-----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, CkXcrlA9pT/UvjAQPO3yi1fYJaNZdQ1UkPkGGTjy4J9DN5Xn9/9tvuvfz4PaQQrE dEPC3fbYHUKzheQWwD2PGw== 0000062418-98-000004.txt : 19980702 0000062418-98-000004.hdr.sgml : 19980702 ACCESSION NUMBER: 0000062418-98-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980531 FILED AS OF DATE: 19980701 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARK IV INDUSTRIES INC CENTRAL INDEX KEY: 0000062418 STANDARD INDUSTRIAL CLASSIFICATION: GASKETS, PACKAGING AND SEALING DEVICES & RUBBER & PLASTIC HOSE [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: 98659367 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 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, 1998. 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 30, 1998 - ------------ ---------------------------- Common stock $.01 par value 58,148,634 2 MARK IV INDUSTRIES, INC. INDEX Part I. Financial Information Page No. - ------------------------------ -------- Consolidated Condensed Balance Sheets as of May 31, 1998 and February 28, 1998 3 Consolidated Statements of Income For the Three Month Periods Ended May 31, 1998 and 1997 4 Consolidated Statements of Cash Flows For the Three Month Periods Ended May 31, 1998 and 1997 5 Consolidated Statements of Comprehensive Income and Retained Earnings For the Three Month Periods Ended May 31, 1998 and 1997 6 Notes to Consolidated Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Part II. Other Information 16 - --------------------------- Signature Page 17 Exhibit Index 18 3 MARK IV INDUSTRIES, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in thousands) May 31, February 28, 1998 1998 -------- ----------- ASSETS (Unaudited) Current Assets: Cash and short-term investments $ 1,300 $ 120,900 Accounts receivable 511,500 466,400 Inventories 394,600 393,400 Other current assets 114,400 105,600 ---------- ---------- Total current assets 1,021,800 1,086,300 Pension and other non-current assets 232,500 226,600 Property, plant and equipment, net 670,700 668,400 Cost in excess of net assets acquired 436,000 439,200 ---------- ---------- TOTAL ASSETS $2,361,000 $2,420,500 ========== ========== LIABILITIES & STOCKHOLDERS' EQUITY Current Liabilities: Notes payable and current maturities $ 88,000 $ 133,800 8-3/4% Notes, called for redemption - 73,100 Accounts payable 234,600 222,400 Compensation related liabilities 75,600 75,500 Accrued interest 11,900 28,600 Other current liabilities 97,000 94,500 ---------- ---------- Total current liabilities 507,100 627,900 ---------- ---------- Long-Term Debt: Senior debt 121,400 21,400 Subordinated debentures 772,500 772,500 ---------- ---------- Total long-term debt 893,900 793,900 ---------- ---------- Other non-current liabilities 263,400 246,700 ---------- ---------- Stockholders' Equity: Preferred stock - - Common stock 600 600 Additional paid-in capital 536,800 617,800 Retained earnings 188,500 167,100 Foreign currency translation adjustment (29,300) (33,500) ---------- ---------- Total stockholders' equity 696,600 752,000 ---------- ---------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $2,361,000 $2,420,500 ========== ========== 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, 1998, and 1997 (Amounts in thousands, except per share data) 1998 1997 ---- ---- Net sales $604,500 $560,100 -------- -------- Operating costs: Cost of products sold 413,600 376,800 Selling and administration 94,800 89,400 Research and development 14,700 11,800 Depreciation and amortization 23,900 18,500 -------- -------- Total operating costs 547,000 496,500 -------- -------- Operating income 57,500 63,600 Interest expense 15,600 14,300 -------- -------- Income before provision for taxes 41,900 49,300 Provision for income taxes 15,000 19,200 -------- -------- Income before extraordinary loss 26,900 30,100 Extraordinary loss from early extinguishment of debt, net of tax benefits (2,600) - -------- -------- Net income $ 24,300 $ 30,100 ======== ======== Net income per share of common stock: Basic: Income before extraordinary loss $ .44 $ .46 Extraordinary loss (.04) - -------- -------- Net income $ .40 $ .46 ======== ======== Diluted: Income before extraordinary loss $ .41 $ .46 Extraordinary loss (.04) - -------- -------- Net income $ .37 $ .46 ======== ======== Weighted average number of shares outstanding: Basic 61,500 65,500 ======== ======== Diluted 70,300 66,000 ======== ======== 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, 1998 and 1997 (Dollars in thousands) 1998 1997 ---- ---- Cash flows from operating activities: Income before extraordinary loss $ 26,900 $ 30,100 Items not affecting cash: Depreciation and amortization 23,900 18,500 Pension and compensation related items (5,700) (4,600) Deferred income taxes 5,600 8,300 Changes in assets and liabilities, net of effects of acquired and divested businesses: Accounts receivable (40,300) (67,400) Inventories (500) 1,500 Other assets (2,200) (20,000) Accounts payable 8,900 8,400 Other liabilities (11,900) (21,400) Net cash provided by (used in) operating -------- ------- activities, before extraordinary loss 4,700 (46,600) Extraordinary loss before deferred charges (3,500) - Net cash provided by (used in) -------- ------- operating activities 1,200 (46,600) Cash flows from investing activities: -------- ------- Divestitures and asset sales - 35,500 Purchase of plant and equipment, net (19,600) (31,100) -------- ------- Net cash provided by (used in) investing activities (19,600) 4,400 Cash flows from financing activities: -------- ------- Credit agreement borrowings, net 80,000 100,000 Retirement of subordinated debt (73,100) - Other changes in long-term debt, net 24,900 (600) Changes in short-term bank borrowings (48,800) 6,400 Repurchase of common stock, net (81,300) (61,100) Cash dividends paid (2,900) (2,500) -------- ------- Net cash provided by (used in) financing activities (101,200) 42,200 -------- ------- Net decrease in cash and short-term investments (119,600) - Cash and short-term investments: Beginning of the period 120,900 1,300 -------- ------- End of the period $ 1,300 $ 1,300 ======== ======= 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, 1998 and 1997 (Dollars in thousands) (Unaudited) Comprehensive Income - -------------------- 1998 1997 -------- -------- Net income $ 24,300 $ 30,100 Balance sheet effect of foreign currency translation adjustments 4,200 100 -------- -------- Comprehensive net income $ 28,500 $ 30,200 ======== ======== Retained Earnings - ----------------- Retained earnings at February 28, 1998 $167,100 $ 79,300 Net income 24,300 30,100 Cash dividends of $.05 and $.04 per share (2,900) (2,500) -------- -------- Retained earnings at end of period $188,500 $106,900 ======== ======== 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, 1998, and the results of its operations and its cash flows for the periods ended May 31, 1998 and 1997. Such results are not necessarily indicative of the results to be expected for the full year. 2. Accounts Receivable and Inventories Accounts receivable are presented net of allowances for doubtful accounts of $12.4 million and $13.6 million at May 31, 1998 and February 28, 1998, respectively. Inventories consist of the following components (dollars in thousands): May 31, February 28, 1998 1998 ------- ----------- Raw materials $ 89,600 $ 86,200 Work-in-process 69,000 73,000 Finished goods 236,000 234,200 --------- --------- Total $ 394,600 $ 393,400 ========= ========= 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, 1998. The amounts at February 28, 1998 are based upon the audited balance sheet at that date. 8 MARK IV INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 3. Property, Plant and Equipment Property, plant and equipment are stated at cost and consist of the following components (dollars in thousands): May 31, February 28, 1998 1998 ------- ----------- Land and land improvements $ 26,000 $ 25,900 Buildings 180,300 179,900 Machinery and equipment 658,700 641,800 -------- -------- Total property, plant and equipment 865,000 847,600 Less accumulated depreciation 194,300 179,200 -------- -------- Property, plant and equipment, net $670,700 $668,400 ======== ======== 4. Long-term debt Long-term debt consists of the following (dollars in thousands): May 31, February 28, 1998 1998 Senior Debt: -------- --------- Credit Agreement $ 80,000 $ - Other borrowing arrangements 56,200 31,200 ---------- ---------- Total 136,200 31,200 Less Current maturities (14,800) (9,800) ---------- ---------- Net senior debt 121,400 21,400 Subordinated Debt: ---------- ---------- 7-3/4% Senior Subordinated Notes 248,700 248,700 7-1/4% Senior Subordinated Notes 248,800 248,800 4-3/4% Convertible Subordinated Notes 275,000 275,000 ---------- ---------- Total subordinated debt 772,500 772,500 ---------- ---------- Total long-term debt 893,900 793,900 Total stockholders' equity 696,600 752,000 ---------- ---------- Total capitalization $1,590,500 $1,545,900 ========== ========== Long-term debt as a percentage of total capitalization 56.2% 51.4% ========= ========= 9 MARK IV INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 5. Cash Flow For purposes of cash flows, the Company considers overnight investments as cash equivalents. The Company made cash interest payments of approximately $33.7 million and $24.1 million in the three month periods ended May 31, 1998 and 1997, respectively. The Company also made cash income tax payments of approximately $8.3 million and $6.5 million in the three month periods ended May 31, 1998 and 1997, respectively. 6. Common Stock Repurchase In May 1998, the Company announced completion of its 7.3 million share repurchase program approved by the Board of Directors in March 1997. The stock was purchased at an average price of $22.03 per share, for a total cost of $160.8 million, with approximately 3.8 million shares repurchased from March 1, 1998 at an average cost of $21.02 per share, or approximately $80.4 million. Upon completion of this program the Board of Directors approved the purchase of an additional ten million shares. It is expected that such shares will be purchased in the open- market, or through privately negotiated transactions at prices which the Company considers to be attractive. Through June 30, 1998 the Company acquired approximately 1.0 million shares, under the new repurchase program, at an average cost of $22.00 per share, or a total cost of approximately $22 million. 7. Senior Subordinated Notes Redemption On April 2, 1998, the Company redeemed the remaining $73.1 million principal balance of its 8-3/4% Senior Subordinated Notes due April 1, 2003. The Notes were redeemed at a price of $1,043.75 per $1,000 principal amounts of Notes plus accrued interest. The redemption resulted in a one-time charge for early debt extinguishment of $2.6 million (net of tax) for the three month period ended May 31, 1998. 8. Comprehensive Income In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("FAS 130"). FAS 130 establishes standards for reporting and measuring of all changes in equity that result from recognized transactions and other economic events of the period other than transactions with owners in their capacity as owners. The Company has reported the change in foreign currency translation items as a component of Comprehensive Income in the Statement of Comprehensive Income for the periods ended May 31, 1998 and 1997, respectively. The accumulated effect of foreign currency translation items at May 31, 1998 and February 28, 1998, is reported in the Stockholders Equity section of the Company's Consolidated Condensed Balance Sheets. 10 MARK IV INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 9. 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, 1998 1997 ------- ------ Basic Net Income Per Share: Net income $24,300 $30,100 ======= ======= Weighted average number of common shares outstanding 61,500 65,500 ======= ======= Basic net income per share $ .40 $ .46 ======= ======= Diluted Net Income Per Share: Net income $24,300 $30,100 After-tax equivalent of interest expense on 4-3/4% convertible subordinated notes 2,000 - ------- ------- Income for purposes of computing diluted net income per share $26,300 $30,100 ======= ======= Weighted average common shares outstanding 61,500 65,500 Dilutive stock options 400 500 Weighted average assumed conversion of 4-3/4% convertible subordinated notes 8,400 - ------- ------- Weighted average number of common shares outstanding for purposes of computing diluted net income per share 70,300 66,000 ======= ======= Diluted net income per share $ .37 $ .46 ======= ======= 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources - ------------------------------- The Company's working capital increased by $56.3 million (12%) during the three month period ended May 31, 1998, reflecting the expected seasonal build which occurs in the Automotive segment's aftermarket business and the Industrial segment's consumer hose business. Such amount compares favorably to an increase of $65.7 million (18%) in the corresponding period last year. As a result of the Company's earnings performance in the current period, coupled with the improvement in the working capital elements and other non- current items, net cash provided by operating activities was $4.7 million for the three month period ended May 31, 1998, a $51.3 million improvement in comparison to the $46.6 million used in operating activities in the three month period ended May 31, 1997. The improvement in the seasonal working capital build-up is due in part to the increased levels required last year to support the restructuring efforts. The improvement also reflects the Company's success in reducing its working capital position as a result of its increased emphasis on cash flow in the current fiscal year. The comparison also reflects the one-time nature of the costs required to fund the Company's restructuring efforts, which were more significant in the prior period. Management anticipates that its working capital investment will be reduced during the remainder of fiscal 1999 as a result of the completion of its restructuring program, and its corporate-wide emphasis on increasing cash flow and improving the Company's return on assets employed. Capital expenditures for the three month period ended May 31, 1998 were approximately $19.6 million, which was lower than depreciation and amortization expense of $23.9 million for the same period, and reflects a decrease in expenditures of approximately $11.9 million in comparison to the three month period ended May 31, 1997. The decreased level of expenditures relates primarily to the return to more normal levels of capital expenditure requirements as the Company completes its restructuring plan and its European and South American expansion efforts. Such activities resulted in above normal capital expenditure requirements in the prior year period. Management anticipates that the Company's capital expenditure requirements will continue at its current level for the remainder of fiscal 1999. In May 1997, the Company announced completion of its 7.3 million share repurchase program approved by the Board of Directors in March 1997. The stock was purchased at an average price of $22.03 per share, for a total cost of $160.8 million, with approximately 3.8 million shares repurchased from March 1, 1998 at an average cost of $21.02 per share, or approximately $80.4 million. Upon completion of this program the Board of Directors approved the purchase of an additional ten million shares. It is expected that such shares will be purchased in the open-market, or through privately negotiated transactions at prices which the Company considers to be attractive. Through June 30, 1998 the Company acquired approximately 1.0 million shares under the new program at an average cost of $22.00 per share, or a total cost of approximately $22 million. 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On April 2, 1998, the Company redeemed the remaining $73.1 million principal balance of its 8-3/4% Senior Subordinated Notes due April 1, 2003. The Notes were redeemed at a price of $1,043.75 per $1,000 principal amounts of Notes plus accrued interest through April 1, 1998. The redemption resulted in a one-time charge for early debt extinguishment of approximately $2.6 million (net of tax) for the three month period ended May 31, 1998. The Company has borrowing availability under its primary credit agreements of approximately $420.0 million, subject to certain covenants, and additional availability under its various domestic and foreign demand lines of credit of approximately $135.0 million as of May 31, 1998. Long-term debt at May 31, 1998 was $893.9 million, an increase of $100.0 million over the $793.9 million that was outstanding as of February 28, 1998. The change primarily reflects increased borrowings to fund the Company's stock repurchase program. The Company's restructuring program is expected to be substantially completed in its second fiscal quarter ending August 31, 1998, with net benefits beginning to be recognized in the second half of the fiscal year. As previously announced, management is currently developing a plan to reposition its Automotive aftermarket operations to better align its assets with the market's changing business conditions. The Company's aftermarket repositioning is expected to include the elimination of low margin, slow moving product lines, a reduction in inventory levels and rationalization of the customer base. While the repositioning plan is still being finalized, management's preliminary estimate is that it will result in a charge against earnings in the range of $25.0 to $40.0 million, net of taxes, or $.37 to $.58 per diluted share. 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, including the costs associated with its stock repurchase program, as well as its restructuring and repositioning efforts. 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 from continuing operations for the three month period ended May 31, 1998 increased by $44.4 million (8%) over the comparable period last year. Excluding the effects of acquisitions in the latter part of fiscal 1998, net sales for the three month period reflect an increase of approximately $18.0 million (3%) from internal sales growth over the comparable period last year. In the Company's Automotive segment, net sales increased $32.0 million (11%) for the three month period ended May 31, 1998 over the comparable period last year. Excluding the effects of acquisitions in the latter part of fiscal 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 1998, internal growth in the Company's Automotive segment amounted to $9.0 million (3%) over the comparable period last year. This internal growth in the Automotive segment was primarily generated by the segment's Automotive OEM sector, which helped to offset the slightly reduced performance of the Company's Automotive Aftermarket sector for the three month period ended May 31, 1998 in comparison to the prior year. In the Company's Industrial segment, net sales increased $12.4 million (5%) for the three month period ended May 31, 1998 over the comparable period last year. Excluding the effects of acquisitions in the latter part of fiscal 1998, internal growth in the Company's Industrial segment amounted to $9.0 million (4%) over the comparable period last year. This internal growth was lead by the segment's transportation sector which helped to offset flat sales in the segment's general industrial sector. The cost of products sold as a percentage of consolidated net sales increased to 68.4% in the current period as compared to 67.3% in the comparable prior year period. This increase is primarily attributable to the effects of duplicative costs and inefficiencies incurred in the current period due to additional time required to complete the restructuring program. Selling and administration costs as a percentage of consolidated net sales were 15.7% for the three month period ended May 31, 1998, as compared to 16.0% for the three month period ended May 31, 1997. The slight reduction in the level of costs indicates operating efficiencies achieved from the integration of operations acquired, as well as the reorganization of the Company's business segments. The lower level of costs also indicates the Company's continued emphasis on cost control and cycle time reduction has been successful in substantially offsetting the impact of inflation on such costs. Research and development costs increased by $2.9 million (25%) for the three month period ended May 31, 1998 as compared to the three month period ended May 31, 1997. As a percentage of consolidated net sales, these expenses increased to 2.4% for the three month period ended May 31, 1998 as compared to 2.1% for the comparable period last year. This significant increase is primarily related to the Company's launching of a number of new product and system initiatives, as well as bringing new technology to the North American Automotive OEM market from acquisitions made in Europe in the latter part of fiscal 1998. Depreciation and amortization expense increased by $5.4 million (29%) for the three month period ended May 31, 1998 as compared to the three month period ended May 31, 1997. The increase is primarily attributable to the Company's increased level of capital equipment expenditures in fiscal 1998 to support the Company's restructuring efforts, as well as new facilities and equipment required to support new products and markets in Europe and South America. To a lesser extent, additional goodwill amortization related to acquisitions in the latter part of fiscal 1998 has also contributed to the increase. 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Interest expense for the three month period ended May 31, 1998 increased $1.3 million (9%) from the level incurred in the three month period ended May 31, 1997. The increase is primarily due to borrowings incurred to finance the Company's stock repurchase program and the acquisitions in the latter part of fiscal 1998, as well as to support higher working capital levels. The increase was substantially offset by the benefits of reduced rates on the Company's domestic debt, primarily related to the issuance in the latter part of fiscal 1998 of the 7-1/2% and 4-3/4% Notes, which refinanced higher rate debt. The effective tax rate as a percentage of pre-tax accounting income for the three month periods ended May 31, 1998 and 1997 decreased to 35.8% from 39%, respectively. The decrease in the effective tax rate in the three month period ended May 31, 1998 as compared to the comparable period last year, is primarily related to the benefit of increased domestic income resulting from internal growth that outpaced income growth in international locations with higher statutory tax rates than in the U.S. As a result of all of the above, income before the extraordinary loss for the three month period ended May 31, 1998 reflects a decrease of $3.2 million (10.6%) as compared to the comparable period in the prior year. On a diluted per share basis, such amount for the three month period ended May 31, 1998 represents a decrease of 10.9% over the comparable prior year period. Net income decreased approximately $5.8 million (19%) for the three month period ended May 31, 1998 as compared to the three month period ended May 31, 1997, with the current year period also including the $2.6 million extraordinary loss from the early extinguishment of debt. 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. 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. 15 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 and joint ventures; 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. 16 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 - ----------------------------- None 17 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, 1998 /s/ Sal H. Alfiero ------------ ----------------------- Sal H. Alfiero Chairman of the Board DATE: July 1, 1998 /s/ William P. Montague ------------ ----------------------- William P. Montague President DATE: July 1, 1998 /s/ John J. Byrne ------------ ----------------------- John J. Byrne Vice President - Finance and Chief Financial Officer DATE: July 1, 1998 /s/ Richard L. Grenolds ------------ ------------------------ Richard L. Grenolds Vice President and Chief Accounting Officer DATE: July 1, 1998 /s/ Clement R. Arrison ------------ ------------------------ Clement R. Arrison Director 18 EXHIBIT INDEX Description - ----------- Page No. * 27 Financial Data Schedule 19 * Filed herewith by direct transmission pursuant to the EDGAR Program EX-27 2
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-28-1999 MAY-31-1998 1,300 0 523,900 12,400 394,600 1,021,800 865,000 194,300 2,361,000 507,100 893,900 0 0 600 696,000 2,361,000 604,500 604,500 413,600 547,000 0 0 15,600 41,900 15,000 26,900 0 2,600 0 24,300 .40 .37
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