-----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, Ngh8EcT+EXSfICUXoHHfS/hU2MUn+Q0p3iVAxMyw2HD3oNNvyz4SfVC3omwJmut3 Jgh9qQb+Q7fBvuBpt7h9tA== /in/edgar/work/0000062418-00-000009/0000062418-00-000009.txt : 20000717 0000062418-00-000009.hdr.sgml : 20000717 ACCESSION NUMBER: 0000062418-00-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000531 FILED AS OF DATE: 20000714 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARK IV INDUSTRIES INC CENTRAL INDEX KEY: 0000062418 STANDARD INDUSTRIAL CLASSIFICATION: [3050 ] IRS NUMBER: 231733979 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08862 FILM NUMBER: 673394 BUSINESS ADDRESS: STREET 1: 501 JOHN JAMES AUDUBON PKWY STREET 2: P O BOX 810 CITY: AMHERST STATE: NY ZIP: 14266-0810 BUSINESS PHONE: 7166894972 MAIL ADDRESS: STREET 1: 501 JOHN JAMES AUDUBON PARKWAY STREET 2: P O BOX 810 CITY: AMHERST STATE: NY ZIP: 14266-0810 FORMER COMPANY: FORMER CONFORMED NAME: MARK FOUR HOMES INC DATE OF NAME CHANGE: 19770921 10-Q 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended May 31, 2000. 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 1-8862 - ---------------------------------------------------------------------------- MARK IV INDUSTRIES, INC. - ---------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 23-1733979 - ---------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 501 John James Audubon Parkway, P.O. Box 810, Amherst, New York 14226-0810 - ---------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (716) 689-4972 - ---------------------------------------------------------------------------- (Registrant's telephone number, including area code) 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 --- Number of shares outstanding of each class of the Registrant's common stock, as of the latest practicable date: Class Outstanding at July 12, 2000 ----- ---------------------------- Common stock $.01 par value 44,361,240 2 MARK IV INDUSTRIES, INC. INDEX Part I. Financial Information Page No. - ------------------------------ -------- Consolidated Condensed Balance Sheets as of May 31, 2000 and February 29, 2000 3 Consolidated Statements of Income For the Three Month Periods Ended May 31, 2000 and 1999 4 Consolidated Statements of Cash Flows For the Three Month Periods Ended May 31, 2000 and 1999 5 Consolidated Statements of Comprehensive Income and Retained Earnings For the Three Month Periods Ended May 31, 2000 and 1999 6 Notes to Consolidated Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Part II. Other Information 17 - --------------------------- Signature Page 18 Exhibit Index 19 3 MARK IV INDUSTRIES, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in thousands) May 31, February 29, 2000 2000 ----------- ----------- ASSETS (Unaudited) Current Assets: Cash and short-term investments $ 2,200 $ 2,100 Accounts receivable 469,700 413,700 Inventories 341,400 346,800 Other current assets 141,600 138,700 ---------- ---------- Total current assets 954,900 901,300 Pension and other non-current assets 206,600 203,000 Property, plant and equipment, net 595,800 605,200 Cost in excess of net assets acquired 327,900 333,600 ---------- ---------- TOTAL ASSETS $2,085,200 $2,043,100 ========== ========== LIABILITIES & STOCKHOLDERS' EQUITY Current Liabilities: Notes payable and current maturities $ 91,200 $ 59,400 Accounts payable 271,000 266,000 Compensation related liabilities 71,400 76,500 Accrued interest 10,600 20,000 Other current liabilities 85,800 86,300 ---------- ---------- Total current liabilities 530,000 508,200 ---------- ---------- Long-Term Debt: Senior debt 157,500 153,300 Subordinated debentures 643,200 643,200 ---------- ---------- Total long-term debt 800,700 796,500 ---------- ---------- Other non-current liabilities 267,900 261,200 ---------- ---------- Stockholders' Equity: Preferred stock - - Common stock 400 400 Additional paid-in capital 277,200 276,500 Retained earnings 305,100 281,700 Foreign currency translation adjustment (96,100) (81,400) ---------- ---------- Total stockholders' equity 486,600 477,200 ---------- ---------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $2,085,200 $2,043,100 ========== ========== The accompanying notes are an integral part of these financial statements. 4 MARK IV INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Three Month Periods Ended May 31, 2000 and 1999 (Amounts in thousands, except per share data) 2000 1999 ---- ---- (As Restated) Net sales from continuing operations $555,300 $521,800 -------- -------- Operating costs: Cost of products sold 381,800 357,500 Selling and administration 78,600 74,500 Research and development 15,200 14,700 Depreciation and amortization 23,700 22,200 -------- -------- Total operating costs 499,300 468,900 -------- -------- Operating income 56,000 52,900 Interest expense 14,600 13,200 -------- -------- Income from continuing operations, before provision for taxes 41,400 39,700 Provision for income taxes 15,300 14,300 -------- -------- Income from continuing operations 26,100 25,400 Income from discontinued operations, net of taxes - 900 -------- -------- Net income $ 26,100 $ 26,300 ======== ======== Net income per share of common stock: Basic: Income from continuing operations $ .59 $ .50 Income from discontinued operations - .02 -------- -------- Net income $ .59 $ .52 ======== ======== Diluted: Income from continuing operations $ .53 $ .46 Income from discontinued operations - .02 -------- -------- Net income $ .53 $ .48 ======== ======== Weighted average number of shares outstanding: Basic 44,300 51,000 ======== ======== Diluted 53,200 59,500 ======== ======== The accompanying notes are an integral part of these financial statements. 5 MARK IV INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Month Periods Ended May 31, 2000 and 1999 (Dollars in thousands) 2000 1999 ---- ---- (As Restated) Cash flows from operating activities: Income from continuing operations $ 26,100 $ 25,400 Items not affecting cash: Depreciation and amortization 23,700 22,100 Pension and compensation related items, net (7,600) (3,100) Deferred income taxes 6,800 5,500 Changes in assets and liabilities, net of effects of acquired and divested businesses: Accounts receivable (63,700) (44,600) Inventories 200 (1,500) Other assets (4,700) 5,600 Accounts payable and other liabilities (1,600) (1,700) -------- -------- Net cash (used in) provided by continuing operating activities (20,800) 7,700 Net cash used in discontinued operations - (1,300) Extraordinary loss before deferred charges - 400 Net cash (used in) provided by operating activities (20,800) 6,800 -------- -------- Cash flows from investing activities: Acquisitions (2,100) (42,000) Divestitures and asset sales - 36,600 Purchase of plant and equipment, net (17,000) (16,200) -------- -------- Net cash used in investing activities (19,100) (21,600) -------- -------- Cash flows from financing activities: Credit agreement borrowings, net 30,000 - Retirement of subordinated debt - (25,600) Other changes in long-term debt, net (4,100) (20,000) Changes in short-term bank borrowings 16,100 28,000 Repurchase of common stock and options exercised, net 700 (68,000) Cash dividends paid (2,700) (2,900) -------- -------- Net cash provided by (used in) financing activities 40,000 (88,500) -------- -------- Net increase (decrease) in cash and short-term investments 100 (103,300) Cash and short-term investments: Beginning of the period 2,100 125,700 -------- -------- End of the period $ 2,200 $ 22,400 ======== ======== The accompanying notes are an integral part of these financial statements. 6 MARK IV INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND RETAINED EARNINGS For the Three Month Periods Ended May 31, 2000 and 1999 (Dollars in thousands) (Unaudited) Comprehensive Income 2000 1999 ---- ---- Net income $ 26,100 $ 26,300 Balance sheet effect of foreign currency translation adjustments (14,700) (8,300) -------- -------- Comprehensive net income $ 11,400 $ 18,000 ======== ======== Retained Earnings Retained earnings at the beginning of the period $281,700 $203,300 Net income 26,100 26,300 Cash dividends of $.0625 and $.055 per share (2,700) (2,700) -------- -------- Retained earnings at the end of the period $305,100 $226,900 ======== ======== The accompanying notes are an integral part of these financial statements. 7 MARK IV INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Financial Statements The unaudited consolidated financial statements include the accounts of the Company and all of its subsidiaries. All significant intercompany transactions have been eliminated. The unaudited consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of such financial statements, and the reported amounts of revenues and expenses during the reporting periods. It should be recognized that the actual results could differ from those estimates. In the opinion of the Company's management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company at May 31, 2000, and the results of its operations and its cash flows for the three month periods ended May 31, 2000 and 1999. Such results are not necessarily indicative of the results to be expected for the full year. Certain reclassifications of the May 31, 1999 financial statements have been made to reflect the Company's discontinued operations which were divested in September of fiscal 2000. 2. Cash Flow For purposes of cash flows, the Company considers overnight investments as cash equivalents. The Company made cash interest payments of approximately $24.1 million and $28.9 million in the three month periods ended May 31, 2000 and 1999, respectively. The Company also made cash income tax payments of approximately $6.9 million and $5.7 million in the three month periods ended May 31, 2000 and 1999, respectively. 3. Merger On May 26, 2000, the Company executed a definitive merger agreement with MIV Acquisition Corporation, an entity controlled by funds advised by BC Partners, a leading European private equity firm, providing for the acquisition of Mark IV at a price of $23.00 per share in cash. The transaction is structured as a cash merger and includes the assumption and/or refinancing the Company's debt. The transaction has been approved by Mark IV's Board of Directors and is conditioned on the approval of the holders of a majority of the outstanding shares of Mark IV. Certain Executive Officers and Directors of the Company have agreed 8 MARK IV INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) with MIV Acquisition Corporation to vote the aggregate 7,173,863 shares of the Company's Common Stock (approximately 16.2% of the outstanding shares) owned by them in favor of the merger. The merger is also conditioned on the receipt of funding under committed financing, the absence of material adverse changes, government regulatory approvals and other customary conditions. The funding for the merger is based upon a debt financing commitment for the acquisition subsidiary from a bank syndicate led by the Chase Manhattan Bank to provide, in the aggregate, approximately $1.2 billion to finance a portion of the acquisition. The balance of the acquisition financing will be provided by equity and other financing from BC Partners and Interbanca S.p.A. under commitments which are subject to funding of the debt financing and other customary conditions. The transaction closing is currently anticipated to occur in the third quarter of the Company's current fiscal year. Under the terms of the Indentures governing Mark IV's 7-3/4% Senior Subordinated Notes due 2006 and its 4-3/4% Convertible Subordinated Notes due 2004, the Company is required to offer to purchase such Notes following the consummation of the Merger at prices set forth in the respective Indentures. MIV Acquisition Corporation has advised that it is currently intended that the Company's 7-1/2% Senior Subordinated Notes due 2007 will remain outstanding following the merger. 4. Accounts Receivable and Inventories Accounts receivable are presented net of allowances for doubtful accounts of $10.7 million and $11.0 million at May 31, 2000 and February 29, 2000, respectively. Inventories consist of the following components (dollars in thousands): May 31, February 29, 2000 2000 ------- ------------ Raw materials $ 104,700 $ 103,000 Work-in-process 61,700 60,900 Finished goods 175,000 182,900 --------- --------- Total $ 341,400 $ 346,800 ========= ========= Since physical inventories taken during the year do not necessarily coincide with the end of a quarter, management has estimated the composition of inventories with respect to raw materials, work-in- process and finished goods. It is management's opinion that this estimate represents a reasonable approximation of the inventory breakdown as of May 31, 2000. The amounts at February 29, 2000 are based upon the audited balance sheet at that date. 9 MARK IV INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 5. Property, Plant and Equipment Property, plant and equipment are stated at cost and consist of the following components (dollars in thousands): May 31, February 29, 2000 2000 ------- ----------- Land and land improvements $ 20,600 $ 20,800 Buildings 190,100 192,400 Machinery and equipment 679,300 670,000 -------- -------- Total property, plant and equipment 890,000 883,200 Less accumulated depreciation (294,200) (278,000) -------- -------- Property, plant and equipment, net $595,800 $605,200 ======== ======== 6. Long-term debt Long-term debt consists of the following (dollars in thousands): May 31, February 29, 2000 2000 ------ ----------- Senior Debt: Credit Agreement $ 60,000 $ 30,000 Italian based debt 114,400 122,900 Other borrowing arrangements 8,500 8,600 ---------- ---------- Total 182,900 161,500 Less current maturities (25,400) (8,200) ---------- ---------- Net senior debt 157,500 153,300 ---------- ---------- Subordinated Debt: 7-3/4% Senior Subordinated Notes 119,200 119,200 7-1/2% Senior Subordinated Notes 249,000 249,000 4-3/4% Convertible Subordinated Notes 275,000 275,000 ---------- ---------- Total subordinated debt 643,200 643,200 ---------- ---------- Total long-term debt 800,700 796,500 Total stockholders' equity 486,600 477,200 ---------- ---------- Total capitalization $1,287,300 $1,273,700 ========== ========== Long-term debt as a percentage of total capitalization 62.2% 62.5% ========== ========== During the quarter ended May 31, 1999, the Company repurchased approximately $25.6 million principal amount of its 7-3/4% Senior Subordinated Notes. The gain resulting from the repurchase of the Notes below their par value was offset by write-offs of deferred charges and discounts related to the issuance of the Notes. Subsequent to May 31, 1999, the Company acquired an additional $104.8 million principal amount of such Notes. There were no Senior Subordinated Notes repurchased during the quarter ended May 31, 2000. 10 MARK IV INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 7. Common Stock Repurchase Approximately 4.3 million shares of the Company's common stock were repurchased and retired in the three-month period ended May 31, 1999, at an average cost of $15.74 per share, or a total cost of approximately $68.0 million, with an additional 4.9 million shares acquired in the balance of fiscal 2000 at an average cost of $19.67 per share, or a total of approximately $96.4 million. The Company did not repurchase any of its common stock during the quarter ended May 31, 2000, and under the terms of the Merger Agreement, it has agreed not to repurchase any additional shares of its common stock. 8. Net Income Per Share Following is a reconciliation of net income and weighted average common shares outstanding for purposes of computing basic and diluted net income per share (amounts in thousands, except per share data): May 31, May 31, 2000 1999 ------- ------- Basic Net Income Per Share: Net income $26,100 $26,300 ======= ======= Weighted average number of common shares outstanding 44,300 51,000 ======= ======= Basic net income per share $ .59 $ .52 ======= ======= Diluted Net Income Per Share: Net income $26,100 $26,300 After-tax equivalent of interest expense on 4-3/4% Convertible Subordinated Notes 2,000 2,000 ------- ------- Income for purposes of computing diluted net income per share $28,100 $28,300 ======= ======= Weighted average common shares outstanding 44,300 51,000 Dilutive stock options 500 100 Weighted average assumed conversion of 4-3/4% Convertible Subordinated Notes 8,400 8,400 ------- ------- Diluted weighted average number of common shares outstanding 53,200 59,500 ======= ======= Diluted net income per share $ .53 $ .48 ======= ======= 11 MARK IV INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 9. Business Segment Information Information concerning the Company's business segments for the three month periods ended May 31, 2000 and 1999 is as follows (dollars in thousands): 2000 1999 ---- ---- NET SALES TO CUSTOMERS Automotive $ 336,800 $ 306,800 Industrial 218,500 215,000 ---------- ---------- Total related to continuing operations $ 555,300 $ 521,800 ========== ========== OPERATING INCOME Automotive $ 34,400 $ 31,300 Industrial 26,700 25,500 ---------- ---------- Management's measure of the segments' operating performance 61,100 56,800 General corporate expense (5,100) (3,900) Interest expense (14,600) (13,200) Provision for income taxes (15,300) (14,300) ---------- ---------- Income from continuing operations $ 26,100 $ 25,400 ========== ========== May 31, February 29, 2000 2000 ------ ----------- IDENTIFIABLE ASSETS Automotive $1,198,600 $1,173,700 Industrial 842,400 844,700 ---------- ---------- Total identifiable assets of the of the segments 2,041,000 2,018,400 General corporate assets 44,200 24,700 ---------- ---------- Total consolidated $2,085,200 $2,043,100 ========== ========== 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources The Company's working capital increased by $31.8 million (8%) during the three month period ended May 31, 2000. Excluding cash and current financial indebtedness, the Company's working capital investment was $513.9 million at May 31, 2000, a net increase of $63.5 million (14%) in comparison to $450.4 million at February 29, 2000. The increase is primarily attributable to the Company's seasonal build of accounts receivable which occurs annually in the Automotive segment's powertrain and aftermarket businesses and the Industrial segment's garden hose business. To a lesser extent, accounts receivable increases are also attributable to increased sales volume and new product launches. The seasonal increase tends to be substantially liquidated during the Company's second fiscal quarter ending August 31, 2000. Capital expenditures for the three month period ended May 31, 2000 were approximately $17.0 million, which was $6.7 million lower than depreciation and amortization expense of $23.7 million in the same period, and reflects a consistent level of expenditures in comparison to the three month period ended May 31, 1999. Management anticipates that the Company's capital expenditure requirements will continue to be less than its depreciation and amortization expense for the remainder of fiscal 2001. The Company's total long-term debt of $800.7 million at May 31, 2000 was comparable to the annual outstanding at February 29, 2000. Its current maturities and notes payable totaled $91.2 million at May 31, 2000, reflecting an increase of $31.8 million from the amount outstanding at February 29, 2000. This increase was primarily the result of the seasonal increase in accounts receivable referred to above, net of the benefits of positive operating cash flow in excess of capital expenditures during the period. Management believes cash generated from operations, as temporarily supplemented by existing credit availability, should be sufficient to support the Company's working capital requirements and anticipated capital expenditure needs for the foreseeable future. On May 26, 2000, the Company executed a definitive merger agreement with MIV Acquisition Corporation, an entity controlled by funds advised by BC Partners, a leading European private equity firm, providing for the acquisition of Mark IV at a price of $23.00 per share in cash. The transaction is structured as a cash merger and includes the assumption and/or refinancing the Company's debt. The transaction has been approved by Mark IV's Board of Directors and is conditioned on the approval of the holders of a majority of the outstanding shares of Mark IV. Certain Executive Officers and Directors of the Company have agreed with MIV Acquisition Corporation to vote the aggregate 7,173,863 shares of the Company's Common Stock (approximately 16.2% of the outstanding shares) owned by them in favor of the merger. The merger is also conditioned on the receipt of funding 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS under committed financing, the absence of material adverse changes, government regulatory approvals and other customary conditions. The funding for the merger is based upon a debt financing commitment for the acquisition subsidiary from a bank syndicate led by the Chase Manhattan Bank to provide, in the aggregate, approximately $1.2 billion to finance a portion of the acquisition. The balance of the acquisition financing will be provided by equity and other financing from BC Partners and Interbanca S.p.A. under commitments which are subject to funding of the debt financing and other customary conditions. The transaction closing is currently anticipated to occur in the third quarter of the Company's current fiscal year. Under the terms of the Indentures governing Mark IV's 7-3/4% Senior Subordinated Notes due 2006 and its 4-3/4% Convertible Subordinated Notes due 2004, the Company is required to offer to purchase such Notes following the consummation of the Merger at prices set forth in the respective Indentures. MIV Acquisition Corporation has advised that it is currently intended that the Company's 7-1/2% Senior Subordinated Notes due 2007 will remain outstanding following the merger. Results of Operations The Company classifies its operations in two business segments: Automotive and Industrial. The Company's current business strategy is focused upon the enhancement of its business segments through internal growth, cost control and quality improvement programs and selective, strategic acquisitions with an emphasis on expanding each segment's international presence. The results of operations of Lombardini, an Italian manufacturer of small diesel engines acquired in fiscal 2000, are included in the actual results of operations for the entire three month period ended May 31, 2000 versus only two months in the comparable period last year. Net sales from continuing operations for the three month period ended May 31, 2000 increased by $33.5 million (6.4%) over the comparable period last year. On a pro forma basis (adjusting for acquisitions made in fiscal 2000 and eliminating the effects of discontinued operations and currency exchange effects), net sales increased approximately $38.6 million (7%) from internal growth over the comparable period last year. In the Company's Automotive segment, net sales increased $30.0 million (10%) for the three month period ended May 31, 2000 over the comparable period last year. On a pro forma basis, internal growth in the Company's Automotive segment amounted to $28.2 million (9%) over the comparable period last year. The internal growth in the Automotive segment was generated by both the domestic and international Automotive OEM sectors, with internal growth in the international OEM sector up 15% and the domestic OEM sector up 4% for the three month period ended May 31, 2000 as compared to the prior year period. 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In the Company's Industrial segment, net sales increased $3.5 million (2%) for the three month period ended May 31, 2000 in comparison to the prior year. On a pro forma basis, net sales increased $10.4 million (5%) for the three month period ended May 31, 2000 in comparison to the prior year. This increase was primarily attributable to the Industrial distribution and specialty products sectors, reflecting solid conditions in the U.S. economy. The industrial sector's agricultural and petrochemical markets, which suffered deep cutbacks in fiscal 2000, showed a slight recovery during the quarter ended May 31, 2000. The Industrial segment also experienced a decrease in its transportation sector due to delivery dates being pushed out on several of its contracts. The cost of products sold as a percentage of consolidated net sales was approximately 69% in both the current period and the comparable prior year period. Increased pension income resulting from higher income from the Company's over-funded pension plans in fiscal 2001 substantially offset the effects of pricing pressures and continued start-up costs related to the new air-intake manifold production in North America. Selling and administration costs as a percentage of consolidated net sales were approximately 14% for the three month periods ended May 31, 2000 and 1999. Research and development costs increased by $.5 million (3%) for the three month period ended May 31, 2000 as compared to the three month period ended May 31, 1999. As a percentage of consolidated net sales, these expenses were 2.7% for each of the three month periods ended May 31, 2000 and 1999. This level of spending relates to the Company's continued emphasis on new product and systems initiatives. Depreciation and amortization expense increased by $1.5 million (7%) for the three month period ended May 31, 2000 as compared to the three month period ended May 31, 1999. The increase is primarily attributable to the inclusion of the results of operations of Lombardini for the entire three month period ended May 31, 2000, as compared to two months for the comparable period last year. Interest expense for the three month period ended May 31, 2000 increased $1.4 million (11%) from the level incurred in the three month period ended May 31, 1999. The increase is primarily due to debt assumed in the acquisition of Lombardini, and increased indebtedness to fund the Company's stock repurchase program during fiscal 2000. The effective tax rate as a percentage of pre-tax accounting income was approximately 37% for the three month period ended May 31, 2000 as compared to 36% for the three month period ended May 31, 1999. The increase in the effective tax rate is a result of an increased mix of foreign income in countries that have higher tax rates, as well as the utilization of certain tax benefits that helped reduce the Company's effective tax rate in fiscal 2000. It is anticipated that the effective tax rate will remain at the 37% level for the balance of the current fiscal year. 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As a result of all of the above, income from continuing operations for the three month period ended May 31, 2000 reflects an increase of $.7 million (3%) as compared to the comparable period in the prior year. On a per share basis for basic shares outstanding, such amount for the three month period ended May 31, 2000 represents an increase of 18% over the comparable period last year. Net income decreased slightly for the three month period ended May 31, 2000 as compared to the three month period ended May 31, 1999, with the prior year period also including $.9 million of income from discontinued operations. Impact of Inflation The competitive environment in which the Company operates makes it extremely difficult to pass on increased costs to its customers. In many instances, the Company is not able to increase its prices at all, and in certain situations is forced to reduce its selling prices. This environment makes it critical for the Company to be able to operate in a continuously more efficient manner. The Company must also work closely with its suppliers to minimize price increases and push for pricing improvements in the same manner that its customers demand of the Company. Forward-Looking Information This Management's Discussion and Analysis and other sections of this Quarterly Report contain forward-looking statements that are based on current expectations, estimates and projections about the industries in which the company operates, as well as management's beliefs and assumptions. Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Future Factors") which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The future factors that may affect the operations, performance and results of the Company's businesses include the following: a. general economic and competitive conditions in the markets and countries in which the Company operates, and the risks inherent in international operations; b. the Company's ability to continue to control and reduce its costs of production; c. the level of consumer demand for new vehicles equipped with the Company's products; d. the level of consumer demand for the Company's aftermarket products, which varies based on such factors as the severity of winter weather, the age of automobiles in the Company's markets and the impact of improvements or changes in original equipment products; e. the effect of changes in the distribution channels for the Company's aftermarket and industrial products; and, f. the strength of the U.S. dollar against currencies of other countries where the Company operates, as well as cross-currencies between the Company's operations outside of the U.S. and other countries with whom they transact business. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the forward-looking statements. The Company does not intend to update forward-looking statements. 17 Part II. OTHER INFORMATION - ---------------------------- Items 1, 2, 3, 4 and 5 are inapplicable and have been omitted. Item 6(a) - Exhibits - -------------------- Exhibit No. * 27 Financial Data Schedule * Filed herewith by direct transmission pursuant to the EDGAR Program Item 6(b) Reports on Form 8-K The following report on Form 8-K was filed pertaining to events occurring during the quarter ended May 31, 2000. (1) A current report on Form 8-K dated May 31, 2000, was filed to report under Item 5, pertaining to the amending of the Company's Shareholders Rights Agreement. 18 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. MARK IV INDUSTRIES, INC. Registrant DATE: July 14, 2000 /s/ Sal H. Alfiero ------------- ----------------------- Sal H. Alfiero Chairman of the Board DATE: July 14, 2000 /s/ William P. Montague ------------- ----------------------- William P. Montague President DATE: July 14, 2000 /s/ John J. Byrne ------------- ----------------------- John J. Byrne Vice President - Finance and Chief Financial Officer DATE: July 14, 2000 /s/ Richard L. Grenolds ------------- ----------------------- Richard L. Grenolds Vice President and Chief Accounting Officer DATE: July 14, 2000 /s/ Clement R. Arrison ------------- ----------------------- Clement R. Arrison Director 19 EXHIBIT INDEX Description - ------------ Page No. -------- * 27 Financial Data Schedule 20 * Filed herewith by direct transmission pursuant to the EDGAR Program EX-27 2 0002.txt
5 This schedule contains summary financial information extracted from the financial statements of Mark IV Industries, Inc. and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS FEB-28-2001 MAY-31-2000 2,200 0 480,400 10,700 341,400 954,900 890,000 294,200 2,085,200 530,000 800,700 0 0 400 486,200 2,085,200 555,300 555,300 381,800 499,300 0 0 14,600 41,400 15,300 26,100 0 0 0 26,100 .59 .53
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