<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1998
--------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from TO
------------ ------------
Commission file number: 01-13407
HUSSMANN INTERNATIONAL, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 43-1791715
- ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12999 ST. CHARLES ROCK ROAD, BRIDGETON, MISSOURI 63044-2483
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(314) 291-2000
---------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No__
COMMON STOCK OUTSTANDING AT MARCH 31, 1998: 50,791,393 SHARES
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HUSSMANN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED; DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------------
1998 1997
------------------- -------------------
<S> <C> <C>
SALES AND REVENUES $ 245.9 $ 198.6
COST OF GOODS SOLD 205.1 163.7
------------ ----------
GROSS PROFIT 40.8 34.9
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 29.3 24.9
AMORTIZATION EXPENSE 0.3 0.4
------------ -----------
OPERATING INCOME 11.2 9.6
WHITMAN CHARGES (1.5) (7.1)
INTEREST EXPENSE:
WHITMAN (1.0) (4.2)
OTHER (3.4) (0.3)
------------ -----------
TOTAL INTEREST EXPENSE (4.4) (4.5)
OTHER INCOME, NET 0.9 0.4
------------ -----------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE AND
MINORITY INTEREST 6.2 (1.6)
INCOME TAX EXPENSE (BENEFIT) 2.3 (0.7)
------------ -----------
NET INCOME (LOSS) BEFORE MINORITY INTEREST 3.9 (0.9)
MINORITY INTEREST 0.3 0.2
------------ -----------
NET INCOME (LOSS) $ 4.2 $ (0.7)
============ ===========
BASIC AND DILUTED EARNINGS PER SHARE $ 0.08 -
WEIGHTED AVERAGE SHARES USED IN COMPUTING
BASIC EARNINGS PER SHARE 50.9 -
WEIGHTED AVERAGE SHARES USED IN COMPUTING
DILUTED EARNINGS PER SHARE 51.8 -
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE> 3
HUSSMANN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31, DECEMBER 31,
1998 1997
----------------- --------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 37.9 $ 38.4
RECEIVABLES, NET 233.0 208.8
INVENTORIES 110.7 146.7
OTHER CURRENT ASSETS 3.9 7.4
---------------- -------------------
TOTAL CURRENT ASSETS 385.5 401.3
PROPERTY AND EQUIPMENT, NET 161.3 159.9
GOODWILL, NET 24.5 25.1
OTHER ASSETS 28.9 27.2
---------------- -------------------
TOTAL ASSETS $ 600.2 $ 613.5
================ ===================
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
SHORT-TERM DEBT $ 18.5 $ 6.2
ACCOUNTS PAYABLE 103.6 126.8
INCOME TAXES PAYABLE 3.7 14.2
ACCRUED EXPENSES 59.5 74.6
--------------- -------------------
TOTAL CURRENT LIABILITIES 185.3 221.8
LOANS AND ADVANCES - WHITMAN - 173.8
LONG-TERM DEBT 246.6 -
DEFERRED INCOME TAXES AND OTHER
LIABILITIES 26.2 31.3
--------------- ------------------
TOTAL LIABILITIES 458.1 426.9
--------------- ------------------
SHAREHOLDERS' EQUITY:
PREFERRED STOCK, $.001 PAR VALUE,
20,000,000 SHARES AUTHORIZED, NONE
ISSUED OR OUTSTANDING - -
COMMON STOCK, $.001 PAR VALUE, 150,000,000
SHARES AUTHORIZED, 50,791,393
ISSUED AND OUTSTANDING 0.1 -
ADDITIONAL PAID-IN CAPITAL 87.2 52.3
RETAINED EARNINGS 110.1 188.1
CUMULATIVE TRANSLATION ADJUSTMENT (55.3) (53.8)
--------------- ------------------
TOTAL SHAREHOLDERS' EQUITY 142.1 186.6
--------------- ------------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 600.2 $ 613.5
=============== ==================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
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HUSSMANN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED; DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 4.2 $ (0.7)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
USED IN OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 6.0 5.5
CHANGES IN ASSETS AND LIABILITIES,
EXCLUSIVE OF ACQUISITIONS:
(INCREASE) DECREASE IN RECEIVABLES (24.2) 39.7
(INCREASE) DECREASE IN INVENTORIES 36.0 (5.1)
DECREASE IN ACCOUNTS PAYABLE (24.2) (27.4)
DECREASE IN INCOME TAXES PAYABLE (10.5) (1.5)
DECREASE IN ACCRUED EXPENSES (15.1) (9.4)
NET CHANGE IN OTHER ASSETS AND LIABILITIES (3.1) (5.0)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (30.9) (3.9)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
CAPITAL INVESTMENTS (6.8) (3.7)
COMPANIES ACQUIRED, NET OF CASH - (12.4)
OTHER 0.2 0.2
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (6.6) (15.9)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
NET INCREASE IN SHORT-TERM DEBT 12.3 0.9
SETTLEMENT OF WHITMAN OBLIGATIONS (221.7) -
NET INCREASE IN LOANS AND ADVANCES - WHITMAN - 6.0
PROCEEDS FROM ISSUANCE OF LONG-TERM DEBT 270.0 -
PRINCIPAL PAYMENTS ON LONG-TERM DEBT (23.4) -
------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 37.2 6.9
------- --------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (0.2) (0.2)
------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (0.5) (13.1)
CASH AND CASH EQUIVALENTS AS OF BEGINNING OF PERIOD 38.4 47.1
------- --------
CASH AND CASH EQUIVALENTS AS OF END OF PERIOD $ 37.9 $ 34.0
======= ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
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HUSSMANN INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED; DOLLARS IN MILLIONS)
1. BASIS OF PRESENTATION
On January 30, 1998, Whitman Corporation ("Whitman") distributed (the
"Distribution") 50.7 million shares of common stock of Hussmann ("Hussmann
Common Stock") to Whitman's shareholders. As a result of the spin-off (the
"Spin-off"), Hussmann became an independent, publicly held company. (As
required by the context, "Hussmann" or the "Company" refers to Hussmann
International, Inc. or to the group of companies that became wholly-owned
subsidiaries of Hussmann International, Inc. in January 1998.)
The accompanying unaudited financial statements present the operations of
Hussmann, which for all periods presented (except as of and for the period
ended March 31, 1998) was composed of wholly-owned subsidiaries of Whitman
Corporation, including Hussmann Corporation and its wholly-owned subsidiaries
and other Hussmann companies owned by Whitman but directly managed by Hussmann.
In January 1998, the companies included in these financial statements became
wholly-owned subsidiaries of Hussmann. Prior to the formation of Hussmann, the
historical financial statements were combined for financial reporting purposes.
For all periods presented herein, the financial statements will be referred to
as consolidated financial statements.
The accompanying unaudited consolidated financial statements, in the
opinion of management, include all adjustments (consisting of normal, recurring
items) necessary to present fairly Hussmann's consolidated financial position
and results of its operations and cash flows for the periods presented. The
unaudited consolidated financial statements are presented in accordance with
requirements of Regulation S-X and consequently do not include all disclosures
required by generally accepted accounting principles. Results of operations for
the three-month period ended March 31, 1998 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1998.
2. EARNINGS PER SHARE
Hussmann adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share", during the three months ended
March 31, 1998. In accordance with SFAS No. 128, basic earnings per share is
calculated using the weighted average number of common shares outstanding
during the period. Diluted earnings per share is calculated using the weighted
average number of common shares outstanding during the period plus shares
issuable upon the assumed exercise of dilutive common stock options by using
the treasury stock method. Although the Spin-off did not occur until January
30, 1998, for purposes of presentation Hussmann has calculated earnings per
share on a pro forma basis assuming the Spin-off occurred at January 1, 1998
for both basic and diluted earnings per share.
The number of shares of Hussmann Common Stock used in the calculation of
earnings per share for the three months ended March 31, 1998 is as follows (in
thousands):
<TABLE>
<CAPTION>
1998
------
<S> <C>
Weighted average shares outstanding - basic 50,851
Dilutive effect of stock options 958
------
Weighted average shares outstanding - diluted 51,809
======
</TABLE>
As of March 31, 1998 all outstanding Hussmann stock options were included
in the computation of diluted earnings per share, as the exercise price was
5
<PAGE> 6
less than the average fair market value of Hussmann Common Stock for the period
it was traded.
3. INVENTORIES
Inventories consist of the following (dollars in millions):
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- ------------
<S> <C> <C>
Raw materials and supplies $ 63.8 $ 66.9
Work in process 35.6 52.0
Finished goods 11.3 27.8
--------- ------------
Total inventories $110.7 $ 146.7
========= ============
</TABLE>
4. BUSINESS SEGMENT INFORMATION
Hussmann manages its business with separate senior management teams
responsible for geographic regions. The following segments correspond to these
geographic regions.
The following tables present financial information for each of these
business segments as of and for the quarters ended March 31, 1998 and 1997 (in
millions):
<TABLE>
<CAPTION>
SALES AND REVENUES OPERATING INCOME
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
U.S. and Canada $209.5 $173.4 $18.9 $16.7
U.K. 22.7 21.8 (2.4) (4.2)
Other International 29.3 16.6 1.4 0.5
Eliminations (15.6) (13.2) - -
------ ------ ----- ------
Total $245.9 $198.6 $17.9 $13.0
====== ======
(6.7) (3.4)
Corporate administrative expenses ----- ------
Total operating income $11.2 $ 9.6
===== ======
</TABLE>
5. COMPREHENSIVE INCOME
In addition, during the three months ended March 31, 1998, Hussmann
adopted SFAS No. 130, "Reporting Comprehensive Income." Statement No. 130
requires the separate reporting of components of comprehensive income, as
defined. This statement requires Hussmann to separately report the translation
adjustments of SFAS No. 52, "Foreign Currency Translation" as a component of
comprehensive income. Management has chosen, on an interim basis, to disclose
the requirements of this statement within the notes to the consolidated
financial statements. The foreign currency translation adjustment accounted
for as a separate component of shareholders' equity was a loss of $1.5 million
and $2.5 million for the three-month periods ended March 31, 1998 and 1997,
respectively.
6
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HUSSMANN INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
In January 1998, the companies included in the accompanying consolidated
financial statements became wholly-owned subsidiaries of Hussmann. On January
30, 1998, Hussmann was spun-off from Whitman Corporation and became an
independent, publicly held company. The results for the three-month periods
ended March 31, 1998 and 1997, are impacted by certain non-recurring items. The
following tables provide a reconciliation of what management believes the
operating results for such periods would have been if Hussmann had been an
independent, publicly held company, excluding the impact of certain
non-recurring items and including the impact of the borrowing under the
five-year unsecured revolving credit facility entered into by the Company and
Hussmann Corporation in January 1998 (the "Credit Facility"). Management
believes the pro forma consolidated operating results provide a more meaningful
presentation for purposes of analyzing the Company's operating results.
HUSSMANN INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1998
(UNAUDITED; DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
-------------------------------
ACTUAL ADJUSTMENTS PRO FORMA
------- ----------- ---------
<S> <C> <C> <C>
Sales and revenues $245.9 $ - $245.9
Cost of goods sold 205.1 - 205.1
- --------------------------------------------------------------------------------
Gross profit 40.8 - 40.8
Total selling, general, administrative
and amortization expenses 29.6 - 29.6
- --------------------------------------------------------------------------------
Operating income 11.2 - 11.2
Whitman charges (1.5) 1.5 a -
Total interest expense (4.4) (0.2)a,b (4.6)
Other income, net 0.9 - 0.9
- --------------------------------------------------------------------------------
Income before income tax expense
and minority interest 6.2 1.3 7.5
Income tax expense 2.3 0.5 c 2.8
- --------------------------------------------------------------------------------
Net income before minority interest 3.9 0.8 4.7
Minority interest 0.3 - 0.3
- --------------------------------------------------------------------------------
Net income $ 4.2 $ 0.8 $ 5.0
================================================================================
Weighted average shares
outstanding - basic 50.9 50.9
Basic earnings per share $ 0.08 $ 0.10
Weighted average shares
outstanding - diluted 51.8 51.8
Diluted earnings per share $ 0.08 $ 0.10
================================================================================
</TABLE>
(a) To eliminate the Whitman charges and interest paid to Whitman.
(b) To record interest expense on the funds borrowed under the Credit
Facility. For pro forma purposes it was assumed that $240 million was
borrowed at an interest rate of 6.0% for the period January 1, 1998
through the Spin-off.
(c) To record the income tax effect of adjustments (a) and (b).
7
<PAGE> 8
HUSSMANN INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1997
(UNAUDITED; DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
-------------------------------
ACTUAL ADJUSTMENTS PRO FORMA
------- ----------- ---------
<S> <C> <C> <C>
Sales and revenues $198.6 $25.3 $223.9
Cost of goods sold 163.7 23.4 187.1
- --------------------------------------------------------------------------------
Gross profit 34.9 1.9 36.8
Total selling, general, administrative
and amortization expenses 25.3 1.7 27.0
- --------------------------------------------------------------------------------
Operating income 9.6 0.2 9.8
Whitman charges (7.1) 7.1 a -
Total interest expense (4.5) 0.6 a,b (3.9)
Other income, net 0.4 - 0.4
- --------------------------------------------------------------------------------
Income (loss) before income tax
expense and minority interest (1.6) 7.9 6.3
Income tax expense (benefit) (0.7) 2.9 c 2.2
- --------------------------------------------------------------------------------
Net income (loss) before minority
interest (0.9) 5.0 4.1
Minority interest 0.2 - 0.2
- --------------------------------------------------------------------------------
Net income (loss) $ (0.7) $ 5.0 $ 4.3
================================================================================
Pro forma shares outstanding - basic - - 50.7
Pro forma basic earnings per share - - $ 0.08
Pro forma shares outstanding -
diluted - - 51.2
Pro forma diluted earnings per
share - - $ 0.08
================================================================================
</TABLE>
Historically as part of Whitman, Hussmann accounted for its results for
each quarter as of the fifteenth day of the month. As a separate, stand-alone
company, Hussmann accounts for its results using the last day of each month.
Therefore, the 1997 pro forma adjustments include the items discussed in the
1998 pro forma consolidated statement of operations and adjustments to reflect
the results of operations through the end of the quarter.
Pro forma basic earnings per share for the three months ended March 31,
1997 was computed using the original shares issued upon the Spin-off of 50.7
million. Pro forma diluted earnings per share was computed using the
aforementioned shares adjusted for the respective replacement options issued by
Hussmann to supplement those granted by Whitman. The market price used was the
initial trading price of Hussmann Common Stock on January 30, 1998 of $13.56.
1997
------
Weighted average shares outstanding - basic 50,731
Dilutive effect of stock options 428
------
Weighted average shares outstanding - diluted 51,159
======
RESULTS OF OPERATIONS -- PRO FORMA THREE MONTHS ENDED MARCH 31, 1998 COMPARED
WITH PRO FORMA THREE MONTHS ENDED MARCH 31, 1997
Sales and Revenues. Sales and revenues for the three months ended March
31, 1998 of $245.9 million were $22.0 million or 9.8% over the same period 1997
sales and revenues of $223.9 million. Sales and revenues increases in the
United States and Latin America drove the overall improvement. The following is
a summarized analysis of the increase in sales and revenues (in millions).
8
<PAGE> 9
<TABLE>
<CAPTION>
1998 SALES % INCREASE
AND $ CHANGE (DECREASE)
REVENUES FROM 1997 FROM 1997
- --------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. and Canada $209.5 $11.2 5.6%
U.K. 22.7 0.9 4.1
Other International 29.3 12.7 76.5
Eliminations (15.6) (2.8) (21.9)
- --------------------------------------------------------------------------
Total $245.9 $22.0 9.8%
==========================================================================
</TABLE>
The 5.6% increase in sales and revenues in the U.S. and Canada was
principally driven by continued strong U.S. supermarket case demand. The
increase in sales and revenues in the U.K. of 4.1% was due to the restructuring
and consolidation program which began in the second half of fiscal year 1997,
including the resolution of startup delays at the new plant in Milton Keynes,
England. The increase in sales and revenues of 76.5% or $12.7 million in Other
International was principally due to increased sales in Mexico, which were $6.3
million above first quarter 1997 results, and the first full quarter sales and
revenues from the Company's 1997 acquisitions of Fast Frio (Brazil) and
Industrias Gilvert (Mexico). Sales and revenues increased $6.4 million related
to these acquisitions.
Gross Profit and Operating Income. As a percent of sales and revenues,
first quarter 1998 gross profit was 16.6% compared to 16.4% in 1997. The most
significant increase in gross profit as a percentage of sales occurred in Other
International operations, mainly Mexico and Asia Pacific. The favorable
increase in Mexico was driven by increased capacity utilization related to
strong growth in display case sales to supermarkets, bottle cooler exports, and
a reduction in overall costs.
Total selling, general, administrative and amortization ("SG&A") expenses
increased 9.7% to $29.6 million in 1998 from $27.0 million in 1997. The
increase in SG&A expenses is primarily due to costs associated with
compensation expense to settle a Whitman stock incentive plan related to the
Spin-off and the impact of the aforementioned acquisitions.
Operating income in 1998 of $11.2 million was 14.3% or $1.4 million
greater then that reported for the same period in 1997. This increase was
mainly driven by a 3.0% increase in operating income in the U.S. and Canada and
improved operations in the U.K. and Mexico. The increase in the U.K., which
still showed an operating loss of $2.4 million, was favorably impacted by the
extensive restructuring of U.K. operations and the consolidation of sales and
service branches in the U.K. that took place in the second half of fiscal year
1997. Operating income for Other International operations of $1.4 million
increased over the 1997 operating income of $0.5 million. This increase is
mainly attributable to the Industrias Gilvert acquisition and the relatively
weak first quarter 1997 sales volume in Mexico.
Interest Expense. Interest expense of $4.6 million increased $0.7 million
or 17.9% from 1997 to 1998 primarily due to the $244 million borrowed under the
new Credit Facility and borrowings to fund working capital requirements. For
pro forma financial statement presentation it was assumed that $240 million in
borrowings were outstanding for the period January 1, 1998 through the
Spin-off.
Effective Income Tax Rate. Hussmann's effective income tax rate was 37.0%
in the first quarter of 1998, or 2.1 points higher than the 1997 effective rate
of 34.9%, principally due to the increased level of earnings from U.S.
operations in 1998, which typically have a higher effective tax rate than
Hussmann's other operations.
9
<PAGE> 10
LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES - ACTUAL
Cash Flows from Operations. Historically, Hussmann's cash flows from
operations have been affected by the allocations from Whitman of expenses to
its operating subsidiaries. These charges were $1.5 million during the quarter
ended March 31, 1998 versus $7.1 million in 1997 when Hussmann operated as a
Whitman subsidiary.
Hussmann used net cash from operations of $30.9 million in 1998 compared
to $3.9 million in 1997. The increase in the use of cash from operations was
principally driven by the increase in working capital (increase in receivables
and decrease in payables). The increase in accounts receivable from year end
was due to the significant increase in sales volume in the month of March in
the U.S. and Latin America.
Cash Flows from Investing Activities. Net cash used in investing
activities was $6.6 million and $15.9 million during the quarters ended March
31, 1998 and 1997, respectively. Capital investments of $6.8 million was the
main component of the investing activity during 1998. The increase in capital
investments relates to the timing of spending on Hussmann's conversion to an
integrated Company-wide information system. In the first quarter of 1997 the
Company acquired a 70% interest in Fast Frio do Brasil, Ltda. in Brazil with a
net cash outlay of $12.4 million.
Cash Flows from Financing Activities. Net cash provided by financing
activities was $37.2 million during the quarter ended March 31, 1998 compared
to $6.9 million for the same period ended March 31, 1997. For 1998, the net
proceeds from long-term debt of $246.6 million were primarily used to settle
the Company's obligations to Whitman and fund working capital needs. In
January 1998, Hussmann paid Whitman $240.0 million to pay-off its intercompany
notes and to pay a cash dividend to Whitman of approximately $80.0 million.
For 1997, Hussmann generated cash from financing activities of $6.9 million due
to improved cash flow resulting from high sales volumes and improved working
capital management. Prior to the Spin-off, Whitman managed Hussmann's excess
cash and therefore all activity between Whitman and the Company was included in
loans and advances - Whitman.
In January 1998, Hussmann and Hussmann Corporation entered into the Credit
Facility with a syndicate of commercial banks and financial institutions that
enables Hussmann and Hussmann Corporation to borrow funds at variable interest
rates on a revolving credit basis up to an aggregate principal amount of $350
million. Hussmann Corporation borrowed $270.0 million under the Credit
Facility in January 1998, of which $240.0 million was paid to Whitman, as
described above. At March 31, 1998, $244.0 million was outstanding under the
Credit Facility.
Hussmann management believes that cash flows from operations, unused
amounts available under the Credit Facility, and access to capital markets will
be sufficient to satisfy Hussmann's future working capital, capital investment,
acquisition and other financing requirements for the foreseeable future.
Hussmann's management believes that Hussmann will be able to access capital
markets on terms satisfactory to Hussmann, although there can be no assurance
that will be the case.
Non-U.S. Operations. The most significant non-U.S. operations are located
in Canada, Mexico and the U.K., with smaller operations located in, among other
countries, Brazil, Chile, China and Singapore. Because the majority of
Hussmann's non-U.S. entities conduct business in their respective local
currencies, Hussmann is subject to foreign currency risks when translating its
non-U.S. entity financial statements into U.S. dollars for financial reporting
purposes. In addition to the foreign currency translation risks faced by
Hussmann, other risks associated with non-U.S. operations include the potential
for restrictive actions taken by host country governments, the risks relating
10
<PAGE> 11
to non-U.S. economic and political conditions, and the risks relating to
limits on the transfer of funds from non-U.S. entities to Hussmann. Hussmann
does not currently use foreign currency risk management instruments to manage
its exposure to changes in currency exchange rates.
OTHER
The Board of Directors of Hussmann approved plans to expand production
capacity of refrigerated display cases at its Bridgeton, Missouri plant by 20
percent, consolidate the production of refrigeration systems from five to two
North American manufacturing locations and to equip a new manufacturing
facility in Mexico. The reconfiguration of the Bridgeton plant and the
consolidation of the refrigeration systems will require $12.6 million of
capital investment. Bridgeton's refrigeration production will be moved to a new
plant in Atlanta, Georgia and to an existing facility in Chino, California. The
Atlanta plant is scheduled to open during the third quarter of 1998, Bridgeton
refrigeration production is scheduled to close during the fourth quarter of
1998 and the new Bridgeton case line is scheduled to begin production during
the second or third quarter of 1999. The new facility in Toluca, Mexico, will
produce primarily beverage coolers for sale in Mexico and emerging Latin
American markets and other refrigeration equipment. Hussmann expects
construction of the plant to be completed in the fourth quarter of 1998 and
production to begin in 1999. The capital cost to equip the leased facility
will be $6 million.
Also in February 1998, the Board of Directors of Hussmann approved a
common stock repurchase plan to offset dilution resulting from the exercise of
stock options by employees.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use". This SOP requires
certain costs related to the development or purchase of internal-use software
be capitalized and amortized over the estimated useful life of the software.
It also requires other costs to be expensed. The SOP is effective for
financial statements issued for fiscal years beginning after December 15, 1998.
As previously stated, Hussmann is currently in the process of converting
certain computer systems to a fully integrated Company-wide information system,
and believes the costs being incurred on this project are being accounted for
in accordance with this SOP.
SAFE HARBOR STATEMENT
Hussmann has made and will make certain forward-looking statements in its
reports filed with the Securities and Exchange Commission, reports to
shareholders and in certain other contexts relating to future revenues, costs,
expenses, production schedules, profitability and financial resources, among
others. These statements are forward-looking statements made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements are based on management's beliefs and
assumptions using information currently available. Accordingly, Hussmann's
actual results may differ materially from those projected, expressed or implied
in such forward-looking statements due to known and unknown risks and
uncertainties that exist in Hussmann's operations and business environment,
including, among other factors: the failure by Hussmann to produce anticipated
cost savings or improve productivity, the timing and magnitude of capital
expenditures, economic and market conditions in the U.S. and worldwide;
currency exchange rates; changes in customer spending levels and demand for new
products; cost and availability of raw materials; the continuation of growth in
significant developing markets such as Mexico, China and South America; overall
competitive activities, and other risks described in the Company's filings with
the Securities and Exchange Commission, including the report on Form 10-K for
the year ended December 31, 1997.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits
Exhibit
Number Exhibit
------- -------
10.3 Amended and Restated Stock Incentive Plan
(amended as of April 9, 1998).
10.8 Stock Option agreement between the Registrant
and Richard G. Cline dated January 30, 1998.
10.9 Employment agreement between the Registrant and
J. Larry Vowell dated April 9, 1998.
27 Financial Data Schedule
(filed electronically with the SEC only)
b) Reports on Form 8-K
On February 13, 1998, Hussmann filed a current report on Form 8-K
dated January 30, 1998 relating to the distribution (the "Distribution") on
January 30, 1998 by Whitman Corporation of all of the issued and
outstanding shares of Common Stock of Hussmann to the shareholders of
Whitman. The Form 8-K reported the following items:
Item 1 (Changes in Control of Registrant) to report the Distribution.;
Item 2 (Acquisition or Disposition of Assets) to report the transfer
by Whitman to Hussmann of Hussmann Corporation and all of the foreign
businesses conducted by Hussmann Corporation which were previously held by
a Netherlands company owned by Whitman; and
Item 7 (Financial Statements, Pro Forma Financial Information and
Exhibits) to incorporate by reference the financial statements contained in
Hussmann's registration statement on Form 10 filed with the Securities and
Exchange Commission under Section 12 of the Securities Exchange Act of
1934.
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<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUSSMANN INTERNATIONAL, INC.
/s/ Michael D. Newman
---------------------------
Michael D. Newman
Senior Vice President
and Chief Financial Officer
(as duly authorized officer
and principal financial
Dated: May 14, 1998 officer of the registrant)
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<PAGE> 1
EXHIBIT 10.3
HUSSMANN INTERNATIONAL, INC.
STOCK INCENTIVE PLAN
(AMENDED AS OF APRIL 9, 1998)
1. DEFINITIONS
The following definitions shall be applicable throughout this Plan:
(a) "Code" shall mean the Internal Revenue Code of 1986, as the
same may be amended from time to time. Reference in the Plan to any
section of the Code shall be deemed to include any amendments or
successor provision to such section and any regulations under such
section.
(b) "Committee" shall mean the Committee selected by the Board of
Directors as provided in Paragraph 4, consisting of two or more members
of the Board of Directors, each of whom shall be (i) a "Non-Employee
Director" within the meaning of Rule 16b-3 under the Exchange Act, and
(ii) an "outside director" within the meaning of Section 162(m) of the
Code.
(c) "Common Stock" shall mean common stock of the Corporation, with
par value of $.001 per share.
(d) "Corporation" shall mean Hussmann International, Inc., a
Delaware corporation.
(e) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(f) "Holder" shall mean an individual who has been granted an
Option, Restricted Stock Award or Performance Award.
(g) "Option" shall mean any option granted under the Plan for the
purchase of Common Stock.
(h) "Performance Award" shall mean an award granted under the
Performance Award provisions of the Plan.
(i) "Plan" shall mean the Corporation's Stock Incentive Plan, as
amended from time to time.
(j) "Restricted Stock Award" shall mean an award of Common Stock
granted under the Restricted Stock Award provisions of the Plan.
<PAGE> 2
(k) "Retirement" shall mean cessation of active employment or
service with the Corporation or a subsidiary pursuant to the
Corporation's retirement policies and programs.
(l) "SAR" shall mean a stock appreciation right which is issued in
tandem with, or by reference to, an Option, which entitles the Holder
thereof to receive, upon exercise of such SAR and surrender for
cancellation of all or a portion of such Option, shares of Common Stock,
cash or a combination thereof with an aggregate value equal to the excess
of the fair market value of one share of Common Stock on the date of
exercise over the purchase price specified in such Option, multiplied by
the number of shares of Common Stock subject to such Option, or portion
thereof, which is surrendered.
2. PURPOSE
It is the purpose of the Plan to provide a means through which the
Corporation may attract able persons to enter its employ and the employ of its
subsidiaries, to serve as directors and to provide a means whereby those
persons upon whom the responsibilities of the successful administration and
management of the Corporation or its subsidiaries rest, and whose present and
potential contributions to the welfare of the Corporation or its subsidiaries
are of importance, can acquire and maintain stock ownership. Such persons
should thus have a greater than ordinary concern for the welfare of the
Corporation and/or its subsidiaries and would be expected to strengthen and
maintain a desire to remain in the employ or service of the Corporation or its
subsidiaries. It is a further purpose of the Plan to provide such persons with
additional incentive and reward opportunities designed to enhance the
profitable growth of the Corporation. So that the maximum incentive can be
provided each participant in the Plan by granting such participant an Option or
award best suited to such participant's circumstances, the Plan provides for
granting "incentive stock options" (as defined in Section 422 of the Code) and
nonqualified stock options (with or without SARs), Restricted Stock Awards and
Performance Awards, or any combination of the foregoing.
3. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan is subject to approval by Whitman Corporation ("Whitman"), the
sole shareholder of the Corporation, and shall become effective concurrently
with the distribution by Whitman to its shareholders of all of the outstanding
shares of Common Stock held by Whitman (the "Distribution"). The Plan may be
submitted at the 1999 annual meeting of the shareholders of the Corporation for
approval in accordance with Section 162(m) of the Code. The Plan shall remain
in effect until all Options granted under the Plan have been exercised, all
restrictions imposed upon Restricted Stock Awards have been eliminated and all
Performance Awards have been satisfied.
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<PAGE> 3
4. ADMINISTRATION
The members of the Committee shall be selected by the Board of Directors
to administer the Plan. A majority of the Committee shall constitute a quorum.
Subject to the express provisions of the Plan, the Committee shall have
authority, in its discretion, to determine the individuals to receive Options
(with or without SARs), Restricted Stock Awards and Performance Awards, the
time or times when they shall receive them, whether an "incentive stock option"
under Section 422 of the Code or nonqualified option shall be granted, the
number of shares to be subject to each Option and Restricted Stock Award and
the value of each Performance Award. In making such determinations the
Committee shall take into account the nature of the services rendered by each
individual, such individual's present and potential contribution to the
Corporation's success, and such other factors as the Committee shall deem
relevant.
The Committee shall have such additional powers as are delegated to it by
the other provisions of the Plan and, subject to the express provisions of the
Plan, to construe the respective Option, Restricted Stock Award and Performance
Award agreements and the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan and to determine the terms, restrictions and
provisions of the Option, Restricted Stock Award and Performance Award
agreements (which need not be identical) including such terms, restrictions and
provisions as shall be requisite in the judgment of the Committee to cause
certain Options to qualify as "incentive stock options" under Section 422 of
the Code, and to make all other determinations necessary or advisable for
administering the Plan. The Committee may, in its sole discretion and for any
reason at any time, subject to the requirements imposed under Section 162(m) of
the Code and regulations promulgated thereunder in the case of an award
intended to be qualified performance-based compensation, take action such that
(i) any or all outstanding Options shall become exercisable in part or in full,
(ii) all or some of the restrictions applicable to any outstanding Restricted
Stock Award shall lapse and (iii) all or a portion of any outstanding
Performance Award shall be satisfied. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any
Option, Restricted Stock Award or Performance Award agreement in the manner and
to the extent it shall deem expedient to carry it into effect, and it shall be
the sole and final judge of such expediency. The determinations of the
Committee on matters referred to in this Paragraph 4 shall be conclusive.
The Committee shall act by majority action at a meeting, except that
action permitted to be taken at a meeting may be taken without a meeting if
written consent thereto is given by all members of the Committee.
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<PAGE> 4
5. GRANTS OF OPTIONS, RESTRICTED STOCK AWARDS AND PERFORMANCE AWARDS; SHARES
SUBJECT TO THE PLAN
The Committee may from time to time grant both "incentive stock options"
under Section 422 of the Code and nonqualified options to purchase shares of
Common Stock (with or without SARs), Restricted Stock Awards and Performance
Awards to one or more officers, key employees or directors determined by it to
be eligible for participation in accordance with the provisions of Paragraph 6
and providing for the issuance of such number of shares and, in the case of
Performance Awards, having such value as in the discretion of the Committee may
be fitting and proper. Subject to Paragraph 10, not more than 4,000,000 shares
of Common Stock may be issued upon exercise of Options or SARs or pursuant to
Restricted Stock Awards or Performance Awards granted under the Plan, plus the
number of shares of Common Stock issued under Options or Restricted Stock
Awards substituted for options to purchase Common Stock or restricted stock
awards of Whitman in connection with the Distribution. Performance Awards
which may be exercised or paid only in cash shall not affect the number of
shares of Common Stock available for issuance under the Plan.
The Common Stock to be offered under the Plan pursuant to Options, SARs,
Restricted Stock Awards and Performance Awards may be authorized but unissued
Common Stock or Common Stock previously issued and outstanding and reacquired
by the Corporation.
The number of shares of Common Stock available for issuance under the Plan
shall be reduced by the sum of the aggregate number of shares of Common Stock
then subject to outstanding Options, Restricted Stock Awards and outstanding
Performance Awards which may be paid solely in shares of Common Stock or in
either shares of Common Stock or cash. To the extent (i) that an outstanding
Option expires or terminates unexercised or is canceled or forfeited (other
than in connection with the exercise of an SAR for Common Stock as set forth in
the immediately following sentence) or (ii) that an outstanding Restricted
Stock Award or outstanding Performance Award which may be paid solely in shares
of Common Stock or in either shares of Common Stock or cash expires or
terminates without vesting or is canceled or forfeited or (iii) shares of
Common Stock are withheld or delivered pursuant to the provisions on Share
Withholding set forth in Paragraph 11(A), then the shares of Common Stock
subject to such expired, terminated, unexercised, canceled or forfeited portion
of such Option, Restricted Stock Award or Performance Award, or the shares of
Common Stock so withheld or delivered, shall again be available for issuance
under the Plan. In the event all or a portion of an SAR is exercised, the
number of shares of Common Stock subject to the related Option (or portion
thereof) shall again be available for issuance under the Plan, except to the
extent that shares of Common Stock were actually issued upon exercise of the
SAR.
4
<PAGE> 5
To the extent necessary for an award hereunder to be qualified
performance-based compensation under Section 162(m) of the Code and the rules
and regulations thereunder, the maximum number of shares of Common Stock with
respect to which Options, SARs or Restricted Stock Awards or a combination
thereof may be granted during any calendar year to any person shall be 500,000,
subject to adjustment as provided in Paragraph 10. Grants of Options,
Restricted Stock Awards or Performance Awards that are canceled shall count
toward the maximum stated in the preceding sentence.
6. ELIGIBILITY
Options, Restricted Stock Awards and Performance Awards may be granted
only to persons who, at the time of the grant or award, are officers, other key
employees or directors of the Corporation or any of its present and future
subsidiaries within the meaning of Section 424(f) of the Code (herein called
subsidiaries). Options, Restricted Stock Awards or Performance Awards, or any
combination thereof, may be granted on more than one occasion to the same
person. A person who has received or is eligible to receive options to
purchase stock of any subsidiary of the Corporation or incentive awards from
any subsidiary of the Corporation will not, by reason thereof, be ineligible to
receive Options, Restricted Stock Awards or Performance Awards under the Plan
unless prohibited by the plan of such subsidiary.
Nothing in the Plan or any Option, Restricted Stock Award or Performance
Award agreement shall be construed to constitute or be evidence of an agreement
or understanding, expressed or implied, on the part of the Corporation or its
subsidiaries to employ any person for any specific period of time.
7. OPTIONS AND SARS
(A) Number of Shares. The Committee may, in its discretion, grant
Options to such eligible persons as may be selected by the Committee. With
respect to each Option, the Committee shall determine the number of shares
subject to the Option and the manner and the time of exercise of such Option.
The Committee shall make such other determinations which in its discretion
appear to be fitting and proper.
(B) Stock Option Agreement. Each Option shall be evidenced by a stock
option agreement in such form containing such provisions not inconsistent with
the provisions of the Plan as the Committee from time to time shall approve,
including, without limitation, provisions to qualify certain Options as
"incentive stock options" under Section 422 of the Code. An incentive stock
option may not be granted to any person who is not an employee of the
Corporation or any parent or subsidiary (as defined in Section 424 of the
Code). Each incentive stock option shall be granted within ten years of the
earlier of the date the Plan is adopted by the Corporation's
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<PAGE> 6
Board of Directors and the date the Plan is approved by Whitman as the sole
shareholder of the Corporation. To the extent that the aggregate fair market
value (determined as of the date of grant) of shares of Common Stock with
respect to which Options designated as incentive stock options are exercisable
for the first time by a person during anycalendar year exceeds the amount
(currently $100,000) established by the Code, such Options shall be deemed to
be non-qualified stock options.
(C) Option Price and Term of Option. The purchase price per share of the
Common Stock under each Option shall be determined by the Committee; provided,
however, that the purchase price per share of Common Stock purchasable upon
exercise of an incentive stock option shall not be less than 100% of the fair
market value of the Common Stock at the date such Option is granted; provided,
further, that if an incentive stock option shall be granted to any person who,
at the time such Option is granted, owns capital stock of the Corporation
possessing more than ten percent of the total combined voting power of all
classes of capital stock of the Corporation (or of any parent or subsidiary of
the Corporation) (a "Ten Percent Holder"), such purchase price shall be the
price (currently 110% of fair market value) required by the Code in order to
constitute an incentive stock option.
The period during which an Option may be exercised shall be determined by
the Committee; provided, however, that no incentive stock option shall be
exercised later than ten years after its date of grant; provided further, that
if an incentive stock option shall be granted to a Ten Percent Holder, such
option shall not be exercised later than five years after its date of grant.
The Committee shall determine whether an Option shall become exercisable in
cumulative or non-cumulative installments and in part or in full at any time.
An exercisable Option, or portion thereof, may be exercised only with respect
to whole shares of Common Stock.
(D) Payment. An Option may be exercised by giving written notice to the
Corporation specifying the number of shares of Common Stock to be purchased and
accompanied by payment of the purchase price in full (or arrangement made for
such payment to the Corporation's satisfaction). As determined by the
Committee at the time of grant of an Option and set forth in the agreement
evidencing the Option, the purchase price may be paid (a) in cash or (b) by
delivery (either actual delivery or by attestation procedures established by
the Corporation) of previously-owned whole shares of Common Stock (for which
the holder has good title, free and clear of all liens and encumbrances and
which such holder either (i) has held for at least six months or (ii) has
purchased on the open market) valued at their fair market value on the date of
exercise. If applicable, a person exercising an Option shall surrender to the
Corporation any SARs which are canceled by reason of the exercise of such
Option.
(E) Termination of Employment or Service or Death of Holder. In the
event of any termination of the employment or service of a Holder with the
Corporation or one of its subsidiaries, other than by reason of death or, in
the case of a Holder of a
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<PAGE> 7
nonqualified option, Retirement, the Holder may (unless otherwise provided in
the Option agreement) exercise each Option held by such Holder at any time
within three months (or one year if the Holder is permanently and totally
disabled within the meaning of Section 22(e)(3) of the Code) after such
termination of employment or service, but only if and to the extent such
Option is exercisable at the date of such termination of employment or service,
and in no event after the date on which such Option would otherwise terminate;
provided, however, that if such termination of employment or service is for
cause or voluntary on the part of the Holder without the written consent of
the Corporation, any Option held by such Holder under the Plan shall terminate
unless otherwise provided in the Option agreement.
In the event of the termination of employment or service of a Holder of a
nonqualified option by reason of Retirement, then each nonqualified option held
by the Holder shall be fully exercisable, and, subject to the following
paragraph, such nonqualified option shall be exercisable by the Holder at any
time up to and including (but not after) the date on which the nonqualified
option would otherwise terminate (unless otherwise provided in the Option
Agreement).
Unless otherwise provided in the Option Agreement, in the event of the
death of a Holder (i) while employed by or providing service to the Corporation
or one of its subsidiaries or after Retirement, (ii) within three months after
termination of the Holder's employment or service, other than a termination by
reason of permanent and total disability within the meaning of Section 22(e)(3)
of the Code, or (iii) within one year after termination of the Holder's
employment or service by reason of such disability, then each Option held by
such Holder may be exercised by the legatees of the Holder under his last will,
or by his personal representatives or distributees, at any time within a period
of nine months after the Holder's death, but only if and to the extent such
Option is exercisable at the date of death (unless death occurs while the
Holder is employed by or providing service to the Corporation or one of its
subsidiaries, in which case each Option held by the Holder shall be fully
exercisable), and in no event after the date on which such Option would
otherwise terminate.
(F) Privileges of the Holder as Shareholder. The Holder shall be
entitled to all the privileges and rights of a shareholder with respect only to
such shares of Common Stock as have been actually purchased under the Option
and registered in the Holder's name.
(G) SARs. The Committee may, in its sole discretion, grant an SAR
(concurrently with the grant of the Option or, in the case of a nonqualified
option which is not intended to be qualified performance-based compensation
under Section 162(m) of the Code and the rules and regulations thereunder,
subsequent to such grant) to any Holder of any Option granted under the Plan
(or such Holder's legatees, personal representatives or distributees then
entitled to exercise such Option). An SAR may be exercised (i) by giving
written notice to the Corporation specifying the number of SARs
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<PAGE> 8
which are being exercised and (ii) by surrendering to the Corporation any
Options which are canceled by reason of the exercise of the SAR. An SAR shall
be exercisable upon such additional terms and conditions as may from time to
time be prescribed by the Committee. No fractional share shall be issued upon
the exercise of any SAR.
(H) Non-Transferability. Unless otherwise specified in the agreement
evidencing an Option or SAR, no Option or SAR hereunder shall be transferable
other than by will or the laws of descent and distribution or pursuant to
beneficiary designation procedures approved by the Corporation. Except to the
extent permitted by the foregoing sentence, each Option or SAR may be exercised
during the Holder's lifetime only by the Holder or the Holder's legal
representative or similar person. Except as permitted by the second preceding
sentence, no Option or SAR hereunder shall be sold, transferred, assigned,
pledged, hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise) or be subject to execution, attachment or
similar process. Upon any attempt to so sell, transfer, assign, pledge,
hypothecate, encumber or otherwise dispose of any Option or SAR hereunder, such
Option or SAR and all rights thereunder shall immediately become null and void.
8. RESTRICTED STOCK AWARDS
(A) Restriction Period to Be Established by the Committee. At the time
of the making of a Restricted Stock Award, the Committee shall establish a
period of time (the "Restriction Period") applicable to such award. The
Committee may establish different Restriction Periods from time to time and
each Restricted Stock Award may have a different Restriction Period, in the
discretion of the Committee.
(B) Other Terms and Conditions. Common Stock, when awarded pursuant to a
Restricted Stock Award, shall be represented by a stock certificate or
book-entry credits registered in the name of the Holder who receives the
Restricted Stock Award or a nominee for the benefit of the Holder. The Holder
shall have the right to receive dividends (or the cash equivalent thereof)
during the Restriction Period and shall also have the right to vote such Common
Stock and all other shareholder's rights (in each case unless otherwise
provided in the agreement evidencing the Restricted Stock Award), with the
exception that (i) the Holder shall not be entitled to delivery of the stock
certificate (or the removal of restrictions in the Corporation's books and
records) until the Restriction Period established by the Committee pursuant to
Paragraph 8(A) shall have expired, (ii) the Corporation shall retain custody of
the stock certificate during the Restriction Period, (iii) the Holder may not
sell, transfer, pledge, exchange, hypothecate or dispose of such Common Stock
during the Restriction Period, and (iv) a breach of restriction or breach of
terms and conditions established by the Committee pursuant to the Restricted
Stock Award shall cause a forfeiture of the Restricted Stock Award. If
requested by the Corporation, a Holder of a Restricted Stock Award shall
deposit with the Corporation stock powers or other instruments of
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<PAGE> 9
assignment (including a power of attorney), each endorsed in blank with a
guarantee of signature if deemed necessary or appropriate by the Corporation,
which would permit transfer to the Corporation of all or a portion of the
shares of Common Stock subject to the Restricted Stock Award in the event such
award is forfeited in whole or in part. A distribution with respect to shares
of Common Stock, other than a distribution in cash, shall be subject to the same
restrictions as the shares of Common Stock with respect to which such
distribution was made, unless otherwise determined by the Committee. The
Committee may, in addition, prescribe additional restrictions, terms or
conditions upon or to the Restricted Stock Award in the manner prescribed by
Paragraph 4. The Committee may, in its sole discretion, also establish rules
pertaining to the Restricted Stock Award in the event of termination of
employment or service (by Retirement, disability, death or otherwise) of a
Holder of such award prior to the expiration of the Restriction Period.
(C) Restricted Stock Award Agreement. Each Restricted Stock Award shall
be evidenced by an agreement in such form and containing such provisions not
inconsistent with the provisions of the Plan as the Committee from time to time
shall approve.
(D) Payment for Restricted Stock. Restricted Stock Awards may be made by
the Committee whereby the Holder receives Common Stock subject to those terms,
conditions and restrictions established by the Committee but is not required to
make any payment for said Common Stock. The Committee may also establish terms
as to each Holder whereby such Holder, as a condition to the Restricted Stock
Award, is required to pay, in cash or other consideration, all (or any lesser
amount than all) of the fair market value of the Common Stock, determined as of
the date the Restricted Stock Award is made.
(E) Termination of Employment or Service or Death of Holder. A
Restricted Stock Award shall terminate for all purposes if the Holder does not
remain continuously in the employ or service of the Corporation or a subsidiary
at all times during the applicable Restriction Period, except as may otherwise
be determined by the Committee.
9. PERFORMANCE AWARDS
(A) Performance Period. The Committee shall establish with respect to
each Performance Award a performance period over which performance shall be
measured. The performance period shall be established at the time of such
award.
(B) Performance Awards. Each Performance Award shall have a maximum
value established by the Committee at the time of such award.
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<PAGE> 10
(C) Performance Measures. Performance Awards shall be awarded to an
eligible person contingent upon future performance of the Corporation and/or a
designated subsidiary, division or department of the Corporation over the
performance period. The Committee shall establish the performance measures
applicable to such performance. The performance measures determined by the
Committee shall be established prior to the beginning of each performance
period but, except as necessary to qualify a Performance Award as
"performance-based compensation" under Section 162(m) of the Code and the rules
and regulations thereunder, may be subject to such later revisions to reflect
significant, unforeseen events or changes, as the Committee shall deem
appropriate.
(D) Award Criteria. In determining the value of Performance Awards, the
Committee shall take into account an eligible person's responsibility level,
performance, potential, cash compensation level, unexercised stock options,
other incentive awards and such other considerations as it deems appropriate.
Notwithstanding the preceding sentence, to the extent necessary for a
Performance Award to be qualified performance-based compensation under Section
162(m) of the Code and the rules and regulations thereunder, the performance
period shall be not less than three years and, if a Performance Award is
payable in shares of Common Stock, the maximum number of shares that may be
paid under the Performance Award during such performance period shall be
500,000 and, if a Performance Award is payable in cash, the maximum amount that
may be paid under the Performance Award during such performance period shall be
$10,000,000.
(E) Payment. Following the end of each performance period, the Holder of
each Performance Award shall be entitled to receive payment of an amount, not
exceeding the maximum value of the Performance Award, based on the achievement
of the performance measures for such performance period, as determined by the
Committee. Payment of Performance Awards may be made wholly in cash, wholly in
shares of Common Stock or a combination thereof, all at the discretion of the
Committee. Payment shall be made in a lump sum or in installments, and shall
be subject to such vesting and other terms and conditions as may be prescribed
by the Committee for such purpose. Notwithstanding anything contained herein
to the contrary, in the case of a Performance Award intended to be qualified
performance-based compensation under Section 162(m) and the rules and
regulations thereunder, no payment shall be made under any such Performance
Award until the Committee certifies in writing that the performance measures
for the performance period have in fact been achieved.
(F) Termination of Employment or Service or Death of Holder. A
Performance Award shall terminate for all purposes if the Holder does not
remain continuously in the employ or service of the Corporation or a subsidiary
at all times during the applicable performance period, except as may otherwise
be determined by the Committee.
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<PAGE> 11
In the event that a Holder of a Performance Award ceases to be an employee
or director of the Corporation or a subsidiary following the end of the
applicable performance period but prior to full payment according to the terms
of the Performance Award, payment shall be made in accordance with terms
established by the Committee for the payment of such Performance Award.
(G) Other Terms and Conditions. When a Performance Award is payable in
installments in Common Stock, if determined by the Committee, one or more stock
certificates or book-entry credits registered in the name of the Holder
representing shares of Common Stock which would have been issuable to the
Holder of the Performance Award if such payment had been made in full on the
day following the end of the applicable performance period may be registered
in the name of such Holder, and during the period until such installment
becomes due such Holder shall have the right to receive dividends (or the cash
equivalent thereof) and shall also have the right to vote such Common Stock and
all other shareholder's rights (in each case unless otherwise provided in the
agreement evidencing the Performance Award), with the exception that (i) the
Holder shall not be entitled to delivery of any stock certificate until the
installment payable in shares becomes due, (ii) the Corporation shall retain
custody of any stock certificates until such time and (iii) the Holder may not
sell, transfer, pledge, exchange, hypothecate or dispose of such Common Stock
until such time. A distribution with respect to shares of Common Stock payable
in installments which has not become due, other than a distribution in cash,
shall be subject to the same restrictions as the shares of Common Stock with
respect to which such distribution was made, unless otherwise determined by
the Committee.
(H) Performance Award Agreements. Each Performance Award shall be
evidenced by an agreement in such form and containing such provisions not
inconsistent with the provisions of the Plan as the Committee from time to time
shall approve.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CHANGE IN CONTROL
(A) Notwithstanding any other provision of the Plan, each Option,
Restricted Stock Award or Performance Award agreement may contain such
provisions as the Committee shall determine to be appropriate for the
adjustment of (i) the number and class of shares or other consideration subject
to any Option or to be delivered pursuant to any Restricted Stock Award or
Performance Award and (ii) the Option or Restricted Stock Award price, in the
event of a stock dividend, spin-off, split-up, recapitalization, merger,
consolidation, combination or exchange of shares, or the like. In such event,
the maximum number and class of shares available under the Plan, and the number
and class of shares subject to Options, SARs, Restricted Stock Awards or
Performance Awards, shall be appropriately adjusted by the Committee, whose
determination shall be conclusive.
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<PAGE> 12
(B)(i) In the event of a "change in control" (as hereinafter defined)
pursuant to subparagraph (C)(i) or (ii) below, or in the event of a change in
control pursuant to subparagraph (C)(iii) or (iv) below in connection with
which the holders of Common Stock receive consideration other than shares of
common stock that are registered under Section 12 of the Exchange Act:
(1)(x) each Option granted under the Plan shall be exercisable in
full, (y) each Holder of an Option shall receive from the Corporation
within 60 days after the change in control, in exchange for the surrender
of the Option or any portion thereof to the extent the Option is then
exercisable in accordance with clause (x), an amount in cash equal to the
difference between the fair market value (as determined by the Committee)
on the date of the change in control of the Common Stock covered by the
Option or portion thereof which is so surrendered and the purchase price
of such Common Stock under the Option and (z) each SAR shall be
surrendered by the Holder thereof and shall be canceled simultaneously
with the cancellation of the related Option;
(2) each Holder of a Restricted Stock Award shall receive from the
Corporation within 60 days after the change in control, in exchange for
the surrender of the Restricted Stock Award, an amount in cash equal to
the fair market value (as determined by the Committee) on the date of the
change in control of the Common Stock subject to the Restricted Stock
Award;
(3) each Holder of a Performance Award for which the performance
period has not expired shall receive from the Corporation within 60 days
after the change in control, in exchange for the surrender of the
Performance Award, an amount in cash equal to the product of the value of
the Performance Award and a fraction the numerator of which is the number
of whole months which have elapsed from the beginning of the performance
period to the date of the change in control and the denominator of which
is the number of whole months in the performance period; and
(4) each Holder of a Performance Award that has been earned but not
yet paid shall receive an amount in cash equal to the value of the
Performance Award.
(ii) Notwithstanding any other provision of the Plan or any agreement
relating to an Option, Restricted Stock Award or Performance Award, in the
event of a change in control pursuant to subparagraph (C)(iii) or (iv) below in
connection with which the holders of Common Stock receive shares of common
stock that are registered under Section 12 of the Exchange Act:
(1) each Option and SAR granted under the Plan shall be exercisable
in full;
12
<PAGE> 13
(2) the Restriction Period applicable to any outstanding Restricted
Stock Award shall lapse and, if applicable, any other restrictions, terms
or conditions shall lapse and/or be deemed to be satisfied at the maximum
value or level;
(3) the performance measures applicable to any outstanding
Performance Award shall be deemed to be satisfied at the maximum value;
and
(4) there shall be substituted for each share of Common Stock
remaining available for issuance under the Plan, whether or not then
subject to an outstanding Option (and SAR), Restricted Stock Award or
Performance Award, the number and class of shares into which each
outstanding share of Common Stock shall be converted pursuant to such
Change in Control. In the event of any such substitution, the purchase
price per share in the case of any award shall be appropriately adjusted
by the Committee (whose determination shall be conclusive), such
adjustments to be made without any increase in the aggregate purchase
price.
(C) For purposes of this paragraph, the term "change in control"
shall mean:
(i) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act, of beneficial ownership within the meaning of Rule 13d-3
promulgated under the Exchange Act, of 25% or more of either (x) the then
outstanding shares of common stock of the Corporation (the "Outstanding Common
Stock") or (y) the combined voting power of the then outstanding securities of
the Corporation entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"); excluding, however, the following: (1) any
acquisition directly from the Corporation (excluding any acquisition resulting
from the exercise of an exercise, conversion or exchange privilege unless the
security being so exercised, converted or exchanged was acquired directly from
the Corporation), (2) any acquisition by the Corporation, (3) any acquisition
by an employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation or (4) any
acquisition by any corporation pursuant to a transaction which complies with
clauses (1), (2) and (3) of clause (iii) in this definition of change in
control;
(ii) individuals who, as of the effective date of the Plan,
constitute the Board of Directors of the Corporation (the "Incumbent Board")
cease for any reason to constitute at least a majority of such Board; provided,
however, that any individual who becomes a director of the Corporation
subsequent to such effective date whose election, or nomination for election
by the Corporation's shareholders, was approved by the vote of at least a
majority of the directors then comprising the Incumbent Board shall be deemed
a member of the Incumbent Board; and provided further, that any individual who
was initially elected as a director of the Corporation as a result of an
13
<PAGE> 14
actual or threatened election contest, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act, or any other actual or
threatened solicitation of proxies or consents by or on behalf of any Person
other than the Board of Directors shall not be deemed a member of the
Incumbent Board;
(iii) the consummation of a reorganization, merger or consolidation
of the Corporation or sale or other disposition of all or substantially all of
the assets of the Corporation (a "Corporate Transaction"); excluding, however, a
Corporate Transaction pursuant to which (1) all or substantially all of the
individuals or entities who are the beneficial owners, respectively, of the
Outstanding Common Stock and the Outstanding Voting Securities immediately
prior to such Corporate Transaction will beneficially own, directly or
indirectly, more than 66 2/3% of, respectively, the outstanding shares of
common stock, and the combined voting power of the outstanding securities of
such corporation entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of such
transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or indirectly) in substantially the same
proportions relative to each other as their ownership, immediately prior to
such Corporate Transaction, of the Outstanding Common Stock and the Outstanding
Voting Securities, as the case may be, (2) no Person (other than: the
Corporation; any employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled by the Corporation;
the corporation resulting from such Corporate Transaction; and any Person which
beneficially owned, immediately prior to such Corporate Transaction, directly
or indirectly, 25% or more of the Outstanding Common Stock or the Outstanding
Voting Securities, as the case may be) will beneficially own, directly or
indirectly, 25% or more of, respectively, the outstanding shares of common
stock of the corporation resulting from such Corporate Transaction or the
combined voting power of the outstanding securities of such corporation
entitled to vote generally in the election of directors and (3) individuals who
were members of the Incumbent Board will constitute at least a majority of the
members of the board of directors of the corporation resulting from such
Corporate Transaction; or
(iv) the consummation of a plan of complete liquidation or
dissolution of the Corporation.
(D) With respect to any Holder of an Option or SAR who is subject to
Section 16 of the Exchange Act, (i) notwithstanding the exercise periods set
forth in Paragraph 7(E) or as set forth pursuant to Paragraph 7(E) in any
agreement evidencing such Option or SAR and (ii) notwithstanding the expiration
date of the term of such Option or SAR, in the event the Corporation is
involved in a business combination which is intended to be treated as a pooling
of interests for financial accounting purposes (a "Pooling Transaction") or
pursuant to which such Holder receives a substitute option to purchase
securities of any entity, including an entity directly or indirectly acquiring
the Corporation, then each Option or SAR (or option or stock
14
<PAGE> 15
appreciation right in substitution thereof) held by such Holder shall be
exercisable to the extent set forth in the Plan or the agreement evidencing
such Option or SAR until and including the latest of (x) the expiration date
of the term of the Option or SAR or, in the event of such Holder's termination
of employment or service, the date determined pursuant to Paragraph 7(E), (y)
the date which is six months and ten business days after the consummation of
such business combination and (z) the date which is ten business days after
the date of expiration of any period during which such Holder may not dispose
of a security issued in the Pooling Transaction in order for the Pooling
Transaction to be accounted for as a pooling of interests.
11. WITHHOLDING TAXES
(A) If provided in the agreement evidencing an Option, SAR,
Restricted Stock Award or Performance Award, the Holder thereof may elect, by
written notice to the Corporation at the office of the Corporation designated
for that purpose, to pay through withholding by the Corporation all or a
portion of the estimated federal, state, local and other taxes arising from (1)
the exercise of an Option or SAR and (2) the vesting or distribution of shares
of Common Stock pursuant to a Restricted Stock Award or Performance Award (a)
by having the Corporation withhold shares of Common Stock or (b) by delivering
previously-owned shares (collectively, "Share Withholding"), in each case being
such number of shares of Common Stock as shall have a fair market value equal
to the amount of taxes to be withheld, rounded up to the nearest whole share.
(B) A Share Withholding election shall be subject to
disapproval by the Corporation.
(C) If the date as of which the amount of tax to be withheld is
determined (the "Tax Date") is deferred until after the exercise of an Option
or SAR, the expiration of the Restriction Period applicable to a Restricted
Stock Award or the payment of a Performance Award, and if the Holder elects
Share Withholding, the Corporation shall issue to the Holder the full number of
shares of Common Stock, if any, resulting from such exercise, expiration or
payment and the Holder shall be unconditionally obligated to deliver to the
Corporation on the Tax Date such number of shares of Common Stock as shall have
an aggregate fair market value equal to the amount to be withheld on the Tax
Date, rounded up to the nearest whole share.
(D) The fair market value of shares of Common Stock used for
payment of taxes, as provided in this Paragraph 11, shall be the mean sale
price per share, as reported for New York Stock Exchange Composite
Transactions, on the Tax Date.
15
<PAGE> 16
12. TERMINATION OF PLAN
The Plan may be terminated at any time by the Board of Directors, except
with respect to any Options, SARs, Restricted Stock Awards or Performance
Awards then outstanding. The Corporation reserves the right to restrict, in
whole or in part, the exercise of any Options or SARs or the delivery of Common
Stock pursuant to any Restricted Stock Awards or Performance Awards granted
under the Plan until such time as:
(A) any legal requirements or regulations have been met relating to
the issuance of the shares covered thereby or to their registration under
the Securities Act of 1933 or to any applicable State laws; and
(B) satisfactory assurances are received that the shares when
issued will be duly listed on the New York Stock Exchange, Inc.
13. AMENDMENT OF THE PLAN
The Board of Directors may amend the Plan; provided, however, that without
approval of the shareholders the Board of Directors may not amend the Plan,
subject to Paragraph 10, to (a) increase the maximum number of shares which may
be issued on exercise of Options or SARs or pursuant to Restricted Stock Awards
or Performance Awards granted under the Plan or (b) effect any change
inconsistent with Section 422 of the Code.
14. EFFECT OF THE PLAN
Neither the adoption of the Plan nor any action of the Board of Directors
or of the Committee shall be deemed to give any person any right to be granted
an Option, a right to a Restricted Stock Award or a right to a Performance
Award or any rights hereunder except as may be evidenced by an Option
agreement, Restricted Stock Award agreement or Performance Award agreement,
duly executed on behalf of the Corporation, and then only to the extent and on
the terms and conditions expressly set forth therein.
16
<PAGE> 1
EXHIBIT 10.8
NONQUALIFIED STOCK OPTION
NONQUALIFIED STOCK OPTION AGREEMENT dated as of January
30, 1998, between HUSSMANN INTERNATIONAL, INC., a Delaware
corporation (the "Corporation"), and Richard G. Cline, Chairman
of the Board of the Corporation (the "Holder").
WHEREAS, the Corporation and Holder have entered into that certain letter
agreement dated December 30, 1997 (the "December 30 Agreement") which agreement
confirms the arrangement and terms under which Holder shall serve as Chairman
of the Board of the Corporation; and
WHEREAS, the December 30 Agreement includes as part of the compensation to
Holder the grant of a 10-year nonqualified option to purchase 200,000 shares of
the Corporation's common stock at the closing price per share on the New York
Stock Exchange on the Distribution Date (the "Closing Price") as defined in the
December 30 Agreement and subsequently determined to be January 30, 1998; and
WHEREAS, the Board of Directors of the Corporation has duly made all
determinations necessary or appropriate to the grant hereof;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth and for other good and valuable consideration, receipt of
which is hereby acknowledged, the parties hereto have agreed, and do hereby
agree, as follows:
1. The Corporation hereby irrevocably grants to the Holder, the right and
option (the "Option"), to purchase 200,000 shares of Common Stock of the
Corporation on the terms and conditions herein set forth.
2. For each of said shares purchased, the Holder shall pay to the
Corporation $13.66 per share (the "Option Price"), being the Closing Price on
the Distribution Date.
3. Subject to the provisions of paragraph 6 hereof, this Option shall
expire at 5:00 p.m., St. Louis time, on January 30, 2008 (the "Expiration
Date") and shall become exercisable as to 100,000 shares on January 30, 1999,
and as to all shares covered by this Option and not theretofore purchased on
January 30, 2000. The Corporation shall not be required to issue any
fractional shares upon exercise of this Option.
4. This Option may be exercised only by one or more notices in writing of
the Holder's intent to exercise this Option, accompanied by payment by check to
the Corporation in an amount equal to the aggregate Option Price of the total
number of whole shares then being purchased. Unless otherwise specified by the
Corporation, each such notice and check shall be delivered to the Treasurer of
the Corporation, at the
<PAGE> 2
principal office of the Corporation or, at the risk of the Holder, mailed to
the Treasurer at said office.
5. This Option is not transferable by the Holder otherwise than by will or
the laws of descent and distribution or pursuant to beneficiary designation
procedures approved by the Corporation and may be exercised, during the
lifetime of the Holder, only by the Holder.
6. In the event of the termination of service of the Holder as Chairman of
the Board of the Corporation for Cause (as defined in the December 30
Agreement) or the voluntary resignation by Holder from the position of Chairman
without the written consent of the Corporation prior to January 30, 2000, then
this Option shall be exercisable only to the extent it is exercisable on the
effective date of the Holder's termination of service and may thereafter be
exercised by the Holder, his personal representatives or distributees as the
case may be until the Expiration Date.
7. In the event of the termination of service of the Holder while serving
as Chairman of the Board of the Corporation for any reason other than for Cause
or the voluntary resignation by Holder from the position of Chairman without
the written consent of the Corporation prior to January 30, 2000, then this
Option shall become fully exercisable as of the effective date of the Holder's
termination of service and may thereafter be exercised by the Holder, his
personal representatives or distributees as the case may be until the
Expiration Date.
8. Prior to the termination of this Option, in the event of a stock split,
stock dividend, reverse stock split, spin-off, split-up, recapitalization,
merger, consolidation, combination, exchange of shares, or the like, then the
aggregate number and class of shares thereafter subject to this Option and the
Option Price thereof, and the number and class of shares reserved for issuance
pursuant to exercise hereof, shall be appropriately adjusted in such manner as
the Management Resources and Compensation Committee of the Board of Directors
shall determine to be equitable and consistent with the purposes of the
Agreement and this Option, subject to resolution of any dispute pursuant to the
provisions of paragraph 9 of the December 30 Agreement. Such determination
shall be conclusive for all purposes of this Option.
9. This Option and each and every obligation of the Corporation hereunder
are subject to the requirement that if at any time the Corporation shall
determine, upon advice of counsel, that the listing, registration, or
qualification of the shares covered hereby upon any securities exchange or
under any state or Federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of or in connection
with the granting of this Option or the purchase of shares hereunder, this
Option may not be exercised in whole or in part unless and until such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Board of Directors of the
Corporation.
10. In the event of a "change in control" or a "Pooling Transaction", as
those terms are defined in the Corporation's Stock
2
<PAGE> 3
Incentive Plan ("Plan"), this Option shall become immediately exercisable in
full and the Holder shall have all of the rights specified in Paragraph 10(B)
and, if applicable, Paragraph 10(D) of the Plan.
11. Nothing herein contained shall confer on the Holder any of the rights
of a shareholder with respect to any of the shares subject to this Option until
such shares shall be issued upon the exercise of this Option.
IN WITNESS WHEREOF, this Nonqualified Stock Option Agreement has been duly
executed by the Corporation and the Holder as of the day and year first above
written.
HUSSMANN INTERNATIONAL, INC.
By: __________________________
Vice President
__________________________
Richard G. Cline
11/97
3
<PAGE> 1
EXHIBIT 10.9
HUSSMANN INTERNATIONAL, INC.
April 9, 1998
Mr. J. Larry Vowell
Hussmann International, Inc.
12999 St. Charles Rock Road
Bridgeton, MO 63044
Dear Mr. Vowell:
This is to confirm the understanding arrived at between us with regard to your
continued employment with the Company. This agreement is made because we
believe it is in the best interests of the Company and its shareholders to
reinforce and encourage your continued undistracted attention and dedication
to your duties by providing some degree of personal financial security in view
of the Distribution described in the following paragraph.
On January 30, 1998, Whitman Corporation, the parent company of Hussmann
Corporation ("Hussmann"), distributed to its shareholders all of the issued and
outstanding common stock of Hussmann International, Inc. (the "Distribution").
Hussmann International, Inc. ("International") was created to act as the
holding company for Hussmann in connection with the Distribution. Prior to the
Distribution, Whitman contributed to International all of the shares of
Hussmann as well as the shares of Hussmann's foreign affiliates. For the
purposes of this agreement, the term "Company" shall mean Hussmann,
International or both Hussmann and International, as required by the context.
For example, after the Distribution, your salary will continue to be paid by
Hussmann. However, stock options or restricted stock you receive will be
granted by International under International's Stock Incentive Plan.
Employment. The Company hereby agrees to continue to employ you as
President and Chief Executive Officer during the term of this agreement and
upon the terms and conditions herein set forth, and you agree to continue such
employment and to serve in such capacity.
Term of Agreement. The term of your employment under this agreement shall
be for a period of three years, commencing on the date of April 9, 1998, and
terminating on the third anniversary thereof.
Salary. The Company will pay to you during the term of this agreement a
base salary at the annual rate of $425,000, payable in accordance with the
Company's usual payroll practices. Your base salary will be reviewed by the
Management Resources and Compensation Committee of the Board of Directors of
the Company at least once in each calendar year and may be increased above, but
not reduced below, your then current base salary.
Other Compensation. You shall be entitled during the term of this
agreement to participate in all executive compensation plans, practices,
policies and programs intended for participation by senior executives of the
Company, as presently in effect or as they may be modified by the Company from
time to time, and you shall be entitled to continue to receive a package of
executive perquisites comparable to what you have received in the past.
<PAGE> 2
2
Employee Benefit Plans. You shall be entitled to continue to participate
in all employee benefit plans and programs of the Company (including, without
limitation, any pension or retirement plan, group life insurance plan, or
medical, dental, accident or disability plans), as presently in effect or as
they may be modified by the Company from time to time, to the extent such plans
are available to senior executives of the Company, subject to the eligibility
and other requirements of such plans and programs.
Termination of Employment. This agreement shall terminate and be of no
further force and effect in any of the following events:
1. Your termination of employment for "Good Reason" as that term
is defined in Section 2(c) of the Change in Control Agreement
between the Company and you effective January 30, 1998 (the "Change
in Control Agreement").
2. Your voluntary termination of employment for other than Good
Reason, including retirement.
3. Termination of your employment by the Company for "Cause."
4. Your permanent disability.
5. Your death.
6. The occurrence of a Change in Control of the Company, within
the meaning set forth in the Change in Control Agreement.
For the foregoing purposes, a termination for Cause shall be limited
to fraud, embezzlement or other criminal act against the Company.
Additionally, the termination of this agreement by reason of your
retirement, death or permanent disability shall not in any way impair
your rights or those of your estate, heirs or designated beneficiaries
under any plan, program or policy in respect thereof.
Severance Compensation. In the event you terminate your employment for
Good Reason or your employment is terminated involuntarily, without Cause,
during the term of this agreement, then you shall be paid severance
compensation in one lump sum equal to the greater of (1) one month of your then
current base salary plus 1/12th of the annual average of your last two
Management Incentive Compensation Plan awards multiplied by the number of full
months remaining on the term of this agreement, or (2) an amount equal to 24
times the sum of your then current base monthly salary plus 1/12th of the
annual average of your last two Management Incentive Compensation Plan awards.
In addition, the Company will continue all executive perquisites and
benefits applicable to you at the time of your termination of employment for
the number of months used to calculate your severance compensation. Such
benefits shall include all benefits under any pension or retirement plans,
employee stock ownership plan or any other plan or agreement relating to
retirement benefits (collectively, "Retirement Benefits") in which you
participate, and you shall be credited with service for purposes of such
Retirement Benefits for the number of months used to calculate your severance
compensation. No contributions shall be required to be made by you to any plan
providing employment. To the extent that the amount of any Retirement Benefits
are or would be payable from a nonqualified plan, the Company shall, as soon as
practicable following your date of employment termination (but in no event
later than the thirtieth day after the date of
<PAGE> 3
3
your employment termination), pay directly to you in one lump sum an amount
equal to the additional benefits that would have been provided had such accrual
or crediting been taken into account in calculating your Retirement Benefits.
Such lump sum payment shall be calculated as provided in the relevant plan and,
in the case of a defined contribution plan, shall include an amount equal to
the gross amount of the maximum employer contributions under such plan. Such
severance compensation shall be in lieu of any other compensation hereunder,
but shall not impair your rights under any other plan, program or contract of
or with the Company. In addition, the Company shall at its expense provide you
with out-placement services for a period of up to six months following your
termination of employment. Such outplacement services shall be comparable to
those provided in the past to certain former executives of the Company.
Change in Control. International and you have entered into the Change in
Control Agreement. In the event of a "Change in Control," as that term is
defined in the Change in Control Agreement, then the preceding section of this
agreement relating to Severance Compensation shall be of no further force and
effect and your rights to severance benefits shall thereafter be governed
exclusively by the terms and provisions of the Change in Control Agreement.
Legal Fees and Expenses.
(a) The Company shall pay all legal fees and expenses which you may incur
as a result of the Company contesting the validity, enforceability or your
interpretation of, or determinations under, this agreement.
(b) The Company shall pay all legal fees and expenses you may incur by
reason of your termination of employment for Good Reason or your involuntary
termination of employment other than for Cause; such fees and expenses shall
include, without limitation, those incurred in contesting or disputing any
involuntary termination other than for Cause or in seeking to obtain or enforce
any right or benefit provided by this agreement.
(c) The Company shall pay all legal fees and expenses which you may incur
as a result of any tax assessments or proceedings arising from payments made by
the Company pursuant to this agreement.
(d) If the payment by the Company of any legal fees and expenses pursuant
to this agreement shall constitute compensation to you, the Company agrees, as
a separate and independent undertaking, to pay to you upon demand any and all
taxes, of whatever nature or description, applicable to such payment, together
with any taxes thereon, on the basis of a customary "gross-up" formula.
Miscellaneous. No provision of this agreement may be modified, waived or
discharged unless such modification, waiver or discharge is agreed to in
writing signed by both you and the Company. No waiver by either party hereto
at any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. This agreement shall be governed
by and construed in accordance with the laws of the State of Missouri.
<PAGE> 4
4
Very truly yours,
HUSSMANN INTERNATIONAL, INC.
By:_______________________________
HUSSMANN CORPORATION
By:_______________________________
ACCEPTED AND AGREED
___________________________
J. Larry Vowell
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY CONSOLIDATED (MARCH 31, 1998) AND COMBINED (MARCH
31, 1997) FINANCIAL INFORMATION EXTRACTED FROM HUSSMANN INTERNATIONAL'S
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS AND NOTES
THERETO.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 38 34
<SECURITIES> 0 0
<RECEIVABLES> 235 166
<ALLOWANCES> 2 2
<INVENTORY> 111 161
<CURRENT-ASSETS> 386 364
<PP&E> 309 280
<DEPRECIATION> 148 139
<TOTAL-ASSETS> 600 578
<CURRENT-LIABILITIES> 185 137
<BONDS> 247 217<F1>
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 142 189
<TOTAL-LIABILITY-AND-EQUITY> 600 578
<SALES> 246 199
<TOTAL-REVENUES> 246 199
<CGS> 205 164
<TOTAL-COSTS> 205 164
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4<F2> 5<F2>
<INCOME-PRETAX> 6 (2)
<INCOME-TAX> 2 (1)
<INCOME-CONTINUING> 4 (1)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4 (1)
<EPS-PRIMARY> .08 0
<EPS-DILUTED> .08 0
<FN>
<F1>During the period ended March 31, 1997, Hussmann's former parent, Whitman
managed all cash not considered necessary for operating requirements. The
amounts shown here represent amounts due to Whitman at March 31, 1997.
<F2>Interest expense includes $1.0 and $4.2 million of interest paid to whitman,
hussmann's previous parent company, for the periods ended march 31,
1998 and 1997, respectively.
</FN>
</TABLE>
