-----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, GLA39KxR0ruUbStwNXzfGD8Bk8QNAOQScFzNsZbuPrHTP+z6icOZuSo8rg+j5oiQ XfkRb/Yb++JWC/rAti9a2w== 0000062418-96-000008.txt : 19960702 0000062418-96-000008.hdr.sgml : 19960702 ACCESSION NUMBER: 0000062418-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960701 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARK IV INDUSTRIES INC CENTRAL INDEX KEY: 0000062418 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 231733979 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08862 FILM NUMBER: 96589598 BUSINESS ADDRESS: STREET 1: 501 JOHN JAMES AUDUBON PKWY STREET 2: P O BOX 810 CITY: AMHERST STATE: NY ZIP: 14226 BUSINESS PHONE: 7166894972 FORMER COMPANY: FORMER CONFORMED NAME: MARK FOUR HOMES INC DATE OF NAME CHANGE: 19770921 10-Q 1 FIRST QUARTER REPORT 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, 1996 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 June 27, 1996 ----- ---------------------------- Common stock $.01 par value 63,119,351 2 MARK IV INDUSTRIES, INC. INDEX Part I. Financial Information Page No. - ------------------------------ ------- Consolidated Condensed Balance Sheets as of May 31, 1996 and February 29, 1996 3 Consolidated Statements of Income and Retained Earnings For the Three Month Periods Ended May 31, 1996 and 1995 4 Consolidated Statements of Cash Flows For the Three Month Periods Ended May 31, 1996 and 1995 5 Notes to Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II. Other Information 11 - -------------------------- Signature Page 12 Exhibit Index 13 3 MARK IV INDUSTRIES, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in thousands) May 31, February 29, 1996 1996 ASSETS (Unaudited) Current Assets: Cash $ 1,100 $ 900 Accounts receivable 451,600 399,600 Inventories 425,300 405,000 Other current assets 81,500 68,300 Total current assets 959,500 873,800 Pension related and other non-current assets 228,100 216,500 Property, plant and equipment, net 599,100 553,700 Cost in excess of net assets acquired 414,200 369,100 TOTAL ASSETS $2,200,900 $2,013,100 LIABILITIES & STOCKHOLDERS' EQUITY Current Liabilities: Notes payable and current maturities of debt $ 119,000 $ 95,100 Accounts payable 174,800 191,300 Compensation related liabilities 59,300 71,300 Accrued interest 13,500 12,700 Other current liabilities 119,500 98,500 Total current liabilities 486,100 468,900 Long-Term Debt: Senior debt 247,200 136,100 Subordinated debentures 506,400 506,400 Total long-term debt 753,600 642,500 Other non-current liabilities 211,000 176,200 Stockholders' Equity: Common stock 600 600 Additional paid-in capital 617,900 617,600 Retained earnings 136,000 109,700 Foreign currency translation adjustment (4,300) (2,400) Total stockholders' equity 750,200 725,500 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $2,200,900 $2,013,100 The accompanying notes are an integral part of these financial statements. 4 MARK IV INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED) For the Three Month Periods Ended May 31, 1996 and 1995 (Amounts in thousands, except per share data) 1996 1995 Net sales $616,900 $518,500 Operating costs: Cost of products sold 420,900 345,800 Selling and administration 99,500 90,400 Research and development 13,100 10,800 Depreciation and amortization 18,800 16,200 Total operating costs 552,300 463,200 Operating income 64,600 55,300 Interest expense 17,800 15,000 Income before provision for taxes 46,800 40,300 Provision for income taxes 18,300 15,700 NET INCOME 28,500 24,600 Retained earnings - beginning of the period 109,700 90,800 Cash dividends of $.035 and $.029 per share (2,200) (1,800) Retained earnings - end of the period $136,000 $113,600 Net income per share of common stock: Primary $ .45 $ .39 Fully-diluted $ .45 $ .39 Weighted average number of shares outstanding: Primary 63,100 63,000 Fully-diluted 63,500 63,400 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, 1996 and 1995 (Dollars in thousands) 1996 1995 Cash flows from operating activities: Net income $ 28,500 $ 24,600 Items not affecting cash: Depreciation and amortization 18,800 16,200 Pension and compensation related items (3,400) (2,600) Deferred income taxes 7,400 7,200 Net cash provided by earnings 51,300 45,400 Changes in assets and liabilities, net of effects of businesses acquired and discontinued: Accounts receivable (36,000) (32,700) Inventories 4,600 (12,000) Accounts payable (23,300) 6,000 Other items, net (31,400) (13,100) Net cash used in operating activities (34,800) (6,400) Cash flows from investing activities: Acquisitions (78,000) (4,300) Divestitures and asset sales - 600 Purchase of plant and equipment, net (18,900) (16,900) Net cash used in investing activities (96,900) (20,600) Cash flows from financing activities: Credit agreement borrowings, net 121,800 30,400 Other changes in long-term debt, net (11,700) (14,900) Changes in short-term bank borrowings 23,900 13,900 Common stock transactions - (400) Cash dividends paid (2,200) (1,800) Net cash provided by financing activities 131,800 27,200 Effect of exchange rate fluctuations 100 (100) Net increase in cash 200 100 Cash and cash equivalents: Beginning of the year 900 800 End of the period $ 1,100 $ 900 The accompanying notes are an integral part of these financial statements. 6 MARK IV INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. In the opinion of the Company's management, the accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of the Company at May 31, 1996, and the results of its operations and its cash flows for the three month periods ended May 31, 1996 and 1995. Such results are not necessarily indicative of the results to be expected for the full year. 2. On March 5, 1996, the Company acquired the net assets of the Imperial Eastman division of the Pullman Company for a cash purchase price of approximately $78.0 million. Imperial Eastman is a leading manufacturer and marketer of a broad range of thermoplastic hydraulic and pneumatic hose assemblies, and steel and brass couplings, adapters and fittings for both high and low pressure applications, with annual sales of approximately $120.0 million. Imperial Eastman is included in the Company's Industrial business segment. 3. Accounts receivable are presented net of allowances for doubtful accounts of $16.9 million and $16.7 million at May 31, 1996 and February 29, 1996, respectively. 4. Inventories consist of the following components (dollars in thousands): May 31, February 29, 1996 1996 ------ ----------- Raw materials, parts and sub-assemblies $121,100 $112,900 Work-in-process 64,500 57,500 Finished goods 239,700 234,600 -------- -------- Inventories $425,300 $405,000 ======== ======== 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, 1996. The amounts at February 29, 1996 are based upon the audited balance sheet at that date. 5. Property, plant and equipment is stated at cost and consists of the following components (dollars in thousands): May 31, February 29, 1996 1996 ------- ---------- Land and land improvements $ 43,400 $ 43,400 Buildings 166,400 155,300 Machinery and equipment 595,500 547,700 ------- ------- Total property, plant and equipment 805,300 746,400 Less accumulated depreciation 206,200 192,700 ------- ------- Property, plant and equipment, net $599,100 $553,700 ======== ======== 7 MARK IV INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6. Long-term debt consists of the following (dollars in thousands): May 31, February 29, 1996 1996 Senior Debt: Credit Agreement $ 218,400 $ 97,300 Other items 36,600 46,700 Total 255,000 144,000 Less Current maturities (7,800) (7,900) Net senior debt 247,200 136,100 Subordinated Debt: 7-3/4% Senior Subordinated Notes 248,400 248,400 8-3/4% Senior Subordinated Notes 258,000 258,000 Total subordinated debt 506,400 506,400 Total long-term debt 753,600 642,500 Total stockholders equity 750,200 725,500 Total capitalization $1,503,800 $1,368,000 Long-term debt as a percentage of total capitalization 50.1% 47.0% 7. For purposes of cash flows, the Company considers overnight investments as cash equivalents. The Company made cash interest payments of approximately $17.2 million and $21.8 million in the three month periods ended May 31, 1996 and 1995, respectively. The Company also made cash income tax payments of approximately $3.0 million and $5.4 million in the three month periods ended May 31, 1996 and 1995, respectively. 8. In March 1996, the Company adopted Financial Accounting Standards Board ("FASB") Statement No. 121 -- Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to be Disposed of ("SFAS No. 121"). SFAS No. 121 requires that long-lived assets and certain identifiable intangibles and goodwill related to those assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The adoption of SFAS No. 121 did not require a charge in the Company's first quarter ended May 31, 1996. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources - ------------------------------- Net cash provided by earnings was approximately $51.3 million for the three month period ended May 31, 1996, an increase of $5.9 million (13%) over the three month period ended May 31, 1995. As of May 31, 1996, the Company had working capital of $473.4 million, an increase of $68.5 million (17%) from February 29, 1996. The increase in working capital is substantially attributable to the acquisition of Imperial Eastman and to support the Company's higher overall revenue base, as well as temporary seasonal inventory and accounts receivable increases in the Company's Industrial business segment. On March 5, 1996, the Company acquired the net assets of the Imperial Eastman division of The Pullman Company for a cash purchase price of approximately $78.0 million. Imperial Eastman is a leading manufacturer and marketer of a broad range of thermoplastic hydraulic and pneumatic hose assemblies, and steel and brass couplings, adapters and fittings for both high and low pressure applications, with annual sales of approximately $120.0 million. Imperial Eastman is included in the Company's Industrial business segment. The Company has borrowing availability under its primary credit agreements in excess of $285.0 million and additional availability under its various domestic and foreign demand lines of credit of approximately $140.0 million as of May 31, 1996. Long-term debt at May 31, 1996 increased $111.1 million (17%) from the total amount as of February 29, 1996, with approximately $78.0 million of the increase related to the acquisition of Imperial Eastman. The remainder of the increase, as well as the $23.9 million increase in short-term debt, are primarily the result of increased borrowings to support temporary increases in working capital requirements. Such temporary working capital increases are expected to be reduced by the end of the Company's second quarter. Debt reduction in the balance of the fiscal year will be pursued through the use of cash generated from operations and further reductions in working capital requirements. Management believes that cash generated from operations, as temporarily supplemented with existing credit availability, should be sufficient to support the Company's working capital requirements and anticipated capital expenditures for the foreseeable future. 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. Net Sales for the three month period ended May 31, 1996 increased by $98.4 million (19%) over the comparable period last year. The increase was attributable to internal sales growth, as well as the inclusion of the results of operations of Imperial Eastman and FitzSimons (as discussed following). Changes in foreign currency exchange rates had a nominal effect on net sales for the quarter ended May 31, 1996, as compared to the comparable period last year. 9 In the Company's Automotive segment, net sales increased $42.8 million (17%) for the three month period ended May 31, 1996 over the comparable period last year. Approximately $19.3 million (7%) of the Automotive segment's increase was attributable to the inclusion of the results of operations of FitzSimons Manufacturing Company, which was acquired in the last quarter of fiscal 1996. Excluding FitzSimons, the Automotive segment's net sales increased approximately $23.5 million (10%) for the three month period ended May 31, 1996 over the comparable period last year. The internal growth in the Automotive segment was primarily lead by the segment's foreign operations. In the aggregate, sales in the after-market increased in the current period compared to the comparable period in the previous fiscal year. Improved sales in the traditional after-market were somewhat offset by competitive conditions in the maintenance side of the business. In the Company's Industrial segment, net sales increased $55.6 million (21%) for the three month period ended May 31, 1996 over the comparable period last year. Approximately $27.5 million (11%) of the Industrial segment's increase was attributable to the inclusion of the results of operations of Imperial Eastman, which was acquired at the beginning of fiscal 1997. Excluding Imperial Eastman, the Industrial segment's net sales increased approximately $28.1 million (10%) for the three month period ended May 31, 1996 over the comparable period last year. This internal growth was lead by the segment's general industrial and transportation products which significantly offset some softening in the segment's Audio markets. The cost of products sold as a percentage of consolidated net sales increased to 68% for the three month period ended May 31, 1996, as compared to 67% for the three month period ended May 31, 1995. The increase was primarily as a result of the Imperial Eastman and FitzSimons acquisitions referred to above, which have a higher level of costs than the Company's existing businesses. The increase in the percentage of costs also reflects negative pressures on margins experienced by the Filters unit of the Automotive business segment. Selling and administration costs as a percentage of consolidated net sales were 16% for the three month period ended May 31, 1996 as compared to 17% for the three month period ended May 31, 1995. The reduced level of costs as a percentage of sales reflects operating efficiencies achieved from the integration of the Purolator businesses and the reorganization of the Company's business segments. The reduction in the level of costs also indicates the Company's continued emphasis on cost control has been successful in substantially offsetting the impact of inflation on such costs. Research and development costs increased by $2.3 million (21%) for the three month period ended May 31, 1996 as compared to the three month period ended May 31, 1995. As a percentage of consolidated net sales, these expenses remained consistent at approximately 2% in each period. This consistent level of investment reflects the Company's continuing emphasis on new product development. Depreciation and amortization expense increased by $2.6 million (16%) for the three month period ended May 31, 1996 as compared to the three month period ended May 31, 1995. The increase is primarily attributable to the Company's increased level of capital equipment expenditures, which included a new manufacturing facility and increased capacity requirements in the Company's Automotive segment, primarily in Europe, and a new domestic distribution facility in the Company's Industrial segment. 10 Interest expense for the three month period ended May 31, 1996 increased by $2.8 million (19%) as compared to the three month period ended May 31, 1995. The increase is primarily due to an increase in the weighted average debt outstanding resulting from borrowings incurred to finance the acquisitions of FitzSimons and Imperial Eastman, and to support temporarily higher working capital levels. The Company experienced increases in economic rates on the Company's domestic debt, primarily related to the private placement of $250.0 million 7-3/4% Senior Subordinated Notes at the beginning of fiscal 1997, offset slightly by lower rates on the Company's Credit Agreement, as a result of its being amended and restated at the beginning of fiscal 1997. The Company also experienced a slight reduction in the economic rates on its foreign debt. The Company's provision for income taxes as a percentage of pre-tax accounting income for the three month periods ended May 31, 1996 and 1995 remained relatively constant at approximately 39%. The benefit of increased domestic income resulting from acquisitions and internal growth were substantially offset by increased income in foreign locations with higher statutory tax rates than in the U.S. The adoption of SFAS No. 121 did not require a charge in the Company's first quarter ended May 31, 1996. However, in conjunction with the Company's realignment of its business segments and refocusing of its factories which is currently taking place, it is anticipated that certain long-lived assets will need to be written-off in accordance with SFAS No. 121. The SFAS No. 121 charges, as well as any realignment costs will be recognized as soon as management's assessment and a formal plan for the realignment have been completed, which is expected to occur later in the current fiscal year. As a result of all of the above, the Company's net income for the three month period ended May 31, 1996 increased $3,900,000 (16%) over the comparable period last year. Impact of Inflation - ------------------ Although the Company has experienced delays in its ability to pass on certain inflation related cost increases, the Company does not expect that such delays or the overall impact of inflation will have a material impact on the Company's operations. 11 Part II. OTHER INFORMATION - --------------------------- Items 1, 2, 3, 4 and 5 are inapplicable and have been omitted. Item 6(a) - Exhibits - -------------------- Exhibit No. 11 Statement Regarding Computation of Per Share Earnings 27 Financial Data Schedule 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, 1996. 1. A current report on Form 8-K, dated March 6, 1996, as amended by the Company's current report on Form 8-K/A dated March 27, 1996 was filed to report under Items 5, pertaining to the Company's (i) entering into a Amended and Restated Credit and Guarantee Agreement with various financial institutions. The Credit Agreement provides for a five-year, non-amortizing revolving credit facility with borrowing availability of $400.0 million under a domestic facility and $100.0 million under a multi- currency facility; and (ii) the Company's private placement of $250.0 million principal amount of its 7-3/4% Senior Subordinated Notes at a purchase price of 99.36% of their face amount. 12 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 1, 1996 /s/ Sal H. Alfiero ---------------------- Sal H. Alfiero Chairman of the Board DATE: July 1, 1996 /s/ William P. Montague ----------------------- William P. Montague President DATE: July 1, 1996 /s/ John J. Byrne ----------------------- John J. Byrne Vice President-Finance and Chief Financial Officer DATE: July 1, 1996 /s/ Richard L. Grenolds ----------------------- Richard L. Grenolds Vice President and Chief Accounting Officer DATE: July 1, 1996 /s/ Clement R. Arrison ----------------------- Clement R. Arrison Director 13 EXHIBIT INDEX Description - ----------- Page No. 11 Statement Regarding Computation of Per Share Earnings 14 27 Financial Data Schedule 15 EX-11 2 EXHIBIT 11 MARK IV INDUSTRIES, INC. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (UNAUDITED) For the Three Month Periods Ended May 31, 1996 and 1995 (Amounts in thousands, except per share data) Three Months Ended May 31, 1996 1995 PRIMARY Shares outstanding: Weighted average number of shares outstanding 63,100 63,000 Net effect of dilutive stock options (1) 400 400 Total 63,500 63,400 Net income $28,500 $ 24,600 Net income per share (2) $ .45 $ .39 FULLY-DILUTED Shares outstanding: Weighted average number of shares outstanding 63,100 63,000 Net effect of dilutive stock options (1) 400 400 Total 63,500 63,400 Net Income $28,500 $24,600 Net income per share $ .45 $ .39 - ------------------------------------ (1) The net effects for the three month periods ended May 31, 1996 and 1995 are based upon the treasury stock method using the average market price during the periods for the primary amounts, and the higher of the average market price or the market price at the end of the period for the fully-diluted amounts. (2) Primary earnings per share have been reported in the Company's financial statements based only upon the shares of common stock outstanding, since the dilutive effect of the stock options is not considered to be material. EX-27 3
5 This schedule contains summary financial information extracted from the financial statements of Mark IV Industries, Inc. and is qualfied in its entirety by reference to such financial statements. 1,000 3-MOS FEB-29-1996 MAY-31-1996 1,100 0 468,500 16,900 425,300 959,500 805,300 206,200 2,200,900 486,100 753,600 0 0 600 749,600 2,200,900 616,900 616,900 420,900 552,300 0 0 17,800 46,800 18,300 28,500 0 0 0 28,500 .45 .45
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