ======== ========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES (unaudited) NOTE E--ACCOUNTING CHANGES--Continued. . .
Available-For-Sale -------------------------- Estimated Fair Cost Value -------- --------- Due in one year or less $ 550 $ 577 Due after one year through five years 645 673 Due after five years through ten years 15,381 15,432 Due after ten years 12,964 13,132 -------- -------- 29,540 29,814 Equity securities 15,773 14,848 -------- -------- $ 45,313 $ 44,662 ======== ========
Effective January 1, 1994, the Company adopted the provisions of SFAS No. 112, "Employers' Accounting for Postemployment Benefits." The adoption of this SFAS did not affect net income. In accordance with this Statement, prior period financial statements have not been restated to reflect the change in accounting method. Effective January 1, 1993, the Company adopted the provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The Company recorded a charge of $29.7 million (net of taxes of $16.5 million), or $3.29 per share, during the quarter ended March 31, 1993 to reflect the cumulative effect of this change in accounting principle. Effective January 1, 1993, the Company adopted the provisions of SFAS No. 109, "Accounting for Income Taxes." The Company recorded a charge of $16.9 million, or $1.87 per share, during the quarter ended March 31, 1993, to reflect the cumulative effect of this change in accounting principle. During the quarter ended March 31, 1993, the Company adopted the provisions of SFAS No. 113, "Accounting and Reporting for Reinsurance of Short Duration and Long Duration Contracts". Because of the type of insurance contracts the Company's Insurance Subsidiary provides, the adoption of this statement had no impact on earnings; however, it requires the disaggrega tion of various balance sheet accounts. NOTE F--CONTINGENCIES On February 8, 1989, the Boeing Company ("Boeing") filed a lawsuit naming the Company, together with three prior subsidiaries of the Company, as defendants in Case No. CV89-119MA, United States District Court for the District of Oregon. In that lawsuit, Boeing sought damages and declaratory relief for past and future costs resulting from alleged groundwater contamination at a location in Gresham, Oregon, where the three prior subsidiaries of the Company formerly conducted business operations. On December 22, 1993, the Company entered into a settlement with Boeing, settling all claims asserted by Boeing in the lawsuit. Pursuant to the settlement terms, the Company will pay Boeing $12.5 million over the course of five years, $5 million of which has been committed by certain insurance NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES (unaudited) NOTE F--CONTINGENCIES--Continued. . . companies in the form of cash or irrevocable letters of credit. In accordance with the settlement agreement, Boeing's claims against the Company and the three former subsidiaries have been dismissed with prejudice and Boeing has released and indemnified the Company with respect to certain claims. On March 4, 1992, Checker received notice that the Insurance Commissioner of the State of California, as Conservator and Rehabilitator of Executive Life Insurance Company of California ("ELIC"), a limited partner of the Partnership, had filed an Amendment to the Application for Order of Conservation filed in Superior Court of the State of California for the County of Los Angeles (the "Court"). The amendment seeks to add to the Order, dated April 11, 1991, Checker, the Partnership and Checker Holding Corp. III ("Holding III"), a limited partner of the Partnership. The amendment alleges that the action by Checker invoking provisions of the Partnership Agreement that alter ELIC's rights in the Partnership upon the occurrence of certain events is improper and constitutes an impermissible forfeiture of ELIC's interest in the Partnership and a breach of fiduciary duty to ELIC. The amendment seeks (a) a declaration of the rights of the parties in the Partnership and (b) damages in an unspecified amount. The Partnership believes that it has meritorious defenses to the claims of ELIC. On April 15, 1994, the Company and the Conservator entered into a letter agreement pursuant to which the Company agreed to purchase ELIC's interest in the Partnership for $37 million, subject to completion of the refinancing described under the caption, "Item 2--Management's Discussion and Analysis of Financial Condition and Results of Operations." The letter agreement has been submitted to the Court for approval. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES GENERAL From the time that present management assumed control of the Company in January 1989, it has been continually reassessing the Company's financial condition and prospects. During March 1990, Great Dane obtained a loan commitment of $80 million. A substantial portion of the loan proceeds was utilized to repurchase, in the open market, a portion of the Company's outstanding 12-3/4% Senior Debentures due 2001 (the "12-3/4% Debentures") and Subordinated Discount Debentures due January 1, 2006 (the 14-1/2% Debentures"). During September 1992, the Partnership entered into a Loan and Security agreement with a bank pursuant to which the bank provided a $30 million term loan. Approximately $18 million of the proceeds from the loan was used to repay certain indebtedness of a subsidiary of Checker, which debt had been guaranteed by the Partnership, and to pay certain costs associated with the financing and repayments. The Company was hampered in its efforts to achieve a refinancing of its debt in recent years, in part because of the Boeing litigation. That lawsuit has now been settled. The Company has also been engaged in litigation with the Conservator of ELIC, a limited partner in the Partnership, seeking, among other things, a declaratory judgment regarding ELIC's rights in the Partnership. With the settlement of the Boeing litigation and negotiations in progress to settle the ELIC litigation, the ability of the Company to achieve a successful refinancing has been enhanced. Accordingly, in February 1994, the Company filed a Registration Statement on Form S-1 with the Securities and Exchange Commission in connection with an overall refinancing of the Company's outstanding indebtedness. The proposed refinancing, as described in the registration statement, involves the Company entering into a credit facility consisting of a $50 million (adjusted from $60 million) term loan and a revolving credit facility which would provide up to $115 million, subject to the Company's ability to meet certain financial tests (the term loan and the revolving credit facility being known as the "New Credit Facility"). Additionally, the Company is proposing to offer $265 million (adjusted from $225 million) of new Senior Secured Notes (the "Senior Notes"). If the refinancing is successfully completed, the proceeds from the New Credit Facility would be utilized to redeem substantially all of the currently outstanding indebtedness of the Company's subsidiaries and the proceeds from the offering of the Senior Notes would be used to redeem parent company indebtedness and to redeem the Minority Interest held by ELIC in the Partnership, in each case together with any accrued interest and transaction fees and expenses. A successful completion of the refinancing, the terms of which are still subject to change, is expected to help the Company achieve increased liquidity from reduced principal debt amortization requirements, the removal of certain restrictions on the use of cash from the Company's subsidiaries and more flexible and efficient cash management at the holding company level. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Available cash and cash equivalents, cash flow generated from operations and proceeds from disposal of assets have provided sufficient liquidity and capital resources for the Company to conduct its operations. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES The Company's Great Dane Subsidiary's debt agreement with certain banks matures in March 1995. Accordingly, this debt is classified as a current liability at March 31, 1994. Refinancing is anticipated to be accomplished prior to maturity and, accordingly, it is not anticipated that working capital will be adversely affected. During the quarter ended March 31, 1994, the Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." While the adoption of this SFAS has a significant effect on the Company's financial position, it does not adversely affect liquidity and capital resources. The Company is a holding company and is, therefore, dependent on cash flow from its subsidiaries in order to meet its obligations. Purchases of property, plant and equipment have averaged approximately $18.0 million per year over the past three years and have been funded principally by cash flow generated from operations as well as proceeds from disposal of assets. Purchases of property, plant and equipment for 1994 are anticipated to be approximately $26.0 million and are expected to be funded principally by cash flow generated from operations. During the fourth quarter of 1993, the Company entered into a settlement of the Boeing litigation. It is anticipated that the settlement ($12.5 million over five years) will be paid by the Company through recoveries from insurance carriers, the sale of assets of certain of the subsidiaries, cash currently on hand and cash flow generated from operations. General Motors Corporation ("GM"), a major customer of the Company's automotive products segment, is resorting to many measures, including obtaining significant price reductions from its suppliers, in an effort to reduce its operating costs. Management of the Company's automotive products segment is currently engaged in discussions with GM concerning future pricing of parts presently being manufactured. Automotive products segment management believes that it has adequately provided in its near-term financial plans for any price reductions which may result from its current discussions with GM. However, price reductions in excess of those anticipated could have a material adverse effect on the automotive products operations. RESULTS OF OPERATIONS Three Months Ended March 31, 1994, Compared to Three Months Ended March 31, 1993 ------------------------------------------------- Revenues increased $66.7 million during the three months ended March 31, 1994, as compared to the same period of 1993. The higher revenues are principally attributed to higher Trailer Manufacturing revenues ($61.4 million), primarily associated with a higher volume of sales of containers and chassis and trailers. Automotive Products revenues increased $3.6 million during the three months ended March 31, 1994, as compared to the same period in 1993. General increases in volume to accommodate automotive customers' demands were the principal reason for the revenue increases. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES The Company's operating profit (gross profit less selling, general and administrative expenses) increased $10.1 million in the 1994 period compared to the 1993 period. This increase is attributed to an increase of Trailer Manufacturing operating profits ($9.2 million) which is principally due to higher sales and improved margins and an increase of Automotive Products operating profits ($0.9 million) principally due to higher sales. Income tax expense is higher for financial statement purposes than would be computed if the statutory rate were used because of state income taxes and the impact of the reporting of certain income and expense items in the financial statements which are not taxable or deductible for income tax purposes. PART II OTHER INFORMATION INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES Item 1: Legal Proceedings The following events have occurred in connection with the Executive Life Litigation, reported under the caption, "Item 3. Legal Proceedings," in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993: On April 15, 1994, the Company and the Conservator entered into a letter agreement pursuant to which the Company agreed to purchase ELIC's interest in the Partnership for $37 million, subject to completion of the refinancing described under the caption, "Item 2--Management's Discussion and Analysis of Financial Condition and Results of Operations." The letter agreement has been submitted to the Court for approval. Item 6: Exhibits and Reports on Form 8-K (a) Exhibits -------- 10.1 Eleventh Amendment, dated as of March 11, 1994, to the Loan and Security Agreement dated as of March 21, 1990, by and among Great Dane Trailers, Inc., Great Dane Trailers Los Angeles, Inc., Great Dane Trailers Nebraska, Inc., and Great Dane Trailers Tennessee, Inc., and certain lending institu- tions and Security Pacific Business Credit Inc., as Agent. (b) Reports on Form 8-K ------------------- None INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES SIGNATURE 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. INTERNATIONAL CONTROLS CORP. ---------------------------------------- (Registrant) /s/ Marlan R. Smith ---------------------------------------- Marlan R. Smith Treasurer (Principal Financial Officer and Principal Accounting Officer) Date: May 2, 1994 EX-10.1 2 AMENDMENT-11 EXHIBIT 10.1 ELEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT This ELEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of March 11, 1994 (this "Amendment"), amends in certain respects, the Loan and Security Agreement (the "Loan Agreement") dated as of March 21, 1990, among Great Dane Trailers, Inc., Great Dane Trailers Los Angeles, Inc., Great Dane Trailers Nebraska, Inc., and Great Dane Trailers Tennessee, Inc., as Borrowers (the "Borrowers"), the lenders from time to time party thereto (the "Lenders") and Security Pacific Business Credit Inc., as Agent (the "Agent"), as heretofore amended, modified or supplemented. W I T N E S S E T H : - - - - - - - - - - WHEREAS, the Borrowers have requested that the Lenders agree to modify in certain respects the limit on Intercompany Loans set forth in Section 10.15A(g)(i)(C) of the Loan Agreement in order, among other things, to increase the aggregate amount of Intercompany Loans allowed in Fiscal Year 1993. WHEREAS, the Lenders are willing to agree to such modification on the terms and conditions herein set forth. NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this Amendment, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the Borrowers, the Agent and the Majority Lenders hereby agrees as follows. SECTION 1. DEFINED TERMS. Terms defined in the Loan Agreement and not otherwise defined herein shall have the meanings set forth in the Loan Agreement. SECTION 2. AMENDMENTS TO LOAN AGREEMENT. Effective as of the date hereof, the Loan Agreement shall be amended as follows: 2.1 SECTION 10.15A(g)(i)(C). Section 10.15A(g)(i)(C) of the Loan Agreement is hereby deleted in its entirety, and the following is substituted therefor: "(C) the aggregate amount of (1) all Intercompany Loans made during Fiscal year 1993 prior to the Loan Date, and (2) any Intercompany Loans made on the Loan Date is less than or equal to the following cumulative amounts on or after the following dates:
Aggregate Amount of Intercompany Loans in Fiscal Year 1993 Dates in 1993 --------------------- --------------- $ 1,000,000 January 1 $ 2,000,000 February 1 $ 4,000,000 March 1 $ 5,000,000 May 1
$ 6,000,000 June 1 $ 7,000,000 July 1 $ 8,000,000 August 1 $ 9,000,000 September 1 $10,000,000 October 1 $11,000,000 November 1 $17,000,000 December 1
For purposes of this subsection (g), Intercompany Loans made in one Fiscal Year but accounted for by Borrowers in the prior Fiscal Year shall be deemed to have been made in the prior Fiscal Year." SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall be effective as of the date first above written when the Agent shall have received the following: (a) counterparts of this Amendment executed by the Borrowers and the Majority Lenders; (b) such certificates, representations, instruments and other documents as the Agent and the Majority Lenders may require, in form and substance satisfactory to the Agent. SECTION 4. REPRESENTATIONS AND WARRANTIES. The Borrowers hereby each represent and warrant to the Lenders and the Agent that (i) the execution, delivery and performance of this Amendment by each of the Borrowers are within their respective corporate powers and have been duly authorized by all necessary corporate action, (ii) no consent, approval, authorization of, or declaration or filing with, any Public Authority, and no consent of any other Person, is required in connection with the execution, delivery and performance of this Amendment, except for those already duly obtained, (iii) this Amendment has been duly executed by each of the Borrowers and constitutes the legal, valid and binding obligation of each of the Borrowers, enforceable against them in accordance with its terms and (iv) the execution, delivery and performance by each of the Borrowers of this Amendment does not and will not conflict with, or constitute a violation or breach of, or constitute a default under, or result in the creation or imposition of any Lien upon the property of any Borrower or any of its Subsidiaries by reason of the terms of (a) any contract, mortgage, Lien, lease, agreement, indenture, or instrument to which such Borrower or such Subsidiary is a party or which is binding upon it, (b) any Requirement of Law applicable to such Borrower or such Subsidiary, of (c) the Certificate or Articles of Incorporation or By-Laws of such Borrower or such Subsidiary. SECTION 5. REFERENCE TO AND EFFECT ON LOAN DOCUMENTS. 5.1 On and after the date hereof, each reference in the Loan Agreement to "this Agreement," "hereunder," "hereof," "herein," or words of like import, and each reference in the other Loan Documents to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended hereby. 5.2 Except as specifically amended above, all of the terms of the Loan Agreement shall remain unchanged and in full force and effect. 5.3 The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of any Lender or the Agent under the Loan Agreement or any of the other Loan Documents, nor constitute a waiver of any provision of the Loan Agreement or any of the other Loan Documents. SECTION 6. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. SECTION 7. GOVERNING LAW. This Amendment shall be governed by, and shall be construed and enforced in accordance with, the laws of the State of New York. SECTION 8. HEADINGS. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment or be given any substantive effect. IN WITNESS WHEREOF, this Amendment has been duly executed as of the date first above written. GREAT DANE TRAILERS, INC. By: /s/ T. W. Horan ------------------------------------------------ Title: Senior Vice President, Finance --------------------------------------------- GREAT DANE TRAILERS LOS ANGELES, INC. By: /s/ T. W. Horan ------------------------------------------------ Title: Senior Vice President, Finance --------------------------------------------- GREAT DANE TRAILERS NEBRASKA, INC. By: /s/ T. W. Horan ------------------------------------------------ Title: Senior Vice President, Finance --------------------------------------------- GREAT DANE TRAILERS TENNESSEE, INC. By: /s/ T. W. Horan ------------------------------------------------ Title: Senior Vice President, Finance --------------------------------------------- SECURITY PACIFIC BUSINESS CREDIT INC., as Lender and Agent By: /s/ Ira A. Mermelstein ------------------------------------------------ Title: Vice President --------------------------------------------- NATIONSBANK OF GEORGIA, N.A. By: /s/ Robert B. H. Moore ------------------------------------------------ Title: Senior Vice President --------------------------------------------- SANWA BUSINESS CREDIT CORPORATION By: /s/ Peter L. Skavla ------------------------------------------------ Title: Vice President --------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----