-----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, I+IvqS6w56FcFrd6wcp+/Y+XghllnDgA895iIOtysJ6v82ZrzA0IiDnCQhwkmmts fJKfONt0HI/WSKS7iYzB+w== 0000950172-98-000673.txt : 19980803 0000950172-98-000673.hdr.sgml : 19980803 ACCESSION NUMBER: 0000950172-98-000673 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980531 FILED AS OF DATE: 19980715 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOKHEIM CORP CENTRAL INDEX KEY: 0000098559 STANDARD INDUSTRIAL CLASSIFICATION: 3580 IRS NUMBER: 350712500 STATE OF INCORPORATION: IN FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06018 FILM NUMBER: 98666118 BUSINESS ADDRESS: STREET 1: 1602 WABASH AVENUE CITY: FORT WAYNE STATE: IN ZIP: 46803 BUSINESS PHONE: 2194704600 MAIL ADDRESS: STREET 1: 1602 WABASH AVENUE CITY: FORT WAYNE STATE: IN ZIP: 46803 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (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 Commission File Number 1-6018 TOKHEIM CORPORATION (Exact name of Registrant as specified in its charter) INDIANA 35-0712500 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10501 CORPORATE DRIVE, FORT WAYNE, IN 46845 (Address of principal executive offices) (Zip Code) (Registrant's telephone number including area code): (219) 470-4600 NOT APPLICABLE (Former name, former address, and former fiscal year if changed since last report) 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 As of May 31, 1998,12,648,222 shares of voting common stock were outstanding. In addition, 763,928 shares of convertible preferred stock were held by the Retirement Savings Plan for Employees of Tokheim Corporation and Subsidiaries. The exhibit index is located on page 17 TOKHEIM CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENT OF EARNINGS (Amounts in thousands, except amounts per share)
Three Months Ended Six Months Ended ------------------------------------------------------------ May 31, 1998 May 31, 1997 May 31, 1998 May 31, 1997 Unaudited Unaudited Unaudited Unaudited ------------- ------------- ------------- ------------ NET SALES $ 99,652 $ 95,857 $ 190,505 $ 187,881 Cost of sales, exclusive of items listed below 73,118 70,379 140,191 140,771 Selling, general, and administrative expenses 18,637 16,985 34,894 32,888 Depreciation and amortization 2,619 2,452 5,118 4,380 Merger and acquisition costs and other unusual items 345 478 6,333 478 --------- ------- -------- ------- OPERATING PROFIT 4,933 5,563 3,969 9,364 Interest expense, net 3,322 4,455 7,333 8,195 Foreign currency gains (815) (57) (780) (177) Minority interest (10) 124 63 81 Other income, net (499) (132) (278) (200) ---------- ---------- ---------- -------- Earnings (loss) before income taxes and extraordinary loss 2,935 1,173 (2,369) 1,465 Income taxes 508 (37) 809 130 ---------- ---------- ---------- ---------- Earnings (loss) before extraordinary loss 2,427 1,210 (3,178) 1,335 Extraordinary loss from debt extinguishment (4,965) --- (4,965) --- ---------- ---------- ---------- ---------- NET EARNINGS (LOSS) (2,538) 1,210 (8,143) 1,335 Preferred stock dividends (370) (375) (744) (758) ---------- ---------- ---------- ---------- EARNINGS (LOSS) APPLICABLE TO COMMON STOCK $ (2,908) $ 835 $ (8,887) $ 577 ========== ============= ========== ========== Earnings (loss) per common share: Basic: Before extraordinary loss $ 0.17 $ 0.10 $ (0.39) $ 0.07 Extraordinary loss on debt extinguishment (0.42) --- (0.49) --- ---------- -- ---------- ---------- ---------- Net earnings (loss) $ (0.25) $ 0.10 $ (0.88) $ 0.07 ========== == ========== ========== ========== Weighted average shares outstanding 11,884 7,974 10,087 7,961 Diluted: Before extraordinary loss $ 0.16 $ 0.09 $ (0.39) $ 0.07 Extraordinary loss on debt extinguishment (0.39) --- (0.49) --- ---------- -- ---------- ---------- ---------- Net earnings (loss) $ (0.23) $ 0.09 $ (0.88) $ 0.07 ========== == ========== ========== ========== Weighted average shares outstanding 12,881 8,824 10,087 8,809
TOKHEIM CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEET (IN THOUSANDS)
MAY 31, 1998 NOVEMBER 30, Unaudited 1997 ASSETS ------------- ----------------- CURRENT ASSETS: CASH AND CASH EQUIVALENTS $ 12,310 $ 6,438 RECEIVABLES, NET 77,844 83,011 INVENTORIES: RAW MATERIALS AND SUPPLIES 30,939 29,427 WORK IN PROCESS 28,345 27,514 FINISHED GOODS 7,088 7,406 ---------- ---------- 66,372 64,347 PREPAID EXPENSES 6,554 6,705 ---------- ---------- TOTAL CURRENT ASSETS 163,080 160,501 PROPERTY, PLANT, AND EQUIPMENT, NET 43,926 42,535 OTHER TANGIBLE ASSETS 3,454 3,615 GOODWILL, NET 71,046 67,695 OTHER NON-CURRENT ASSETS AND DEFERRED CHARGES, NET 15,297 16,273 ---------- ---------- TOTAL ASSETS $ 296,803 $ 290,619 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: CURRENT MATURITIES OF LONG-TERM DEBT $ 2,253 $ 2,391 NOTES PAYABLE, BANKS 257 98 CASH OVERDRAFT 11,836 10,575 ACCOUNTS PAYABLE 45,337 54,597 ACCRUED EXPENSES 46,400 51,190 ---------- ---------- TOTAL CURRENT LIABILITIES 106,083 118,851 SENIOR SUBORDINATED NOTES 55,000 90,000 LONG-TERM DEBT 27,129 28,487 GUARANTEED EMPLOYEES' STOCK OWNERSHIP PLAN 8,232 9,429 OBLIGATION POSTRETIREMENT BENEFIT LIABILITY 14,581 14,378 MINIMUM PENSION LIABILITY 2,173 2,173 OTHER LONG-TERM LIABILITIES 4,042 5,169 DEFERRED INCOME TAXES 364 342 MINORITY INTEREST 977 1,319 218,581 270,148 ---------- ---------- REDEEMABLE CONVERTIBLE PREFERRED STOCK 24,000 24,000 GUARANTEED EMPLOYEES' STOCK OWNERSHIP PLAN OBLIGATION (8,232) (9,429) TREASURY STOCK, AT COST (4,902) (4,718) ---------- ---------- 10,866 9,853 ---------- ---------- COMMON STOCK 88,883 21,158 MINIMUM PENSION LIABILITY (2,173) (2,173) FOREIGN CURRENCY TRANSLATION ADJUSTMENTS (20,152) (18,048) RETAINED EARNINGS 946 9,821 ---------- ---------- 67,504 10,758 LESS TREASURY STOCK, AT COST (148) (140) ---------- ---------- 67,356 10,618 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 296,803 $ 290,619 ========== ==========
TOKHEIM CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (IN THOUSANDS)
SIX MONTHS ENDED -------------------------------- MAY 31, 1998 MAY 31, 1997 UNAUDITED UNAUDITED -------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: NET EARNINGS (LOSS) $ (8,143) $ 1,335 ADJUSTMENTS TO RECONCILE NET EARNINGS (LOSS) TO CASH PROVIDED FROM (USED IN) OPERATIONS: WRITE-OFF OF IN PROCESS RESEARCH AND DEVELOPMENT 5,879 -- EXTRAORDINARY LOSS FROM DEBT EXTINGUISHMENT 4,965 -- DEPRECIATION AND AMORTIZATION 5,118 4,380 AMORTIZATION OF DEFERRED DEBT ISSUANCE COST 721 924 MINORITY INTEREST (342) 82 GAINS ON SALE OF PROPERTY, PLANT, AND EQUIPMENT (2) (77) DEFERRED INCOME TAXES 31 22 CHANGES IN ASSETS AND LIABILITIES: RECEIVABLES, NET 5,142 14,585 INVENTORIES (2,783) (1,755) PREPAID EXPENSES 98 (1,475) ACCOUNTS PAYABLE (8,677) (877) ACCRUED EXPENSES (5,225) (4,073) U.S. AND FOREIGN INCOME TAXES (202) 521 OTHER (833) (1,793) ---------- ---------- NET CASH PROVIDED FROM (USED IN) OPERATIONS (4,253) 11,799 ---------- ---------- CASH FLOWS FROM INVESTING AND OTHER ACTIVITIES: ACQUISITION, NET OF CASH ACQUIRED (12,137) --- PLANT AND EQUIPMENT ADDITIONS (5,058) (3,375) PROCEEDS FROM SALE OF PROPERTY, PLANT, AND EQUIPMENT 177 379 ---------- ---------- NET CASH USED IN INVESTING AND OTHER ACTIVITIES (17,018) (2,996) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: REDEMPTION OF SENIOR SUBORDINATED NOTES (35,000) --- PREMIUMS PAID ON DEBT EXTINGUISHMENT (3,450) --- DECREASE IN TERM DEBT (386) (4,548) DECREASE IN NOTES PAYABLE, BANKS (830) (6,327) INCREASE IN CASH OVERDRAFT 1,461 2,332 PROCEEDS FROM ISSUANCE OF COMMON STOCK 72,582 286 EQUITY ISSUANCE COSTS (4,858) --- TREASURY STOCK, NET (191) (300) PREFERRED STOCK DIVIDENDS (744) (758) ---------- ---------- NET CASH PROVIDED FROM (USED IN ) FINANCING ACTIVITIES 28,584 (9,315) ---------- ---------- EFFECT OF TRANSLATION ADJUSTMENT ON CASH (1,441) (266) CASH AND CASH EQUIVALENTS: INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,872 (778) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 6,438 9,814 ---------- ---------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 12,310 $ 9,036 ========== ==========
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS The interim financial statements are unaudited and reflect all adjustments (consisting solely of normal recurring adjustments, other than the merger and acquisitions costs and other unusual items and extraordinary loss from debt extinguishment) that, in the opinion of management, are necessary for a fair statement of the financial position, results of operations and cash flows of the financial position, of operations and cash flows of the interim periods presented. This report includes information in a condensed form and should be read in conjunction with the audited consolidated financial statements included in the Company's report on Form 10-K for the year ended November 30, 1997, filed by Tokheim Corporation (the "Company") with the Securities and Exchange Commission on February 13, 1998. The results of operations for the three and six month periods ended May 31, 1998 are not necessarily indicative of the results to be expected for the full year or any other interim period. Certain prior year amounts in these financial statements have been reclassified to conform with current period presentation. ACQUISITION OF RPS BUSINESS OF SCHLUMBERGER LIMITED On June 19, 1998, Tokheim announced the signing of an agreement (the "Purchase Agreement") regarding the acquisition (the "Acquisition") of the fuel dispenser, systems and service business of Schlumberger Limited (the "RPS Business"). The Purchase Agreement contains other provisions customary for transactions of this type, including representations and warranties with respect to the conditions and operations of the RPS Business, covenants with respect to the conduct of the RPS Business' operations prior to the consummation of the Acquisition and various closing conditions, including the receipt or waiver of all other necessary consents and approvals and the continued accuracy of representations and warranties contained in the Purchase Agreement. In connection with the Acquisition of the RPS Business, the Company is in the process of finalizing a comprehensive refinancing of the its current debt structure. Included in this refinancing plan, the Company has commenced a tender offer to repurchase the remaining $55,000 of its outstanding 11 1/2% Senior Subordinated Notes due 2006 (the "Notes") at a tender price of 119.512%, expressed as a percentage of the original face value of the Notes. The Company believes that this refinancing will provide more than adequate funds to consummate the Acquisition and support the Company's working capital needs for the short-term and on into the foreseeable long- term future. Terms of this refinancing are not yet final. ACQUISITION OF MANAGEMENT SOLUTIONS, INC. In December 1997, the Company acquired Management Solutions, Inc. ("MSI"). MSI develops and distributes retail automation systems (including Point of Sale ("POS") software), primarily for the convenience store, petroleum dispensing and fast food service industries. The Company paid MSI's stockholders an initial amount of $12,000. The Company is also obligated to make contingent payments of up to $13,200 over the next three years based upon MSI's performance. The $13,200 consists of $8,000 of additional purchase price, $2,600 related to a non-compete agreement, and $2,600 of additional employee compensation. The Company borrowed funds for the initial purchase price under the Company's bank credit facility (the "Bank Credit Facility"). As part of the transaction, the Company entered into an employment relationship with Arthur S. Elston, the President of MSI, pursuant to which he will oversee the Company's retail automation systems business. The transaction was accounted for as a purchase. Intangible assets of $4,800 were recorded which are being amortized over four years. In process research and development ("R & D") of $5,900 was written off in connection with the acquisition and is included in merger and acquisition ("M & A") costs and other unusual items in the consolidated statement of earnings. The portion of the contingent payments that do not relate to employee compensation will be allocated to various intangible assets and goodwill amortized over periods ranging from four to twelve years as the payments are made. EARNINGS PER SHARE The Company adopted Statement of Financial Accounting Standards SFAS No. 128, Earnings Per Share, during the first quarter of fiscal 1998. Under SFAS No. 128, the Company presents two earnings per share ("EPS") amounts, Basic and Diluted. Basic EPS is calculated based on earnings available to common shareholders and the weighted average number of shares outstanding during the reported period. Diluted EPS includes additional dilution from potential common stock, such as stock issuable pursuant to the conversion of preferred stock or the exercise of stock options outstanding. The incremental shares from conversions of preferred stock and the exercise of stock options were not included in computing diluted EPS for the three and six month periods ended May 31, 1998, since the effect of such is antidilutive during periods when a net loss is reported. For the three month and six month periods ended May 31, 1998 there were 767,817 shares of convertible preferred stock outstanding and 228,528 and 245,596 of vested and non-vested stock options, respectively, that could be exercised, which could have a dilutive effect on EPS in the future. During the three month and six month periods ended May 31, 1998, 4,250 and 74,812, respectively, of stock options were exercised. EPS for the three and six month periods ended May 31, 1997, has been restated to apply the provisions of SFAS No. 128. Earnings per common share calculated for the three and six month periods ended May 31, 1997, on a primary and fully diluted basis under the provisions of Accounting Principles Board Opinion No. 15 differs by less than one cent per share from that calculated on a basic and diluted basis under SFAS No. 128 as there is no difference in the earnings amounts applicable to common stock and the difference between the weighted average shares outstanding used in the two calculations is not material. The following table presents information necessary to calculate earnings per share for the three and six month periods ended May 31, 1998 and 1997.
Basic Three Months Ended Six Months Ended May 31, May 31, May 31, May 31, 1998 1997 1998 1997 ---- ---- ---- ---- Shares outstanding (in thousands): Weighted average outstanding............ 11,884 7,997 10,087 7,938 ====== ===== ====== ===== Net earnings (loss): Before extraordinary item............... $ 2,427 $ 1,210 $ (3,178) $ 1,335 Extraordinary loss on debt extinguishment, net of tax benefit.... (4,965) -- (4,965) -- ------- ---- ------- ---- Net earnings (loss)..................... (2,538) 1,210 (8,143) 1,335 Preferred stock dividend................ (370) (375) (744) (758) ----- ----- ----- ----- Earnings (loss) applicable to common stock................................. $ (2,908) $ 835 $ (8,887) $ 557 ========== ========= ========= ========= Net earnings (loss) per common share: Before extraordinary item............... $ 0.17 $ 0.10 $ (0.39) $ 0.07 Extraordinary loss on debt extinguishment, net of tax benefit.... (0.42) -- (0.49) -- --------- --------- --------- --------- Net earnings (loss)..................... $ (0.25) $ 0.10 $ (0.88) $ 0.07 ========= ========= ========= =========
For financial reporting purposes, the loss per share, assuming full dilution, is considered to be the same as basic since the effect of the common stock equivalents would be antidilutive.
Diluted Three Months Ended Six Months Ended May 31, May 31, May 31, May 31, 1998 1997 1998 1997 ---- ---- ---- ---- Shares outstanding (in thousands): Weighted average outstanding............ 11,884 7,997 10,087 7,938 Share equivalents....................... 229 57 -- 54 Weighted conversion of preferred stock... 768 791 -- 792 ------ ----- ------ ----- Adjusted outstanding.................... 12,881 8,845 10,087 8,784 ====== ===== ====== ===== Net earnings (loss): Before extraordinary item............... $ 2,427 $ 1,210 $ (3,178) $ 1,335 Extraordinary loss on debt extinguishment, net of tax benefit.... (4,965) -- (4,965) -- ------- --------- ------- ---- Net earnings (loss)..................... (2,538) 1,210 (8,143) 1,335 Preferred stock dividend................ (370) (375) (744) (758) ------- --------- ------- -------- Earnings (loss) applicable to common stock..................................$ (2,908) $ 835 $ (8,887) $ 557 ========= ========= ========= ========= Net earnings (loss) per common share: Before extraordinary item............... $ 0.16 $ 0.09 $ (0.39) $ 0.07 Extraordinary loss on debt extinguish- ment, net of tax benefit............. (0.39) -- (0.49) -- ---------- --------- --------- --------- Net earnings (loss)..................... $ (0.23) $ 0.09 $ (0.88) $ 0.07 ========= ========= ========= =========
ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards ("SFAS") No. 129 "Disclosure of Information about Capital Structure," was adopted during the first quarter of the fiscal year ending November 30, 1998. This statement did not have a material impact on the Company's financial position, results of operations or cash flows as disclosure requirements did not change for the Company with this new statement. SFAS No. 131 "Disclosures about Segments of an Enterprise and Related information," and SFAS No. 132 "Employers' Disclosures about Pensions and Other Postretirement Benefits," are effective for the year ending November 30, 1999. In the opinion of management, these statements will not have a material impact on the Company's financial position, results of operations, or cash flows. SFAS No. 130 "Reporting Comprehensive Income," is effective for the year ending November 30, 1999. Due to the significance of the foreign currency translation adjustments recorded, comprehensive income is expected to be significantly lower than reported net earnings. SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," was issued in June, 1998 and is effective for the year ending November 30, 2000. SFAS No. 133 establishes a new model for accounting for derivatives in the balance sheet as either assets or liabilities and measured at fair value. Certain disclosures concerning the designation and assessment of hedging relationships are also required. In the opinion of the Company, the adoption of this statement will not have a material impact on the Company's financial position, results of operations, or cash flows. The American Institute of Certified Public Accountants ("AICPA") Statements of Position ("SOP") No. 96-1 "Environmental Remediation Liabilities," and SOP No. 97-2 "Software Revenue Recognition," were adopted during the first quarter of 1998. SOP No. 96-1 provides guidance for recognizing, measuring and disclosing environmental remediation liabilities. SOP No. 97-2 supersedes SOP No. 91-1 and provides more specific guidance on revenue recognition related to software products. The adoption of these statements did not have a material impact on the Company's financial position, results of operations or cash flows. SOP No. 98- 1 "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," is effective for the year ending November 30, 2000. The Company adopted this statement effective March 1, 1998 capitalizing approximately $400 associated with internally developed software developed in connection with its implementation of the new financial and accounting software package. COMMON STOCK OFFERING In March 1998, the Company completed an offering of 4,370,000 shares of its common stock (the "Offering"). Net proceeds from the Offering totaled approximately $67,724. The Company used $39,356 of the proceeds to redeem $35,000 in aggregate principal amount of the Notes. These Notes were redeemed at the call price of 109.857%, expressed as a percentage of the original face value, resulting in premiums paid of $3,450 along with accrued interest of $906. Following the redemption, $55,000 in aggregate principal amount of the Notes remains outstanding. The Company recorded an extraordinary loss on the extinguishment of the Notes of approximately $4,965 during the second quarter of 1998. This loss includes $3,450 of premiums paid to purchase the Notes and $1,515 representing the write-off of a proportionate share of the original unamortized deferred issuance costs. The remaining $28,368 was applied toward the Bank Credit Facility and general corporate purposes. In December 1997, approximately $12,000 was borrowed under the Bank Credit Facility to finance the acquisition of MSI. This amount was repaid as part of the reduction of the Bank Credit Facility balance. In the period prior to when the Company was able to effect the redemption of the Notes, the proceeds were used to reduce the outstanding balance of the Bank Credit Facility with the remaining amount placed in short-term investments. See financial statements and accompanying notes in the Company's 1997 Annual Report to Shareholders. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Tokheim is one of the world's largest manufacturers and servicers of electronic and mechanical petroleum dispensing systems. These systems include petroleum dispensers and pumps, POS, dispenser payment or "pay-at-the-pump" terminals, replacement parts and upgrade kits. As a result of its acquisition of the petroleum dispenser business of Sofitam S.A. ("Sofitam") in September 1996, Tokheim has positioned itself as a global competitor in the petroleum dispenser business, with the ability to provide both products and services to customers in over 80 countries. Tokheim is a leading supplier of petroleum dispensing systems in the United States, France, Canada, Mexico, and Africa, and has strong market positions in Italy, the United Kingdom, Germany, and Spain. The Company also has operations established in Asia, Eastern Europe, and Latin America. On June 19, 1998, Tokheim announced the signing of the Purchase Agreement regarding the Acquisition of the RPS Business of Schlumberger Limited. See "Notes to the Consolidated Condensed Financial Statements - Acquisition of the RPS Business of Schlumberger Limited." RESULTS OF OPERATIONS Consolidated sales for the three and six month periods ended May 31, 1998 were $99,652 and $190,505, respectively. Consolidated sales, excluding sales of the newly acquired subsidiary, MSI, were $97,796 and $187,034 as compared to $95,857 and $187,881 in the year ago three and six month periods, respectively. On a comparable basis, consolidated sales for the 1998 three month period increased 2.0% over the prior year period with the six month sales declining by 0.5% from 1997 levels. Sales for North America, excluding export sales, have increased 22.3% for the three month period from $34,935 in 1997 to $42,712 in 1998. The six month period sales have increased 17.3% from $65,855 to $77,220. This increase is due to a stronger demand in the Company's retail distribution and commercial dispenser sales for the first half of the year. This demand was driven by new, more convenient products, such as credit/debit card readers, environmental regulations, such as those requiring vapor recovery systems, and unusually mild weather in the northern regions for the first half of the year, which facilitated an earlier than normal start of the construction period. International sales, including domestic export sales, have decreased 9.5% for the three month period from $60,882 in 1997 to $55,804 in 1998. The six month period sales for 1998 have decreased 10.0% from 1997 amounts of $122,026 to $109,814. A major contributing factor to this decrease in sales dollars for the three and six month periods is attributable to the continued decline in foreign currency exchange rates from prior year levels. International sales for the three and six month periods ended May 31, 1998 would have been $2,741 and $7,308 higher, respectively, if average exchange rates of European and African currencies remained consistent with 1997 rates. In addition, current year domestic export sales to the Asia Pacific region have materially declined from prior year levels caused by the significant economic downturn in that region's economy. Although the United States of America ("U.S.") has taken steps to assist in the improvement of the Asia Pacific region's economy, there can be no assurance as to when Asian market conditions will improve or whether they may worsen or spread to other regions. Gross margins as a percent of sales (defined as net sales less cost of sales divided by net sales) have remained constant at 26.6% for each of the three month periods ended May 31, 1998 and 1997. The gross margin for the six month period ended May 31, 1998 was 26.4% indicating a 1.3% improvement from the year ago period. This improvement was primarily due to the unusually high margins obtained during the first three months of 1998, brought on by strong North America sales volumes. The first three months of the Company's business cycle are generally lower sales volume months creating less opportunity to recover manufacturing fixed cost. Selling, general, and administrative expenses as a percent of sales for the three and six month periods ended May 31, 1998 were 18.7% and 18.3%, respectively. On a comparable basis, after excluding the effects of MSI, these expenses were 18.3% and 17.2% for the three and six month periods of 1998 compared to 17.7% and 17.5% for the same year ago periods. The increase in the three month period of 1998 was attributed to increased costs associated with year 2000 corrective actions and royalty payments to satisfy a previously settled lawsuit. The decrease in the six month period of 1998 is attributable to the Company's continued implementation of the Sofitam consolidation plan resulting in continued cost reductions in the international operations. Merger and acquisition cost and other unusual items for the three month period ended May 31, 1998 relates to involuntary termination and other exit costs incurred in connection with the sales office in Boca Raton, Florida. The Company has ceased operations in Boca Raton to provide more responsive attention to its customers in the Latin American region and Mexico through its Tokheim de Mexico subsidiary. In addition to the restructuring expenses, the merger and acquisition costs and other unusual items for the six month period ended May 31, 1998 consists primarily of a $5,987 non-recurring write-off for in process research & development ("R&D") that was purchased in connection with the acquisition of MSI. This amount represents the estimated fair value of acquired incomplete R&D projects as determined by an independent appraisal. Net interest expense for the three and the six month periods ended May 31, 1998 have decreased by $1,133 and $862, respectively. These decreases are due to significantly reduced debt levels from the prior year. The Company reduced its outstanding borrowing under its Bank Credit Facility by $28,349 and repurchased $35,000 of its Notes from the net proceeds received from the March 1998 equity offering. Depreciation and amortization expense for the three and six month periods of 1998 was $2,619 and $5,118 versus $2,452 and $4,380 reported in the comparable year ago periods. The majority of the increase between periods relates to increased amortization expense related to intangible assets recorded in connection with the acquisition of MSI, as well as increased depreciation expense on capital additions during the current year. Foreign currency gains for the 1998 second quarter were $815 verses gains of $57 in the second quarter of 1997. The current year to date foreign currency gains were $780 compared to gains of $177 in the first six months of 1997. During the second quarter of 1998 the Company realized a foreign currency gain of $770 associated with the repayment of various French Franc denominated Euro Currency contracts previously entered into under the Company's Bank Credit Facility. Under the terms of the Bank Credit Facility, the Company has the ability to borrow funds under Euro Currency contracts denominated in a variety of foreign currencies. Due to the decline in the value of the French Franc, the Company was able to repay these contracts with less U.S. Dollars than it received when the original contracts were entered into. Currently all remaining contracts held under the Bank Credit Facility are denominated in U.S. Dollars. Other income, net, for the second quarter of 1998 increased 0.4% as a percent of sales from the prior year period. This increase was attributable to fluctuations in numerous small income and expense items, none of which are individually significant. Other income, net, for the six month periods ended May 31, 1998 and 1997 remained unchanged at 0.1% of sales. Income taxes have increased in the current year for both the three and six month periods as compared to the year ago periods. This increase is due to higher aggregate pretax earnings at foreign subsidiaries. As a result of the above mentioned items, earnings before extraordinary loss from debt extinguishment were $2,427 or $0.16 per common share on a diluted basis for the three months ended May 31, 1998 compared to earnings of $1,210 or $0.09 per common share on a diluted basis for the same period in 1997. Loss before extraordinary loss from debt extinguishment was $3,178 or $0.39 per common share on a diluted basis for the six months ended May 31, 1998 compared to earnings of $1,335 or $0.07 per common share on a diluted basis for the same period in 1997. During the second quarter of 1998, the Company recorded an extraordinary loss from debt extinguishment of $4,965, or $0.39 and $0.49 loss per diluted common share for the three month and six month periods ended May 31, 1998, respectively. This loss was the result of the Company redeeming $35,000 of its Notes under the call provision of the related indenture. The amount includes $3,450 of premiums paid to call the Notes and $1,515 representing the write-off of a proportionate share of the original unamortized deferred issuance cost. LIQUIDITY AND CAPITAL RESOURCES Cash used in operations for the first six months ended May 31, 1998, was $4,253 versus cash provided by operations of $11,799 in the comparable period of 1997. This decline from the prior year was caused primarily by decreased accounts payables, accrued expenses and increased inventories for the six month period to a greater extent than in the prior year. Cash flow from accounts receivable reductions were $14,585 in the year ago period compared to $5,142 in the current year. During the first six months of 1997 the Company made major improvements in the newly acquired Sofitam entities accounts receivable collection period and therefore generated an exceptionally large inflow of cash from receivables collections at these locations. In March 1998, the Company completed an offering of 4,370,000 shares of its common stock (the "Offering"). Net proceeds from the Offering totaled approximately $67,724. The Company used $39,356 of the proceeds to redeem $35,000 in aggregate principal amount of the Company's Notes. These Notes were redeemed at the call price of 109.857%, expressed as a percentage of the original face value, resulting in premiums paid of $3,450 along with accrued interest of $906. Following the redemption, $55,000 in aggregate principal amount of the Notes remains outstanding. The remaining $28,368 was applied toward the Bank Credit Facility and general corporate purposes. In December 1997, approximately $12,000 was borrowed under the Bank Credit Facility to finance the acquisition of MSI. This amount was repaid as part of the reduction of the Bank Credit Facility balance. In the period prior to when the Company was able to effect the redemption of the Notes, the proceeds were used to reduce the outstanding balance of the Bank Credit Facility with the remaining amount placed in short-term investments. The Company's French subsidiaries participate, as needed, in a customary practice of selling traits (selling accounts receivable without recourse) to financial institutions. Under this agreement, the subsidiaries present traits to financial institutions and receive 95% of the face value in the form of short-term loans. These loans bear interest at a variable rate, which was 3.8% at May 31, 1998. When the subsidiaries receive payment from the customers, they remit 95% of the amount received back to the financial institutions plus accrued interest. The amount outstanding at May 31, 1998 was approximately $7,062. The Company did not sell traits prior to 1997. The Company incurred capital expenditures of $5,058 and $3,375 for the six months ended May 31, 1998 and 1997, respectively. The increase relates primarily to capital requirements for implementing the consolidation plan for Sofitam, improvements at the Company's Fort Wayne, Indiana manufacturing facility, and capitalizable costs associated with the implementation of new finance and accounting software packages at the Fort Wayne, Indiana and Lansdale, Pennsylvania locations. The Company adopted SOP No. 98-1 "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," effective March 1, 1998, capitalizing approximately $400 associated with internally developed software developed in connection with its implementation of the new financial and accounting software package. In connection with the continued implementation of the Sofitam consolidation plan, the Company expects to incur a number of charges. During the first six months of 1998, the Company charged $1,376 against the acquisition accrual recorded for estimated cost necessary to realign the Sofitam operations in Europe, including the closure of certain redundant operations. This realignment also resulted in $137 of charges against operating income for the 1998 six month period. With respect to the consolidation, the Company anticipates charging $6,000 against the remaining acquisition accrual during the next twelve to eighteen months. The Company also expects to charge an additional $1,600 against operating income for continued realignments in the second half of 1998. These expenditures were originally scheduled for the 1999 fiscal year, however, due to changing circumstances the Company has stepped up its timetable for these realignments. As part of the MSI acquisition, the Company is obligated to make contingent payments of up to $13,200 over the next three years based on MSI's performance. The $13,200 consists of $8,000 of additional purchase price, $2,600 related to a non-compete agreement, and $2,600 of additional employee compensation. The Company has guaranteed loans to the Employees' Stock Ownership Plan ("ESOP") in the amounts of $8,232 and $9,429 at May 31, 1998 and 1997, respectively. The Trustee who holds the ESOP Preferred Stock may elect to convert each preferred share to one common share in the event of a redemption by Tokheim, certain consolidations or mergers of Tokheim, or a redemption by the Trustee that is necessary to provide for distributions under the Company's Retirement Savings Plan. A participant may elect to receive a distribution from the plan in cash or common stock. If redeemed by the Trustee, the Company is responsible for purchasing the preferred stock at the twenty-five dollar floor value. The Company may elect to pay the redemption price in cash or an equivalent amount of common stock. Preferred stock dividends paid were $744 and $758 for the first six months of 1998 and 1997, respectively. In December 1997, the Company began to implement its year 2000 ("Y2K") plan, including the organization and staffing of a full-time Y2K program office. The Company has organized the process into the following areas: product certification (ensuring all products sold by the Company are Y2K compliant); internal information systems (ensuring all internal hardware and software is Y2K compliant through upgrades or replacement); suppliers, distributors and external agents (ensuring all suppliers, distributors and external agents used by the Company to purchase or sell goods and services are Y2K compliant); and manufacturing and infrastructure (ensuring manufacturing and infrastructure systems are Y2K compliant). As of June 30, 1998, all of the Company's products have been tested; all critical suppliers and distributors have been surveyed with such follow-up as is needed; 40% of applicable software programs have been converted and tested; and the manufacturing and infrastructure segment of the project is to begin shortly. The Company expects to complete all of its diagnostics by the end of the third quarter, 1999. To date, the Company has not uncovered any major Y2K problems. The Company estimates that it will spend a total of approximately $2,200 by December 31, 1999 (of which approximately $540 had been sent by May 31, 1998), to become Y2K compliant. The Company's long-term investments and long-term loans to foreign subsidiaries, when translated at the May 31, 1998 and November 30, 1997 period end currency rates, resulted in a translation adjustment that is reflected as a reduction to shareholders' equity of $20,263 and $18,048, respectively. The adjustments represent the effect of changes in the current rate of exchange from the beginning of the year to the end of the six month periods used in translating the net assets of foreign subsidiaries, including certain long-term intercompany loans of foreign subsidiaries into U.S. Dollar amounts. The majority of the 1998 and 1997 adjustments are the result of translating long-term loans to foreign affiliates, which were established to complete the acquisition of Sofitam. It should be noted that the Company's loan covenants exclude foreign currency translation gains or losses when calculating compliance with loan covenants. No cash dividends on common stock were declared or paid during the period. Currently, the Bank Credit Facility and the indenture governing the Notes restrict the payment of dividends. Based upon the above discussions of liquidity and capital resources, together with the Company's ability to generate future cash flows from operations through various means and the availability of borrowing capacity under the Company's Bank Credit Facility, $27,424 at July 3, 1998, the Company believes that it has adequate liquidity available to it to meet cash requirements for the short-term and the foreseeable long-term periods. This assessment does not take into consideration the effect of the pending consummation of the Acquisition as discussed below. After the Acquisition After consummation of the Acquisition, the Company's principal sources of liquidity are expected to be cash flow from operations, including cash flow anticipated to be generated from the Acquisition and available borrowings under the agreements effecting the related refinancing. It is expected that the Company's principal uses of cash will be to provide working capital, finance capital expenditures, fund costs associated with the Acquisition, implementation of a consolidation plan and meet debt service requirements. Following the consummation of the Acquisition, the Company will be highly leveraged. Based upon current operations, anticipated cost savings and future growth, the Company believes that its cash flow from operations, together with available borrowings under the agreements effecting the refinancing and its other sources of liquidity (including leases), will be adequate to meet its anticipated requirements for working capital, capital expenditures, lease payments and scheduled principal and interest payments. There can be no assurance, however, that the Company's business will continue to generate cash flow at or above current levels or that estimated cost savings or growth can be achieved. In connection with the Acquisition, the Company is in the process of finalizing a comprehensive refinancing of the Company's current debt structure. Included in this refinancing plan, the Company has commenced a tender an offer to repurchase the remaining $55,000 of its outstanding Notes at a tender price of 119.512%, expressed as a percentage of the original face value of the Notes. The Company belies that this refinancing will provide more than adequate funds to consummate the Acquisition and support the Company's working capital needs for the short-term and on into the foreseeable long-term future. Terms of this refinancing are not yet final. EXHIBIT INDEX NO. DESCRIPTION (a) 3.1 Restated Articles of Incorporation of the Registrant, as amended, as filed with the Indiana Secretary of State on February 5, 1997 (incorporated by reference to the Registrant's Annual Report on form 10-K/A for the year ended November 30, 1997). 3.2 Bylaws of the Registrant, as rested on July 12, 1995 and amended March 2, 1998. 10.12 Amendment No. 5 to Credit Agreement, dated as of March 20, 1998, among the Registrant, certain subsidiaries of the Registrant, certain banks and NBD Bank, N.A. (the "Credit Agreement"), dated as of September 6, 1996 (incorporated by reference to the Registrant's Quarterly Report on form 10-Q for the period ended February 28, 1998). 11 Statement regarding computation of per share earnings. 27 Financial data schedule. (b) Reports on Form 8-K. The Company filed a report on form 8-K dated December 31, 1997, describing the MSI acquisition. An amendment to that form 8-K dated December 31, 1997, including financial statements of MSI and unaudited pro forma financial statements. The Company filed a form 8-K dated March 17, 1998 containing an exhibit to the registration statement for the Offering. 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. TOKHEIM CORPORATION Date: July 14, 1998 /S/ DOUGLAS K. PINNER ______________________________ Chairman, President and Chief Executive Officer Date: July 14, 1998 /S/ JOHN A. NEGOVETICH _____________________________ Executive Vice-President, Finance and Administration and Chief Financial Officer EXHIBIT INDEX NO. DESCRIPTION (a) 3.1 Restated Articles of Incorporation of the Registrant, as amended, as filed with the Indiana Secretary of State on February 5, 1997 (incorporated by reference to the Registrant's Annual Report on form 10-K/A for the year ended November 30, 1997). 3.2 Bylaws of the Registrant, as rested on July 12, 1995 and amended March 2, 1998. 10.12 Amendment No. 5 to Credit Agreement, dated as of March 20, 1998, among the Registrant, certain subsidiaries of the Registrant, certain banks and NBD Bank, N.A. (the "Credit Agreement"), dated as of September 6, 1996 (incorporated by reference to the Registrant's Quarterly Report on form 10-Q for the period ended February 28, 1998). 11 Statement regarding computation of per share earnings. 27 Financial data schedule. (b) Reports on Form 8-K. The Company filed a report on form 8-K dated December 31, 1997, describing the MSI acquisition. An amendment to that form 8-K dated December 31, 1997, including financial statements of MSI and unaudited pro forma financial statements. The Company filed a form 8-K dated March 17, 1998 containing an exhibit to the registration statement for the Offering. TOKHEIM CORPORATION AND SUBSIDIARIES Exhibit (11) - Earnings per share For the three and six month periods ended May 31, 1998 and 1997. (Restated to apply SFAS No. 128) Basic earnings per share ("EPS") is calculated based on earnings (loss) available to common shareholders and the weighted average number of common stock shares outstanding during each period. Diluted EPS includes additional dilution from potential common stock equivalents such as stock issued pursuant to the conversion of preferred stock or the exercise of stock options outstanding. The following table presents information necessary to calculate earnings per share for the three month and six month periods ended May 31, 1998 and 1997.
Basic Three Months Ended Six Months Ended ------------------ ----------------- May 31, May 31, May 31, May 31, 1998 1997 1998 1997 Shares outstanding (in thousands): Weighted average outstanding............ 11,884 7,997 10,087 7,938 ====== ===== ====== ===== Net earnings (loss): Before extraordinary item............... $ 2,427 $ 1,210 $ (3,178) $ 1,335 Extraordinary loss on debt extinguishment, net of tax benefit.... (4,965) -- (4,965) -- ------- --------- -------- ------- Net earnings (loss)..................... (2,538) 1,210 (8,143) 1,335 Preferred stock dividend................ (370) (375) (744) (758) ------- --------- --------- --------- Earnings (loss) applicable to common stock................................. $ (2,908) $ 835 $ (8,887) $ 557 ========= ========= ========= ========= Net earnings (loss) per common share: Before extraordinary item............... $ 0.17 $ 0.10 $ (0.39) $ 0.07 Extraordinary loss on debt extinguishment, net of tax benefit.... (0.42) -- (0.49) -- --------- --------- --------- --------- Net earnings (loss).....................$ (0.25) $ 0.10 $ (0.88) $ 0.07 ========== ========= ========= =========
For financial reporting purposes, the loss per share, assuming full dilution, is considered to be the same as basic since the effect of the common stock equivalents would be antidilutive.
Diluted Three Months Ended Six Months Ended May 31, May 31, May 31, May 31, 1998 1997 1998 1997 ---- ---- ---- ---- Shares outstanding (in thousands): Weighted average outstanding............ 11,884 7,997 10,087 7,938 Share equivalents....................... 229 57 246 54 Weighted conversion of preferred stock... 768 791 768 792 ------ ----- ------ ----- Adjusted outstanding..................... 12,881 8,845 11,101 8,784 ====== ===== ====== ===== Net earnings (loss): Before extraordinary item............... $ 2,427 $ 1,210 $ (3,178) $ 1,335 Extraordinary loss on debt extinguishment, net of tax benefit... (4,965) -- (4,965) -- --------- -------- -------- -------- Net earnings (loss)..................... (2,538) 1,210 (8,143) 1,335 Preferred stock dividend................ (370) (375) (744) (758) --------- --------- -------- -------- Earnings (loss) applicable to common stock................................. $ (2,908) $ 835 $ (8,887) $ 557 ========= ========= ========= ========= Net earnings (loss) per common share: Before extraordinary item............... $ 0.16 $ 0.09 $ (0.35) $ 0.07 Extraordinary loss on debt extinguishment, net of tax benefit.... (0.39) -- (0.45) -- --------- --------- --------- --------- Net earnings (loss)..................... $ (0.23) $ 0.09 $ (0.80) $ 0.07 ========= ========= ========= =========
EX-3 2 EXHIBIT 3.2 - BY-LAWS BYLAWS OF TOKHEIM CORPORATION (Restated July 12, 1995; and Amended March 2, 1998) ARTICLE I Meetings of Shareholders Section 1.1 Annual Meetings. Annual meetings of the shareholders of the Corporation shall be held in March of each year, on such date and at such hour and place within or without the State of Indiana as shall be designated by the Board of Directors. The Board of Directors may, by resolution, change the date, time or place of such annual meeting. If the day fixed for any annual meeting of shareholders shall fall on a legal holiday, then such annual meeting shall be held on the first following day that is not a legal holiday. Section 1.2 Special Meetings. Special meetings of the shareholders of the Corporation may be called at any time by a majority of the Board of Directors, the Chairman of the Board or the President and shall be called by the Board of Directors if the Secretary receives written, dated and signed demands for a special meeting, describing in reasonable detail the purpose or purposes for which it is to be held, from the holders of shares representing at least twenty-five percent (25%) of all votes entitled to be cast on any issue proposed to be considered at the proposed special meeting. If the Secretary receives one (1) or more proper written demands for a special meeting of shareholders, the Board of Directors may set a record date for determining shareholders entitled to make such demand. The Board of Directors or the Chairman of the Board, as the case may be, calling a special meeting of shareholders shall set the date, time and place of such meeting, which may be held within or without the State of Indiana. Section 1.3 Notices. A written notice, stating the date, time and place of any meeting of the shareholders, and in the case of a special meeting the purpose or purposes for which such meeting is called, shall be delivered or mailed by the Secretary of the Corporation, to each shareholder of record of the Corporation entitled to notice of or to vote at such meeting no fewer than ten (10) nor more than sixty (60) days before the date of the meeting. In the event of a special meeting of shareholders required to be called as the result of a demand therefor made by shareholders, such notice shall be given no later than the sixtieth (60th) day after the Corporation's receipt of the demand requiring the meeting to be called. Notice of shareholders' meetings, if mailed, shall be mailed, postage prepaid, to each shareholder at his address shown in the Corporation's current record of shareholders. Notice of a meeting of shareholders shall be given to shareholders not entitled to vote, but only if a purpose for the meeting is to vote on any amendment to the Corporation's Restated Articles of Incorporation, merger or share exchange to which the Corporation would be a party, sale of the Corporation's assets, dissolution of the Corporation, or consideration of voting rights to be accorded to shares acquired or to be acquired in a "control share acquisition" ( as such term is defined in the Indiana Business Corporation Law). Except as required by the foregoing sentence or as otherwise required by the Indiana Business Corporation Law or the Corporation's Restated Articles of Incorporation, notice of a meeting of shareholders is required to be given only to shareholders entitled to vote at the meeting. A shareholder or his proxy may at any time waive notice of a meeting if the waiver is in writing and is delivered to the Corporation for inclusion in the minutes or filing with the Corporation's records. A shareholder's attendance at a meeting, whether in person or by proxy, (a) waives objection to lack of notice or defective notice of the meeting, unless the shareholder or his proxy at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, and (b) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder or his proxy objects to considering the matter when it is presented. Each shareholder who has in the manner above provided waived notice or objection to notice of a shareholders' meeting shall be conclusively presumed to have been given due notice of such meeting, including the purpose or purposes thereof. If an annual or special shareholders' meeting is adjourned to a different date, time or place, notice need not be given of the new date, time or place if the new date, time or place is announced at the meeting before adjournment, unless a new record date is or must be established for the adjourned meeting. Section 1.4 Voting. Except as otherwise provided by the Indiana Business Corporation Law or the Corporation's Restated Articles of Incorporation, each share of the capital stock of any class of the Corporation that is outstanding at the record date established for any annual or special meeting of shareholders and is outstanding at the time of and represented in person or by proxy at the annual or special meeting, shall entitle the record holder thereof, or his proxy, to one (1) vote on each matter voted on at the meeting. Section 1.5 Quorum. Unless the Corporation's Restated Articles of Incorporation or the Indiana Business Corporation Law provide otherwise, at all meetings of shareholders a majority of the votes entitled to be cast on a matter, represented in person or by proxy, constitutes a quorum for action on the matter. Action may be taken at a shareholders' meeting only on matters with respect to which a quorum exists; provided, however, that any meeting of shareholders, including annual and special meetings and any adjournments thereof, may be adjourned to a later date although less than a quorum is present. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting. Section 1.6 Vote Required to Take Action. If a quorum exists as to a matter to be considered at a meeting of shareholders, action on such matter (other than the election of Directors) is approved if the votes properly cast favoring the action exceed the votes properly cast opposing the action, except as the Corporation's Restated Articles of Incorporation or the Indiana Business Corporation Law require a greater number of affirmative votes. Directors shall be elected by a plurality of the votes properly cast. Section 1.7 Record Date. Only those persons shall be entitled to notice of or to vote, in person or by proxy, at any shareholders' meeting who shall appear as shareholders upon the books of the Corporation as of the record date for such meeting set by the Board of Directors, which date may not be earlier than the date seventy (70) days immediately preceding the meeting. In the absence of such determination, the record date shall be the fiftieth (50th) day immediately preceding the date of such meeting. Unless otherwise provided by the Board of Directors, shareholders shall be determined as of the close of business on the record date. Section 1.8 Proxies. A shareholder may vote his shares either in person or by proxy. A shareholder may appoint a proxy to vote or otherwise act for the shareholder (including authorizing the proxy to receive, or to waive, notice of any shareholders' meetings within the effective period of such proxy) by signing an appointment form either personally or by the shareholder's attorney-in-fact. An appointment of a proxy is effective when received by the Secretary or other officer or agent authorized to tabulate votes and is effective for eleven (11) months unless a shorter or longer period is expressly provided in the appointment form. The proxy's authority may be limited to a particular meeting or may be general and authorize the proxy to represent the shareholder at any meeting of shareholders held within the time provided in the appointment form. Subject to the Indiana Business Corporation Law and to any express limitation on the proxy's authority appearing on the face of the appointment form, the Corporation is entitled to accept the proxy's vote or other action as that of the shareholder making the appointment. Section 1.9 Removal of Directors. Any or all of the members of the Board of Directors may be removed, with or without cause, only at a meeting of the shareholders called expressly for that purpose, by a vote of the holders of shares representing seventy-five percent (75%) of the votes then entitled to be cast at an election of Directors. Section 1.10 Participation by Conference Telephone. The Chairman of the Board or the Board of Directors may permit any or all shareholders to participate in an annual or special meeting of shareholders by, or through the use of, any means of communication, such as conference telephone, by which all shareholders participating may simultaneously hear each other during the meeting. A shareholder participating in a meeting by such means shall be deemed to be present in person at the meeting. Section 1.11 Notice of Shareholder Business. (a) At any meeting of the shareholders, only such business may be conducted as shall have been properly brought before the meeting, and as shall have been determined to be lawful and appropriate for consideration by shareholders at the meeting. To be properly brought before a meeting, business must be: (i) specified in the notice of meeting given in accordance with Section 1.3 of this Article I, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors or the Chief Executive Officer, or (iii) otherwise properly brought before the meeting by a shareholder. (b) For business to be properly brought before a meeting by a shareholder pursuant to clause (c) above, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal office of the Corporation, not less than 50 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 60 days' notice of the date of the meeting is given to shareholders, notice by the shareholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was given. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the meeting: (i) a brief description of the business desired to be brought before the meeting, (ii) the name and address, as they appear on the Corporation's stock records, of the shareholder proposing such business, (iii) the class and number of shares of the Corporation which are beneficially owned by the shareholder, and (iv) any interest of the shareholder in such business. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at a meeting except in accordance with the procedures set forth in this Section 1.11. The person presiding at the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the Bylaws, or that business was not lawful or appropriate for consideration by shareholders at the meeting, and if he should so determine, he shall so declare to the meeting and any such business shall not be transacted. Section 1.12 Notice of Shareholder Nominees. Nominations of persons for election to the Board of Directors of the Corporation may be made at any meeting of shareholders by or at the direction of the Board of Directors or by any shareholder of the Corporation entitled to vote for the election of directors at the meeting. Shareholder nominations shall be made pursuant to timely notice given in writing to the Secretary of the Corporation in accordance with Section 1.11 of this Article I. Such shareholder's notice shall set forth, in addition to the information required by Section 1.11, as to each person whom the shareholder proposes to nominate for election or reelection as a Director: (a) the name, age, business address and residence address of such person, (b) the principal occupation or employment of such person, (c) the class and number of shares of the Corporation which are beneficially owned by such person, (d) any other information relating to such person that is required to be disclosed in solicitation of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such person's written consent to being named in the proxy statement as a nominee and to serving as a Director if elected), and (e) the qualifications of the nominee to serve as a Director of the Corporation. No shareholder nomination shall be effective unless made in accordance with the procedures set forth in this Section 1.12. The person presiding at the meeting shall, if the facts warrant, determine and declare to the meeting that a shareholder nomination was not made in accordance with the Bylaws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. ARTICLE II Directors Section 2.1 Number and Terms. The business and affairs of the Corporation shall be managed under the direction of a Board of Directors consisting of ten (10) Directors. The Directors shall be divided into three (3) groups consisting of three (3) Directors in each group, with one-third (1/3) the total as near as may be, whose terms expire on successive years; and at each annual meeting of shareholders, the Directors chosen to succeed those, whose terms then expire, shall be identified as being of the same group as the Directors they succeed and shall be elected for a term expiring at the third succeeding annual meeting of shareholders. Despite the expiration of a Director's term, the Director shall continue to serve until his successor is elected and qualified, or until the earlier of his death, resignation, disqualification or removal, or until there is a decrease in the number of Directors. Any vacancy occurring in the Board of Directors, from whatever cause arising, shall be filled by selection of a successor by a majority vote of the remaining members of the Board of Directors (although less than a quorum); provided, however, that if such vacancy or vacancies leave the Board of Directors with no members or if the remaining members of the Board are unable to agree upon a successor or determine not to select a successor, such vacancy may be filled by a vote of the shareholders at a special meeting called for that purpose or at the next annual meeting of shareholders. The term of a Director elected or selected to fill a vacancy shall expire at the end of the term for which such Director's predecessor was elected. In the event the Board of Directors shall increase the total number of its members within the limits provided in the Articles of Incorporation, the Board of Directors shall be authorized to assign such additional member or members to such class of Directors as it deems appropriate and to fill such vacancy for the term of that class to which such additional member or members are assigned. The Directors and each of them shall have no authority to bind the Corporation except when acting as a Board. Section 2.2 Quorum and Vote Required to Take Action. A majority of the whole Board of Directors shall be necessary to constitute a quorum for the transaction of any business, except the filling of vacancies. If a quorum is present when a vote is taken, the affirmative vote of a majority of the Directors present shall be the act of the Board of Directors, unless the act of a greater number is required by the Indiana Business Corporation Law, the Corporation's Restated Articles of Incorporation or these Bylaws. Section 2.3 Annual and Regular Meetings. The Board of Directors shall meet annually, without notice, immediately following the annual meeting of the shareholders, for the purpose of transacting such business as properly may come before the meeting. Other regular meetings of the Board of Directors, in addition to said annual meeting, shall be held on such dates, at such times and at such places as shall be fixed by resolution adopted by the Board of Directors and specified in a notice of each such regular meeting, or otherwise communicated to the Directors. The Board of Directors may at any time alter the date for the next regular meeting of the Board of Directors. Section 2.4 Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President or a majority of the members of the Board of Directors upon not less than twenty-four (24) hours' notice given to each Director of the date, time and place of the meeting, which notice need not specify the purpose or purposes of the special meeting. Such notice may be communicated in person (either in writing or orally), by telephone, telegraph, teletype or other form of wire or wireless communication, or by mail, and shall be effective at the earlier of the time of its receipt or, if mailed, five (5) days after its mailing. Notice of any meeting of the Board may be waived in writing at any time if the waiver is signed by the Director entitled to the notice and is filed with the minutes or corporate records. A Director's attendance at or participation in a meeting waives any required notice to the Director of the meeting, unless the Director at the beginning of the meeting (or promptly upon the Director's arrival) objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. Section 2.5 Written Consents. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if the action is taken by all members of the Board. The action must be evidenced by one (1) or more written consents describing the action taken, signed by each Director, and included in the minutes or filed with the corporate records reflecting the action taken. Action taken under this Section 2.5 is effective when the last Director signs the consent, unless the consent specifies a different prior or subsequent effective date, in which case the action is effective on or as of the specified date. A consent signed under this Section 2.5 shall have the same effect as a unanimous vote of all members of the Board and may be described as such in any document. Section 2.6 Participation by Conference Telephone. The Board of Directors may permit any or all Directors to participate in a regular or special meeting by, or through the use of, any means of communication, such as conference telephone, by which all Directors participating may simultaneously hear each other during the meeting. A Director participating in a meeting by such means shall be deemed to be present in person at the meeting. Section 2.7 Committees. (a) The Board of Directors shall appoint an Audit Committee comprised only of nonofficer members of the Board of Directors, which shall arrange the details of the annual audit of the Corporation and shall recommend to the Board of Directors independent auditors to be presented for consideration by the shareholders. The Board of Directors shall also appoint a Compensation Committee, comprised only of nonofficer members of the Board of Directors, which shall make recommendations to the Board of Directors concerning officers' salaries and other compensation. (b) The Board of Directors may create one (1) or more other committees and appoint members of the Board of Directors to serve on them, by resolution of the Board of Directors adopted by a majority of all the Directors in office when the resolution is adopted. Each committee may have one (1) or more members, and all the members of a committee shall serve at the pleasure of the Board of Directors. (c) To the extent specified by the Board of Directors in the resolution creating a committee, each committee may exercise all of the authority of the Board of Directors; provided, however, that a committee may not: (i) authorize dividends or other distributions, except a committee (or a senior executive officer of the Corporation) may authorize or approve a reacquisition of shares or other distribution if done according to a formula or method or within a range prescribed by the Board of Directors; (ii) approve or propose to shareholders action that is required to be approved by shareholders; (iii) fill vacancies on the Board of Directors or on any of its committees; (iv) amend the Corporation's Restated Articles of Incorporation under IC 23-1- 38-2; (v) adopt, amend, repeal, or waive provisions of these Bylaws; (vi) approve a plan of merger not requiring shareholder approval; or (vii) authorize or approve the issuance or sale or a contract for sale of shares, or determine the designation and relative rights, preferences, and limitations of a class or series of shares, except that the Board of Directors may authorize a committee (or a senior executive officer of the Corporation) to do so within limits prescribed by the Board of Directors. (d) Except to the extent inconsistent with the resolutions creating a committee, Sections 2.1 through 2.6 of these Bylaws, which govern meetings, action without meetings, notice and waiver of notice, quorum and voting requirements and telephone participation in meetings of the Board of Directors, apply to each committee and its members as well. Section 2.8 Compensation. The Board of Directors may fix fees and expenses paid to Directors for attending meetings, and any other compensation paid to Directors by resolution. ARTICLE III Officers Section 3.1 Designation, Selection and Terms. The officers of the Corporation shall consist of a Chief Executive Officer (CEO) and/or President, one or more Vice Presidents, Chief Financial Officer or Treasurer, and Secretary. The Board of Directors may also elect such other officers or assistant officers as it may from time to time determine by resolution creating the office and defining the duties thereof. In addition, the CEO or the President may, by a certificate of appointment creating the office and defining the duties thereof delivered to the Secretary for inclusion with the corporate records, from time to time create and appoint such assistant officers as they deem desirable. The officers of the Corporation shall be elected by the Board of Directors (or appointed by the CEO or the President as provided above) and need not be selected from among the members of the Board of Directors, except for the Chairman of the Board, the CEO and/or President, who shall be members of the Board of Directors. Any two (2) or more offices may be held by the same person. All officers shall serve at the pleasure of the Board of Directors and, with respect to officers appointed by the CEO or the President, also at the pleasure of such officers. The election or appointment of an officer does not itself create contract rights. Section 3.2 Removal. The Board of Directors may remove any officer at any time with or without cause. An officer appointed by the Chairman of the Board or the President may also be removed at any time, with or without cause, by either of such officers. Vacancies in such offices, however occurring, may be filled by the Board of Directors at any meeting of the Board of Directors (or by appointment by the Chairman of the Board or the President to the extent provided in Section 3.1 of these Bylaws). Section 3.3 Chairman of the Board. The Chairman of the Board shall be the chief executive and principal policy-making officer of the Corporation. Subject to the authority of the Board of Directors, he shall formulate the major policies to be pursued in the administration of the Corporation's affairs. He shall study and make reports and recommendations to the Board of Directors with respect to major problems and activities of the Corporation and shall see that the established policies are placed into effect and carried out under the direction of the President. The Chairman of the Board shall, if present, preside at all meetings of the shareholders and of the Board of Directors. Section 3.4 President. Subject to the provisions of Section 3.3, the President shall be the chief operating officer of the Corporation, shall exercise the powers and perform the duties which ordinarily appertain to that office and shall manage and operate the business and affairs of the Corporation in conformity with the policies established by the Board of Directors and by the Chairman of the Board, or as may be provided for in these Bylaws. In connection with the performance of his duties, he shall keep the Chairman of the Board fully informed as to all phases of the Corporation's activities. In the absence of the Chairman of the Board, the President shall preside at meetings of the shareholders and of the Board of Directors. Section 3.5 Executive Vice President. The Executive Vice President shall perform such duties as are assigned by the Board of Directors or the President, shall perform the duties of the President in case of the absence of the President and the Chairman of the Board, and shall report to the President regarding his official activities. Section 3.6 Vice Presidents. Each Vice President shall have such powers and perform such duties as the Board of Directors may, from time to time, prescribe and as the President may, from time to time, delegate to him, and shall report to the President regarding his official activities. The Board of Directors shall also be empowered to specifically designate said Vice President as "Group Vice President," "Senior Vice President," or with any other title descriptive of the Vice President's position. Section 3.7 Chief Financial Officer. The Chief Financial Officer shall have charge of the Corporation's fiscal affairs and keep and hold all moneys, bonds and securities belonging to the Corporation as ordered by the Board of Directors. He shall keep or cause to be kept a correct account and record of the financial affairs of the Corporation in proper books. He shall report to the President regarding his official activities. He shall also be responsible for causing the Corporation to furnish financial statements to its shareholders pursuant to IC 23-1-53-1. Section 3.7.1. Treasurer. If the Board of Directors shall not elect a Chief Financial Officer, then it shall elect a Treasurer in lieu of a Chief Financial Officer. Section 3.8 Secretary. The Secretary shall be the custodian of the books, papers and records of the Corporation and of its corporate seal, if any, and shall be responsible for seeing that the Corporation maintains the records required by IC 23-1-52-1 (other than accounting records) and that the Corporation files with the Indiana Secretary of State the annual report required by IC 23-1-53- 3. The Secretary shall be responsible for preparing minutes of the meetings of the shareholders and of the Board of Directors and for authenticating records of the Corporation, and he shall perform all of the other duties usual in the office of Secretary of a corporation. The Secretary shall report to the President regarding his official activities. Section 3.9 Assistant Officers. An assistant officer shall have and perform the duties and powers of his principal in case of the principal's absence or inability to act, and his duties shall be such as to properly supplement the duties, powers, and functions of the principal officer and as directed by such principal officer and the Board of Directors; and such assistant officer shall report to his superior officer and to the President as to his official activities. Section 3.10 Salary. The Board of Directors may, at its discretion, from time to time, fix the salary of any officer by resolution included in the minute book of the Corporation. ARTICLE IV Checks All checks, drafts or other orders for payment of money shall be signed in the name of the Corporation by such officers or persons as shall be designated from time to time by resolution adopted by the Board of Directors and included in the minute book of the Corporation; and in the absence of such designation, such checks, drafts or other orders for payment shall be signed by either the President or the Chief Financial Officer. If no Chief Financial Officer position exists, then said responsibilities shall be performed by the Treasurer. ARTICLE V Loans Any two of the Chairman of the Board, Chief Executive Officer and/or President, Executive Vice President, or any Vice President, Secretary, and/or Chief Financial Officer or Treasurer, are authorized and empowered to negotiate and make any loan for money from any bank or banking institution or other corporation or person, and to make, deliver and fully execute any promissory note, or other evidence of indebtedness for or on account of said borrowed money, and to accept the proceeds of said loan. EX-27 3 FINANCIAL DATA SCHEDULE
5 1000 6-MOS NOV-30-1998 MAY-31-1998 12,310 0 81,773 3,929 66,372 163,083 111,586 67,660 296,803 103,922 55,000 88,735 16,866 0 (21,379) 296,803 190,505 190,505 140,191 140,191 0 0 7,333 (2,369) 809 (3,178) 0 (4,965) 0 (8,143) (0.88) (0.88) Represents gross inventory net of loss reserve. Represents gross PP&E. Represents redeemable preferred stock of $24,000 less Guaranteed ESOP of $8,232 and treasury stock of $4,902 Represents common stock of $88,883 less treasury stock of $148. Represents retained earnings of $946 less minimum pension liability of $2,173 and foreign currency translation adjustments of $20,152. Includes product development expenses and excludes depreciation and amortization.
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