Document/Exhibit Description Pages Size
1: 10-K Annual Report 55± 236K
2: EX-10.1 Material Contract 23± 94K
11: EX-10.10 Material Contract 17± 76K
12: EX-10.11 Material Contract 20± 90K
13: EX-10.14 Material Contract 8± 40K
14: EX-10.19 Material Contract 37± 150K
3: EX-10.2 Material Contract 23± 94K
15: EX-10.20 Material Contract 6± 28K
4: EX-10.3 Material Contract 23± 94K
5: EX-10.4 Material Contract 23± 94K
6: EX-10.5 Material Contract 23± 94K
7: EX-10.6 Material Contract 23± 94K
8: EX-10.7 Material Contract 23± 94K
9: EX-10.8 Material Contract 20± 89K
10: EX-10.9 Material Contract 20± 87K
16: EX-11 Statement re: Computation of Earnings Per Share 2± 10K
17: EX-21 Subsidiaries of the Registrant 3± 17K
18: EX-23 Consent of Experts or Counsel 1 8K
19: EX-27 Financial Data Schedule (Pre-XBRL) 1 9K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended February 28, 1995
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________________ to _______________________
Commission File No. 1-8862
MARK IV INDUSTRIES, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 23-1733979
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(State or other jurisdiction of (IRS employer Identification number)
incorporation or organization)
501 John James Audubon Pkwy., P.O. Box 810, Amherst, NY 14226-0810
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716) 689-4972
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of Class which registered
---------------------------- ----------------------
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 .
---- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
The aggregate market value of the voting stock of the Registrant held by
non-affiliates of the Registrant based on the closing price of the Common
Stock on May 19, 1995 on the New York Stock Exchange was $938,481,594.
As of May 19, 1995, the number of outstanding shares of Registrant's
Common Stock, $.01 par value, was 60,138,070 shares.
Documents Incorporated By Reference
Portions of the Registrant's definitive proxy statement to be filed
pursuant to Regulation 14A not later than 120 days after the end of the fiscal
year are incorporated by reference into Part III.
MARK IV INDUSTRIES, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-K
PART I Page
Item 1: Business . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2: Properties . . . . . . . . . . . . . . . . . . . . . . . . .14
Item 3: Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .15
Item 4: Submission of Matters to a Vote
of Security Holders . . . . . . . . . . . . . . . . . . . .15
PART II
Item 5: Market for the Company's Common Stock and
Related Security Holder Matters . . . . . . . . . . . . . .16
Item 6: Selected Financial Data. . . . . . . . . . . . . . . . . . .17
Item 7: Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . . . . . . .19
Item 8: Financial Statements and Supplementary
Data. . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Item 9: Disagreement on Accounting and Financial
Disclosure. . . . . . . . . . . . . . . . . . . . . . . . .54
PART III
Item 10: Directors and Executive Officers of the
Registrant. . . . . . . . . . . . . . . . . . . . . . . . .54
Item 11: Executive Compensation . . . . . . . . . . . . . . . . . . .54
Item 12: Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . . .54
Item 13: Certain Relationships and Related
Transactions. . . . . . . . . . . . . . . . . . . . . . . .54
PART IV
Item 14: Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . .55
Signatures . . . . . . . . . . . . . . . . . . . . . . . . .62
Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . 63
PART I
ITEM 1. BUSINESS
General
Mark IV Industries, Inc. ("Mark IV" or "the company") is a diversified
manufacturer of a broad range of proprietary and other power and fluid
transfer products and systems which serve four markets: general industrial;
automotive aftermarket; automotive original equipment manufacturers ("OEMs");
and infrastructure. Power and fluid transfer products and systems accounted
for approximately 90% of Mark IV's net sales in fiscal 1995 after giving pro
forma effect to the company's recent acquisition of Purolator Products Company
("Purolator"). Mark IV is also a leading manufacturer of professional audio
products.
Many of Mark IV's products have a significant, and in certain instances
the leading, share of their respective markets. Products manufactured by Mark
IV principally serve specialized needs in markets in which relatively few
manufacturers compete. These products are primarily sold directly, and
through independent distributors, to other manufacturers and commercial users
in the United States and Europe and, to a lesser extent, in Canada, Latin
America and the Far East. Mark IV operates 71 manufacturing facilities and 52
distribution and sales locations and employs approximately 16,200 people in
eighteen countries.
Mark IV's business strategy is focused on building its power and fluid
transfer business through internal growth, continuation of cost control and
quality improvement programs, and selective strategic domestic and foreign
acquisitions. The company's operating strategy emphasizes management for
continuous improvement, establishing co-operative programs with customers to
engineer, design and develop higher value added systems in addition to
individual products, and the introduction of new, more cost effective and
durable products.
In furtherance of these strategies, over the past five years Mark IV
has: (i) emphasized continuous product development, with over 50% of its
current sales worldwide arising from the introduction of new products or
products which have been redesigned; (ii) significantly expanded its presence
in Western Europe through its June 1993 acquisition of Pirelli Trasmissioni
Industriali, S.p.A. ("PTI"), a leading Italian-based manufacturer of power
transmission products; (iii) substantially increased its domestic production
capacity and strengthened its market position in the power steering and garden
hose markets through its fiscal 1991 acquisition of Anchor Swan, a leading
manufacturer of these and other products; (iv) established distribution
centers to serve markets in Central and South America and the Pacific Rim, and
acquired manufacturing and distribution facilities in Mexico and Sweden; and
(v) implemented cost savings and efficiency programs in its Power and Fluid
Transfer business segment which have contributed to the improvement of the
segment's operating income margins.
Acquisition of Purolator Products Company
As part of the company's strategic emphasis on its power and fluid
transfer business, in November 1994 Mark IV acquired Purolator, which is a
leading manufacturer of filtration products, including automotive oil, air and
fuel filters; residential and commercial heating, ventilating and air-
conditioning ("HVAC") filters; high-technology liquid filtration products; and
specialized industrial filters and filtration systems. The total cost of the
acquisition was $286.3 million. Purolator's filtration business complements
the company's fluid transfer products since many of Purolator's products serve
customers in the same markets as the company's other power and fluid transfer
products, such as certain industrial markets, the automotive aftermarket and,
to a much lesser extent, the automotive OEM market. In addition, filters are
generally an integral part of most power and fluid transfer systems produced
by the company. In particular, the acquisition of Purolator will strengthen
Mark IV's presence in the automotive aftermarket since more than 60% of
Purolator's sales are made to customers in this market. Mark IV also believes
that its extensive sales and distribution network will provide opportunities
for increased sales of Purolator's products.
Segment Information
Prior to the acquisition of Purolator, the company classified its
operations into three business segments: Power and Fluid Transfer;
Transportation; and Professional Audio. Following the acquisition of
Purolator, management reviewed its existing businesses and determined that its
Transportation business segment should be combined with the Power and Fluid
Transfer business segment in view of the similarity in markets and customers
served. Management also believes that the revised classification will enable
the company to benefit from a global organizational structure and the
coordination of distribution activities.
The company now classifies its operations into the following two
business segments:
(i) Power and Fluid Transfer, which includes the design, manufacture
and distribution of products and systems primarily in the general
industrial market, the automotive aftermarket, the automotive OEM
market and the infrastructure market. Such products and systems
include those related to rubber and plastic belts, hose, fittings
and related assemblies; filters; power transfer mechanisms for
door control systems used in mass transit vehicles; information
displays; and advanced traffic control and management systems; and
(ii) Professional Audio, which includes the design and manufacture of
products and systems used primarily in the high-performance
professional audio market, such as microphones, speakers, public
address and musical instrument loudspeaker systems, audio signal
processors, and sound enhancement and noise canceling equipment.
The results of operations of Purolator have been included in the
company's results of operations for fiscal 1995 from its November 1994
acquisition date. The results of operations of PTI have been included in the
company's results of operations from its June 1993 acquisition date. Selected
summary information has been presented below to facilitate the review of the
company's business segment discussion. The summary information has been
derived from the more detailed information regarding industry segments in
accordance with generally accepted accounting principles as presented in Note
14 to the company's audited consolidated financial statements included
elsewhere herein. Such summary information is as follows (dollars in
thousands):
1995
Pro Forma (1) 1995 1994
(Unaudited)
Net Sales to Customers:
Power and Fluid Transfer $1,728,000 $1,418,000 $1,070,700
Professional Audio 185,300 185,300 173,500
Total $1,913,300 $1,603,300 $1,244,200
Operating Income (2):
Power and Fluid Transfer $ 184,500 $ 158,400 $ 124,800
Professional Audio 21,800 21,800 21,900
Total $ 206,300 $ 180,200 $ 146,700
(1) To reflect acquisition and equity transactions as if they had occurred
at the beginning of the year, as described in Note 2 to the audited
financial statements referred to above.
(2) Represents income before corporate expenses, interest expense and taxes.
POWER AND FLUID TRANSFER
Dayco Products Inc. ("Dayco"), a subsidiary of the company, and
Purolator produce a variety of belts, hose, filters, and related assemblies
and systems, for industrial, automotive aftermarket and automotive OEM
customers, primarily in North America and Europe. The acquisition of
Purolator significantly increased the size and scope of the Power and Fluid
Transfer segment. The complementary nature of the product lines, particularly
in the automotive aftermarket, Original Equipment Service (OES) market and
industrial markets integrates the segments's systems and distribution approach
to product offerings. The acquisition of Purolator roughly balances the power
and fluid transfer product lines, and increases the pro forma revenue of these
core products to about $1.5 billion. The balance of this segment serves the
infrastructure market, generating about $228 million of revenue.
The Power and Fluid Transfer segment was expanded and reorganized during
fiscal 1995. Added to the segment's three markets -- General Industrial,
Automotive Aftermarket and Automotive OEM -- were products for the
Infrastructure market, which are produced by the operating units that
previously comprised the company's Transportation business segment. In the
Infrastructure market, sales improved and backlogs continued at record levels.
Also included in this business segment is Protective Closures, which
manufactures plastic and metal caps, plugs, seals and protective netting sold
to a broad base of industrial and automotive OEM customers, and Mokon, which
produces circulating oil and water temperature control systems.
General Industrial
Approximately 30% of fiscal 1995's pro forma sales were to industrial
customers, making General Industrial the largest market in this segment.
General Industrial products include a variety of belts, hose, filters,
tensioners, pulleys, couplings, assemblies and systems for a number of
markets, including agricultural, oil field, mining, lawn and garden, food and
beverage handling, construction, environmental, chemical, lumber and specialty
applications.
Many of the General Industrial products are sold directly to industrial
OEMs for use in agricultural, manufacturing, office, mining, environmental,
fuel dispensing and fuel flow equipment, as well as in products such as
snowmobiles, washing machines, golf carts, vacuum cleaners, outboard motors
and lawn mowers. The balance of sales in this market are to distributors of
industrial replacement belts and hose, and lawn and garden product
distributors and retailers, such as hardware chains, home centers and mass
merchandisers.
The segment's product offerings were expanded in fiscal 1995 to include
the industrial filters and filtration systems which Purolator supplies to the
industrial, aviation and marine markets, broadening the company's product
offerings and customer base in the industrial marketplace. Facet
International, Inc. ("Facet") a Purolator subsidiary, has also expanded the
segment's General Industrial product lines and markets. Facet is a
manufacturer of high performance filtration and separation products and
systems for commercial and military aviation applications. Facet's products,
which have been approved by numerous governmental and industry-related
organizations around the world, are sold to oil companies, airlines and
defense ministries. Facet also produces bilge separators for the commercial
and military marine markets, as well as an environmental protection product
which removes oil pollution from water.
The May 1994 acquisition of the U.S. Rubber Hose Co. ("U.S. Rubber") in
Vero Beach, Florida, is enabling Dayco to enter new areas in the industrial
hose market. U.S. Rubber provides the capability of manufacturing rigid
mandrel hose up to 200 feet in length, in a variety of bore sizes. This new
capability allows Dayco to better serve customers in the paper, oil drilling
and refining, water pumping, natural gas production, manufacturing,
cement/construction, chemical and trucking industries.
Areas of concentration in the General Industrial business include:
strengthening product lines and continuing to integrate the products of Dayco,
Purolator, PTI, U.S. Rubber and Citla, S.A. de C.V. ("Citla"); centralizing
distribution of these products to provide better, more efficient customer
service; expanding the markets and distribution channels for many products by
partnering with customers, as well as by finding new markets for existing
product lines; and increasing manufacturing capacity in certain product areas,
including couplings and hydraulic hose.
Automotive Aftermarket
The Automotive Aftermarket accounted for roughly 28% of fiscal 1995's
pro forma sales. The products in this market include a vast array of
automotive belts, hose, filters and accessories sold to automotive warehouse
distributors, oil companies, original equipment service centers, retail and
auto parts chains, mass merchandisers, farm and fleet stores, and hardware
distributors.
Products include V-ribbed belts, V-belts, and timing belts; radiator,
automotive service, fuel line and heater hose and assemblies; as well as fan
clutches, transmission oil coolers, fan blades, electric fans, couplings and
pulleys. With the addition of Purolator, product offerings were expanded to
include a complete line of automotive oil, air and fuel filters for virtually
all automobiles and light duty trucks currently operated in North America,
including those manufactured by North American, Japanese and European OEMs.
The combined Dayco/Purolator distribution system and complementary customer
base provide opportunities for revenue growth, margin improvement and
increased market penetration.
Dayco's strategy of expansion into new geographic markets was evident in
fiscal 1995 in a number of areas. Purolator's equity interest with Anand
Corporation in Purolator India Limited provides access to the Indian
marketplace. In Australia, a new distribution center was established in
Melbourne to support automotive aftermarket growth in the Asia Pacific region.
Automotive OEM
The segment's Automotive OEM business accounted for 20% of fiscal 1995's
proforma sales. Dayco designs, develops and manufactures automotive accessory
drive, camshaft drive, fuel, air conditioning, and power steering systems for
the global automotive OEM market, as well as radiator, heater, fuel, engine
and transmission oil cooler assemblies, consisting of various hose, belts,
filters, tensioners, brackets, pulleys, canisters and sprockets.
In response to the increased global nature of the automotive OEM
industry, Dayco's Automotive OEM business is now organized into a single
global unit, to better meet the needs of its worldwide customers, and to
maximize the use of its resources on a global basis.
In keeping with the company's long-term growth strategy to expand its
geographic presence, several strategic acquisitions were made in fiscal 1995.
Citla, a manufacturer of industrial and automotive belts and hose products
with headquarters in Mexico City, Mexico, was acquired in June 1994. Citla
provides support to the company's existing OEM customers in Mexico, as well as
access to the Mexican automotive aftermarket and industrial marketplace.
Acquired in September 1994, Dayco Hevas ("Hevas") of Varberg, Sweden,
manufactures automotive tubes and tube assemblies. Hevas' products complement
existing power steering and air conditioning components for the European
automobile industry, further enhancing the company's market position in
Europe.
The acquisition of Purolator also provided increased market
opportunities with the company's global OEM customers. Purolator's products
will be incorporated into Dayco's systems, and the distribution of Purolator's
products will be enhanced by Dayco's global OEM programs. Purolator's equity
interest in Purolator India Limited expands the company's manufacturing
capabilities and OEM markets in Southeast Asia, while the company's 50%
ownership in Purodenso Corp. provides access to the OEM transplant market in
the U.S.
Dayco also has multiple development programs with the Detroit "Big
Three," U.S. foreign-based OEMs, and most of the major European automotive
manufacturers. Fiscal 1995 saw improvements in the truck OEM market with new
orders from Iveco, Mercedes and Scania, and increased volume with Mack,
Navistar, and Cummins. Dayco also continues to benefit from the increasing
demand in Europe for automobiles equipped with power steering and air
conditioning.
Emphasis on vertical integration as a hose and assembly producer has
helped Dayco gain market share in the power steering hose assembly market,
while the increase in the number of motor vehicles and the climate in Asia
are expected to create a strong demand for Dayco's air conditioning hose
assemblies.
Infrastructure
Mark IV designs and manufactures products and systems serving two
principal components of the Infrastructure market. Mark IV produces
information displays, door systems, interior hardware, lighting and other
systems, primarily for mass transit buses and railcars. In addition the
company produces electronic vehicle identification products for the electronic
toll and traffic management markets, as well as information signs and signals.
These products, which are manufactured and sold in North America and
throughout Europe, accounted for 12% of fiscal 1995's pro forma sales.
Customers include OEMs of mass transit bus and rail vehicles, and
commercial aircraft, as well as state and local highway and transportation
agencies. Some of the Infrastructure products are also sold to the
aftermarket.
The Infrastructure market is predominantly contract-driven, with many of
the contracts spanning one or more years. At times, there are delays in the
completion of contracts which may cause fluctuations in the timing of
revenues, allowing inventories to build. Backlogs in the Infrastructure market
have been growing steadily over the past several years, and are at record
levels today.
Luminator Mass Transit, together with LLE in Germany and SLE in France,
design, market, and produce electronic vehicle information and passenger
information display systems and components for mass transit buses and railcars
throughout the world. These systems are also sold throughout Europe and Asia.
While most of these products are sold directly to vehicle manufacturers, there
is also a large market for replacement parts used to repair or upgrade mass
transit vehicles. The marketing efforts of these companies are directed
primarily at transit agencies, who can specify that Mark IV products be
included in their mass transit systems, as well as to the OEMs.
F-P Electronics is a producer of digital electromagnetic display
components, supplying product to all of the major manufacturers of mass
transit information display systems in North America and Europe -- including
the company's Luminator, LLE and SLE operations. These products are also used
in gasoline pump displays, variable message signs for highways, time and
temperature displays, and scoreboards. This market was enhanced by a new line
of high intensity fiber optic displays designed to dramatically improve
visibility.
Vapor supplies complete bus door systems, as well as basic components,
to the transit industry. Vapor also supplies the railroad industry with
various electronic products. Vapor introduced three new door systems during
the year. These unique systems, which include microprocessor-based controls,
were developed to meet the changing needs of domestic customers, and to
position Vapor for entry into the Asian market.
Mark IV's Luminator Aircraft Products unit supplies interior lighting
and other passenger comfort systems for commercial aircraft, including the
MD-11 and the new MD-90, and every other McDonnell Douglas aircraft produced
since the DC-3. In addition, Luminator provides components for several Boeing
aircraft models, as well as aircraft panel, navigation, landing and emergency
lighting for general aviation customers. The company also makes a
comprehensive line of night vision-compatible interior and exterior lighting
used in military applications. Luminator supplies its airline customers with
aftermarket replacement and spare parts through its Product Support Center in
Texas.
Mark IV's Automatic Signal/Eagle Signal and Interstate Highway Sign
operations manufacture products sold to state and local governments, as well
as transportation agencies, primarily in the U.S. and Canada. Automatic
Signal/Eagle Signal is a leading, full-line supplier of traffic control
equipment and systems in the U.S., including traffic and pedestrian signals,
signal control devices and complete traffic management systems. Some of these
products are also sold to the U.S. Government and to foreign municipalities.
Interstate Highway Sign is a leading manufacturer of reflective directional,
informational, regulatory and warning signs for the nation's highways and
other roadways. Interstate's products include a newer line of signs, using
exterior light, that provide better visibility and are easier to maintain.
NRD, a leading supplier of ionization elements used in smoke detectors, also
manufactures self-energized, luminous exit signs, as well as static control
devices used mainly in the electronics and printing industries.
Mark IV's Intelligent Vehicle Highway Systems (IVHS) products and their
markets have been in development for a number of years. In March 1994, Mark IV
IVHS equipment was selected by a group representing eight toll authorities in
New Jersey, New York, Pennsylvania and Delaware for use in the new E-ZPass(SM)
electronic toll collection system. Mark IV IVHS will provide the tag and
reader equipment for the E-ZPass system, which is designed to eliminate the
need for motorists to exchange cash, tokens, or tickets at toll booths. Tolls
will be paid electronically, as vehicles pass through the booths, reducing
congestion and pollution, increasing accuracy in toll collection, and
improving driver convenience on toll roads, bridges and tunnels.
PROFESSIONAL AUDIO
The Professional Audio business segment accounted for approximately 10%
of total pro forma sales, and 11% of pro forma operating income in fiscal
1995. This group of companies, known in the marketplace as Mark IV Audio,
provides a comprehensive range of high quality, high performance audio
products to the professional audio market, including recording studio
equipment, systems for live performance, and permanently installed engineered
sound systems. Products include microphones, mixing consoles, signal
processors, amplifiers and loudspeakers, and accessory items for use in a wide
variety of installations, such as arenas, stadiums, theaters, amusement parks,
airports, churches and factories, and in concert sound applications.
In fiscal 1995, Mark IV Audio took significant steps forward in
realizing the objectives of its recent organizational restructuring, including
a better focus on its diversified technologies, brand recognition, and
geographic distribution and manufacturing. General administration, research
and development, and manufacturing responsibilities are now centralized for
all Mark IV Audio companies, for more effective coordination and utilization
of resources.
Marketing, sales and other business development activities are divided
into three regions -- the Americas, Europe and the Pacific. Each region is
structured with a business development team whose mission is to identify and
aggressively pursue growth opportunities within its territory. This new
strategy enables Mark IV Audio to provide products, pricing and programs
tailored to the specific needs of the customers in each area, with an
understanding of the cultures, conditions and business practices of the given
region.
Mark IV Audio has a full-line strategy for the production of all
components required in sound systems, which allows it to serve its customers
as a single-source audio supplier. The Mark IV Audio group is a leader in
many segments of the professional audio market, and is diversified globally,
with over 58% of the group's fiscal 1995 revenue coming from outside the U.S.
Mark IV Audio holds a large share of the worldwide market for fixed
installations of engineered sound systems under its Electro-Voice, Altec
Lansing and Dynacord product lines. The group also accounts for a leading
share of the wired dynamic and high-end wireless microphones employed in the
broadcast and production segments of the professional audio market, with
products under the Vega and Electro-Voice brand names, as well as signal
processing products under the Klark Teknik brand. Mark IV Audio is also a
leading supplier of high-speed tape cassette duplication equipment under its
Gauss and Electro Sound brands, and mixers under the DDA and Midas labels. In
addition, Mark IV Audio has developed numerous digital audio signal processing
(DSP) applications under its Dynacord and Klark Teknik brand names.
Under the Dynacord and University Sound brand names, Mark IV Audio
serves the commercial sound segment of the professional audio market,
providing products for fixed installations with typically less demanding
performance requirements than those of engineered sound systems. The concert
sound market, which consists of audio equipment used in touring sound systems
for live performances, is served by the company's Electro-Voice, Klark Teknik,
Midas and Vega product lines.
In fiscal 1995, Electro-Voice introduced the RE 2000, a true condenser
studio microphone that delivers exceptional sound quality and other superior
performance specifications that exceed those of much more expensively priced
microphones. The RE 2000 is used primarily in high-end professional recording
studios, and also has some applications in the broadcast market in areas where
flawless performance is required.
University Sound commercial speaker products were used in all of the
security systems and nearly all of the paging systems at the 1994 World Cup
Soccer events held in the United States, and viewed by billions throughout the
world. The new Duplex Technology Systems (DTS) speakers from Altec Lansing
were used in the main sound system of the 1994 tour of Ice Capades. These DTS
speakers have also received an enthusiastic response in churches and other
houses of worship, with sales growing rapidly.
The introduction of the Midas XL 200 and XL 4 mixing consoles is
expected to add to the success already experienced by the Midas XL 3 console.
The XL 200 offers quality and performance in a mid-priced touring console. The
Midas XL 4 is a world-class mixing console combining state-of-the-art analog
circuitry with a digital automation control system.
Digital Signal Processing (DSP) is the latest trend in the professional
audio market. Recognizing the trend in its early stages, Mark IV Audio
offered its first digital products in 1987. With DSP technology, sound system
users in airports, sports facilities, convention centers, churches and concert
halls throughout the world, will have access to operation, reconfiguration and
system status information that is flexible and easy to use. Musicians can now
purchase a single "black box" that can be programmed to provide effects such
as reverberation and echo, and tailor the effects through software.
The group's structural reorganization in fiscal 1995 brings increased
effectiveness in the area of customer service within the three geographic
regions defined for business development. The centralization of manufacturing
and engineering is helping Mark IV Audio to achieve a worldwide unity of
effort, bring a tighter focus on key developments, share intellectual and
physical resources, and concentrate investment in process and design
technologies.
Marketing and Competition
Mark IV's products are marketed primarily in the United States and
Europe, and to a lesser extent in Canada and the Far East. The company uses
its own sales engineers and other sales personnel, independent distributors
and sales representatives to market its products.
A majority of the company's products have a significant and in many
instances the leading market share in their respective markets. Most of the
markets for the company's products are characterized by a limited number of
competitors. However, competition in certain of those markets is intense.
Some of the company's competitors are substantially larger than Mark IV and
have greater financial resources. The company competes on the basis of price,
quality, technical innovation and its ability to fill orders promptly, with
the relative importance of each factor depending on the market for the
particular product.
Backlog
The company does not believe that the backlog of orders for any of its
products is material to the company as a whole. However, backlogs are a
significant factor in the Infrastructure market of the Power and Fluid
Transfer segment.
Patents and Trademarks
Although a number of patents and trademarks have been issued to the
company and its subsidiaries, the company believes its competitive position is
more dependent on its technical knowledge and processes than on patent or
trademark protection. The company believes, however, that its trademarks and
tradenames used in connection with certain products may be significant to its
business.
Research and Development
The company is engaged in ongoing research and development in connection
with new and existing products. Research and development expenditures are
expensed as incurred, and amounted to $34,800,000; $30,900,000; and
$26,100,000 in the company's operations in fiscal 1995, 1994 and 1993,
respectively.
Raw Materials and Supplies
The materials and supplies used to produce the company's products are
generally obtained from a wide variety of suppliers, and the company has not
experienced any shortages. Although certain materials used in the manufacture
of flip-dots, electrostatic control equipment, self-illuminating lights and
smoke-detector ionization elements are readily available from only a few
suppliers, the company does not anticipate any significant difficulties in
obtaining any of these raw materials in the foreseeable future.
Government Regulation
Certain of the company's process control systems, electrostatic control
devices, smoke-detector ionization elements and self-illuminating lights have
radioactive components, the production, storage and transportation of which
are subject to federal, state and local laws and regulations. Federal and
state regulations also limit the amount of exposure the company's employees
may have to such radioactive materials. The company has obtained the
necessary licenses and approvals required for its businesses and believes it
is in material compliance with all applicable regulations concerning
radioactive materials and employee safety.
A portion of the company's business is conducted pursuant to U.S.
Government contracts or sub-contracts. Generally, government contracts and
sub-contracts contain provisions permitting termination at any time at the
convenience of the Government upon payment to the company of costs incurred
plus a profit related to the work performed to the date of termination.
Substantially all of the company's government contracts and sub-contracts
contain these provisions. The company, as a government contractor, is subject
to various statutes and regulations governing defense contracts.
Other than as described above with respect to radioactive components,
the company is not subject to any particular environmental laws or regulations
which are not generally applicable to all manufacturing companies. The
company believes that it is in material compliance with all applicable
environmental laws and regulations. Mark IV does not anticipate having to
incur material capital expenditures for environmental compliance in fiscal
1996 or fiscal 1997.
Employees
The company currently employs approximately 16,200 persons, of whom
approximately 11,300 are production employees, with the remainder serving in
executive, administrative, engineering or sales capacities. Approximately
3,300 production employees are covered by seventeen collective bargaining
agreements which expire at various times through the year 2000. The company
believes its relationship with its employees is good.
Other
Mark IV was incorporated in Delaware in 1970 and its executive offices
are at 501 John James Audubon Parkway, Amherst, New York 14226-0810. Its
telephone number is (716) 689-4972.
ITEM 2. PROPERTIES
The table below summarizes the approximate floor space of the company's
corporate office and principal manufacturing facilities by business segment.
Approximate Floor Space
(In Thousands of Square Feet)
Owned Leased Total
Corporate Office - 23 23
Power and Fluid Transfer (1) 6,994 2,472 9,466
Professional Audio (2) 506 188 694
(1) Consisting of the following fifty-eight facilities:
North American facilities (approximately 8,055,000 square feet):
Waynesville, NC; Springfield, MO; Walterboro, SC; Williston, SC; Ocala,
FL; Fort Scott, KS; Fort Worth, TX; Alliance, NE; Eldora, IA; McCook,
NE; Fayetteville, AR; Red Wing, MN; Weston, Ontario, Canada; Walnut, CA;
Rock Island, IL; Easley, SC; Bucyrus, OH; Lexington, TN; Buffalo, NY;
Vero Beach, FL; Stillwell, OK; Tulsa, OK; Henderson, NC; Kenly, NC;
Davenport, IA; Sacramento, CA; Newark, NJ; Dexter, MO; Fayettville, NC;
Salt Lake City, UT; Greensboro, NC; Mexico City, Mexico; Pasteje,
Mexico; Plano, TX; Montreal, Quebec, Canada; Niles, IL; Mississauga,
Ontario, Canada (3); Cobourg, Ontario, Canada; Little Rock, AR; Austin,
TX; Grand Island, NY; Clinton, MA; Hudsonville, MI.
European Facilities (approximately 1,411,000 square feet): Halesowen,
U.K.; Torino, Italy (2); Barcelona, Spain; Baudour, Belgium; Chieti,
Italy; Manopello, Italy (2); Treforest, Wales, UK; Lacoruna, Spain;
Varberg, Sweden; Rastatt, Germany and Nice, France.
(2) Consisting of the following thirteen facilities:
North American facilities (approximately 518,000 square feet):
Buchanan, MI; Newport, TN; Sevierville, TN; Mishawaka, IN; Oklahoma
City, OK(2); Sun Valley, CA; El Monte, CA; Gananoque, Ontario, Canada.
European facilities (approximately 176,000 square feet):
Straubing, West Germany; Hohenwarth, West Germany; Kidderminster,
Worchester, U.K.; Hounslow, Middlesex, U.K.
The company also owns or leases various small production facilities,
sales offices, distribution and research centers which are not included in the
above list of properties.
The company believes that its existing facilities have sufficient
capacity to meet its anticipated needs in each of its industry segments for
the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The company is involved in various legal and environmental related
claims or disputes in the ordinary course of business. In the opinion of
management, the ultimate cost to resolve these matters will not have a
material adverse effect on the company's financial position, results of
operations, or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The company's Common Stock is listed on the New York Stock Exchange
(Symbol: IV). The following table sets forth, for the fiscal periods
indicated, the high and low closing sale prices per share of the company's
Common Stock as reported by the New York Stock Exchange. All amounts have
been adjusted for the 5% stock dividend issued in April 1995.
Fiscal 1995 Fiscal 1994
Low High Low High
1st Quarter $15.000 $18.125 $14.875 $17.875
2nd Quarter $17.125 $19.875 $18.000 $21.000
3rd Quarter $19.250 $21.875 $17.125 $23.375
4th Quarter $17.625 $19.375 $16.250 $19.000
As of February 28, 1995, the approximate number of holders of record of
the company's Common Stock was 2,600.
The company declared total cash dividends of $.107 and $.093 per share
during fiscal 1995 and 1994, respectively.
ITEM 6. SELECTED FINANCIAL DATA
[Enlarge/Download Table]
The following table sets forth selected consolidated financial information of the company
for each of the five fiscal years in the period ended February 28, 1995. This table should be
read in conjunction with the audited consolidated financial statements for the company and the
related notes thereto included elsewhere herein.
FIVE YEAR SUMMARY OF OPERATIONS
(Amounts in thousands, except per share data)
Fiscal Year Ended the Last Day of February,
1995
Pro Forma (1) 1995 (2) 1994 1993 1992 1991
(unaudited)
Income Statement Data:
Net sales $1,913,300 $1,603,300 $1,244,200 $1,085,700 $1,004,300 $ 789,700
Operating income (3) $ 190,400 $ 164,300 $ 131,800 $ 113,600 $ 108,600 $ 88,000
Interest expense 63,400 53,900 50,100 51,600 64,700 60,600
Operating income,
net of interest
expense $ 127,000 $ 110,400 $ 81,700 $ 62,000 $ 43,900 $ 27,400
Income from continuing
operations:
Before securities
transactions $ 78,300 $ 67,900 $ 51,100 $ 39,100 $ 28,400 $ 17,000
Securities
transactions - - - - (1,600) 600
Income from
continuing
operations 78,300 67,900 51,100 39,100 26,800 17,600
Income from
discontinued
operations - - - 3,600 2,000 4,700
Extraordinary items (1,100) (1,100) (21,700) (3,700) (4,500) 700
Cumulative effect of
accounting change - - (26,000) - - -
NET INCOME $ 77,200 $ 66,800 $ 3,400 $ 39,000 $ 24,300 $ 23,000
Primary income
per share (4):
Continuing operations:
Before securities
transactions $ 1.46 $ 1.40 $ 1.15 $ .89 $ .82 $ .64
Securities
transactions - - - - (.05) .02
Continuing
operations 1.46 1.40 1.15 .89 .77 .66
Discontinued
operations - - - .08 .06 .18
Extraordinary items (.02) (.02) (.49) (.08) (.13) .03
Cumulative effect of
accounting change - - (.58) - - -
NET INCOME $ 1.44 $ 1.38 $ .08 $ .89 $ .70 $ .87
Fiscal Year Ended the Last Day of February,
1995
Pro Forma(1) 1995 (2) 1994 1993 1992 1991
(unaudited)
Fully-diluted income
per share (4):
Continuing operations:
Before securities
transactions $ 1.35 $ 1.29 $ 1.04 $ .83 $ .75 $ .56
Securities
transactions - - - - (.04) .02
Continuing
operations 1.35 1.29 1.04 .83 .71 .58
Discontinued
operations - - - .07 .05 .13
Extraordinary items (.02) (.02) (.41) (.07) (.12) .02
Cumulative effect of
accounting change - - (.48) - - -
NET INCOME $ 1.33 $ 1.27 $ .15 $ .83 $ .64 $ .73
Weighted average
number of shares
outstanding (4):
Primary 53,700 48,600 44,600 44,100 34,800 26,600
Fully-diluted 60,100 55,000 53,300 52,800 40,300 35,100
Balance Sheet Data:
Working capital $ 379,700 $ 379,700 $ 312,800 $ 275,400 $ 285,500 $ 345,100
Total assets $1,846,400 $1,846,400 $1,282,300 $1,124,800 $1,104,500 $1,100,100
Long-term debt $ 610,700 $ 610,700 $ 567,200 $ 497,100 $ 525,400 $ 717,600
Stockholders'
equity (5) $ 635,500 $ 635,500 $ 345,400 $ 345,600 $ 311,900 $ 170,000
____________________________
(1) Presents the proforma consolidated condensed results of operations
as if the following transactions had occurred at the beginning of
fiscal 1995: (i) the acquisition of Purolator in November 1994 and
the related borrowings under the credit agreement; and (ii) the sale
of the company's common stock in December 1994.
(2) Includes the results of operations of the Purolator business from
its November 1994 acquisition date.
(3) Represents income from continuing operations before interest
expense, securities transactions and taxes.
(4) Adjusted to reflect the 5% stock dividend issued in April 1995.
(5) The company declared cash dividends of approximately $.107; $.093;
$.08; $.063 and $.055 per share in fiscal 1995, 1994, 1993, 1992 and
1991, respectively.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The company's short-term capital needs are met by cash generated through
operations, and supplemented by its various credit facilities to the extent
required. During fiscal 1995, net cash provided by earnings was $126.5
million, a 39% increase over the $91.2 million generated in fiscal 1994, which
in turn represented a 46% increase over fiscal 1993. At February 28, 1995,
the company's working capital investment was $379.7 million, a net increase of
$66.9 million in comparison to February 28, 1994. Excluding the effects of
the Purolator acquisition, net working capital was actually reduced by
approximately $5.6 million in fiscal 1995. Management believes that cash
generated from operations should be sufficient to support working capital
requirements and anticipated capital expenditures for the foreseeable future.
The company's long-term capital needs are met by cash generated from
operations, bank financing, and a combination of public debt and equity
offerings. Recent financing activities of a longer term nature include the
following:
- In October 1994, the company entered into agreements with certain
holders of its 6-1/4% Convertible Debentures due February 15, 2011 to
convert approximately $76.7 million of the debentures into
approximately 5.6 million shares of the company's common stock. In
January 1995, the company called for redemption the $37.5 million
remaining principal amount of these debentures. As a result of the
call for redemption, substantially all of the remaining debentures were
converted into 2.7 million shares of the company's common stock.
- In November 1994, the company entered into a $650 million credit
agreement (the "1994 Credit Agreement") with a group of financial
institutions which provides for (i) a five-year term loan in the
principal amount of approximately $300 million used to finance the
acquisition of Purolator and to repay certain existing Purolator debt,
and (ii) a five-year revolving credit facility in an amount of up to
$350 million used for refinancing the company's previously existing
credit facility (the "1993 Credit Facility") and certain existing
Purolator debt, and for working capital and other general corporate
purposes. The loans outstanding under the 1994 Credit Agreement bear
interest, at the company's option, at (i) the reference rate of the
agent acting on behalf of the financial institutions, or (ii) under a
LIBOR option with borrowing spreads of LIBOR plus 0.55% to LIBOR plus
1.00%, depending on the company's consolidated leverage ratio (as
defined in the 1994 Credit Agreement). The company is currently paying
interest on the loan at LIBOR plus 0.55% per annum. The 1994 Credit
Agreement contains certain affirmative and negative covenants customary
for this type of agreement and is guaranteed by all of the company's
significant domestic subsidiaries. All of such guarantees are secured
by all of the outstanding capital stock of each guarantor subsidiary.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- In November 1994, the company acquired all of the stock of Purolator
Products Company ("Purolator") for a total cash purchase price,
including expenses, of approximately $286.3 million. Funding for the
acquisition was provided by borrowings under the company's 1994 Credit
Agreement. Purolator is a significant addition to the company's Power
and Fluid Transfer business segment. The company also completed a
number of smaller acquisitions during fiscal 1995 for a total purchase
price of approximately $14.5 million.
- In December 1994, the company completed an underwritten public offering
of 6.5 million shares of its common stock, at a public offering price
of $18.10 per share (the "Offering"). The net proceeds from the
Offering of approximately $113 million were used to repay a portion of
the company's outstanding indebtedness under the 1994 Credit Agreement.
Under the terms of the 1994 Credit Agreement, the amount of net
proceeds from the Offering used to repay outstanding indebtedness under
the revolving credit facility may be reborrowed by the company.
As a result of all of the activities discussed above, long-term debt at
February 28, 1995 increased $43.5 million from the total amount outstanding at
February 28, 1994. Absent the effects of the company's acquisitions and
divestitures, as well as the effects of the equity offerings and debt
conversion in fiscal 1995, long-term debt was actually reduced by
approximately $17 million from the levels at February 28, 1994. The company's
long-term debt as a percentage of total capitalization at February 28, 1995 is
49%, versus the 62.2% relationship which existed at February 28, 1994.
In addition to the financing mentioned above, the company also has a revolving
credit agreement (the "Multi-Currency Agreement") which it entered into in May
1993 and amended during fiscal 1995. The Multi-Currency Agreement provides
for a five year multi-currency revolving credit facility with a group of
financial institutions in the U.S. and Europe. The Multi-Currency Agreement
provides for a revolving loan commitment for the first two years of the
equivalent of $100,000,000. The commitment declines by $12,500,000 at each of
six semi-annual dates beginning in June 1995, with the remaining $25,000,000
of commitment expiring May 1998. Interest rates on borrowings under the
Multi-Currency Agreement are subject to change based on a specified pricing
grid which increases from LIBOR plus 0.55% to LIBOR plus 1.00% per annum based
on the company's senior debt rating (as defined in the Multi-Currency
Agreement). The company is currently paying interest at LIBOR plus .55% on
borrowings under the Multi-Currency Agreement. The Multi-Currency Agreement
also contains certain affirmative and negative covenants customary in an
agreement of this nature.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The company has borrowing availability under its primary credit agreements,
including the Multi-Currency Agreement, of $411.7 million and additional
availability under its various domestic and foreign demand lines of credit of
approximately $87.0 million as of February 28, 1995. Management believes that
cash generated from operations should be sufficient to support the company's
working capital requirements and anticipated capital expenditures for the
foreseeable future and that availability under existing credit agreements is
adequate to support operations and to provide flexibility in the balance
sheet.
Foreign Currency
The company does not hold or issue derivatives for trading purposes and is not
a party to leveraged derivatives transactions. The company's sales from
foreign locations and exports are about $580 million and as a result, the
company does enter into foreign currency forward contracts as a hedge for
certain existing or anticipated business transactions denominated in various
foreign currencies. Foreign currency transactions included in income amounted
to gains (losses) of approximately $100,000; $300,000 and ($700,000) in fiscal
1995, 1994 and 1993, respectively. Unrealized gains and losses related to
foreign currency forward contracts were not significant at February 28, 1995
or February 28, 1994. The maximum notional amount of foreign currency forward
contracts outstanding at any one time during fiscal 1995 amounted to
approximately $31.3 million and the approximate notional amounts of such
contracts outstanding were $12,700,000 and $27,700,000 at the end of fiscal
1995 and 1994, respectively.
At February 28, 1995, the company also had an interest rate swap outstanding
on debt of approximately $17 million, which effectively converts variable rate
debt to a fixed annual interest rate of approximately 4.75% through September
1996. From time to time, the company may enter into such arrangements to
balance the mix of fixed and variable rate debt.
Results of Operations
Prior to the acquisition of Purolator, the company classified its operations
into three business segments: Power and Fluid Transfer; Transportation; and
Professional Audio. Following the acquisition of Purolator, management
reviewed its existing businesses and determined that its Transportation
business segment should be combined with the Power and Fluid Transfer business
segment in view of the similarity in markets and customers served. Management
also believes that the revised classification will enable the company to
benefit from a global organizational structure and the coordination of
distribution activities.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The company now classifies its operations into the following two business
segments:
(i) Power and Fluid Transfer, which includes the design, manufacture
and distribution of products and systems primarily in the general
industrial market, the automotive aftermarket, the original
equipment manufacturers ("OEM") market and the infrastructure
market. Such products and systems include those related to
rubber and plastic belts, hose, fittings and related assemblies;
filters; power transfer mechanisms for door control systems used
in mass transit vehicles; information displays; and advanced
traffic control and management systems; and
(ii) Professional Audio, which includes the design and manufacture of
products and systems used primarily in the high-performance
professional audio market, such as microphones, speakers, public
address and musical instrument loudspeaker systems, audio signal
processors, and sound enhancement and noise canceling equipment.
The results of operations of Purolator have been included in the company's
results of operations for fiscal 1995 from its November 1994 acquisition date.
The results of operations of Pirelli Trasmissioni SpA ("PTI"), a significant
acquisition in fiscal 1994, have been included in the company's results of
operations from its June 1993 acquisition date.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
In reviewing the company's sales performance, the following results by segment
should be considered for each of the fiscal years presented (dollars in
thousands):
1995 1994
------------------ -----------
% Increase % Increase
Over Prior Over Prior
Amount Year Amount Year 1993
----
Net Sales
to Customers:
Power and Fluid
Transfer $1,418,000 32.4% $1,070,700 17.8% $ 908,900
Professional
Audio 185,300 6.8% 173,500 (1.9%) 176,800
Total $1,603,300 28.9% $1,244,200 14.6% $1,085,700
The increase in the Power and Fluid Transfer sales in fiscal 1995 is primarily
the result of the Purolator acquisition and other smaller acquisitions, as
well as the inclusion of PTI (acquired in June 1993), for all of fiscal 1995
and only nine months in fiscal 1994. Excluding the acquisitions, sales
increased approximately $201.1 million (21.1%) over fiscal 1994, with $105.3
million of the increase in the U.S., and the $95.8 million balance of the
increase primarily in Europe. Foreign currency exchange rate movements did
not significantly effect fiscal 1995 sales in comparison to fiscal 1994. The
increase in fiscal 1994 in comparison to fiscal 1993 is the result of internal
growth of approximately $54.1 million (6.0%), and the inclusion of the PTI
operations. Excluding PTI and the negative effect of foreign currency
movements, the internal growth in fiscal 1994 was approximately $74.8 million
(8.2%), with $45.7 million (5.0%) of such growth generated from the segment's
U.S. operations and the balance from its foreign based operations.
The $11.8 million increase in Professional Audio sales in fiscal 1995 was
generated equally by the segment's U.S. and Pacific Rim operations. Sales in
the segment's European operations remained comparable to the prior year's,
with relative strengthening beginning in the latter part of fiscal 1995.
Sales in the Professional Audio segment in fiscal 1994 remained comparable to
fiscal 1993, with a slight increase in U.S. sales being offset by a decline in
the segment's foreign operations, primarily in Europe.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cost of products sold as a percentage of consolidated net sales were 66.1%,
64.6%, and 64.4% in fiscal 1995, 1994 and 1993, respectively. The increase in
the percentage of costs in fiscal 1995 is primarily the result of the
Purolator acquisition, due to its historically lower gross margin, with its
last four months tending to be the lowest margin months. This level of costs
also reflects the positive effects of the company's cost control programs,
which have helped to substantially offset the negative pressures on the
margins experienced by both of the company's business segments.
Selling and administration costs as a percentage of consolidated net sales
were 18.3%, 19.0%, and 19.8% in fiscal 1995, 1994 and 1993, respectively. The
reductions in fiscal 1995 and 1994 are primarily the result of operating
synergies achieved from the combination of the PTI business with the
previously existing European operations of the Power and Fluid Transfer
business segment. The relatively consistent level of costs also indicates the
company's continued emphasis on cost control has been successful in
substantially offsetting the impact of inflation on such costs.
Research and development costs increased by $3.9 million (12.6%) in fiscal
1995 over fiscal 1994, which in turn increased by $4.8 million (18.4%) over
fiscal 1993. The increases in fiscal 1995 and 1994 are primarily caused by
the Purolator and PTI acquisitions. As a percentage of consolidated net
sales, such costs were in the range of 2.2% to 2.5% in each of fiscal 1995,
1994 and 1993. This consistent level of investment reflects the company's
continuing emphasis on new product development.
Depreciation and amortization expense increased by $9.8 million (23.5%) in
fiscal 1995 over fiscal 1994, which in turn increased by $9.6 million (29.9%)
over fiscal 1993. The increases in fiscal 1995 and 1994 are primarily
attributable to the Purolator and PTI acquisitions. The fiscal 1995 amount
also includes $1.6 million related to the restricted stock grants made
primarily in fiscal 1994, compared to $800,000 in fiscal 1994. The remaining
increases are primarily the result of increased capital equipment
expenditures.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The above mentioned items resulted in the following operating income for each
of the fiscal years presented (dollars in thousands):
[Download Table]
1995 1994 1993
% of % of % of
Related Related Related
Amount Sales Amount Sales Amount Sales
OPERATING INCOME
Power and Fluid Transfer $158,400 11.2% $124,800 11.7% $104,100 11.5%
Professional Audio 21,800 11.8% 21,900 12.6% 22,000 12.4%
Total operating income 180,200 11.2% 146,700 11.8% 126,100 11.6%
Corporate expenses (15,900) (1.0) (14,900) (1.2)% (12,500) (1.1)%
Continuing operations,
before interest
and taxes $164,300 10.2% $131,800 10.6% $113,600 10.5%
In spite of the increased interest cost resulting from the Purolator and PTI
acquisitions, as well as the increase in the overall interest rate
environment, interest expense was up only $3.8 million (7.6%) in fiscal 1995
in comparison to fiscal 1994. The relatively slight increase in fiscal 1995's
expense was achieved as a result of the financing transactions referred to in
the Liquidity and Capital Resources section, as well as the new 1994 Credit
Agreement which provided for lower interest rates as a result of the company's
improved debt to total capitalization position. Fiscal 1994's interest
expense was actually down $1.5 million (2.9%) from fiscal 1993's expense. The
reduction in fiscal 1994 was primarily the result of the company's repurchase
and in-substance defeasance of its 13-3/8% subordinated debentures at the
beginning of fiscal 1994, which was refinanced with the issuance of the
company's 8-3/4% Senior Subordinated Notes. The interest expense amounts
reported for continuing operations also reflect the allocation of $1.4
million, $2.2 million, and $5 million to discontinued operations in fiscal
1995, 1994 and 1993, respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The company's provision for income tax as a percentage of pre-tax accounting
income was 38.5%, 37.5%, and 36.9% in fiscal 1995, 1994 and 1993,
respectively. The higher rates in fiscal 1995 and 1994 are primarily the
result of increased income in foreign jurisdictions with higher statutory tax
rates than in the U.S.
As a result of all of the above, the company's income from continuing
operations in fiscal 1995 increased $16.8 million (32.9%) over fiscal 1994.
In turn, fiscal 1994's income from continuing operations increased $12 million
(30.7%) over fiscal 1992.
As a result of replacing the prior credit agreement with the 1994 Credit
Agreement and the other debt extinguishment referred to above, the company
incurred extraordinary losses, net of related tax benefits, of $1.1 million,
$21.7 million and $3.7 million in fiscal 1995, 1994 and 1993, respectively.
Additionally, the company's adoption of SFAS No. 106 in fiscal 1994 resulted
in the recognition of a net of tax charge of $26 million as the cumulative
effect of the accounting change in fiscal 1994. The above extraordinary items
and cumulative effect of the accounting change in fiscal 1994 resulted in
significantly reduced net income of $3.4 million in fiscal 1994 in comparison
to the $66.8 million earned in fiscal 1995 and the $39 million earned in
fiscal 1993.
Impact of Inflation
Generally, the company has been able to pass on or offset inflation-related
cost increases; consequently, inflation has had no material impact on income
from operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Page
Report of Independent Accountants for
each of the three fiscal years in the
period ended February 28, 1995. . . . . . . . . . . . . . . . . . . . .28
Financial Statements:
Consolidated Balance Sheets at February 28, 1995 and 1994 . . . . . . . .29
Consolidated Statements of Income for each of
the three fiscal years in the period ended
February 28, 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Consolidated Statements of Stockholders' Equity for
each of the three fiscal years in the period
ended February 28, 1995. . . . . . . . . . . . . . . . . . . . . . . . .31
Consolidated Statements of Cash Flows
for each of the three fiscal years in
the period ended February 28, 1995 . . . . . . . . . . . . . . . . . . .32
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . .33
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Mark IV Industries, Inc.
We have audited the accompanying consolidated balance sheets of Mark IV
Industries, Inc. and Subsidiaries as of February 28, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended February 28, 1995. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Mark IV
Industries, Inc. and Subsidiaries as of February 28, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended February 28, 1995, in conformity with
generally accepted accounting principles.
As discussed in Note 11 to the consolidated financial statements, in 1994 the
company changed its method of accounting for postretirement benefits other
than pensions.
COOPERS & LYBRAND L.L.P.
Rochester, New York
March 30, 1995
MARK IV INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, 1995 AND 1994
(Dollars in Thousands)
ASSETS 1995 1994
Current Assets:
Cash $ 800 $ 500
Accounts receivable 383,700 275,100
Inventories 361,900 265,000
Other current assets 58,600 42,100
Total current assets 805,000 582,700
Pension and other non-current assets 197,100 138,200
Property, plant and equipment, net 487,900 365,300
Cost in excess of net assets acquired 356,400 196,100
TOTAL ASSETS $1,846,400 $1,282,300
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current maturities of debt $ 67,300 $ 45,000
Accounts payable 174,000 99,700
Compensation related liabilities 70,400 43,100
Accrued interest 13,800 13,600
Other current liabilities 99,800 68,500
Total current liabilities 425,300 269,900
Long-Term Debt:
Senior debt 352,700 195,000
Subordinated debt 258,000 372,200
Total long-term debt 610,700 567,200
Other non-current liabilities 174,900 99,800
Stockholders' Equity:
Common stock - $.01 par value;
Authorized 100,000,000 shares;
Issued 59,900,000 shares in 1995 and
44,800,000 shares in 1994 600 400
Additional paid-in capital 550,200 261,500
Retained earnings 90,800 88,600
Foreign currency translation adjustment (6,100) (5,100)
Total stockholders' equity 635,500 345,400
TOTAL LIABILITIES
& STOCKHOLDERS' EQUITY $1,846,400 $1,282,300
The accompanying notes are an integral part of these financial statements.
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED THE LAST DAY OF FEBRUARY 1995, 1994 and 1993
(Amounts in Thousands, Except Per Share Data)
[Enlarge/Download Table]
Pro Forma
1995* 1995 1994 1993
(Unaudited)
Net sales $1,913,300 $1,603,300 $1,244,200 $1,085,700
Operating costs:
Cost of products sold 1,285,200 1,060,000 803,500 698,800
Selling and administration 338,200 292,700 236,300 215,100
Research and development 38,900 34,800 30,900 26,100
Depreciation and amortization 60,600 51,500 41,700 32,100
Total operating costs 1,722,900 1,439,000 1,112,400 972,100
Operating income 190,400 164,300 131,800 113,600
Interest expense 63,400 53,900 50,100 51,600
Income from continuing operations,
before provision for taxes 127,000 110,400 81,700 62,000
Provision for taxes 48,700 42,500 30,600 22,900
Income from continuing operations 78,300 67,900 51,100 39,100
Income from discontinued operations,
net - - - 3,600
Income before extraordinary items
and accounting change 78,300 67,900 51,100 42,700
Extraordinary loss from early
extinguishment of debt, net of tax
benefit of $700; $12,300; and $2,000 (1,100) (1,100) (21,700) (3,700)
Cumulative effect of a change in
accounting principle - - (26,000) -
NET INCOME $ 77,200 $ 66,800 $ 3,400 $ 39,000
Net income per share of common stock:
Primary:
Income from continuing operations $ 1.46 $ 1.40 $ 1.15 $ .89
Income from discontinued operations - - - .08
Extraordinary loss (.02) (.02) (.49) (.08)
Cumulative effect of a change in
accounting principle - - (.58) -
NET INCOME $ 1.44 $ 1.38 $ .08 $ .89
Fully-diluted:
Income from continuing operations $ 1.35 $ 1.29 $ 1.04 $ .83
Income from discontinued operations - - - .07
Extraordinary loss (.02) (.02) (.41) (.07)
Cumulative effect of a change in
accounting principle - - (.48) -
NET INCOME $ 1.33 $ 1.27 $ .15 $ .83
Weighted average shares outstanding:
Primary 53,700 48,600 44,600 44,100
Fully-diluted 60,100 55,000 53,300 52,800
The accompanying notes are an integral part of these financial statements.
* To reflect acquisition and equity transactions occurring as of the
beginning of the year, as discussed further in Note 2.
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED THE LAST DAY OF FEBRUARY 1995, 1994 AND 1993
(Dollars in Thousands, Except Per Share Data)
[Download Table]
Foreign
Additional Currency
Common Paid-in Retained Translation
Stock Capital Earnings Adjustment
Balance at February 29, 1992 $ 400 $154,800 $156,500 $ 200
Net income for fiscal 1993 39,000
Cash dividends of $.08 per share (3,600)
Stock dividend of 5%
issued in July 1992 27,900 (27,900)
Stock dividend of 5%
issued in May 1993 35,700 (35,700)
Exercise of stock options 900
Translation adjustments (2,600)
Balance at February 28, 1993 400 219,300 128,300 (2,400)
Net income for fiscal 1994 3,400
Cash dividends of $.093 per share (4,200)
Stock dividend of 5% issued
in April 1994 38,900 (38,900)
Conversion of 6-1/4% Convertible
Debentures 100
Restricted stock grants, net 800
Exercise of stock options,
including related tax benefits 2,400
Translation adjustments (2,700)
Balance at February 28, 1994 400 261,500 88,600 (5,100)
Net income for fiscal 1995 66,800
Cash dividends of $.107 per share (5,600)
Stock dividend of 5% issued
in April 1995 59,000 (59,000)
Public sale of common stock at
$18.10 per share,net of expenses 100 112,400
Sale of common stock to employee
benefits plans at $18.10 per share 2,000
Conversion of 6-1/4% Convertible
Debentures, net of expenses 100 111,100
Restricted stock grants, net 1,600
Stock options activity,
including related tax benefits 2,600
Translation adjustments ( 1,000)
Balance at February 28, 1995 $ 600 $550,200 $ 90,800 ($ 6,100)
The accompanying notes are an integral part of these financial statements.
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED THE LAST DAY OF FEBRUARY 1995, 1994 AND 1993
(Dollars in Thousands)
[Download Table]
1995 1994 1993
Cash flows from operating activities:
Income from continuing operations $ 67,900 $ 51,100 $ 39,100
Items not affecting cash:
Depreciation and amortization 51,500 41,700 32,100
Deferred income taxes 18,200 10,800 3,900
Pension income, net of other items (11,100) (12,400) (12,500)
Net cash provided by earnings 126,500 91,200 62,600
Changes in assets and liabilities, net
of effects of acquired and discontinued
businesses:
Accounts receivable (20,900) (27,200) (12,000)
Inventories (23,100) (7,700) 1,300
Other assets (3,000) (5,700) 6,000
Accounts payable 33,700 (2,600) 3,800
Other liabilities (16,100) (8,400) (21,400)
Net cash provided by
continuing operations 97,100 39,600 40,300
Discontinued operations,
before non-cash items - 1,100 8,800
Extraordinary items, before
deferred charges - (30,100) (4,900)
Net cash provided
by operating activities 97,100 10,600 44,200
Cash flows from investing activities:
Acquisitions (300,900) (65,000) (4,000)
Divestitures and asset sales 12,100 35,000 13,500
Purchase of plant and equipment, net (49,600) (38,000) (32,900)
Net cash used in investing activities (338,400) (68,000) (23,400)
Cash flows from financing activities:
Credit agreement borrowings, net 121,400 (30,000) 65,000
Multi-currency credit agreement
borrowings, net (10,200) 48,400 -
Purchases of senior and
subordinated debt - (190,200) (62,800)
Issuance of subordinated debt - 258,000 -
Other changes in long-term debt, net 900 (18,900) (33,600)
Changes in short-term bank borrowings 19,500 (8,300) 11,700
Common stock transactions 114,800 800 900
Cash dividends paid (5,100) (4,100) (3,300)
Net cash provided by (used in)
financing activities 241,300 55,700 (22,100)
Effect of exchange rate fluctuations 300 (500) (600)
Net increase (decrease) in cash 300 (2,200) (1,900)
Cash and cash equivalents:
Beginning of the year 500 2,700 4,600
End of the year $ 800 $ 500 $ 2,700
The accompanying notes are an integral part of these financial statements.
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company and its Significant Accounting Policies
The Company
The company is a diversified manufacturer of proprietary and other products,
with operations in Power and Fluid Transfer and Professional Audio businesses.
Principles of Consolidation
The consolidated financial statements include the accounts of the company and
all of its subsidiaries. All significant intercompany transactions have been
eliminated.
Inventories
Inventories are stated at the lower of cost or market, with cost determined
primarily on the last-in, first-out (LIFO) method.
Property, Plant and Equipment
Property, plant and equipment are presented at cost, net of accumulated
depreciation. The cost of property, plant and equipment retired or otherwise
disposed of, and the accumulated depreciation thereon, are eliminated from the
asset and related accumulated depreciation accounts, and any resulting gain or
loss is reflected in income. The company provides for depreciation of plant
and equipment primarily on the straight-line method to amortize the cost of
such plant and equipment over its useful life.
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired ("goodwill") is presented net of
accumulated amortization. The company continually evaluates the existence of
goodwill impairment on the basis of whether the goodwill is fully recoverable
from projected, undiscounted net cash flows of the related business unit.
Goodwill is amortized on the straight-line method over 40 year periods from
the acquisition dates of the respective businesses acquired.
Income Taxes
The company adopted Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS No. 109), in fiscal 1994. The adoption of
this standard changed the company's method of accounting for income taxes from
the deferred method to the liability method. The company adopted SFAS No. 109
retroactively by restating prior years' financial statements for all years
back to and including fiscal 1986.
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Postretirement Benefits
Through fiscal 1993, the company accounted for the cost of postretirement
benefits on the cash basis as they were paid. In fiscal 1994, the company
adopted Statement of Financial Accounting Standards No. 106, Employers
Accounting for Postretirement Benefits Other Than Pensions (SFAS No. 106).
SFAS No. 106 required the estimated present-value of the company's liability
for its commitments to provide health and life insurance benefits to its
retirees to be included in the balance sheet. The related expense is required
to be recognized on the accrual method over the remaining years of the
employees' active service, up to the dates of individual eligibility to retire
and begin receiving the benefit.
Foreign Currency
The assets and liabilities of the company's foreign subsidiaries are
translated at year-end exchange rates, and resulting gains and losses are
accumulated in a separate component of stockholders' equity. Foreign currency
transactions are included in income as realized. The company enters into
foreign currency forward contracts as a hedge for certain existing or
anticipated business transactions denominated in various foreign currencies.
Gains or losses on contracts related to existing business transactions are
deferred and recognized as the related transaction is completed. Gains or
losses on contracts related to anticipated transactions are recognized as of
the balance sheet date.
Net Income Per Share of Common Stock
Primary net income per share is calculated on the basis of the weighted
average number of shares outstanding during each year, adjusted for subsequent
stock distributions. Common stock equivalents which would arise from the
exercise of stock options, using the treasury stock method, were not
significant and have not been included in the calculation.
Fully-diluted net income per share, in addition to the weighted average
determined above, includes common stock equivalents which would arise from the
exercise of stock options using the treasury stock method, and assumes the
conversion of the company's 6-1/4% Convertible Debentures (for the periods
outstanding), as well as the elimination of related interest expense, net of
income tax effects.
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Cash Flows
For purposes of cash flows, the company considers overnight investments as
cash equivalents. The company paid interest of approximately $56,000,000;
$52,900,000; and $58,700,000 in fiscal 1995, 1994 and 1993, respectively. Such
amounts include $1,400,000; $2,200,000 and $5,000,000 allocated to the costs
of discontinued operations in fiscal 1995, 1994 and 1993, respectively. The
company paid income taxes of approximately $21,900,000; $13,700,000; and
$11,800,000 in fiscal 1995, 1994 and 1993, respectively.
2. Acquisitions and Divestitures
In November 1994, the company acquired substantially all of the stock of
Purolator Products Company ("Purolator") for a total cash purchase price,
including expenses, of approximately $286,300,000. Funding for the
acquisition was provided by borrowings under the company's 1994 Credit
Agreement. Purolator is a manufacturer of a broad range of filters used
principally in the automotive aftermarket, and specialized separation systems
for marine, high-technology and industrial applications. Purolator is a
significant addition to the company's Power and Fluid Transfer business
segment.
The acquisition has been accounted for under the purchase method, and
Purolator's results of operations have been consolidated with the company's
results of operations effective as of the acquisition date. The company has
made a preliminary determination and allocation of the purchase price as of
the acquisition date, consisting of the following (dollars in thousands):
Accounts receivable $ 83,300
Inventories 69,900
Other current assets 22,000
Accounts payable and
other current liabilities (102,700)
Net working capital acquired 72,500
Fixed assets 106,900
Cost in excess of net assets acquired 154,200
Long-term bank indebtedness (38,600)
Other non-current items, net (8,700)
Total purchase price,
including expenses $286,300
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The financial position of Purolator has been included in the consolidated
balance sheet of the company as of February 28, 1995 based upon the above
preliminary determination and allocation. Such amounts will be finalized upon
additional analysis and asset valuation determinations to be made by the
company with the assistance of various outside firms. The final changes will
be recorded in fiscal 1996, and are not expected to have a significant impact
on the company's results of operations as reported herein.
The pro forma 1995 information presented in the consolidated statements of
income is based upon the following information, which presents the pro forma
consolidated condensed results of operations as if the acquisition of
Purolator in November 1994 and the sale of the company's common stock in
December 1994 had occurred at the beginning of each of the years presented.
The pro forma amounts do not purport to be indicative of the results that
actually would have been obtained had the transactions identified above
actually taken place at the beginning of each of the years, nor are they
intended to be a projection of future results (dollars in thousands, except
per share amounts):
1995 1994
(Unaudited)
Net sales $1,913,300 $1,654,500
Income before interest
and taxes $ 190,400 $ 160,400
Income before
extraordinary items and
accounting changes $ 78,300 $ 60,800
Income per share,
before extraordinary items
and accounting changes:
Primary $ 1.46 $ 1.19
Fully-diluted $ 1.35 $ 1.09
The company made several other small acquisitions during fiscal 1995 for a
total purchase price of approximately $14,500,000. During fiscal 1994, the
company decided to sell its non-core business units, and accounted for them as
discontinued operations. The sale of certain of the company's assets held for
sale generated proceeds of $12,100,000 in fiscal 1995 and $35,000,000 in
fiscal 1994. At February 28, 1995, the company's net assets of its remaining
discontinued operations amounted to approximately $19,500,000. Such amounts
have been segregated in the balance sheet and offset by a corresponding amount
of long-term debt, on the assumption that the net sale proceeds will equal or
exceed the net asset amount, and all such proceeds will be utilized to offset
existing borrowings of the company.
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Accounts Receivable
Accounts receivable are reflected net of allowances for doubtful accounts of
$18,600,000 and $12,000,000 at February 28, 1995 and 1994, respectively.
4. Inventories
Inventories consist of the following at February 28, 1995 and 1994 (dollars in
thousands):
1995 1994
Raw materials, parts, and sub-assemblies $ 103,500 $ 67,700
Work-in-process 60,200 43,500
Finished goods 198,200 153,800
Total $361,900 $265,000
As a result of the fair value determination of inventories required by the
purchase method of accounting for acquired companies as of their acquisition
date, LIFO costs exceed FIFO costs by approximately $39,300,000 and
$35,000,000 at February 28, 1995 and 1994, respectively.
5. Property, Plant and Equipment
Property, plant and equipment are stated at cost and consist of the following
at February 28, 1995 and 1994 (dollars in thousands):
1995 1994
Land and land improvements $ 41,500 $ 35,700
Buildings 145,300 115,700
Machinery and equipment 451,600 324,700
Total property, plant and equipment 638,400 476,100
Less accumulated depreciation 150,500 110,800
Property, plant and equipment, net $487,900 $365,300
Depreciation expense was approximately $40,900,000; $33,200,000; and
$29,800,000 in fiscal 1995, 1994 and 1993, respectively.
6. Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired is presented net of accumulated
amortization of approximately $29,700,000 and $22,700,000 at February 28, 1995
and 1994, respectively. Amortization expense was approximately $7,000,000;
$5,700,000 and $4,700,000 in fiscal 1995, 1994 and 1993, respectively.
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Long-Term Debt
Long-term debt consists of the following at February 28, 1995 and 1994
(dollars in thousands):
1995 1994
Senior debt:
Credit Agreement $ 300,000 $140,000
Multi-Currency Agreement 38,300 48,400
Other items 42,500 40,500
Total 380,800 228,900
Less current maturities (8,600) (5,800)
Less amounts allocated
to discontinued operations (19,500) (28,100)
Net senior debt 352,700 195,000
Subordinated debt:
8-3/4% Senior Subordinated Notes 258,000 258,000
6-1/4% Convertible Debentures - 114,200
Total subordinated debt 258,000 372,200
Total long-term debt 610,700 567,200
Total stockholders' equity 635,500 345,400
Total capitalization $1,246,200 $912,600
Long-term debt as a percentage of
total capitalization 49.0% 62.2%
In November 1994, the company entered into a new $650,000,000 credit agreement
(the "1994 Credit Agreement") with a group of financial institutions which
provides for (i) a five-year term loan in the principal amount of
approximately $300,000,000 used to finance the acquisition of Purolator and to
repay certain existing Purolator debt, and (ii) a five-year revolving credit
facility in an amount of up to $350,000,000 used for refinancing the company's
previously existing credit facility (the "1993 Credit Facility") and certain
existing Purolator debt, and for working capital and other general corporate
purposes.
The loans outstanding under the 1994 Credit Agreement bear interest, at the
company's option, at (i) the reference rate of the agent acting on behalf of
the financial institutions, or (ii) under a LIBOR option, with borrowing
spreads of LIBOR plus 0.55% to LIBOR plus 1.00% depending on the company's
consolidated leverage ratio (as defined in the 1994 Credit Agreement). The
company is currently paying interest on the loan at LIBOR plus 0.55% per
annum. The 1994 Credit Agreement contains certain affirmative and negative
covenants customary for this type of agreement and is guaranteed by all of the
company's significant domestic subsidiaries. All such guarantees are
collateralized by first priority pledges of all outstanding capital stock of
each guarantor subsidiary.
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In October 1994, the company entered into agreements with certain holders of
its 6-1/4% Convertible Debentures due February 15, 2011 to convert
approximately $76,700,000 of the debentures into approximately 5,600,000
shares of the company's common stock. In January 1995, the company called for
redemption the $37,500,000 remaining principal amount of these debentures. As
a result of the call for redemption, substantially all of the debentures were
voluntarily converted into 2,700,000 shares of the company's common stock.
The principal amount of converted debt, as well as related unamortized
deferred charges, have been reclassified to common stock and additional paid
in capital.
In May 1993, the company entered into a revolving credit agreement (as amended
in January 1995, the "Multi-Currency Agreement") providing for a five year
multi-currency revolving credit facility with a group of financial
institutions in the U.S. and Europe. The Multi-Currency Agreement provides
for a revolving loan commitment for the first two years of the equivalent of
$100,000,000. The commitment declines by $12,500,000 at each of six semi-
annual dates beginning in June 1995, with the remaining $25,000,000 of
commitment expiring in May 1998. Interest rates on borrowings under the
Multi-Currency Agreement are subject to change based on a specified pricing
grid which increases from LIBOR plus 0.55% to LIBOR plus 1.00% per annum based
on the company's senior debt rating (as defined in the Multi-Currency
Agreement). The company is currently paying interest at LIBOR plus .55% on
borrowings under the Multi-Currency Agreement. The Multi-Currency Agreement
also contains certain affirmative and negative covenants customary in an
agreement of this nature.
In March 1993, the company completed a public offering of $258,000,000
principal amount of its 8-3/4% Senior Subordinated Notes due April 2003. A
substantial portion of the net proceeds from the sale of the notes was used to
fund the retirement of the company's 13-3/8% Subordinated Debentures. There
are no sinking fund requirements on the Senior Subordinated Notes and they may
not be redeemed until April 1998. At such date they are redeemable at
104.375% of principal amount, and thereafter at an annually declining premium
over par until April 2001 when they are redeemable at par. The Indenture
limits the payment of dividends and the repurchase of capital stock, and
includes certain other restrictions and limitations customary with
subordinated indebtedness of this type.
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In March 1993, the company offered to purchase its 13-3/8% Subordinated
Debentures for a cash price of $1,137.50 per $1,000 principal amount, plus
accrued interest. As a result of the offer, and certain open-market
purchases, the company acquired approximately $138,000,000 principal amount of
these debentures. The company then completed an "in-substance defeasance" in
which approximately $60,400,000 was deposited in an irrevocable trust to cover
both the remaining outstanding principal amount ($52,000,000) and the related
interest expense requirements of these debentures. The company recognized an
extraordinary loss, net of tax, of approximately $21,700,000 as a result of
the extinguishment of this debt in fiscal 1994. The company also acquired or
defeased approximately $63,000,000 of its indebtedness and recognized an
extraordinary loss, net of tax, of $3,700,000 in fiscal 1993.
The fair value of the 8-3/4% Senior Subordinated Notes is less than their
recorded value by approximately $9,000,000 as of February 28, 1995, based upon
the quoted market value of such notes as of that date. Since the rest of the
company's notes payable and senior debt are primarily floating rate debt,
their recorded amounts approximate their fair values as of February 28, 1995.
The recorded amounts for other financial instruments, such as cash and
accounts receivable, approximate their fair value.
Annual maturities of the company's long-term debt for the next five fiscal
years are approximately: 1996-$8,600,000; 1997-$4,200,000; 1998-$17,100,000;
1999-$27,000,000; and 2000-$312,700,000. The amounts for fiscal 1996 through
1999 exclude maturities related to the term loan portion of the 1994 Credit
Agreement as it is anticipated that such amounts will be offset with
availability under the revolving credit facility portion of such agreement
until maturity in 2000, by which date it is anticipated that the agreement
will have been extended, or replaced.
8. Leases
The company has operating leases which expire at various dates through 2010
with, in some instances, renewal privileges. Certain leases provide for
escalation of the rentals primarily for increases in maintenance costs and
property taxes. Total rental expense under operating leases was approximately
$18,300,000; $15,900,000; and $15,900,000 in fiscal 1995, 1994 and 1993,
respectively. Minimum rental payments under operating leases having an
initial or remaining noncancellable term in excess of 12 months are
approximately: 1996-$18,500,000; 1997-$15,300,000; 1998-$13,300,000; 1999-
$11,400,000; 2000-$8,400,000; 2001 and thereafter $19,300,000.
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Income Taxes
Income from continuing operations and the related provision for taxes for
fiscal 1995, 1994 and 1993 consists of the following (dollars in thousands):
1995 1994 1993
Income from continuing operations,
before provision for taxes:
United States $ 69,500 $45,800 $41,400
Foreign 40,900 35,900 20,600
Total $110,400 $81,700 $62,000
Provision for taxes on income from
continuing operations:
Currently payable:
United States $ 12,500 $14,500 $10,900
Foreign 11,800 5,300 8,100
Total currently payable 24,300 19,800 19,000
Deferred:
United States 7,600 3,600 4,200
Foreign 10,600 7,200 (300)
Total deferred 18,200 10,800 3,900
Total provision for taxes $ 42,500 $30,600 $22,900
The provision for taxes on income for fiscal 1995, 1994, and 1993 differs from
the amount computed using the United States statutory income tax rate as
follows (dollars in thousands):
1995 1994 1993
Expected tax at United States
statutory income tax rate $ 38,600 $28,600 $21,100
Permanent differences 2,100 1,200 900
State and local income taxes 1,900 1,200 600
Tax credits (700) (500) (400)
Foreign tax rate differences 600 100 700
Total provision for taxes $ 42,500 $30,600 $22,900
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of temporary differences which give rise to a significant
portion of deferred tax assets (liabilities) consist of the following at
February 28, 1995 and 1994 (dollars in thousands):
1995 1994
Current:
Accounts receivable $ 7,300 $ 3,900
Inventories (5,000) (9,500)
Compensation related 8,000 3,400
Tax credit and net
operating loss carryforwards - 9,000
Other items 7,000 7,500
Total current asset 17,300 14,300
Valuation allowance (5,600) (4,000)
Net current asset $ 11,700 $ 10,300
Non-current:
Fixed and intangible assets $(52,100) $(39,500)
Pension and other benefit plans (5,500) (21,400)
Tax credits 23,000 29,400
Capital loss carryforwards 11,000 11,300
All other items 26,800 19,600
Total non-current liability 3,200 (600)
Valuation allowance (14,100) (16,800)
Net non-current liability $(10,900) $(17,400)
The current valuation allowance primarily offsets foreign tax benefits
established in a previous acquisition which may not be realized. The non-
current valuation allowance is primarily attributable to the capital loss
carryforwards which are available to use substantially through fiscal 1996.
Based on the company's history of prior operating earnings and its
expectations for the future, management of the company has determined that it
is more likely than not that operating income will be sufficient to utilize
the tax credits in their carryforward periods, which run substantially through
fiscal 2007. The undistributed earnings of the company's foreign subsidiaries
have been reinvested in each country, and are not expected to be remitted back
to the parent company. The determination of the possible tax effect relating
to such reinvested income is not practicable.
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Pension and Profit Sharing Plans
The company has a variety of defined benefit pension plans covering both union
and non-union employees. Under the union plans, employee benefits are
computed based on a dollar amount multiplied by the number of years of
service. Benefits under the non-union plans are computed in a similar manner
for certain plans, and based on the employees' earnings in other plans.
The following table sets forth the funded status of the company's defined
benefit plans and the net asset amount included in the consolidated balance
sheets at February 28, 1995 and 1994 (dollars in thousands):
1995 1994
Actuarial present value of benefit obligations:
Vested $(259,400) $(233,300)
Accumulated $(264,500) $(236,100)
Projected $(273,700) $(241,900)
Plan assets at fair value 335,400 314,300
Plan assets in excess of projected
benefit obligation 61,700 72,400
Unrecognized net loss and
differences in assumptions 49,100 36,400
Unrecognized prior service costs 2,700 3,100
Prepaid pension cost recognized in the
consolidated balance sheets $ 113,500 $ 111,900
The plans' assets consist of corporate and government bonds, guaranteed
investment contracts, listed common stocks and real estate investments.
Included in the plans' assets are common stock of the company with a market
value of approximately $28,800,000 and the company's 8-3/4% subordinated
debentures with a market value of $6,700,000 at February 28, 1995. The funded
status of Purolator's defined benefit plans as of the acquisition date
consisted of plan assets of approximately $42,500,000 and a projected benefit
obligation of approximately $53,500,000.
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net pension income for the defined benefit pension plans in fiscal 1995, 1994,
and 1993 includes the following components (dollars in thousands):
1995 1994 1993
Service cost-benefits
earned during the period $ (3,600) $ (2,900) $ (2,700)
Interest cost on projected
benefit obligation (19,500) (18,200) (17,300)
Actual return on assets 4,300 32,100 36,600
Net amortization and deferral 31,300 2,500 (4,100)
Net pension income $ 12,500 $ 13,500 $ 12,500
The assumptions utilized to measure net pension income and the projected
benefit obligations are as follows:
1995 1994 1993
Discount rate 8.75% 7.75% 9.00%
Expected long-term rate of return 11.50% 12.00% 12.00%
Average increase in compensation 4.00% 5.00% 5.00%
The changes in the expected long-term rate of return and the rate of
compensation increase did not have a significant effect on fiscal 1995's
income, nor are they expected to have a significant effect on fiscal 1996's
income.
The company also has defined contribution pension and profit sharing plans for
a significant number of its salaried and hourly employees. The company's
contributions to these plans are based on various percentages of compensation,
and in some instances are based upon the amount of the employees'
contributions to the plans. The annual cost of these plans, the substantial
part of which is funded currently, amounted to approximately $8,100,000;
$6,700,000; and $6,600,000 in fiscal 1995, 1994 and 1993, respectively.
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Post-retirement Benefits
The company currently provides health and life insurance benefits to a number
of existing retirees from certain of its operations under the provisions of a
number of different plans. Contributions currently required to be paid by the
retirees towards the cost of such plans range from zero to 100%. The company
also has a number of active employees who might receive such benefits upon
their retirement. A number of the plans which relate to retirees and active
non-union employees include provisions which allow the company to increase the
cost to participants, or otherwise modify or terminate them as determined by
management. The plans which relate to active union employees are subject to
modification in the same manner as are all other compensation and benefits
matters in the process of the company's negotiations of contracts covering its
union employees.
The company recognized a $40,000,000 liability for the cost of these plans,
referred to as the accumulated post-retirement benefit obligation (APBO),
entirely in fiscal 1994 in accordance with SFAS No. 106. Since the company
also adopted SFAS No. 109 at the same date, the company recognized a deferred
tax asset of $14,000,000 representing the future tax benefits to be received
related to the APBO. The resulting net charge of $26,000,000 ($.48 per fully
diluted share) was included as the cumulative effect of a change in accounting
principle in the consolidated statement of income for fiscal 1994. The
company continues to fund such costs on the cash-basis, which amounted to
approximately $4,700,000; $4,600,000; and $3,600,000 in fiscal 1995, 1994 and
1993, respectively.
The following table sets forth the amount included with other non-current
liabilities in the consolidated balance sheets at February 28, 1995 and 1994
(dollars in thousands):
1995 1994
Accumulated post-retirement benefit obligation:
Retirees and beneficiaries receiving benefits $64,100 $34,700
Active employees, fully eligible for benefits 6,100 4,600
Active employees, not fully eligible for benefits 10,300 6,500
Total accumulated benefit obligation 80,500 45,800
Unrecognized net loss (2,900) (6,600)
Post-retirement benefit liability recognized
in the consolidated balance sheets $77,600 $39,200
The company's post-retirement benefit expense on the accrual method for fiscal
1995 and 1994 includes the following components (dollars in thousands):
1995 1994
Service cost-benefits earned
during the period $ 500 $ 400
Interest cost on the APBO 4,600 3,400
Total expense $5,100 $3,800
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The APBO for Purolator's various plans was approximately $38,200,000 as of the
acquisition date, and such amount is the primary cause of the increase in the
APBO from the end of fiscal 1994. The APBO was calculated using a discount
rate of 8.75% at February 28, 1995, and 7.75% at February 28, 1994. The
change in the discount rate did not have a significant effect on the expense
determination for fiscal 1995 and 1994, and is not expected to have a
significant effect for fiscal 1996. The APBO determinations assume an initial
health care cost trend rate of approximately 10%, trending down rateably to an
ultimate rate of 5%, which is expected to be reached in five years. The
impact of a one-percentage-point increase in such trend rate would be to
increase the APBO at February 28, 1995 by approximately $3,000,000 and
increase annual expense by approximately $500,000.
12. Legal Proceedings
The company is involved in various legal and environmental related issues. In
the opinion of the company's management, the ultimate cost to resolve these
matters will not have a material adverse effect on the company's financial
position, results of operations or cash flows.
13. Stockholders' Equity and Stock Options
In December 1994, the company completed an underwritten public offering of
approximately 6,500,000 shares of its common stock, at a public offering price
of $18.10 per share (the "Offering"). The net proceeds from the Offering of
approximately $113,000,000 were used to repay a portion of the indebtedness
outstanding under the company's 1994 Credit Agreement. The company also sold
approximately 110,000 shares of its common stock to one of its pension plans
in December 1994 at a price of $18.10 per share, or a total cost of
approximately $2,000,000.
The company granted certain executives restricted stock awards with respect to
22,000 shares in fiscal 1995 and 353,075 shares in fiscal 1994, at $.01 par
value per share. In certain situations the restrictions on the stock lapse
after a five year period. Therefore, the expense is being recognized as it is
earned over the restriction period, with $1,600,000 and $800,000 recognized as
an expense in fiscal 1995 and 1994, respectively. The unearned balance as of
February 28, 1995 is approximately $4,500,000. As of February 28, 1995,
approximately 250,500 shares remain available for issuance under the company's
Restricted Stock Plan.
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The company's qualified Incentive Stock Option Plans provide for granting
officers and other key employees options to purchase the company's common
stock at an exercise price equal to 100% of the market price on the date of
grant. The options may be exercised in cumulative annual increments of 25%
commencing one year after the date of grant, and have a maximum duration of
seven to ten years. There were approximately 952,419 and 1,486,791 shares
reserved for the future granting of qualified incentive stock options at
February 28, 1995 and 1994.
As a result of the company's acquisition of Purolator, holders of Purolator
non-qualified stock options were entitled to receive an immediate cash payment
equal to their built-in gain in such options as of the acquisition date. In
lieu of the cash payment, holders of Purolator options were given the
opportunity to convert their options into options to acquire company stock at
an exercise price that would give them the same built-in gain as they had in
the Purolator options. As a result, certain of the Purolator options were
converted into non-qualified options to acquire approximately 334,600 shares
of the company's common stock at an average exercise price of $12.80 per
share. The company's common stock and additional paid in capital were
increased by approximately $2,000,000 to recognize the issuance of these "in-
the-money" company stock options. The holders of such options are 100% vested
in their exercise rights, and all such options have a duration of 10 years
from the date they were originally granted by Purolator.
The following table summarizes the status of all of the company's stock option
transactions for fiscal 1995, 1994 and 1993 (dollars in thousands, except per
share amounts):
1995 1994 1993
Average Average Average
Option Option Option Option Option Option
Shares Price Shares Price Shares Price
Balance at
beginning
of year 596,650 $ 8.55 774,149 $ 7.29 885,252 $ 4.05
Activity during
the year:
Granted 870,946 $15.45 14,333 $18.37 245,069 $12.43
Exercised (100,583) $ 5.98 (175,680) $ 3.70 (352,525) $ 2.86
Canceled (6,421) $11.49 (16,152) $ 9.18 (3,647) $ 5.90
Balance at
end of year:
Outstanding 1,360,592 $13.12 596,650 $ 8.55 774,149 $ 7.29
Exercisable 644,348 $10.50 267,803 $ 6.83 271,783 $ 3.92
As a result of the exercise of certain employees' incentive stock options, the
company realized a tax benefit of $200,000 and $1,700,000 in fiscal 1995 and
1994, respectively, and such amounts have been recognized as a direct increase
in additional paid-in capital.
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The company's Board of Directors declared five percent stock dividends which
were distributed in April 1995 (declared March 30, 1995), April 1994, and May
1993. All share amounts have been presented as if the stock distributions had
occurred on March 1, 1992, the beginning of fiscal 1993. The company
continues to be authorized by its Board of Directors to repurchase
approximately 6,700,000 shares, or approximately 11%, of the company's
outstanding common stock as of February 28, 1995. The company is authorized
to issue 10,000,000 shares of preferred stock, and there are no shares
outstanding at the present time.
14. Industry Segments, Geographic Areas and Currency Transactions
Prior to the acquisition of Purolator, the company classified its operations
into three business segments: Power and Fluid Transfer; Transportation; and
Professional Audio. Following the acquisition of Purolator, management
reviewed its existing businesses and determined that its Transportation
business segment should be combined with the Power and Fluid Transfer business
segment in view of the similarity in markets and customers served. Management
also believes that the revised classification will enable the company to
benefit from a global organizational structure and the coordination of
distribution activities.
The company now classifies its operations into the following two business
segments:
(i) Power and Fluid Transfer, which includes the design, manufacture
and distribution of products and systems primarily in the general
industrial market, the automotive aftermarket, the original
equipment manufacturers ("OEM") market and the infrastructure
market. Such products and systems include those related to
rubber and plastic belts, hose, fittings and related assemblies;
filters; power transfer mechanisms for door control systems used
in mass transit vehicles; information displays; and advanced
traffic control and management systems; and
(ii) Professional Audio, which includes the design and manufacture of
products and systems used primarily in the high-performance
professional audio market, such as microphones, speakers, public
address and musical instrument loudspeaker systems, audio signal
processors, and sound enhancement and noise canceling equipment.
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information concerning the company's business segments for fiscal 1995, 1994
and 1993 is as follows (dollars in thousands):
Proforma
1995 * 1995 1994 1993
(Unaudited)
NET SALES TO CUSTOMERS
Power and Fluid Transfer $1,728,000 $1,418,000 $1,070,700 $ 908,900
Professional Audio 185,300 185,300 173,500 176,800
Total net sales
to customers $1,913,300 $1,603,300 $1,244,200 $1,085,700
OPERATING INCOME
Power and Fluid Transfer $ 184,500 $ 158,400 $ 124,800 $ 104,100
Professional Audio 21,800 21,800 21,900 22,000
Total operating income 206,300 180,200 146,700 126,100
General corporate (15,900) (15,900) (14,900) (12,500)
Interest expense (63,400) (53,900) (50,100) (51,600)
Income from continuing
operations, before
provision for taxes $ 127,000 $ 110,400 $ 81,700 $ 62,000
IDENTIFIABLE ASSETS
Power and Fluid Transfer $1,614,600 $1,614,600 $1,062,100 $ 843,100
Professional Audio 177,800 177,800 162,700 158,900
General corporate 54,000 54,000 57,500 122,800
Total
identifiable assets $1,846,400 $1,846,400 $1,282,300 $1,124,800
DEPRECIATION AND AMORTIZATION
Power and Fluid Transfer $ 52,400 $ 43,300 $ 34,600 $ 25,800
Professional Audio 4,500 4,500 4,500 4,400
General corporate 3,700 3,700 2,600 1,900
Total depreciation
and amortization $ 60,600 $ 51,500 $ 41,700 $ 32,100
CAPITAL OUTLAYS
Power and Fluid Transfer $ 55,900 $ 46,900 $ 38,900 $ 32,600
Professional Audio 3,900 3,900 2,500 1,700
General corporate - - - 1,200
Total capital outlays $ 59,800 $ 50,800 $ 41,400 $ 35,500
* To reflect acquisition and equity transactions occurring as of
the beginning of the year, as discussed further in Note 2.
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Operating income represents net sales less operating expenses, and excludes
general corporate expenses, interest expense and income taxes. Litigation
costs are considered to be corporate expenses. Identifiable assets are those
assets employed in each segment's operations, including an allocated value to
each segment of cost in excess of net assets acquired. Corporate assets
consist primarily of cash, investments and assets not employed in production.
The company's foreign operations are located primarily in Europe, and to a
lesser extent in Canada and the Far East. Information concerning the
company's operations by geographic area for fiscal 1995, 1994 and 1993 is as
follows (dollars in thousands):
Pro Forma
1995 * 1995 1994 1993
(Unaudited)
NET SALES TO CUSTOMERS
United States $1,385,200 $1,115,600 $ 884,500 $ 815,200
Foreign 528,100 487,700 359,700 270,500
Total net sales
to customers $1,913,300 $1,603,300 $1,244,200 $1,085,700
OPERATING INCOME
United States $ 151,200 $ 126,400 $ 105,700 $ 102,100
Foreign 55,100 53,800 41,000 24,000
Total operating
income $ 206,300 $ 180,200 $ 146,700 $ 126,100
IDENTIFIABLE ASSETS
United States $1,350,100 $1,350,100 $ 898,700 $ 916,800
Foreign 496,300 496,300 383,600 208,000
Total identifiable
assets $1,846,400 $1,846,400 $1,282,300 $1,124,800
* To reflect acquisition and equity transactions occurring as of
the beginning of the year, as discussed further in Note 2.
The net sales to customers reflect the sales of the operating units in each
geographic area to unaffiliated customers. Export sales from the United
States to unaffiliated customers were $92,900,000; $71,300,000; and
$67,800,000 in fiscal 1995, 1994, and 1993, respectively. Inter-segment sales
are not material. Sales between geographic areas are accounted for at prices
which are competitive with prices charged to unaffiliated customers.
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Foreign currency transactions included in income amounted to gains (losses) of
approximately $100,000; $300,000 and ($700,000) in fiscal 1995, 1994 and 1993,
respectively. Unrealized gains and losses related to foreign currency forward
contracts were not significant at February 28, 1995 or February 28, 1994. The
maximum notional amount of foreign currency forward contracts outstanding at
any one time during fiscal 1995 amounted to approximately $31,300,000 and the
approximate notional amounts of such contracts outstanding at the end of
fiscal 1995 was approximately $12,700,000. At February 28, 1995, the company
also had an interest rate swap outstanding on debt of approximately
$17,000,000 which effectively converts variable rate debt to a fixed rate of
approximately 4.75% through September 1996. The company does not hold or
issue derivatives for trading purposes and is not a party to leveraged
derivatives transactions.
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Quarterly Financial Data and Information (Unaudited)
[Download Table]
The following table sets forth the unaudited quarterly results of operations for
each of the fiscal quarters in the years ended February 28, 1995 and 1994 (dollars
in thousands, except per share data):
First Second Third Fourth Total
Fiscal 1995 Quarter Quarter Quarter(a) Quarter(a) Year
Net sales $363,800 $357,200 $397,300 $485,000 $1,603,300
Gross profit (b) $127,700 $124,700 $135,600 $155,300 $ 543,300
Income from
continuing operations $ 17,100 $ 16,700 $ 16,500 $ 17,600 $ 67,900
Extraordinary items - - (1,100) - ( 1,100)
Net income $ 17,100 $ 16,700 $ 15,400 $ 17,600 $ 66,800
Income per share (d):
Primary:
Continuing operations $ .38 $ .37 $ .34 $ .31 $ 1.40
Extraordinary items - - (.02) - (.02)
Net income $ .38 $ .37 $ .32 $ .31 $ 1.38
Fully-diluted:
Continuing operations $ .34 $ .33 $ .32 $ .30 $ 1.29
Extraordinary items - - (.02) - (.02)
Net income $ .34 $ .33 $ .30 $ .30 $ 1.27
Fiscal 1994
Net sales $287,800 $316,600 $320,000 $319,800 $1,244,200
Gross profit (b) $102,000 $110,800 $113,800 $114,100 $ 440,700
Income from
continuing operations $ 13,600 $ 13,100 $ 12,800 $ 11,600 $ 51,100
Extraordinary items (21,700) - - - (21,700)
Cumulative effect of
accounting change (26,000) - - - (26,000)
Net income $(34,100) $ 13,100 $ 12,800 $ 11,600 $ 3,400
Income per share (c) (d):
Primary:
Continuing operations $ .31 $ .29 $ .29 $ .26 $ 1.15
Extraordinary items (.49) - - - (.49)
Cumulative effect of
accounting change (.59) - - - (.58)
Net income $ (.77) $ .29 $ .29 $ .26 $ .08
Fully-diluted:
Continuing operations $ .28 $ .27 $ .26 $ .24 $ 1.04
Extraordinary items (.41) - - - (.41)
Cumulative effect of
accounting change (.49) - - - (.48)
Net income $ (.62) $ .27 $ .26 $ .24 $ .15
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________________________________
(a) Includes the results of operations of Purolator from its acquisition
date of November 4, 1994.
(b) Excluding depreciation expense.
(c) The sum of the quarterly amounts do not equal the total as a result of
common stock transactions during the year. The impact of those
transactions on the determination of the weighted average number of
shares outstanding is different in each quarter, and for the year in
total.
(d) Restated to reflect the five percent stock dividend issued in April
1995.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Items 10-13
The information required for Items 10, 11, 12 and 13 is incorporated
herein by reference to the information set forth in the definitive Proxy
Statement for the company's 1995 Annual Meeting of Stockholders which will be
filed with the Securities and Exchange Commission not later than 120 days
after February 28, 1995.
PART IV
ITEM 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Page
(a) (1) Financial Statements
Report of Independent Accountants for
each of the three fiscal years in the
period ended February 28, 1995 . . . . . . . . . . . . . . .28
Consolidated Balance Sheets at February 28, 1995 and 1994. . .29
Consolidated Statements of Income for each of
the three fiscal years in the period ended
February 28, 1995. . . . . . . . . . . . . . . . . . . . . .30
Consolidated Statements of Stockholders' Equity for
each of the three fiscal years in the period
ended February 28, 1995. . . . . . . . . . . . . . . . . . .31
Consolidated Statements of Cash Flows
for each of the three fiscal years in
the period ended February 28, 1995 . . . . . . . . . . . . .32
Notes to Consolidated Financial Statements . . . . . . . . . .33
(2) Financial Statement Schedule
Report of Independent Accountants
for each of the three fiscal years in the
period ended February 28, 1995 . . . . . . . . . . . . . . .60
II. Valuation and qualifying accounts . . . . . . . . . . . .61
All other schedules and statements have been omitted as the required
information is inapplicable or is presented in the financial
statements or notes thereto.
(b) Reports on Form 8-K
The following reports on Form 8-K were filed pertaining to
events occurring during the quarter ended February 28, 1995.
1. A current report on Form 8-K dated December 21, 1994 was
filed to report under Item 5 that the company completed an
underwritten public offering of 6,483,750 shares of its
common stock at a public offering price of $18.10 per share.
2. A current report on Form 8-K dated February 17, 1995 was
filed to report under Item 5 that the company completed a
redemption of the $37,478,000 outstanding aggregate
principal amount of its 6-1/4% Convertible Subordinated
Debentures due February 15, 2007. As a result of the call
for redemption, substantially all of the debentures were
voluntarily converted into approximately 2.7 million shares
of common stock.
(c) Exhibits
2.1 Agreement and Plan of Merger dated as of October 3, 1994 by and
among Mark IV Industries, Inc., Mark IV Acquisition Corp., and
Purolator Products Company, incorporated by reference to exhibit
(c)(1) to Schedule 14D-1 (Tender Offer) dated October 7, 1994,
as filed with the SEC on such date (incorporated by reference to
the exhibit (c)(1) to Schedule 14D - (Tender Offer) dated
October 7, 1994, as filed with the SEC on such date).
2.2 Offer to Purchase, as revised, incorporated by reference to
exhibit (a)(1) to Amendment No. 1 to Schedule 14D-1 Tender
Offer) dated October 11, 1994, as filed with the SEC on such
date.
2.3 Share Purchase Agreement dated April 29, 1993 among Mark IV
Industries, Inc., a Delaware Corporation, and its indirect
wholly-owned subsidiary, Dayco Italy, S.p.A., an Italian
Corporation, and Pirelli S.p.A., an Italian Corporation
(incorporated by reference to exhibit 2.1 to the company's
Current Report on Form 8-K dated May 27, 1993, as filed on June
17, 1993). All schedules and other attachments to this exhibit,
as identified on the last page of the exhibit, have been
omitted.
3.1 Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 28.1 to the company's Registration
Statement No. 33-45215 on Form S-3, as filed with the SEC on
January 24, 1993).
4.1 Specimen Common Stock Certificate (incorporated by reference to
Exhibit 4.11 to Amendment No. 1 to the Registrant's Registration
Statement No. 33-41553 on Form S-3 dated August 6, 1991).
4.2 By-Laws of the Registrant (incorporated by reference to Exhibit
4.12 To Amendment No. 1 to the Registrant's Registration
Statement No. 33-41553 on Form S-3, dated August 6, 1991).
4.3 Conformed copy of the Indenture, dated as of March 15, 1993,
between Mark IV Industries, Inc. and Citibank, N.A.; including
the form of Senior Subordinated Notes due April 1, 2003
(incorporated by reference to Exhibit 4.1 to the company's
Current Report on Form 8-K dated March 29, 1993).
Executive Compensation Plans and Arrangements (10.1 -10.20)
10.1* Employment Agreement dated March 1, 1995 between the Company and
Sal Alfiero.
10.2* Employment Agreement dated March 1, 1995 between the Company and
Clement R. Arrison.
10.3* Employment Agreement dated March 1, 1995 between the Company and
Gerald S. Lippes.
10.4* Employment Agreement dated March 1, 1995 between the Company and
William P. Montague.
10.5* Employment Agreement dated March 1, 1995 between the Company and
Frederic L. Cook.
10.6* Employment Agreement dated March 1, 1995 between the Company and
John J. Byrne.
10.7* Employment Agreement dated March 1, 1995 between the Company and
Richard L. Grenolds.
10.8* Employment Agreement dated March 1, 1995 between the Company and
Douglas J. Fiegel.
10.9* Employment Agreement dated January 1, 1995 between the Company,
Dayco Products, Inc. ("Dayco") and Bruce A. McNiel.
10.10* Employment Agreement dated January 1, 1995 between the Company,
Dayco, Dayco Europe, A.B. and Kurt J. Johansson.
10.11* Employment Agreement dated January 1, 1995 between the Company,
Dayco and Patricia Richert.
10.12 Amendment and Restatement of Mark IV Industries, Inc. and
Subsidiaries Incentive Stock Option Plan, as of February 8, 1988
(incorporated by reference to Exhibit 10.13.1 to the Company's
Registration Statement No. 33-42307 on Form S-8 dated August 19,
1991).
10.13 Amendment and Restatement of the Mark IV Industries, Inc. and
Subsidiaries 1992 Incentive Stock Option Plan Effective March
30, 1994 (incorporated by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1994).
10.14* Amendment and Restatement of the Mark IV Industries, Inc. 1992
Restricted Stock Plan Effective March 1, 1995.
10.15 Mark IV Industries, Inc. Executive Bonus Plan (incorporated by
reference to Exhibit 10.8 to the Company's Annual Report on Form
10-K for the fiscal year ended February 28, 1991).
10.16 First Amendment and Restatement of the Mark IV Industries, Inc.
Enhanced Executive Incentive Plan (incorporated by reference to
Exhibit 10.16 to the Company's Annual Report on Form 10-K dated
February 29, 1992).
10.17 Third Amendment and Restatement of the Non-Qualified Plan of
Deferred Compensation of Mark IV Industries, Inc. Effective
September 1, 1993 (incorporated by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended February
28, 1994).
10.18 First Amendment and Restatement of the Non-Qualified Plan of
Deferred Compensation for Non-Employee Directors of Mark IV
Industries, Inc. Effective December 1, 1993 (incorporated by
reference to the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1994).
10.19* First Amendment and Restatement of the Non-qualified Plan of
Deferred Incentive Compensation for Executives of Certain
Operating Divisions and Subsidiaries of Mark IV Industries, Inc.
Effective November 30, 1993.
10.20* Short Term Incentive Bonus Plan of Dayco Products, Inc. dated
March 30, 1994.
Other Material Contract Exhibits
10.21 Credit and Guarantee Agreement dated as of November 2, 1994,
among Mark IV Industries, Inc., as Borrower, Mark IV
Transportation Products Corp., Gulton Industries, Inc., Dayco
Products, Inc. Electro-Voice Incorporated, Anchor Swan, Inc. and
Mark IV Acquisition Corp., as Guarantors, the banks and other
financial institutions which are parties thereto, Bank of
American National Trust and Savings Association, as
Administrative Agent and BID Agent, and BA Securities, Inc. as
Arranger (incorporated by reference to exhibit (b)(2) to
Amendment No. 3 to Schedule 14D-1 (Tender Offer) dated November
2, 1994, as filed on that date).
10.22 Revolving Credit Facility Agreement dated May 27, 1993, among
Mark IV Industries, Inc., a Delaware Corporation, Dayco Italy
S.p.A., an Italian Corporation, Bank of America National Trust
and Savings Association, Chemical Investment Bank Limited, and
Citibank, N.A. and Chase Manhattan Bank N.A., as co-agents for
various financial institutions that are signatories thereto
(incorporated by reference to the Company's Current Report on
Form 8-K dated May 27, 1993 as filed on June 17, 1993). All
schedules and other attachments to this exhibit, as identified
on page v of the exhibit, have been omitted.
11* Statement regarding computation of per share earnings.
21* Subsidiaries of the Registrant.
23* Consent of Independent Accountants.
27* Financial Data Schedule.
______________________
* Filed herewith by direct transmission pursuant to the EDGAR program.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Mark IV Industries, Inc.
Our report on the consolidated financial statements of Mark IV Industries,
Inc. is included in Item 8 of this Form 10-K. In connection with our audits
of such financial statements, we have also audited the related financial
statement schedule listed in Item 14 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Rochester, New York
March 30, 1995
[Enlarge/Download Table]
MARK IV INDUSTRIES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions
Charged Deductions
Beginning (Credited) Accounts Ending
Classifications Balance to Expense Charged Off Other(a) Balance
Year ended February 28, 1995
Allowance for doubtful
accounts $ 12,000,000 $ 3,300,000 $ (3,100,000) $ 6,400,000 $ 18,600,000
Year ended February 28, 1994
Allowance for doubtful
accounts $ 10,300,000 $ 2,400,000 $ (3,100,000) $ 2,400,000 $ 12,000,000
Year ended February 29, 1993
Allowance for doubtful
accounts $ 10,900,000 $ 2,700,000 $ (3,600,000) $ 300,000 $ 10,300,000
(a) Represents the following
February February February
28, 1995 28, 1994 28, 1993
Reserve at date of acquisition of subsidiary $5,500,000 $3,700,000 $ -
Reclassification from other reserves 400,000 100,000 500,000
Reserves of discontinued operations
at February 28, 1993 - (900,000) -
Foreign currency translation adjustment 500,000 (500,000) (200,000)
$6,400,000 $2,400,000 $ 300,000
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
MARK IV INDUSTRIES, INC.
By: /s/ Sal H. Alfiero
Sal H. Alfiero, Chairman of the
Board and Chief Executive Officer
Dated: May 25, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report on Form 10-K has been signed below by the following
persons in the capacities and on the date indicated.
Signature Title Date
/s/ Sal H. Alfiero Chairman of the Board May 25, 1995
Sal H. Alfiero and Chief Executive Officer
/s/ Clement R. Arrison President, Director May 25, 1995
Clement R. Arrison
/s/ William P. Montague Executive Vice President May 25, 1995
William P. Montague and Chief Financial Officer
/s/ Frederic L. Cook Senior Vice President - May 25, 1995
Frederic L. Cook Administration
/s/ John J. Byrne Vice President-Finance May 25, 1995
John J. Byrne
/s/ Richard L. Grenolds Vice President - May 25, 1995
Richard L. Grenolds Chief Accounting Officer
/s/ Gerald S. Lippes Secretary and Director May 25, 1995
Gerald S. Lippes
/s/ Joseph G. Donohoo Director May 25, 1995
Joseph G. Donohoo
/s/ Herb Roth, Jr. Director May 25, 1995
Herb Roth, Jr.
Exhibit Index
2.1 Agreement and Plan of Merger dated as of October 3, 1994 by and
among Mark IV Industries, Inc., Mark IV Acquisition Corp., and
Purolator Products Company, incorporated by reference to exhibit
(c)(1) to Schedule 14D-1 (Tender Offer) dated October 7, 1994, as
filed with the SEC on such date (incorporated by reference to the
exhibit (c)(1) to Schedule 14D - (Tender Offer) dated October 7,
1994, as filed wiht the SEC on such date).
2.2 Offer to Purchase, as revised, incorporated by reference to
exhibit (a)(1) to Amendment No. 1 to Schedule 14D-1 Tender Offer)
dated October 11, 1994, as filed with the SEC on such date.
2.3 Share Purchase Agreement dated April 29, 1993 among Mark IV
Industries, Inc., a Delaware Corporation, and its indirect wholly-
owned subsidiary, Dayco Italy, S.p.A., an Italian Corporation, and
Pirelli S.p.A., an Italian Corporation (incorporated by reference
to exhibit 2.1 to the Company's Current Report on Form 8-K dated
May 27, 1993, as filed on June 17, 1993). All schedules and other
attachments to this exhibit, as identified on the last page of the
exhibit, have been omitted.
3.1 Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 28.1 to the Company's Registration Statement
No. 33-45215 on Form S-3, as filed with the SEC on January 24,
1993).
4.1 Specimen Common Stock Certificate (incorporated by reference to
Exhibit 4.11 to Amendment No. 1 to the Registrant's Registration
Statement No. 33-41553 on Form S-3 dated August 6, 1991).
4.2 By-Laws of the Registrant (incorporated by reference to Exhibit
4.12 To Amendment No. 1 to the Registrant's Registration Statement
No. 33-41553 on Form S-3, dated August 6, 1991).
4.3 Conformed copy of the Indenture, dated as of March 15, 1993,
between Mark IV Industries, Inc. and Citibank, N.A.; including the
form of Senior Subordinated Notes due April 1, 2003 (incorporated
by reference to Exhibit 4.1 to the Company's Current Report on
Form 8-K dated March 29, 1993).
Executive Compensation Plans and Arrangements (10.1 -10.20)
10.1* Employment Agreement dated March 1, 1995 between the Company and
Sal Alfiero.
10.2* Employment Agreement dated March 1, 1995 between the Company and
Clement R. Arrison.
10.3* Employment Agreement dated March 1, 1995 between the Company and
Gerald S. Lippes.
10.4* Employment Agreement dated March 1, 1995 between the Company and
William P. Montague.
10.5* Employment Agreement dated March 1, 1995 between the Company and
Frederic L. Cook.
10.6* Employment Agreement dated March 1, 1995 between the Company and
John J. Byrne.
10.7* Employment Agreement dated March 1, 1995 between the Company and
Richard L. Grenolds.
10.8* Employment Agreement dated March 1, 1995 between the Company and
Douglas J. Fiegel.
10.9* Employment Agreement dated January 1, 1995 between the Company,
Dayco Products, Inc. ("Dayco") and Bruce A. McNiel.
10.10* Employment Agreement dated January 1, 1995 between the Company,
Dayco, Dayco Europe, A.B. and Kurt J. Johansson.
10.11* Employment Agreement dated January 1, 1995 between the Company,
Dayco and Patricia Richert.
10.12 Amendment and Restatement of Mark IV Industries, Inc. and
Subsidiaries Incentive Stock Option Plan, as of February 8, 1988
(incorporated by reference to Exhibit 10.13.1 to the Company's
Registration Statement No. 33-42307 on Form S-8 dated August 19,
1991).
10.13 Amendment and Restatement of the Mark IV Industries, Inc. and
Subsidiaries 1992 Incentive Stock Option Plan Effective March 30,
1994 (incorporated by reference to Exhibit 10.4 to the Company's
Annual Report on Form 10-K for the fiscal year ended February 28,
1994).
10.14* Amendment and Restatement of the Mark IV Industries, Inc. 1992
Restricted Stock Plan Effective March 1, 1995.
10.15 Mark IV Industries, Inc. Executive Bonus Plan (incorporated by
reference to Exhibit 10.8 to the Company's Annual Report on Form
10-K for the fiscal year ended February 28, 1991).
10.16 First Amendment and Restatement of the Mark IV Industries, Inc.
Enhanced Executive Incentive Plan (incorporated by reference to
Exhibit 10.16 to the Company's Annual Report on Form 10-K dated
February 29, 1992).
10.17 Third Amendment and Restatement of the Non-Qualified Plan of
Deferred Compensation of Mark IV Industries, Inc. Effective
September 1, 1993 (incorporated by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended February 28,
1994).
10.18 First Amendment and Restatement of the Non-Qualified Plan of
Deferred Compensation for Non-Employee Directors of Mark IV
Industries, Inc. Effective December 1, 1993 (incorporated by
reference to the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1994).
10.19* First Amendment and Restatement of the Non-qualified Plan of
Deferred Incentive Compensation for Executives of Certain
Operating Divisions and Subsidiaries of Mark IV Industries, Inc.
Effective November 30, 1993.
10.20* Short Term Incentive Bonus Plan of Dayco Products, Inc. dated
March 30, 1994.
Other Material Contract Exhibits
10.21 Credit and Guarantee Agreement dated as of November 2, 1994, among
Mark IV Industries, Inc., as Borrower, Mark IV Transportation
Products Corp., Gulton Industries, Inc., Dayco Products, Inc.
Electro-Voice Incorporated, Anchor Swan, Inc. and Mark IV
Acquisition Corp., as Guarantors, the banks and other financial
institutions which are parties thereto, Bank of American National
Trust and Savings Association, as Administrative Agent and BID
Agent, and BA Securities, Inc. as Arranger (incorporated by
reference to exhibit (b)(2) to Amendment No. 3 to Schedule 14D-1
(Tender Offer) dated November 2, 1994, as filed on that date).
10.22 Revolving Credit Facility Agreement dated May 27, 1993, among Mark
IV Industries, Inc., a Delaware Corporation, Dayco Italy S.p.A.,
an Italian Corporation, Bank of America National Trust and Savings
Association, Chemical Investment Bank Limited, and Citibank, N.A.
and Chase Manhattan Bank N.A., as co-agents for various financial
institutions that are signatories thereto (incorporated by
reference to the Company's Current Report on Form 8-K dated May
27, 1993 as filed on June 17, 1993). All schedules and other
attachments to this exhibit, as identified on page v of the
exhibit, have been omitted.
11* Statement regarding computation of per share earnings.
21* Subsidiaries of the Registrant.
23* Consent of Independent Accountants.
27* Financial Data Schedule.
______________________
* Filed herewith by direct transmission pursuant to the EDGAR program.
Dates Referenced Herein and Documents Incorporated by Reference
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