<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 10/A
(AMENDMENT NO. 1)
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
Lanier Worldwide, Inc.
- --------------------------------------------------------------------------------
(Exact name of Registrant as Specified in its Charter)
Delaware 59-2606737
- -------------------------------------------- ----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2300 Parklake Drive, Atlanta, Georgia 30345
- -------------------------------------------- ----------------------------------
(Address of Principal Executive Offices) (Zip code)
Registrant's telephone number, including area code (770) 621-1588
--------------------------
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
------------------- ------------------------------
Common Stock, par value $0.01 per share New York Stock Exchange, Inc.
Preferred Stock Purchase Rights New York Stock Exchange, Inc.
Securities to be registered pursuant to Section 12(g) of the Act:
None
- --------------------------------------------------------------------------------
(Title of Class)
EXPLANATORY NOTE
This Registration Statement has been prepared on a prospective basis on
the assumption that, among other things, the Distribution (as defined in the
Information Statement which is a part of this Registration Statement) and the
related transactions contemplated to occur prior to or contemporaneously with
the Distribution will be consummated as contemplated by the Information
Statement. There can be no assurance, however, that any or all of such
transactions will occur or will occur as so contemplated. Any significant
modifications or variations in the transactions contemplated will be reflected
in an amendment or supplement to this Registration Statement.
<PAGE> 2
CROSS REFERENCE
LANIER WORLDWIDE, INC.
I. INFORMATION INCLUDED IN INFORMATION STATEMENT AND INCORPORATED IN FORM
10 BY REFERENCE
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
<TABLE>
<CAPTION>
Item
No. Item Caption Location in Information Statement
<S> <C> <C>
1. Business "SUMMARY;" "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS;" and "LANIER'S BUSINESS."
2. Financial Information "SUMMARY - LANIER WORLDWIDE,
INC. AND SUBSIDIARIES SUMMARY
HISTORICAL AND PRO FORMA
CONSOLIDATED FINANCIAL DATA;"
"LANIER WORLDWIDE, INC. AND
SUBSIDIARIES HISTORICAL AND
PRO FORMA CONSOLIDATED
CAPITALIZATION;" "LANIER
WORLDWIDE, INC. UNAUDITED PRO
FORMA CONSOLIDATED FINANCIAL
STATEMENTS;" "LANIER
WORLDWIDE, INC. SELECTED
FINANCIAL DATA;" "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS;" and
"LANIER WORLDWIDE, INC. AND
SUBSIDIARIES CONSOLIDATED
FINANCIAL STATEMENTS."
3. Properties "LANIER'S BUSINESS - Properties"
4. Security Ownership of Certain "SECURITY OWNERSHIP OF CERTAIN
Beneficial Owners and BENEFICIAL OWNERS."
Management
5. Directors and Executive "LANIER'S MANAGEMENT."
Officers
6. Executive Compensation "LANIER'S MANAGEMENT."
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
7. Certain Relationships and "SUMMARY;" "THE DISTRIBUTION -
Related Transactions Relationship Between Harris And
Lanier Following The Distribution."
8. Legal Proceedings "LANIER'S BUSINESS - Legal Proceedings."
9. Market Price of and Dividends "SUMMARY;" and "THE DISTRIBUTION -
on the Registrant's Common Listing and Trading of the Lanier
Equity and Related Stockholder Shares" and "DIVIDEND POLICIES."
Matters
11. Description of Registrant's "DESCRIPTION OF LANIER'S CAPITAL
Securities to be Registered STOCK."
12. Indemnification of Officers and "LIABILITY AND INDEMNIFICATION OF
Directors DIRECTORS AND OFFICERS."
13. Financial Statements and "SUMMARY;" "LANIER WORLDWIDE, INC.
Supplementary Data UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS," "LANIER
WORLDWIDE, INC. SELECTED FINANCIAL
DATA;" and "LANIER WORLDWIDE, INC.
AND SUBSIDIARIES CONSOLIDATED
FINANCIAL STATEMENTS."
</TABLE>
II. INFORMATION NOT INCLUDED IN INFORMATION STATEMENT
Item 10. Recent Sales of Unregistered Securities.
None.
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Item 15. Financial Statements and Exhibits.
(a) List of Financial Statements. The following financial statements are
included in the Information statement:
Report of Independent Certified Public Accountants.
Lanier Worldwide, Inc. and Subsidiaries Consolidated Balance Sheets as of July
2, 1999, July 3, 1998, and June 27, 1997.
<PAGE> 4
Lanier Worldwide, Inc. and Subsidiaries Consolidated Statements of Income for
the Fiscal Years ended July 2, 1999, July 3, 1998 and June 27, 1997.
Lanier Worldwide, Inc. and Subsidiaries Consolidated Statements of Cash Flows
for the Fiscal Years ended July 2, 1999, July 3, 1998 and June 27, 1997.
Lanier Worldwide, Inc. and Subsidiaries Consolidated Statements of Changes in
Shareholder Equity for the Fiscal Years ended July 2, 1999, July 3, 1998 and
June 27, 1997.
(b) Exhibits The following documents are filed as exhibits hereto:
Exhibit No.
- -----------
2.1 Form of Distribution Agreement.*
3.1 Form of Amended and Restated Certificate of Incorporation of Lanier
Worldwide, Inc.**
3.2 Form of By-Laws of Lanier Worldwide, Inc.**
4.1 Form of Stockholder Protection Rights Agreement.**
4.2 Form of Certificate of Designation and Terms of Registrant's
Participating Preferred Stock.**
10.1 Form of Tax Disaffiliation Agreement.*
10.2 Form of Credit Agreement.*
10.3 Form of Transition Services Agreement.*
10.4 Form of Distribution Agreement (filed as Exhibit 2.1).*
10.5 Form of Employee Benefits Compensation and Allocation Agreement.*
10.6 Form of Registration Rights Agreement.**
10.7 Form of Stock Incentive Plan.*
12.1 Computation of Ratios of Earnings to Fixed Charges.
21.1 List of Subsidiaries.*
23.1 Consent of Independent Certified Public Accountants.
27.1 Financial Data Schedule.
- ------------
* To be filed by amendment
** Previously filed
<PAGE> 5
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this Amendment No. 1 to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized.
LANIER WORLDWIDE, INC.
By /s/ Wesley E. Cantrell
-----------------------
Name: Wesley E. Cantrell
Title: President and Chief
Executive Officer
<PAGE> 6
[HARRIS LOGO]
[HARRIS LOGO]
HARRIS CORPORATION
1025 West NASA Boulevard
Melbourne, Florida 32919
-, 1999
Dear Fellow Stockholder:
I am pleased to inform you that the Board of Directors of Harris
Corporation has approved a pro rata distribution to Harris stockholders of
approximately 90% of the outstanding shares of common stock of Lanier Worldwide,
Inc., one of the world's leading independent providers of office products and
document management solutions, which is currently a subsidiary of Harris. Harris
will retain approximately 10% of the Lanier shares.
The distribution will take place on -, 1999. Each Harris stockholder as of
- -, 1999 will receive one Lanier share for every Harris share held on that date.
Lanier has submitted an application to list the Lanier shares on the New York
Stock Exchange under the symbol "LR."
We believe that the distribution will meaningfully enhance value for Harris
stockholders and will give Lanier the financial and operational flexibility to
take advantage of significant growth opportunities in the office products and
document management solutions business. We believe that separating the two
companies will enhance the ability of each of Lanier and Harris to focus on
strategic initiatives and new business opportunities, as well as to improve cost
structures and operating efficiencies and to design equity-based compensation
programs targeted to its own performance. In addition, we expect that the
transition to an independent company will heighten Lanier management's focus,
provide Lanier with greater access to capital, and allow the investment
community to better measure Lanier's performance relative to its peers.
The enclosed Information Statement describes the distribution and provides
important financial and other information about Lanier. Please read it
carefully.
You do not have to take any action to receive your Lanier shares. You will
not be required to pay anything or to surrender your Harris shares. Account
statements reflecting your ownership of Lanier shares will be mailed to record
holders of Harris stock shortly after -, 1999. If you are a participant in
Harris' dividend reinvestment program and are entitled to receive a fractional
Lanier share, you will receive a check for its cash value. If you are not a
record holder of Harris stock, your Lanier shares should be credited to your
account with your stockbroker or nominee on or about -, 1999. Following the
distribution, you may also request physical stock certificates if you wish.
Information for making that request will be furnished with your account
statement.
Sincerely,
/s/ Phillip W. Farmer
Phillip W. Farmer
Chairman and Chief Executive Officer
<PAGE> 7
LOGO
LOGO
Lanier Worldwide, Inc.
2300 Parklake Drive,
N.E.
Atlanta, Georgia
30345-2979
770/496-9500
-, 1999
Dear Stockholder:
We are very pleased that you will soon be a stockholder of Lanier
Worldwide, Inc. We are one of the world's leading independent providers of
office products and document management solutions, together with related service
and support. Lanier is truly a global company. In fact, we have over 1,600 sales
and service centers in over 100 countries around the world, through which we
continually seek to provide "best of breed" products to our customers.
As a subsidiary of Harris Corporation, Lanier has been known for its
customer focused strategy. As an independent company, our highest priority will
continue to be customer satisfaction. We continually train our sales people and
service force on new products, technologies and techniques, and we believe that
this training, coupled with our commitment to viewing business interactions
through the eyes of our customers, will allow us to maintain our coveted
reputation in our industry.
We believe that the separation of our business from the businesses of our
corporate parent, Harris Corporation, will enhance our ability to grow our
businesses aggressively, both internally and through selective acquisitions. For
the first time, we will have the ability to offer our employees incentive
opportunities linked to Lanier's performance as a stand-alone company, which we
believe will aid our efforts to enhance employee performance.
As an independent company, we can more effectively focus on our objectives,
support the capital needs of our company and thus bring value to you as a
stockholder.
Lanier has applied for listing of its shares on the New York Stock Exchange
under the symbol "LR."
Our board, management and employees are excited about our future as an
independent company and we look forward to your support and participation in our
success.
Sincerely,
/s/ Wesley E. Cantrell
Wesley E. Cantrell
President and Chief Executive Officer
<PAGE> 8
SUBJECT TO COMPLETION, DATED JULY 28, 1999
INFORMATION STATEMENT RELATING TO THE SPINOFF OF
LANIER WORLDWIDE, INC.
FROM HARRIS CORPORATION
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
Harris Corporation is sending you this information statement to describe
the pro rata distribution to Harris stockholders of approximately 90% of the
outstanding common stock of Lanier Worldwide, Inc. In this distribution, you
will receive one share of Lanier common stock, together with an associated
preferred stock purchase right, for every share of Harris common stock that you
hold at the close of business on -, 1999. Harris will retain approximately 10%
of Lanier's common stock. See "The Distribution" beginning on page 14.
Lanier is currently a wholly owned subsidiary of Harris and is one of the
world's largest independent providers of office products and document management
solutions, related services and support, with over 1,600 sales and service
centers in over 100 countries around the world. See "Lanier's Business"
beginning on page 36.
The distribution of Lanier shares will be effected at 11:59 p.m., Eastern
Daylight Time, on -, 1999. You do not have to take any action to receive your
Lanier shares. You will not be required to pay anything or to surrender your
Harris shares. Harris intends to distribute the Lanier shares by book entry. The
number of Harris shares that you own will not change as a result of the
distribution.
There is no current public trading market for the Lanier shares, although a
"when-issued" trading market may develop prior to completion of the
distribution. Lanier has filed an application to list the Lanier shares on the
New York Stock Exchange under the symbol "LR." See "The Distribution -- Listing
and Trading of the Lanier Shares" beginning on page 16.
------------------------
NO VOTE OF STOCKHOLDERS IS REQUIRED IN CONNECTION WITH THE DISTRIBUTION. WE
ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY OR
YOUR SHARE CERTIFICATES.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS DESCRIBED IN THIS
INFORMATION STATEMENT BEGINNING ON PAGE 7.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS
INFORMATION STATEMENT OR DETERMINED IF THIS INFORMATION STATEMENT IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS INFORMATION STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES.
THE DATE OF THIS INFORMATION STATEMENT IS -, 1999.
<PAGE> 9
QUESTIONS AND ANSWERS ABOUT THE DISTRIBUTION
The following section answers various questions that you may have with
respect to the pro rata distribution to Harris stockholders of approximately 90%
of the outstanding shares of Lanier common stock. We refer to this distribution
in this document as the "Distribution."
Q: WHY IS HARRIS EFFECTING THE DISTRIBUTION?
A: Harris' board of directors and management believe that the Distribution is
in the best interests of Harris, Lanier and Harris stockholders. Harris' board
of directors and management believe that separating Lanier from the rest of
Harris' businesses will allow both Lanier and Harris to focus on their
respective businesses and provide them with the flexibility to pursue different
strategies and react quickly to changing market environments. Lanier's business
is a distinct business with significant differences from Harris' other
operations with respect to its markets, products, capital needs and plans for
growth. Harris' board of directors and management believe that the Distribution
will enhance the ability of each of Lanier and Harris to focus on strategic
initiatives and new business opportunities, improve cost structures and
operating efficiencies and design equity-based compensation programs targeted to
its own performance. In addition, Harris' board of directors expects that the
transition to an independent company will heighten Lanier management's focus,
provide Lanier with greater access to capital, and allow the investment
community to measure Lanier's performance relative to its peers. For a more
detailed discussion of the reasons for the Distribution, see "The
Distribution -- Reasons for the Distribution" on page 14.
Q: WHY IS HARRIS RETAINING APPROXIMATELY 10% OF THE LANIER SHARES?
A: Harris will retain approximately 10% of the Lanier shares because the
contemplated future sale of these shares will provide Harris with a source of
cash following the Distribution. Harris intends to use this cash to make
acquisitions in the telecommunications equipment industry and for general
working capital purposes. See "The Distribution -- Reasons for Harris' Retention
of Lanier Shares" on page 15.
Q: WHEN WILL THE DISTRIBUTION OCCUR?
A: We currently anticipate completing the Distribution on -, 1999.
Q: WHAT BUSINESS WILL LANIER CONDUCT FOLLOWING THE DISTRIBUTION?
A: After the Distribution, Lanier will continue operating its current business.
See "Summary -- Lanier's Business" on page 1, "The Distribution -- Results of
the Distribution" beginning on page 15 and "Lanier's Business" beginning on page
36.
Q: WHAT WILL I RECEIVE AS A RESULT OF THE DISTRIBUTION?
A: For every share of Harris common stock that you own of record on -, 1999,
you will receive one share of Lanier common stock. For example, if you own 123
shares of Harris common stock on -, you will receive 123 shares of Lanier common
stock.
Harris currently intends to distribute the Lanier shares by book entry. If
you are a record holder of Harris stock, instead of physical stock certificates,
you will receive from Lanier's transfer agent shortly after -, 1999 a statement
of your book entry account for the Lanier shares distributed to you. Following
the Distribution, you may request physical stock certificates if you wish, and
instructions for making that request will be furnished with your account
statement. If you are a participant in Harris' dividend reinvestment plan and
are entitled to receive a fractional Lanier share, you will receive a check for
the cash value of the fractional Lanier share, which may be taxable to you. If
you are not a record holder of Harris stock because such shares are held on your
behalf by your stockbroker or other nominee, your Lanier shares should be
credited to your account with your stockbroker or nominee on or about -, 1999.
Associated with every share of Lanier common stock that you receive will be
one preferred stock purchase right. These rights are similar to the rights
associated with your existing shares of Harris common stock and may have certain
anti-takeover effects similar to Harris' current preferred stock purchase
rights. See "The Distribution -- Manner of Effecting the Distribution" on page
15, "Risk Factors -- Certain Provisions of Lanier's Restated Certificate of
Incorporation and Bylaws and Rights Plan and the Tax Disaffiliaton Agreement May
ii
<PAGE> 10
Discourage Takeovers" beginning on page 11 and "Certain Anti-Takeover Provisions
of Lanier's Certificate of Incorporation, Bylaws and Rights Agreement and
Delaware Law" beginning on page 58.
Q: WHAT DO I HAVE TO DO TO RECEIVE MY LANIER SHARES?
A: Nothing. Your Lanier shares will be either reflected in an account statement
that Lanier's transfer agent will send to you shortly after -, 1999 or credited
to your account with your broker or nominee on or about -, 1999.
Q: WHEN WILL I RECEIVE MY LANIER SHARES?
A: If you hold your Harris shares in your own name, your account statement will
be mailed to you on or about -, 1999. You should allow several days for the mail
to reach you.
If you hold your Harris shares through your stockbroker, bank or other
nominee, you are probably not a stockholder of record and your receipt of Lanier
shares depends on your arrangements with the nominee that holds your Harris
shares for you. Harris anticipates that stockbrokers and banks generally will
credit their customers' accounts with Lanier shares on or about -, 1999, but you
should check with your stockbroker, bank or other nominee. See "The
Distribution -- Manner of Effecting the Distribution" on page 15.
Q: HOW WILL THE DISTRIBUTION AFFECT THE MARKET PRICE OF MY HARRIS SHARES?
A: Following the Distribution, Harris shares will continue to be listed and
traded on the New York Stock Exchange under the symbol "HRS." As a result of the
Distribution, the trading price of Harris shares immediately following the
Distribution will likely be lower than immediately prior to the Distribution.
Until the market has fully analyzed the operations of Harris without the
operations of Lanier, the price of Harris shares may fluctuate significantly.
See "The Distribution -- Listing and Trading of the Lanier Shares" beginning on
page 16.
Q: WHERE WILL MY LANIER SHARES BE TRADED?
A: Lanier has submitted an application to list the Lanier shares on the New
York Stock Exchange under the symbol "LR." Trading of the Lanier shares may
commence on a when-issued basis after the record date. See "The
Distribution -- Listing and Trading of the Lanier Shares" beginning on page 16.
Q: HOW WILL THE CASH PAYMENT FOR FRACTIONAL SHARES BE DETERMINED AND PAID?
A: If your account with Harris' dividend reinvestment plan is credited with a
fractional share of Harris stock as of -, 1999, you will receive cash in lieu of
the fractional Lanier share that you are entitled to receive. Your fractional
Lanier share will be aggregated with the fractional Lanier shares of other
stockholders and sold in the open market by Harris' distribution agent. You will
receive a check for your share of the net proceeds of such sale. See "The
Distribution -- Manner of Effecting the Distribution" on page 15.
Q: WHAT IF I WANT TO SELL MY HARRIS SHARES OR MY LANIER SHARES?
A: You should consult with your own financial advisors, such as your
stockbroker, bank or tax advisor. Harris does not make recommendations on the
purchase, retention or sale of Harris shares or Lanier shares.
If you do decide to sell any shares, you should make sure your stockbroker,
bank or other nominee understands whether you want to sell your Harris shares or
your Lanier shares, or both. The following information may be helpful in
discussions with your stockbroker, bank or other nominee.
Beginning about -, 1999 and continuing until -, 1999, New York Stock
Exchange practices should generally allow you to sell your Harris shares either
together with the right to receive the Lanier shares in the Distribution or
without the right to receive the Lanier shares. If you sell your Harris shares
with the right to receive the Lanier shares, you (or your broker or bank) will
be required to deliver to the buyer the Lanier shares you receive in the
Distribution. You should also be able to sell your right to receive the Lanier
shares without selling your Harris shares.
Sales of Harris shares with the right to receive the Lanier shares should
generally settle in the three business day settlement period. Sales of Harris
shares without the right to receive the Lanier shares and sales of the Lanier
shares without Harris shares are expected to settle four business days following
the date account statements for
iii
<PAGE> 11
the Lanier shares are mailed. Check with your stockbroker, bank or other
nominee. Beginning about -, 1999, you may only sell your Harris shares and
Lanier shares separately. Once again, check with your stockbroker, bank or other
nominee. See "The Distribution -- Listing and Trading of the Lanier Shares"
beginning on Page 16.
Q: HOW WILL THE DISTRIBUTION AFFECT THE DIVIDENDS I CURRENTLY RECEIVE ON MY
HARRIS SHARES?
A: Following the Distribution, Harris intends to pay quarterly dividends at an
initial annual rate expected to be substantially below Harris' current annual
dividend rate of $.96 per share. No determination has been made by Harris' board
of directors with respect to the initial dividend rate that will be paid
following the Distribution. The declaration and payment of dividends is at the
discretion of Harris' board of directors and will be subject to Harris'
financial results and the availability of surplus funds to pay dividends. The
declaration of dividends and the amount thereof will depend on a number of
factors, including Harris' financial condition, capital requirements, results of
operations, future business prospects and other factors Harris' board of
directors may deem relevant. No assurance can be given that Harris will pay any
dividends. See "Dividend Policies" on page 23.
Q: WILL LANIER PAY DIVIDENDS?
A: Lanier intends to pay quarterly cash dividends, although the declaration and
payment of dividends is at the discretion of Lanier's board of directors and
will be subject to Lanier's financial results and the availability of surplus
funds to pay dividends. The amount of quarterly cash dividends will depend on a
number of factors, including Lanier's financial condition, capital requirements,
results of operations, future business prospects and other factors Lanier's
board of directors may deem relevant. No assurance can be given that Lanier will
pay any dividends. See "Risk Factors -- Uncertainty of Dividends" on page 11 and
"Dividend Policies" on page 23. Certain covenants set forth in the revolving
credit facility that Lanier will enter into in connection with the Distribution
may limit Lanier's ability to declare and pay dividends on the Lanier Shares.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Credit Facility" on page 33.
Q: WILL LANIER HAVE A DIVIDEND REINVESTMENT OR STOCK PURCHASE PLAN?
A: Lanier intends to establish a direct stock purchase and dividend
reinvestment plan that will enable holders to purchase additional Lanier shares
and to reinvest dividends into additional Lanier shares. See "Dividend Policies"
on page 23.
Q: WILL I HAVE TO PAY TAXES ON THE LANIER SHARES THAT I RECEIVE?
A: Based upon the opinion of Sullivan & Cromwell, special counsel to Harris,
Harris anticipates that the Distribution will be tax-free to Harris stockholders
for U.S. federal income tax purposes, except for any tax payable because of any
cash stockholders may receive in lieu of fractional Lanier shares. (You will be
entitled to receive cash in lieu of a fractional Lanier share only if you are a
participant in Harris' dividend reinvestment plan and your account with such
plan is credited with a fractional share of Harris common stock as of -, 1999).
In addition, you may have to pay taxes if you sell your Lanier shares. If you
have any questions, please consult your tax advisor. See "Risk
Factors -- Failure to Qualify as a Tax Free Transaction Could Result in
Substantial Liability" beginning on page 8 and "The Distribution -- Federal
Income Tax Consequences of the Distribution" beginning on page 17.
Q: WILL THERE BE ANY CHANGE IN THE UNITED STATES FEDERAL TAX BASIS OF MY HARRIS
SHARES AS A RESULT OF THE DISTRIBUTION?
A: Yes, your tax basis in your Harris shares will be reduced. If you are the
record holder of your Harris shares, you will receive information with your
account statement that will help you calculate the adjusted tax basis for your
Harris shares, as well as the tax basis for your Lanier shares. See "The
Distribution -- Federal Income Tax Consequences of the Distribution" beginning
on page 17.
iv
<PAGE> 12
Q: WHERE CAN I GET MORE INFORMATION?
A: If you have any questions relating to the mechanics of the Distribution and
the delivery of account statements or the trading of Harris or Lanier shares
prior to the Distribution, you can contact the Distribution Agent:
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Ridgefield Park, NJ 07660
(201) 296-4040
For other questions related to the Distribution, Harris or Lanier, please
contact:
Georgeson Shareholder Communications, Inc.
17 State Street
New York, New York 10004
(800) 223-2064
After the Distribution, Lanier stockholders with inquiries relating to the
Distribution or their investment in Lanier should contact:
Lanier Worldwide, Inc.
2300 Parklake Drive, N.E.
Atlanta, Georgia 30345
Attention: Corporate Secretary
(770) 621-1588
After the Distribution, Harris stockholders with inquiries relating to the
Distribution or their investment in Harris should contact:
Harris Corporation
1025 West NASA Boulevard
Melbourne, Florida 32919
Attention: Corporate Secretary
(407) 727-9100
v
<PAGE> 13
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE DISTRIBUTION................ ii
SUMMARY..................................................... 1
RISK FACTORS................................................ 7
INTRODUCTION................................................ 14
THE DISTRIBUTION............................................ 14
RELATIONSHIP BETWEEN HARRIS AND LANIER FOLLOWING THE
DISTRIBUTION.............................................. 19
LANIER WORLDWIDE, INC. AND SUBSIDIARIES HISTORICAL AND PRO
FORMA CONSOLIDATED CAPITALIZATION......................... 22
DIVIDEND POLICIES........................................... 23
LANIER WORLDWIDE, INC. UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS...................................... 24
LANIER WORLDWIDE, INC. SELECTED FINANCIAL DATA.............. 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 29
LANIER'S BUSINESS........................................... 36
LANIER'S MANAGEMENT......................................... 43
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS............. 54
BENEFICIAL OWNERSHIP OF MANAGEMENT.......................... 56
DESCRIPTION OF LANIER'S CAPITAL STOCK....................... 56
CERTAIN ANTI-TAKEOVER PROVISIONS OF LANIER'S CERTIFICATE OF
INCORPORATION, BYLAWS AND RIGHTS AGREEMENT AND DELAWARE
LAW....................................................... 58
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS..... 63
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.................... 64
ADDITIONAL INFORMATION...................................... 64
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.......... F-1
LANIER WORLDWIDE, INC. AND SUBSIDIARIES CONSOLIDATED
FINANCIAL STATEMENTS...................................... F-2
</TABLE>
vi
<PAGE> 14
SUMMARY
This summary highlights selected information contained elsewhere in this
document. It is not complete and may not contain all of the information that is
important to you. To better understand the Distribution and Lanier, you should
read this entire document carefully, including the risks described beginning on
page 7 and the financial statements and the notes pertaining thereto beginning
on page F-1.
WHY WE SENT THIS DOCUMENT TO YOU
Harris Corporation ("Harris") sent you this document because you were an
owner of Harris common stock on -, 1999. This entitles you to receive a pro rata
distribution of one share of common stock of Lanier Worldwide, Inc. ("Lanier"),
which is currently a wholly owned subsidiary of Harris, for every Harris share
you owned on that date. We refer to this distribution in this document as the
"Distribution." No action is required on your part to participate in the
Distribution and you do not have to pay cash or other consideration to receive
your Lanier shares.
This document describes Lanier's business, the relationship between Harris
and Lanier, and how this transaction benefits Harris and its stockholders, and
provides other information to assist you in evaluating the benefits and risks of
holding or disposing of the Lanier shares that you will receive in the
Distribution. You should be aware of certain risks relating to the Distribution
and Lanier's business, which are described in this document beginning on page 7.
LANIER'S BUSINESS
Lanier and its subsidiaries form one of the world's largest independent
suppliers of copiers, facsimiles and other related automated office imaging
equipment. With over 1,600 sales and service locations in more than 100
countries, Lanier markets these products and related services, parts and
supplies to customers both on a direct sales basis and through a worldwide
network of independent dealers. Lanier provides customers with a wide array of
customized document management solutions including black and white digital and
analog copiers, color copiers, facsimile machines, multifunction devices,
dictation equipment, computer based health care information management systems,
associated parts and supplies, and a variety of related outsourcing services,
including legal support services. Lanier sources substantially all of these
products from a variety of manufacturers, seeking out the "best-of-breed."
Selected products undergo rigorous testing by Lanier, and upgrades are often
recommended to the manufacturers in order to meet Lanier's demanding standards.
Lanier targets sales of its products to four primary markets: (i)
global/national or "key" accounts; (ii) major accounts; (iii) commercial users;
and (iv) specific vertical industries, such as the health care and legal
industries. Some of Lanier's national customers include Abbott Laboratories,
Corning, Inc., CountryWide Home Loans, Federal Express, Merck & Company, Inc.,
Minnesota Mining & Manufacturing Co. and the National Aeronautics & Space
Administration (NASA).
Lanier's goal is to become the leading global provider of document
management solutions and related services and support. In order to accomplish
this goal, Lanier intends to use the following strategies:
- continue to cultivate its "best of breed" sourcing and distribution
relationships;
- deliver integrated document management solutions to its customers;
- focus on customer satisfaction and retention;
- maintain and develop its effective marketing initiatives;
- attract, retain and incentivize its high caliber employees; and
- continue to add revenue and operating income through selective
acquisitions.
1
<PAGE> 15
\ THE DISTRIBUTION
DISTRIBUTING COMPANY....... Harris Corporation, a Delaware corporation.
DISTRIBUTED COMPANY........ Lanier Worldwide, Inc., a Delaware corporation.
PRIMARY PURPOSES OF
DISTRIBUTION............. Harris' board of directors believes that separating
Lanier from the rest of Harris' businesses will
allow both Lanier and Harris to focus on their
respective businesses and provide them with the
flexibility to pursue different strategies and
react quickly to changing market environments.
Lanier's business is a distinct business with
significant differences from Harris' other
operations with respect to its markets, products,
capital needs and plans for growth. Harris' board
of directors believes that separating the two
companies will enhance the ability of each of
Lanier and Harris to focus on strategic initiatives
and new business opportunities, improve cost
structures and operating efficiencies and design
equity-based compensation programs targeted to its
own performance. In addition, Harris' board of
directors believes that Lanier will have greater
access to capital as an independent company and
that the investment community will be better able
to measure Lanier's performance relative to its
peers. For a more detailed discussion of the
reasons for the Distribution, see "The
Distribution -- Reasons for the Distribution" on
page 14 and "-- Reasons for Harris' Retention of
Lanier Shares" on page 15.
LANIER SHARES TO BE
DISTRIBUTED................ We will distribute to Harris stockholders
approximately - Lanier shares, par value $.01 per
share (together with the associated preferred stock
purchase rights, the "Lanier Shares"), based on
approximately - Harris shares outstanding on -,
1999. The Lanier Shares to be distributed will
constitute approximately 90% of the Lanier Shares
outstanding after the Distribution.
LANIER SHARES TO BE
RETAINED BY HARRIS......... Harris will retain approximately 10% of the Lanier
Shares and Lanier will grant Harris certain rights
to cause Lanier to register these Lanier Shares for
sale under the securities laws. Harris will retain
such Lanier Shares because the contemplated future
sale of these shares will provide Harris with a
source of cash following the Distribution. Harris
has agreed not to sell its Lanier Shares for six
months following the Distribution, but intends to
sell its Lanier Shares within two years following
the Distribution. In addition, Harris has agreed to
vote its Lanier Shares in proportion to votes cast
by other Lanier stockholders. See "Risk
Factors -- The Possibility of Substantial Sales May
Have an Adverse Impact on the Trading Price of the
Lanier Shares" on page 8, "The
Distribution -- Reasons for Harris' Retention of
Lanier Shares" on page 15 and "The
Distribution -- Listing and Trading of the Lanier
Shares" beginning on page 16.
TRADING MARKET AND
SYMBOL..................... There is no current trading market for the Lanier
Shares, although a when-issued market may develop
prior to completion of the Distribution. Lanier has
filed an application to list the Lanier Shares on
the New York Stock Exchange under the symbol "LR."
RECORD DATE................ If you owned Harris shares at the close of business
on -, 1999 (the "Record Date"), then you will
receive Lanier Shares in the Distribution.
2
<PAGE> 16
DISTRIBUTION DATE.......... The Distribution will occur at 11:59 p.m., Eastern
Daylight Time, on -, 1999 (the "Distribution
Date"). If you are a record holder of Harris stock,
instead of physical stock certificates you will
receive from Lanier's transfer agent shortly after
-, 1999 a statement of your book entry account for
the Lanier Shares distributed to you. Following the
Distribution, you may request physical stock
certificates if you wish, and instructions for
making that request will be furnished with your
account statement. If you are not a record holder
of Harris stock because such shares are held on
your behalf by your stockbroker or other nominee,
your Lanier Shares should be credited to your
account with your stockbroker or other nominee on
or about -, 1999.
DISTRIBUTION RATIO......... You will receive one Lanier Share for every Harris
share you held on the Record Date.
DISTRIBUTION AGENT......... ChaseMellon Shareholder Services, L.L.C.
TRANSFER AGENT AND
REGISTRAR FOR THE LANIER
SHARES................... ChaseMellon Shareholder Services, L.L.C.
FRACTIONAL SHARE
INTERESTS.................. Fractional Lanier Shares will not be issued. You
will be entitled to receive a fractional Lanier
Share only if you are a participant in Harris'
dividend reinvestment plan and your account with
such plan is credited with a fractional share of
Harris common stock as of the Record Date. Your
fractional Lanier Share will be aggregated with the
fractional Lanier Shares of other stockholders and
sold in the open market by Harris' Distribution
Agent. You will receive a check for your pro rata
share of the net proceeds of such sale. See "The
Distribution -- Manner of Effecting the
Distribution" on page 15.
TAX CONSEQUENCES........... Sullivan & Cromwell, special counsel to Harris,
expects to render an opinion to Harris that the
Distribution will be tax-free to you for U.S.
federal income tax purposes except to the extent of
any cash you receive in lieu of fractional Lanier
Shares. See "Risk Factors -- Failure to Qualify as
a Tax Free Transaction Could Result in Substantial
Liability" beginning on page 8 and "The
Distribution -- Federal Income Tax Consequences of
the Distribution" beginning on page 17.
RELATIONSHIP WITH HARRIS
AFTER THE DISTRIBUTION..... Immediately prior to the Distribution Date, Harris
and Lanier will enter into agreements to transfer
to Lanier selected assets and liabilities of Harris
related to Lanier's business, to transfer to Harris
selected assets and liabilities of Lanier related
to Harris' business, to arrange for the continued
provision of certain services by each company to
the other, to make arrangements for the
Distribution and to define the ongoing
relationships between Harris and Lanier. In
addition, Lanier will grant Harris registration
rights with respect to the Lanier Shares which
Harris will continue to own. Harris and Lanier will
also enter into an agreement providing for the
sharing of taxes incurred by them prior to the
Distribution and providing certain indemnification
rights with respect to tax matters. After the
Distribution, Harris and Lanier will not have any
other material contracts or other arrangements
between them other than arrangements made on an
arm's length basis. See "Relationship Between
Harris and Lanier Following the Distribution"
beginning on page 19.
3
<PAGE> 17
BOARD OF DIRECTORS OF
LANIER..................... After the Distribution, Lanier will have an initial
board of nine directors, classified into three
classes of three directors each. Directors of each
class will serve three-year terms. See "Lanier's
Management" beginning on page 43.
MANAGEMENT OF LANIER....... Lanier's current executive officers will continue
to serve as executive officers of Lanier after the
Distribution. See "Lanier's Management" beginning
on page 43.
CREDIT FACILITY............ Prior to the Distribution, Lanier will incur debt
under a credit facility to be entered into with
certain major financial institutions (the "Credit
Facility") in connection with the payment of a
dividend by Lanier to Harris immediately prior to
the Distribution. As a result of this incurrence of
debt and the assumption by Lanier of certain of
Harris' indebtedness relating to Lanier's business,
Lanier will have approximately $700 million of
indebtedness net of cash on the Distribution Date.
The terms of the Credit Facility will include
customary affirmative and negative covenants that
will, among other things, require Lanier to satisfy
certain financial tests and maintain certain
financial ratios, and will limit Lanier's ability
to declare and pay dividends on the Lanier Shares.
Lanier may also incur additional indebtedness from
time to time, for general corporate purposes,
including working capital requirements, capital
expenditures and future acquisitions. See
"Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Credit
Facility" on page 33.
POST-DISTRIBUTION DIVIDEND
POLICIES................. Lanier. Following the Distribution, Lanier's
dividend policy will be set by Lanier's board of
directors. Lanier intends to pay quarterly cash
dividends, although the declaration and payment of
dividends is at the discretion of the Lanier Board
and will be subject to Lanier's financial results
and the availability of surplus funds to pay
dividends. The amount of quarterly cash dividends
will depend on a number of factors, including
Lanier's financial condition, capital requirements,
results of operations, future business prospects
and other factors Lanier's board of directors may
deem relevant. No assurance can be given that
Lanier will pay any dividends. See "Risk
Factors -- Uncertainty of Dividends" on page 11 and
"Dividend Policies" on page 23. Certain covenants
set forth in the Credit Facility will limit
Lanier's ability to declare and pay dividends and
distributions on the Lanier Shares. See
"Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Credit
Facility" on page 33.
Harris. Following the Distribution, Harris intends
to pay quarterly dividends at an initial annual
rate expected to be substantially below Harris'
current annual dividend rate of $.96 per share. No
determination has been made by Harris' board of
directors with respect to the initial dividend rate
that will be paid following the Distribution. The
payment and level of dividends is at the discretion
of Harris' board of directors and will be subject
to Harris' financial results and the availability
of surplus funds to pay dividends. The declaration
of dividends and the amount thereof will depend on
a number of factors, including Harris' financial
condition, capital requirements, results of
operations, future business prospects and other
factors Harris' board of directors may deem
relevant. No assurance can be given that Harris
will pay any dividends. See "Dividend Policies" on
page 23.
4
<PAGE> 18
CERTAIN ANTI-TAKEOVER
EFFECTS.................... Certain provisions of Lanier's restated certificate
of incorporation and bylaws may have the effect of
making the acquisition of control of Lanier in a
transaction not approved by Lanier's board of
directors more difficult. The stockholder
protection rights agreement that Lanier will enter
into in connection with the Distribution also would
make such a transaction more difficult. Moreover,
certain provisions of the Tax Disaffiliation
Agreement that Lanier will enter into in connection
with the Distribution could discourage potential
acquisition proposals. See "Risk Factors -- Certain
Provisions of Lanier's Certificate of Incorporation
and Bylaws and Rights Plan and the Tax
Disaffiliation Agreement May Discourage Takeovers"
beginning on page 11 and "Certain Anti-Takeover
Provisions of Lanier's Certificate of
Incorporation, Bylaws and Rights Agreement and
Delaware Law" beginning on page 58.
RISK FACTORS............... You should review the risks relating to the
Distribution and Lanier's business described in
"Risk Factors" beginning on page 7.
5
<PAGE> 19
LANIER WORLDWIDE, INC. AND SUBSIDIARIES
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The summary historical and pro forma consolidated financial data of Lanier
set forth below is qualified in its entirety by, and should be read in
conjunction with, the Consolidated Financial Statements of Lanier, including the
Notes thereto, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this document. The income
statement data for each of the three fiscal years ended July 2, 1999 and the
balance sheet data as of July 2, 1999 and July 3, 1998 are derived from, and are
qualified by reference to, the consolidated financial statements included
elsewhere in this document that have been audited by Ernst & Young LLP, Lanier's
independent certified public accountants.
The summary pro forma consolidated financial data reflect adjustments to
the historical consolidated balance sheet of Lanier as if the Distribution had
occurred on July 2, 1999 and to the historical consolidated income statement of
Lanier as if the Distribution had occurred on July 4, 1998. The historical and
pro forma consolidated financial statements of Lanier do not necessarily reflect
the results of operations or financial position that Lanier would have had if
Lanier had been a separate, independent company for the periods indicated.
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------------------------------------
FISCAL YEAR ENDED
------------------------------------------------------------------------------
PRO FORMA (A)
JULY 2, JULY 3, JUNE 27, JUNE 30, JUNE 30, JULY 2,
1999 1998 1997 1996 1995 1999
---------- ---------- ---------- ---------- ---------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue from sales,
rentals and
services............ $1,430,488 $1,254,777 $1,170,014 $1,115,962 $1,023,544 $1,430,488
Gross margin........... 533,111 495,908 488,267 448,075 414,101 533,111
Income before income
taxes............... 111,270 99,401 101,907 90,603 82,747 93,096
Income taxes........... 40,000 36,604 38,208 33,331 30,454 33,094
Net income............. 71,270 62,797 63,699 57,272 52,293 60,002
PRO FORMA INCOME PER
SHARE.................. $ 0.68(B)
BALANCE SHEET DATA (END
OF PERIOD):
Total assets........... $1,337,708 $1,123,296 $1,075,307 $1,056,814 $1,011,404 $1,150,093
Long-term debt......... 4,622 3,660 3,990 4,103 4,192 577,616
Shareholder equity..... 882,738 803,657 750,157 689,240 635,113 87,421
</TABLE>
- ---------------
(A) The pro forma consolidated financial data reflect the elimination of a
corporate expense allocation by Harris, the addition of administrative and
general expenses that Lanier expects to incur as an independent public
company, the allocation of additional debt and related interest expense, pro
forma income adjustments, settlement of intercompany loans and a dividend to
be paid by Lanier to Harris immediately prior to the Distribution. The
aggregate amount of such dividend will be the sum of: (i) $700 million; plus
(ii) any cash retained by Lanier on the Distribution Date; less (iii) the
amount of debt retained or assumed by Lanier; and less (iv) amounts owed by
Lanier under Lanier's European asset securitization facility. See "Lanier
Worldwide, Inc. Pro Forma Consolidated Financial Statements" beginning on
page 24 and the Notes thereto.
(B) Pro forma income per share for the fiscal year ended July 2, 1999 is
computed based on 88,857,000 shares, which represents the approximate number
of Lanier Shares expected to be distributed in the Distribution based on the
number of Harris shares outstanding as of July 2, 1999, the retention of
Lanier Shares by Harris and conversion of performance share awards.
6
<PAGE> 20
RISK FACTORS
This document contains forward-looking statements that reflect Lanier's
current assumptions and estimates of future performance and economic conditions.
Such statements are made in reliance upon the safe harbor provisions of Section
27A of the Securities Act of 1933, as amended (the "Securities Act") and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Harris and Lanier may make these statements directly in this document or
incorporate such statements into this document by reference to other documents.
Harris and Lanier may also include statements pertaining to periods following
the Distribution. You can find many of these statements by looking for words
such as "believes," "expects," "anticipates," "estimates" or similar
expressions. Any forward-looking statements are subject to risks and
uncertainties that may cause actual results and future trends to differ
materially from those projected, stated, or implied by the forward-looking
statements.
Lanier's results and the accuracy of the forward-looking statements could
be affected by, among other things, general economic conditions in the markets
in which Lanier operates; economic developments that have a particularly adverse
effect on one or more of the markets served by Lanier; the ability to execute
management's internal operating plans; stability of key markets for office
products and document management solutions; fluctuation in foreign currency
exchange rates and the effectiveness of Lanier's currency hedging program;
worldwide demand and product and service pricing for office products and
document management solutions; and the other risk factors discussed below.
Lanier disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise.
In addition to the information contained elsewhere in this document, you
should carefully read the following risk factors related to the Distribution.
RISKS RELATING TO THE DISTRIBUTION
THERE HAS NOT BEEN ANY PRIOR TRADING MARKET FOR THE LANIER SHARES
There is no current trading market for the Lanier Shares, although a
when-issued trading market may develop prior to completion of the Distribution.
Lanier has filed an application to list the Lanier Shares on the New York Stock
Exchange under the symbol "LR." See "The Distribution -- Listing and Trading of
the Lanier Shares" beginning on page 16.
There can be no assurance as to whether the Lanier Shares will be actively
traded or as to the prices at which the Lanier Shares will trade. Some of the
Harris stockholders who receive Lanier Shares may decide that they do not want
shares in an office products and document management solutions company, and may
sell their Lanier Shares following the Distribution. This may delay the
development of an orderly trading market in the Lanier Shares for a period of
time following the Distribution. Until the Lanier Shares are fully distributed
and an orderly market develops, the prices at which the Lanier Shares trade may
fluctuate significantly and may be lower or higher than the price that would be
expected for a fully distributed issue. Prices for Lanier Shares will be
determined in the marketplace and may be influenced by many factors, including
the depth and liquidity of the market for the shares, Lanier's results of
operations, what investors think of Lanier and the office products and document
management solutions industry, the amount of dividends that Lanier pays, changes
in economic conditions in the office products and document management solutions
industry and general economic and market conditions. In addition, the stock
market often experiences significant price fluctuations that are unrelated to
the operating performance of the specific companies whose stock is traded.
Market fluctuations could have a material adverse impact on the trading price of
the Lanier Shares. See "The Distribution -- Listing and Trading of the Lanier
Shares" beginning on page 16.
THE DISTRIBUTION MAY CAUSE FLUCTUATIONS IN TRADING PRICES OF HARRIS COMMON
STOCK
Following the Distribution, Harris common stock will continue to be listed
and traded on the New York Stock Exchange under the symbol "HRS." As a result of
the Distribution, the trading price of Harris common stock immediately following
the Distribution will likely be lower than the trading price of Harris common
stock
7
<PAGE> 21
immediately prior to the Distribution. The combined trading prices of Harris
common stock and the Lanier Shares after the Distribution may be less than,
equal to or greater than the trading prices of Harris common stock immediately
prior to the Distribution. Until the market has fully analyzed the operations of
Harris without the operations of Lanier, the prices at which Harris common stock
trades may fluctuate significantly. In addition, the stock market often
experiences significant price fluctuations that are unrelated to the operating
performance of the specific companies whose stock is traded. Market fluctuations
could have a material adverse effect on the trading price of Harris common
stock. See "The Distribution -- Listing and Trading of the Lanier Shares"
beginning on page 16.
THE POSSIBILITY OF SUBSTANTIAL SALES MAY HAVE AN ADVERSE IMPACT ON THE TRADING
PRICE OF THE LANIER SHARES
Based on the number of shares of Harris common stock outstanding on the
Record Date, Harris will distribute to its stockholders a total of approximately
- - million Lanier Shares. Under the United States federal securities laws, almost
all of these shares may be resold immediately in the public market, except for
Lanier Shares held by affiliates of Lanier. Lanier cannot predict whether
stockholders will resell large numbers of Lanier Shares in the public market
following the Distribution or how quickly they may resell these Lanier Shares.
See "The Distribution -- Listing and Trading of the Lanier Shares" beginning on
page 16.
Harris will retain approximately 10% of the Lanier Shares and Lanier will
grant Harris certain rights entitling Harris to cause Lanier to register its
Lanier Shares under the securities laws. Harris has agreed not to sell its
Lanier Shares for six months following the Distribution, but intends to sell
these shares within two years after the Distribution. If Harris or Lanier
stockholders sell large numbers of Lanier Shares over a short period of time, or
if investors anticipate large sales of Lanier Shares over a short period of
time, this could adversely affect the trading price of the Lanier Shares. See
"The Distribution -- Listing and Trading of the Lanier Shares" beginning on page
16.
FAILURE TO QUALIFY AS A TAX-FREE TRANSACTION COULD RESULT IN SUBSTANTIAL
LIABILITY
Harris and Lanier intend for the Distribution generally to be tax-free for
federal income tax purposes. In connection with the Distribution, Sullivan &
Cromwell, special counsel to Harris, expects to render an opinion that the
Distribution will be tax-free to you for federal income tax purposes except to
the extent of any cash you receive in lieu of fractional Lanier Shares. This
opinion of counsel will not be binding on the Internal Revenue Service and, as a
result, we cannot assure you that the Distribution will qualify as a tax-free
transaction. Additionally, even though the Distribution is tax-free to Harris
stockholders, it is possible that the Distribution could be rendered taxable to
Harris as a result of a subsequent acquisition of Harris or Lanier.
If the Distribution were not to qualify for tax-free treatment, then, in
general, a substantial corporate tax would be payable by the consolidated group
of which Harris is the common parent based upon the difference between (1) the
aggregate fair market value of the Lanier Shares distributed in the Distribution
and (2) Harris' adjusted basis in the Lanier Shares. The corporate level tax
would be payable by Harris. However, under certain circumstances, Lanier has
agreed to indemnify Harris for all or a portion of this tax liability. See
"Relationship Between Harris and Lanier Following the Distribution -- Tax
Disaffiliation Agreement" beginning on page 20. This indemnification obligation,
if triggered, would have a material adverse effect on the results of operations
and financial position of Lanier. In addition, under the consolidated return
regulations, each member of Harris' consolidated group (including Lanier) is
severally liable for such tax liability. See "The Distribution -- Federal Income
Tax Consequences of the Distribution" beginning on page 17.
Furthermore, if the Internal Revenue Service determines that the
Distribution does not qualify as tax-free for any reason other than a
post-Distribution acquisition of Harris or Lanier, each Harris stockholder who
receives Lanier Shares in the Distribution would generally be taxed as if he or
she received a dividend equal to the fair market value of his or her Lanier
Shares. See "The Distribution -- Federal Income Tax Consequences of the
Distribution" beginning on page 17.
Harris would also incur a substantial corporate tax liability under Section
355(e) of the Internal Revenue Code of 1986, as amended (the "Code"), if Harris
were to be acquired by a third party within two years after the
8
<PAGE> 22
Distribution and Harris fails to prove that the subsequent acquisition of Harris
and the Distribution were not made pursuant to a plan or a series of related
transactions. Similarly, if Lanier is acquired by a third party within two years
after the Distribution and Harris fails to prove that the subsequent acquisition
of Lanier and the Distribution were not made pursuant to a plan or a series of
related transactions, Harris may incur this substantial corporate tax liability
under Section 355(e) of the Code. Lanier would be obligated to indemnify Harris
for all or a portion of this substantial corporate tax liability under the Tax
Disaffiliation Agreement under certain circumstances. This indemnification
obligation would have a material adverse effect on the results of operations and
financial position of Lanier. However, Harris stockholders would not recognize
gain or loss under Section 355(e) of the Code solely because either Harris or
Lanier is acquired by a third party after the Distribution. See "The
Distribution -- Federal Income Tax Consequences of the Distribution" beginning
on page 17 and "Relationship Between Harris and Lanier Following the
Distribution -- Tax Disaffiliation Agreement" beginning on page 20.
RISKS RELATING TO LANIER
LANIER HAS NO RECENT OPERATING HISTORY AS AN INDEPENDENT PUBLIC COMPANY
Lanier does not have a recent operating history as an independent public
company and since 1983 has relied on Harris for various financial,
administrative and managerial expertise in conducting its operations. Following
the Distribution, Lanier will maintain its own credit and banking relationships
and perform its own financial and investor relations functions. While Lanier has
been profitable as a subsidiary of Harris, there can be no assurance that as an
independent company profits will continue at the same level, if at all.
Additionally, there can be no assurance that Lanier will be able to put in place
successfully the financial, administrative and managerial structure necessary to
operate as an independent public company, or that the development of such
structure will not require a significant amount of management's time and other
resources.
HISTORICAL FINANCIAL INFORMATION MAY BE OF LIMITED RELEVANCE
The historical financial information included in this document does not
reflect the results of operations, financial position and cash flows of Lanier
in the future or the results of operations, financial position and cash flows of
Lanier operated as a separate stand-alone entity during the periods presented.
The financial information included herein does not reflect any changes that may
occur in the funding and operations of Lanier as a result of the Distribution.
LANIER'S CREDIT FACILITY AND OTHER INDEBTEDNESS MAY RESTRICT CERTAIN
ACTIVITIES
Prior to the Distribution, Lanier will incur debt under the Credit Facility
in connection with the payment of a dividend by Lanier to Harris immediately
prior to the Distribution and for general working capital purposes. As a result
of this incurrence of debt and the assumption by Lanier of certain of Harris'
indebtedness relating to Lanier's business, Lanier will have approximately $700
million of indebtedness net of cash on the Distribution Date. The terms of the
Credit Facility will include customary affirmative and negative covenants that
will, among other things, require Lanier to satisfy certain financial tests and
maintain certain financial ratios, and will limit Lanier's ability to declare
and pay dividends on the Lanier Shares. Lanier may also incur additional
indebtedness from time to time for general corporate purposes, including working
capital requirements, capital expenditures and future acquisitions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Credit Facility" on page 33.
ADVERSE ECONOMIC CONDITIONS COULD AFFECT LANIER'S ABILITY TO SERVICE DEBT
Lanier's ability to service its indebtedness will depend on its future
operating performance, which will be affected by prevailing economic conditions
and financial and other factors, certain of which Lanier cannot control. While
Lanier believes that future operating cash flow, together with financing
arrangements, will be sufficient to finance current operating requirements,
Lanier's leverage and debt service requirements may make Lanier more vulnerable
to economic downturns. If Lanier could not service its indebtedness, it would be
forced to pursue one or more alternative strategies such as reducing its capital
expenditures, selling assets, restructuring or
9
<PAGE> 23
refinancing its indebtedness or seeking additional equity capital (which may
substantially dilute the ownership interest of holders of Lanier Shares). There
can be no assurance that Lanier can effect any of these strategies on
satisfactory terms, if at all. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" beginning on page 32.
CHANGES IN LANIER'S CREDIT STANDING COULD REDUCE LANIER'S ABILITY TO FINANCE
CUSTOMER PURCHASES
A portion of Lanier's operating income arises from the financing of its
customers' purchases of Lanier products. On average, 46% of Lanier's aggregate
sales in the United States, Puerto Rico, Canada and Australia are financed
through leases that typically have a term of 3 years. In Europe, 16% of Lanier's
sales derive from rental arrangements that differ from leases primarily because
customers may terminate the rental agreement more quickly and easily. Lanier's
ability to provide financing at competitive rates and realize operating income
is highly dependent upon its own costs of borrowing, which in turn depend upon
Lanier's credit standing. Significant changes in such standing could reduce the
profitability of Lanier's financing business and/or make Lanier's financing less
attractive to customers. Lanier cannot be certain that it can maintain credit
standing sufficient to realize profits on the portion of revenues derived from
financing arrangements.
LANIER OPERATES IN HIGHLY COMPETITIVE MARKETS
Lanier's competitors include the distribution units of large office
equipment manufacturers and independent distributors, as well as office
superstores and consumer electronics chains. As digital and other new technology
develops, Lanier may find itself competing with new distribution channels,
including computer distributors and value added resellers, for products
containing new technology. While Lanier is a significant distributor in the
office products and document management solutions market, certain competitors,
principally the distribution units of large office equipment manufacturers, may
have greater total financial, purchasing and/or sourcing power than Lanier.
Lanier believes that the principal competitive factors in the office products
and document management solutions market are price and product capabilities;
quality and speed of post-sales service support; availability of equipment,
parts and supplies; speed of delivery; financing terms; and availability of
financing, leasing or rental programs. See "Lanier's Business -- Lanier Products
and Services" beginning on page 37 and "-- Competition" on page 41.
LANIER'S SUCCESS WILL DEPEND ON ITS ABILITY TO RESPOND TO TECHNOLOGICAL
DEVELOPMENTS
The document imaging and management industry is undergoing an evolution in
product, moving toward digital technology in a multi-functional office
environment. Lanier's success will partly depend on its ability to respond to
this rapidly changing environment. There can be no assurance that Lanier will be
able to anticipate which products or technologies will gain market acceptance or
that, even if Lanier does correctly anticipate market demand, Lanier's suppliers
will be willing or able to supply such products to Lanier at competitive prices.
Further, there can be no assurance that Lanier will be able to obtain any
manufacturer's authorization necessary to market any newly developed equipment.
Additionally, new products containing new technology may be sold through other
channels of distribution. While it is possible that technological advancements,
including the lowered per unit cost that often accompanies technological
improvements, may enhance unit sales, this trend may reduce Lanier's sales
revenues, and reliability improvements may result in reduced service revenues.
Lanier will also incur increased expenses for the training of its sales and
service personnel to familiarize them with such new technologies. See "Lanier's
Business -- Industry Overview" beginning on page 36.
LANIER IS DEPENDENT ON OUTSIDE SUPPLIERS
Lanier relies on outside suppliers to manufacture the products that it
distributes, including Ricoh, Toshiba, Canon, Sharp and Okidata. Although Lanier
has long-term relationships with its suppliers, there can be no assurance that
products from Lanier's suppliers will continue to be available in the future.
Although Lanier has no reason to believe that access to current sources of
products will become restricted, loss of such access could have a material
adverse effect on Lanier's business, financial condition and results of
operations. See "Lanier's Business -- Suppliers" on page 41.
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LANIER IS DEPENDENT ON CERTAIN KEY PERSONNEL
Lanier's success depends to a significant extent on the continued service
of certain key management personnel. The loss or interruption of the services of
Lanier's senior management personnel or the inability to attract and retain
other qualified management, sales, marketing and technical employees could also
have an adverse effect on Lanier. Lanier intends to use a variety of incentive
plans to attract and retain key management personnel, including a stock
incentive plan, annual bonus plans, a pension plan and a 401(k) plan. See
"Lanier's Management" beginning on page 43.
LANIER IS SUBJECT TO RISKS RELATED TO INTERNATIONAL OPERATIONS
Lanier operates a multinational business and, accordingly, is subject to
risks inherent in international operations. Non-U.S. operations generated
approximately 39.2% of Lanier's fiscal year 1999 revenues and approximately
29.2% of Lanier's fiscal 1998 revenues. Due to the significant amount of
non-U.S. revenues, fluctuations in the value of foreign currencies relative to
the U.S. dollar could increase the volatility of Lanier's U.S.
dollar-denominated operating results. Lanier's non-U.S. operations are also
subject to political, economic and other risks inherent in operating in
countries outside the United States, including possible adverse government
regulation, imposition of import and export duties and quotas, currency
restrictions, price controls, potentially burdensome taxation and/or other
restrictive government actions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Market Risk" beginning on page
33.
LANIER IS SUBJECT TO RISKS RELATED TO FOREIGN CURRENCIES
Lanier purchases and sells a significant portion of its products using
currencies other than U.S. dollars. Approximately 39.5% of Lanier's fiscal year
1999 and 28.4% of Lanier's fiscal year 1998 cost of goods sold were denominated
in foreign currencies. Approximately 36.9% of Lanier's fiscal year 1999 and
25.8% of Lanier's fiscal year 1998 revenues were denominated in foreign
currencies. Due to the significant portion of products purchased and sold by
Lanier in foreign currencies, fluctuations in the value of foreign currencies
relative to the U.S. dollar could have a material adverse effect on Lanier's
U.S. dollar-denominated operating results. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Impact of Foreign
Exchange" on page 33.
UNCERTAINTY OF DIVIDENDS
The payment of dividends is at the discretion of Lanier's board of
directors and will be subject to Lanier's financial results and the availability
of surplus funds to pay dividends. No assurance can be given that Lanier will
pay any dividends. See "Dividend Policies" on page 23.
CERTAIN PROVISIONS OF LANIER'S RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS
AND RIGHTS PLAN AND THE TAX DISAFFILIATION AGREEMENT MAY DISCOURAGE TAKEOVERS
Lanier's restated certificate of incorporation and bylaws contain
provisions that may make more difficult or expensive or that may discourage a
tender offer, change in control or takeover attempt that is opposed by Lanier's
board of directors. In particular, Lanier's restated certificate of
incorporation and bylaws:
(1) classify Lanier's board of directors into three groups, so that
stockholders elect only one-third of the board each year;
(2) permit stockholders to remove directors only for cause and only by
the affirmative vote of at least 80% of Lanier's voting shares;
(3) permit a special stockholders' meeting to be called only by a
majority of the board of directors;
(4) do not permit stockholders to take action except at an annual or
special meeting of stockholders;
(5) require stockholders to give Lanier advance notice to nominate
candidates for election to Lanier's board of directors or to make
stockholder proposals at a stockholders' meeting;
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(6) permit Lanier's board of directors to issue, without stockholder
approval, preferred stock with such terms as the board may determine; and
(7) require the vote of the holders of at least 80% of Lanier's voting
shares for stockholder amendments to Lanier's bylaws.
The preferred stock purchase rights attached to the Lanier Shares would, in
effect, prevent a person or group from acquiring more than 15% of the Lanier
Shares without approval from Lanier's board of directors. In addition, Delaware
law generally restricts mergers and other business combinations between Lanier
and any holder of 15% or more of the Lanier Shares, unless the transaction or
the 15% acquisition is approved in advance by Lanier's board of directors. See
"Description of Lanier's Capital Stock" beginning on page 57 and "Certain
Anti-Takeover Provisions of Lanier's Certificate of Incorporation, Bylaws and
Rights Agreement and Delaware Law" beginning on page 58.
These provisions of Lanier's restated certificate of incorporation and
bylaws, Delaware law and the preferred stock purchase rights could discourage
potential acquisition proposals and could delay or prevent a change in control
of Lanier, even though a majority of Lanier's stockholders may consider such
proposals, if effected, desirable. Such provisions could also make it more
difficult for third parties to remove and replace the members of Lanier's board
of directors. Moreover, these provisions could diminish the opportunities for
stockholders to participate in certain tender offers, including tender offers at
prices above the then-current market value of the Lanier Shares, and may also
inhibit increases in the trading price of the Lanier Shares that could result
from takeover attempts or speculation.
In connection with the Distribution, Lanier has agreed to indemnify Harris
for all taxes and liabilities incurred solely because (1) Lanier breaches a
representation or covenant given to Sullivan & Cromwell in connection with
rendering its tax opinion, which contributes to an Internal Revenue Service
determination that the Distribution was not tax-free or (2) Lanier or an
affiliate's post-Distribution action or omission contributes to an Internal
Revenue Service determination that the Distribution was not tax-free. Unless
Harris effectively rebuts the presumption that a change in control transaction
involving Lanier or disposition of Lanier occurring prior to the second
anniversary of the Distribution Date is pursuant to the same plan or series of
related transactions as the Distribution, the Internal Revenue Service might
determine that the Distribution was not tax-free, giving rise to Lanier's
indemnification obligation. These provisions of the Tax Disaffiliation Agreement
may have the effect of discouraging or preventing an acquisition of Lanier or a
disposition of Lanier's businesses, which may in turn depress the market price
for the Lanier Shares. See "Relationship Between Harris and Lanier Following the
Distribution -- Tax Disaffiliation Agreement" beginning on page 20.
LANIER IS SUBJECT TO RISKS OF SIGNIFICANT EXPENSE AND BUSINESS DISRUPTION DUE
TO YEAR 2000 PROBLEMS
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, prior to January 1, 2000, computer systems
and/or software used by many companies (including Lanier) will need to be
upgraded to comply with such "Year 2000" requirements. Significant uncertainty
exists in the software industry concerning the potential consequences of the
Year 2000 problem. Although Lanier has determined that it needs to replace or
modify several of its software systems and is in the process of replacing or
outsourcing many of its time sensitive software systems, there can be no
assurance that the costs of these programs will not be significantly greater
than expected, that compliance will be achieved in a timely manner, or that
Lanier's suppliers, customers or other third parties will bring their systems
into Year 2000 compliance in a timely manner. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Impact of Year
2000" beginning on page 34.
EURO CONVERSION COULD ADVERSELY IMPACT LANIER'S SYSTEMS
On January 1, 1999, certain member nations of the European Economic and
Monetary Union ("EMU") adopted a common currency, the Euro. For a three-year
transition period, both the Euro and the individual countries' currencies will
remain in circulation. After January 1, 2002, the Euro will represent the sole
legal
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tender for EMU countries. The adoption of the Euro affects a multitude of
financial systems and business applications, as EMU countries begin to conduct
commerce in the Euro and in their existing national currencies.
For the fiscal year ended July 2, 1999, Lanier derived 20.7% of its
revenues from EMU countries. Lanier is currently addressing Euro-related issues
and their impact on Lanier's information systems, currency exchange rate risk,
taxation, contracts, competition and pricing. Action plans being implemented are
expected to result in compliance with all applicable laws and regulations.
However, there can be no certainty that Lanier's plans to address Euro-related
issues are adequate or that they will be successfully implemented or that
external factors will not have a material adverse effect upon Lanier's
operations or business in the EMU or elsewhere. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Euro Conversion" on
page 35.
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INTRODUCTION
On -, 1999, Harris' board of directors declared a pro rata distribution
payable to the holders of record of Harris common stock at the close of business
on -, 1999 (the "Record Date"), of one share of common stock (the "Lanier Common
Stock") of Lanier, together with the associated preferred stock purchase right
(the shares of Lanier Common Stock and the associated preferred stock purchase
rights collectively, the "Lanier Shares"), for every share of Harris common
stock outstanding on the Record Date. The Distribution will be effected at 11:59
p.m., Eastern Daylight Time, on -, 1999 (the "Distribution Date"). As a result
of the Distribution, approximately 90% of the outstanding Lanier Shares will be
distributed to Harris stockholders, and Harris will retain ownership of
approximately 10% of the outstanding Lanier Shares. Harris intends to distribute
the Lanier Shares by book entry. Instead of stock certificates, each Harris
stockholder that is a record holder of Harris shares will receive a statement of
such stockholder's book entry account for the Lanier Shares distributed to such
stockholder. Account statements reflecting ownership of the Lanier Shares will
be mailed shortly after the Distribution Date. Lanier Shares should be credited
to accounts with stockbrokers, banks or nominees of Harris stockholders that are
not record holders on or about -, 1999.
Lanier was incorporated in 1985 as the successor to a business established
in 1935 and acquired by Harris in 1983. Lanier's principal executive offices are
located at 2300 Parklake Drive, N.E., Atlanta, Georgia 30345, and its telephone
number is (770) 496-9500.
The business of Lanier constitutes a significant part of the business of
Harris. Following the Distribution, which was first announced on April 13, 1999,
and following the unrelated sale of Harris' semiconductor business, which was
first announced on June 3, 1999, Harris will be a more focused organization with
five divisions, all focusing on communications. Harris will provide
communications equipment, systems and support services -- concentrating on the
wireless, broadcast, government systems and network support markets.
THE DISTRIBUTION
REASONS FOR THE DISTRIBUTION
The board of directors and management of Harris believe that the
Distribution is in the best interests of Harris, Lanier and Harris stockholders.
Harris believes that the Distribution will meaningfully enhance value for Harris
stockholders and give Lanier the financial and operational flexibility to take
advantage of significant growth opportunities in the office products and
document management solutions business. Lanier's business is a distinct business
with significant differences from Harris' other operations with respect to its
markets, products, capital needs and plans for growth. Harris' board of
directors and management believe that the Distribution will enhance the ability
of each of Lanier and Harris to focus on strategic initiatives and new business
opportunities, improve cost structures and operating efficiencies and design
equity-based compensation programs targeted to its own performance. In addition,
Harris' board of directors expects that the transition to an independent company
will heighten Lanier management's focus, provide Lanier with greater access to
capital, and allow the investment community to measure Lanier's performance
relative to its peers.
In addition, the Distribution will give Lanier direct access to capital
markets. As part of Harris, Lanier competed with Harris' other core business
groups for capital to finance expansion and growth opportunities. As a separate
entity, Lanier will be free of Harris' capital structure restrictions and should
be in a better position to fund the implementation of its business strategy. The
Distribution will also enable Lanier to provide its management and employees
incentive compensation in the form of equity ownership in Lanier, enhancing
Lanier's ability to attract, retain and motivate key employees.
The separation will also enable Harris management to concentrate its
attention on the remaining Harris businesses. Harris management strongly
believes that these businesses may be expanded more effectively if Lanier is no
longer controlled by Harris.
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REASONS FOR HARRIS' RETENTION OF LANIER SHARES
Harris will retain approximately 10% of the Lanier Shares because the
contemplated future sale of these Lanier Shares will provide Harris with a
source of cash following the Distribution. Harris intends to use this cash to
make acquisitions in the telecommunications equipment industry and for general
working capital purposes.
MANNER OF EFFECTING THE DISTRIBUTION
The general terms and conditions relating to the Distribution will be set
forth in an Agreement and Plan of Distribution (the "Distribution Agreement")
between Harris and Lanier. See "Relationship between Harris and Lanier Following
the Distribution -- Distribution Agreement" beginning on page 19.
The Distribution will be made on the basis of one Lanier Share for every
share of Harris common stock outstanding on the Record Date. The actual total
number of Lanier Shares to be distributed will depend on the number of Harris
shares outstanding on the Record Date. Based upon the number of Harris shares
outstanding on -, 1999, approximately - Lanier Shares will be distributed to
Harris stockholders. The Lanier Shares to be distributed will constitute
approximately 90% of the outstanding Lanier Shares. Harris will retain
approximately 10% of the outstanding Lanier Shares. Options to purchase Harris
shares ("Harris Options") held by Lanier employees or Harris employees who will
become Lanier employees will be replaced by options to purchase Lanier Shares
("Lanier Options"). The option price and number of shares subject to each option
will be adjusted so that the aggregate difference between the market price and
the option price will be equal for the Harris Options and the Lanier Options.
See "Relationship Between Harris and Lanier Following the
Distribution -- Employee Benefits and Compensation Allocation Agreement" on page
21. Performance share awards of Harris shares previously granted to Lanier
employees under the Harris Stock Incentive Plan will be canceled and replaced by
Lanier performance shares granted under the Lanier Stock Incentive Plan (the
"Lanier Stock Plan"). The Lanier Shares will be fully paid and non-assessable
and the holders thereof will not be entitled to preemptive rights. See
"Description of Lanier's Capital Stock" beginning on page 56.
Harris intends to use a book entry system to distribute the Lanier Shares
in the Distribution unless the stockholder requests a stock certificate.
Following the Distribution, each record holder of Harris stock on the Record
Date will receive from ChaseMellon Shareholder Services, L.L.C. (the
"Distribution Agent") a statement of the Lanier Shares credited to the
stockholder's account. After the Distribution, stockholders may request stock
certificates from Lanier's transfer agent instead of participating in the book
entry system.
Fractional Lanier Shares will not be issued. If a stockholder's account
with Harris' dividend reinvestment program is credited with a fractional Harris
share as of the Record Date, the Distribution Agent will aggregate all
fractional Lanier Shares that would otherwise have been credited to a
stockholder's account into whole shares, and sell such whole shares in the open
market at then prevailing prices on behalf of all stockholders entitled to
receive fractional shares, who will receive cash in the amount of their pro rata
share of the total sale proceeds, net of brokerage commissions. Such sales are
expected to be made as soon as practicable after the mailing of the account
statements to Harris stockholders.
No Harris stockholder will be required to pay any cash or other
consideration for the Lanier Shares received in the Distribution, or to
surrender or exchange Harris shares in order to receive Lanier Shares. The
Distribution will not affect the number of, or the rights attaching to,
outstanding Harris shares. No vote of Harris stockholders is required or sought
in connection with the Distribution, and Harris stockholders will have no
appraisal rights in connection with the Distribution.
In order to receive Lanier Shares in the Distribution, Harris stockholders
must be stockholders at the close of business on the Record Date.
RESULTS OF THE DISTRIBUTION
After the Distribution, Lanier will be a separate public company operating
its current office products and document management solutions business.
Immediately after the Distribution, Lanier expects to have approximately -
holders of record of Lanier Shares and approximately - Lanier Shares
outstanding, based on the number of stockholders of record and outstanding
Harris shares on -, 1999, the distribution ratio of one Lanier Share for
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every Harris share and the retention by Harris of approximately 10% of the
outstanding Lanier Shares. Harris Options held by Lanier employees or Harris
employees who will become Lanier employees will be replaced by Lanier Options.
Performance share awards granted to Lanier employees under the Harris Stock
Incentive Plan will be canceled and replaced by Lanier performance shares
granted under the Lanier Stock Plan. See "Relationship Between Harris and Lanier
Following the Distribution -- Employee Benefits and Compensation Allocation
Agreement" on page 21. The actual number of Lanier Shares to be distributed will
be determined as of the Record Date. The Distribution will not affect the number
of outstanding Harris shares or any rights of Harris stockholders.
LISTING AND TRADING OF THE LANIER SHARES
Lanier has filed an application to list the Lanier Shares on the New York
Stock Exchange under the symbol "LR." A stockholder who decides to sell any
Lanier Shares or Harris shares should make sure that such stockholder's
stockbroker, bank or other nominee understands whether such stockholder wants to
sell Harris shares, Lanier Shares, or both. Beginning on or about -, 1999 and
continuing until -, 1999, New York Stock Exchange practices should generally
allow sales of Harris shares either together with the right to receive the
Lanier Shares in the Distribution or without the right to receive the Lanier
Shares. A stockholder that sells Harris shares with the right to receive the
Lanier Shares will be required to deliver to the buyer the Lanier Shares
received in respect of such Harris shares in the Distribution. Stockholders
should also be able to sell their rights to receive Lanier Shares without
selling Harris shares.
Sales of Harris shares with the right to receive the Lanier Shares should
generally settle in the three business day settlement period. Sales of Harris
shares without the right to receive the Lanier Shares and sales of the Lanier
Shares without Harris shares are expected to settle four business days following
the date account statements for the Lanier Shares are mailed. Beginning about -,
1999, stockholders should only be able to sell Harris shares and Lanier Shares
separately. Stockholders should check with their brokers or banks.
The Lanier Shares distributed to Harris stockholders will be freely
transferable, except for Lanier Shares received by persons who may be deemed to
be "affiliates" of Lanier under the Securities Act of 1933. Persons who may be
deemed to be affiliates of Lanier after the Distribution generally include
individuals or entities that control, are controlled by, or are under common
control with Lanier and may include certain directors, officers and significant
stockholders of Lanier. Persons who are affiliates of Lanier will be permitted
to sell their Lanier Shares only pursuant to an effective registration statement
under the Securities Act or an exemption from the registration requirements of
the Securities Act, such as the exemptions afforded by Section 4(1) of the
Securities Act and the brokerage sales provisions of Rule 144 thereunder. It is
believed that persons who may be deemed to be affiliates of Lanier after the
Distribution will own approximately - Lanier Shares, or less than 2% of the
outstanding Lanier Shares.
Harris will retain approximately 10% of the outstanding Lanier Shares, and
Lanier will grant Harris certain rights entitling Harris to cause Lanier to
register Harris' Lanier Shares under the securities laws. Harris has agreed not
to sell its Lanier Shares for six months following the Distribution, but Harris
intends to sell its shares within two years after the Distribution. In addition,
Harris has agreed to vote its Lanier Shares in proportion to votes cast by other
Lanier stockholders. See "Relationship Between Harris and Lanier Following the
Distribution -- Registration Rights Agreement" on page 20.
There can be no assurance as to whether the Lanier Shares will be actively
traded or as to the prices at which Lanier Shares will trade. Some of the Harris
stockholders who receive Lanier Shares may decide that they do not want shares
in an office products and document management solutions company, and may sell
their Lanier Shares following the Distribution. This may delay the development
of an orderly trading market in the Lanier Shares for a period of time following
the Distribution. Until the Lanier Shares are fully distributed and an orderly
market develops, the prices at which the Lanier Shares trade may fluctuate
significantly and may be lower or higher than the price that would be expected
for a fully distributed issue. Prices for Lanier Shares will be determined in
the marketplace and may be influenced by many factors, including the depth and
liquidity of the market for the Lanier Shares, Lanier's results of operations,
what investors think of Lanier and the office products and document
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management solutions business, the amount of dividends that Lanier pays, changes
in economic conditions in the office products and document management solutions
business and general economic and market conditions.
Following the Distribution, Harris common stock will continue to be listed
and traded on the New York Stock Exchange under the symbol "HRS." As a result of
the Distribution, the trading price of Harris common stock immediately following
the Distribution will likely be lower than the trading price of Harris common
stock immediately prior to the Distribution. Until the market has fully analyzed
the operations of Harris without the operations of Lanier, the prices at which
Harris common stock trades may fluctuate significantly.
In addition, the stock market often experiences significant price
fluctuations that are unrelated to the operating performance of the specific
companies whose stock is traded. Market fluctuations could have a material
adverse impact on the trading price of the Lanier Shares and/or Harris common
stock.
FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
The following summary of the material federal income tax consequences of
the Distribution is not a complete description of those consequences and, in
particular, may not address federal income tax considerations that affect the
treatment of a stockholder who acquired Harris stock pursuant to an employee
benefit plan. Each stockholder's individual circumstances may affect the tax
consequences of the Distribution to such stockholder. In addition, no
information is provided herein with respect to tax consequences under applicable
foreign, state or local laws. Consequently, each Harris stockholder is advised
to consult his or her own tax advisor as to the specific tax consequences of the
Distribution.
Neither Harris nor Lanier has requested an advance ruling from the Internal
Revenue Service as to the tax consequences of the Distribution.
GENERAL
Sullivan & Cromwell, special counsel to Harris, expects to render an
opinion to Harris that the Distribution is a distribution described in Section
355 of the Code. In rendering its opinion, counsel will rely upon analysis,
representations and future undertakings from Lanier and Harris and certain other
data, documentation and other materials that Sullivan & Cromwell deemed
necessary for purposes of its opinion. The opinion of counsel will not be
binding on the Internal Revenue Service or the courts; accordingly, there can be
no complete assurance that the Distribution will qualify as a tax-free
transaction.
HOLDERS OF HARRIS COMMON STOCK
The following is a summary, subject to the qualifications set forth above,
of the material federal income tax consequences of the Distribution to holders
of Harris common stock:
- Except for any cash received in lieu of a fractional Lanier Share, a
Harris stockholder will not recognize any income, gain or loss as a
result of the receipt of Lanier Shares in the Distribution.
- A Harris stockholder's holding period for the Lanier Shares received in
the Distribution will include the period for which that stockholder's
Harris shares were held if those shares were held as capital assets.
- A Harris stockholder's tax basis for Lanier Shares received in the
Distribution will be determined by allocating to the Lanier Shares, on
the basis of the relative fair market values of Harris shares and Lanier
Shares at the time of the Distribution, a portion of the stockholder's
basis in his or her Harris shares. The Harris stockholder's basis in his
or her Harris shares will be decreased by the portion allocated to the
Lanier Shares.
- The receipt of cash in lieu of a fractional Lanier Share will be treated
as a sale of the fractional Lanier Share, and a stockholder will
recognize gain or loss equal to the difference between the amount of cash
received and the stockholder's basis in the fractional Lanier Share, as
determined above. The gain or loss will be capital gain or loss if the
stockholder holds his or her Harris shares as capital assets, and will be
long-term capital gain or loss if the holding period for the fractional
Lanier Share, as determined above, is more than one year.
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- A Harris stockholder will not recognize any income, gain or loss as a
result of the receipt of the preferred stock purchase rights which are
attached to Lanier Common Stock in the Distribution, and the receipt of
such rights will have no effect on a stockholder's basis or holding
period in the Lanier Shares or the Harris shares. For federal income tax
purposes, the distribution of such rights will not occur unless and until
they become separately transferable.
- Current Treasury regulations require each holder of Harris common stock
who receives Lanier Shares pursuant to the Distribution to attach to his
or her federal income tax return for the year in which the Distribution
occurs a detailed statement setting forth such data as may be appropriate
in order to show the applicability of Section 355 of the Code to the
Distribution. Harris will convey appropriate information to each holder
of record of Harris common stock as of the Record Date.
- If, contrary to the opinion of Sullivan & Cromwell, the Distribution were
not to qualify for tax-free treatment under Section 355 of the Code for
any reason other than a post-Distribution acquisition of Harris or
Lanier, then each Harris stockholder who receives Lanier Shares in the
Distribution would generally be taxed as if he or she received a dividend
equal to the fair market value of his or her Lanier Shares. However,
Harris stockholders would not recognize gain or loss solely because
either Harris or Lanier is acquired by a third party after the
Distribution.
HARRIS AND LANIER
Assuming that the Distribution qualifies for tax-free treatment under
Section 355 of the Code, neither Harris nor Lanier will recognize any gain or
loss in the Distribution other than deferred intercompany gains that may be
triggered as a result of the Distribution. Harris expects that the Distribution
will trigger deferred gains resulting in tax liabilities of less than $5 million
that will be payable by Lanier under the Tax Disaffiliation Agreement. Harris
does not expect that the Distribution will result in the recognition of any
other deferred intercompany transactions or excess loss accounts.
However, if the Distribution were not to qualify for tax-free treatment,
then, in general, a substantial corporate tax would be payable by the
consolidated group of which Harris is the common parent based upon the
difference between (1) the aggregate fair market value of Lanier Shares
distributed in the Distribution and (2) Harris' adjusted basis in the Lanier
Shares. The corporate level tax would be payable by Harris. However, under
certain circumstances, Lanier has agreed to indemnify Harris for this tax
liability. This indemnification obligation would have a material adverse effect
on the results of operations and financial position of Lanier. See "Relationship
Between Harris and Lanier Following the Distribution -- Tax Disaffiliation
Agreement" beginning on page 20. In addition, under the consolidated return
regulations, each member of Harris' consolidated group (including Lanier) is
severally liable for such tax liability.
Harris would incur this substantial corporate tax liability under Section
355(e) of the Code if Harris were to be acquired by a third party within two
years after the Distribution and Harris failed to prove that the subsequent
acquisition of Harris and the Distribution were not made pursuant to a plan or a
series of related transactions. Similarly, if Lanier is acquired by a third
party within two years after the Distribution, and Harris failed to prove that
the subsequent acquisition of Lanier and the Distribution were not made pursuant
to a plan or a series of related transactions, Harris would also incur this
substantial corporate tax liability under Section 355(e) of the Code.
Lanier would be obligated to indemnify Harris under the Tax Disaffiliation
Agreement for the full amount of any liability of Harris incurred solely because
(1) Lanier breaches a representation or covenant given to Sullivan & Cromwell in
connection with rendering its tax opinion, which breach contributes to an
Internal Revenue Service determination that the Distribution was not tax-free,
or (2) Lanier or an affiliate's post-Distribution action or omission contributes
to an Internal Revenue Service determination that the Distribution was not
tax-free. Harris will indemnify Lanier for all taxes and liabilities incurred
solely because (1) Harris breaches a representation or covenant given to
Sullivan & Cromwell in connection with rendering its tax opinion, which breach
contributes to an Internal Revenue Service determination that the Distribution
was not tax-free, or (2) Harris or an affiliate's post-Distribution action or
omission contributes to an Internal Revenue Service determination that the
Distribution was not tax-free. If the Internal Revenue Service determines that
the
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Distribution was not tax-free for any other reason, Harris and Lanier will
indemnify each other against 50% of all taxes and liabilities. If triggered,
Lanier's indemnification obligation would have a material adverse effect on the
results of operations and financial position of Lanier.
Lanier will also indemnify Harris for any taxes resulting from any internal
realignment undertaken to facilitate the Distribution on or before the
Distribution Date. Any such taxes are not expected to be material.
For a description of the agreement pursuant to which Harris and Lanier have
provided for certain tax disaffiliation and other tax-related matters, see
"Relationship Between Harris and Lanier Following the Distribution -- Tax
Disaffiliation Agreement" beginning on page 20.
REASONS FOR FURNISHING THIS DOCUMENT
This document is being furnished solely to provide information to Harris
stockholders who will receive Lanier Shares in the Distribution. It is not, and
is not to be construed as, an inducement or encouragement to buy or sell any
securities of Harris or Lanier. Neither Harris nor Lanier will update the
information contained in this document except in the normal course of their
respective public disclosure practices.
RELATIONSHIP BETWEEN HARRIS AND LANIER
FOLLOWING THE DISTRIBUTION
For purposes of governing certain of the ongoing relationships between
Harris and Lanier after the Distribution and to provide for an orderly
transition to the status of two independent companies, Harris and Lanier have
entered or will enter into the agreements described in this section. The forms
of agreements summarized in this section are included as exhibits to the
Registration Statement on Form 10 (including any amendments thereto, the
"Registration Statement") that Lanier has filed with the Securities and Exchange
Commission (the "Commission"), and the following summaries are qualified in
their entirety by reference to the agreements as so filed. See "Additional
Information" beginning on page 64.
DISTRIBUTION AGREEMENT
Prior to the Distribution Date, Harris and Lanier will enter into the
Distribution Agreement, which will provide for, among other things, the
principal corporate transactions required to effect the Distribution and certain
other agreements relating to the continuing relationship between Lanier and
Harris after the Distribution.
The Distribution Agreement will provide that prior to the Distribution Date
Lanier will issue to Harris a number of Lanier Shares so that the total number
of Lanier Shares owned by Harris is one less than 10% of the outstanding Lanier
Shares after giving effect to the Distribution. Harris will effect the
Distribution by delivering a certificate representing approximately 90% of such
Lanier Shares to the Distribution Agent.
Although Harris and Lanier have generally held their assets separately, the
Distribution Agreement will provide for the transfer of certain assets used
exclusively in Lanier's business to Lanier and the assumption by Lanier of the
related liabilities, and the transfer of certain assets used exclusively in
Harris' business to Harris and the assumption by Harris of the related
liabilities. The asset transfers made pursuant to the Distribution Agreement
will be made without any representation, warranty or covenant of Harris or
Lanier with respect to such assets, title thereto or the legal sufficiency of
the transfers and assignments thereof. All asset transfers will be effected on
an "as is, where is" basis.
Under the Distribution Agreement and effective as of the Distribution Date,
Lanier will assume, and will agree to indemnify Harris against, all liabilities,
litigation and claims, including related insurance costs, arising out of
Lanier's business, and Harris will retain, and will agree to indemnify Lanier
against, all liabilities, litigation and claims, including related insurance
costs, arising out of Harris' businesses. The foregoing obligations will not
entitle an indemnified party to recovery to the extent any such liability is
covered by proceeds received by such party from any third party insurance
policy.
The Distribution Agreement will provide for the payment of a dividend by
Lanier or its affiliates to Harris or its affiliates immediately prior to the
Distribution, the assumption by Lanier of certain of Harris' indebtedness
19
<PAGE> 33
relating to Lanier's business and the settlement of certain intercompany loans
between Harris and Lanier. The aggregate amount of such dividend will be the sum
of: (i) $700 million; plus (ii) any cash retained by Lanier on the Distribution
Date; less (iii) the amount of debt retained or assumed by Lanier; and less (iv)
amounts owed by Lanier under Lanier's European asset securitization facility.
The Distribution Agreement will provide that each of Harris and Lanier
shall be granted access to certain records and information in the possession of
the other, and will require the retention by each of Harris and Lanier for a
period of eight years following the Distribution Date of all such information in
its possession.
TRANSITION SERVICES AGREEMENT
Harris and Lanier will enter into a Transition Services Agreement prior to
the Distribution Date under which, in exchange for the fees specified in such
agreement, Harris will agree to continue to provide certain administrative
services to Lanier, including tax filing assistance, information management
services and other services, and Lanier will agree to provide certain
administrative services to Harris. The Transition Services Agreement will
provide that each of Lanier and Harris will undertake to provide the same degree
of care and diligence as it uses in providing these services to itself and its
subsidiaries. The Transition Services Agreement will expire - years from the
Distribution Date. Lanier believes that the terms and conditions of the
Transition Services Agreement are as favorable to Lanier as those available from
unrelated parties for a comparable arrangement.
REGISTRATION RIGHTS AGREEMENT
Harris and Lanier will enter into a Registration Rights Agreement prior to
the Distribution Date in which Harris will agree not to offer, sell, contract to
sell or otherwise transfer or dispose of any of the Lanier Shares retained by
Harris during the period ending on the 180th calendar day following the
Distribution Date. The Registration Rights Agreement will provide that Harris
will vote its Lanier Shares on all matters in proportion to the way in which the
other Lanier stockholders vote their Lanier Shares. The Registration Rights
Agreement will also provide that at any time during the period commencing on the
120th calendar day after the Distribution Date and terminating upon the second
anniversary of the Distribution Date, Harris will have the right on two
occasions to require Lanier to file with the Commission a registration statement
under the Securities Act registering all or a portion of the Lanier Shares held
by Harris. On one of these occasions, Harris will be entitled to cause Lanier to
file with the Commission a "shelf" registration statement covering the resale of
the Lanier Shares retained by Harris. Lanier has agreed to use its reasonable
efforts to keep any such registration statement continuously effective for the
period of time terminating upon the earlier of the date that Harris no longer
holds any Lanier Shares or the second anniversary of the Distribution Date. The
Registration Rights Agreement will also provide that Lanier will take certain
actions to assist Harris in offering, marketing and selling the Lanier Shares
retained by Harris and pay certain expenses in connection therewith. In
addition, the Registration Rights Agreement will also provide that Lanier will
indemnify Harris against certain losses, claims, damages and liabilities,
including liabilities under the federal securities laws.
TAX DISAFFILIATION AGREEMENT
Harris and Lanier will enter into a Tax Disaffiliation Agreement which sets
out each party's rights and obligations with respect to deficiencies and
refunds, if any, of federal, state, local or foreign taxes for periods before
and after the Distribution and related matters such as the filing of tax returns
and the conduct of Internal Revenue Service and other audits. Under the Tax
Disaffiliation Agreement, Lanier will indemnify Harris for any tax liability of
Lanier or its affiliates for any period. Lanier will also indemnify Harris for
all taxes and liabilities incurred solely because (1) Lanier breaches a
representation or covenant given to Sullivan & Cromwell in connection with
rendering its tax opinion, which breach contributes to an Internal Revenue
Service determination that the Distribution was not tax-free or (2) Lanier or an
affiliate's post-Distribution action or omission contributes to an Internal
Revenue Service determination that the Distribution was not tax-free. Harris
will indemnify Lanier for all taxes and liabilities incurred solely because (1)
Harris breaches a representation or covenant given to Sullivan & Cromwell in
connection with rendering its tax opinion, which breach contributes to an
Internal Revenue Service determination that the Distribution was not tax-free,
or (2) Harris or an affiliate's
20
<PAGE> 34
post-Distribution action or omission contributes to an Internal Revenue Service
determination that the Distribution was not tax-free. If the Internal Revenue
Service determines that the Distribution was not tax-free for any other reason,
Harris and Lanier will indemnify each other against 50% of all taxes and
liabilities.
Lanier will also indemnify Harris for any taxes resulting from any internal
realignment undertaken to facilitate the Distribution on or before the
Distribution Date. Any such taxes are not expected to be material.
EMPLOYEE BENEFITS AND COMPENSATION ALLOCATION AGREEMENT
Prior to the Distribution, Harris and Lanier will enter into the Employee
Benefits and Compensation Allocation Agreement (the "Employee Benefits
Agreement"), which will contain certain provisions relating to employee
compensation, benefits and labor matters and the treatment of options to
purchase and awards with respect to Harris shares held by Lanier employees or
Harris employees who will become Lanier employees. The Employee Benefits
Agreement will provide that Harris Options held by Lanier employees or Harris
employees who will become Lanier employees will be replaced by Lanier Options.
The option price and number of shares subject to each option will be adjusted so
that the aggregate difference between the market price and the option price will
be equal for the Harris Options and the Lanier Options. The number of shares
subject to each Lanier Option will be determined by multiplying (i) the number
of shares subject to each Harris Option by (ii) a number equal to (A) the
closing price of Harris shares on the New York Stock Exchange on the Record
Date, divided by (B) the opening price of the Lanier Shares on the New York
Stock Exchange on the day following the Distribution Date (such result, the
"Lanier Option Adjustment Ratio"). Similarly, the price of each Lanier Option
will be determined by dividing the price of each Harris Option by the Lanier
Option Adjustment Ratio. Performance share awards granted to Lanier employees
under Harris' Stock Incentive Plan will be canceled and replacement performance
shares will be awarded under the Lanier Stock Plan by multiplying the number of
performance shares by the Lanier Option Adjustment Ratio.
21
<PAGE> 35
LANIER WORLDWIDE, INC. AND SUBSIDIARIES
HISTORICAL AND PRO FORMA CONSOLIDATED CAPITALIZATION
The following table sets forth the historical and pro forma consolidated
debt and capitalization of Lanier at July 2, 1999. This data should be read in
conjunction with the historical consolidated balance sheet of Lanier and the
unaudited pro forma consolidated balance sheet and the notes thereto, and the
introduction to the unaudited pro forma consolidated financial statements
appearing elsewhere in this document. The pro forma information set forth below
gives effect to the Distribution as if it had occurred on July 2, 1999. The pro
forma information may not necessarily reflect the debt and capitalization of
Lanier in the future or as it would have been had Lanier been a separate,
independent company at July 2, 1999 or had the Distribution actually been
effected on such date.
<TABLE>
<CAPTION>
JULY 2, 1999
----------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt...................................... $ 138,011 -- $ 138,011
Current portion of long-term debt.................... 2,582 -- 2,582
Long-term debt....................................... 4,622 $ 572,994(A) 577,616
Shareholder Equity:
Preferred stock, par value $1.00; authorized
1,000,000 shares; issued none................... -- -- --
Common stock, par value $1.00; authorized 1,000,000
shares; issued 41,893 shares.................... 42 843(B) 885
Additional paid-in-capital......................... 329,679 (209,604)(C) 120,075
Retained earnings.................................. 586,556 (586,556)(C) --
Accumulated comprehensive loss..................... (33,539) -- (33,539)
---------- --------- ---------
Total shareholder equity............................. 882,738 (795,317) 87,421
---------- --------- ---------
Total capitalization................................. $1,027,953 $(222,323) $ 805,630
========== ========= =========
</TABLE>
NOTES TO PRO FORMA COMBINED CAPITALIZATION
The following adjustments were made to the balance sheet of Lanier as of July 2,
1999 to give effect to the Distribution as if it had occurred as of that date.
(A) To reflect additional debt of Lanier to be incurred on or prior to the
Distribution Date under a new credit facility. Pro forma debt is subject to
change and the components may be revised prior to the Distribution Date.
(B) To reflect Lanier common stock to be distributed in the Distribution and the
conversion of performance share awards. Pro forma par value is $.01 and
500,000,000 shares of Lanier Common Stock are authorized.
(C) To reflect pro forma income adjustments, settlement of intercompany loans
and a dividend to be paid by Lanier to Harris immediately prior to the
Distribution. The aggregate amount of such dividend will be the sum of: (i)
$700 million; plus (ii) any cash retained by Lanier on the Distribution
Date; less (iii) the amount of debt retained or assumed by Lanier; and less
(iv) amounts owed by Lanier under Lanier's European asset securitization
facility. See "Notes to Unaudited Pro Forma Consolidated Income Statement"
on page 27 and "Notes to Unaudited Pro Forma Consolidated Balance Sheet" on
page 26.
22
<PAGE> 36
DIVIDEND POLICIES
Following the Distribution, Lanier's dividend policy will be set by
Lanier's board of directors. Lanier intends to pay quarterly cash dividends,
although the declaration and payment of dividends is at the discretion of
Lanier's board of directors and will be subject to Lanier's financial results
and the availability of surplus funds to pay dividends. Delaware law prohibits
Lanier from paying dividends or otherwise distributing funds to its
stockholders, except out of legally available funds. The amount of quarterly
cash dividends will depend on a number of factors, including Lanier's financial
condition, capital requirements, results of operations, future business
prospects and other factors the Lanier Board may deem relevant. No assurance can
be given that Lanier will pay any dividends. See "Risk Factors -- Uncertainty of
Dividends" on page 11. Certain covenants set forth in the Credit Facility may
limit Lanier's ability to declare and pay dividends and distributions on the
Lanier Shares. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Credit Facility" on page 33. Lanier intends to
establish a direct stock purchase and dividend reinvestment plan that will
enable holders to purchase additional Lanier Shares and to reinvest dividends
into additional Lanier Shares.
Following the Distribution, Harris intends to pay quarterly dividends at an
initial annual rate substantially below Harris' current dividend rate of $.96
per share. No determination has been made by Harris' board of directors with
respect to the initial dividend rate that will be paid following the
Distribution. The payment and level of dividends is at the discretion of Harris'
board of directors and will be subject to Harris' financial results and the
availability of surplus funds to pay dividends. Delaware law prohibits Harris
from paying dividends or otherwise distributing funds to its stockholders,
except out of legally available funds. The declaration of dividends and the
amount thereof will depend on a number of factors, including Harris' financial
condition, capital requirements, results of operations, future business
prospects and other factors Harris' board of directors may deem relevant. No
assurance can be given that Harris will pay any dividends.
23
<PAGE> 37
LANIER WORLDWIDE, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Lanier was acquired by Harris in 1983 and has no recent operating history
as an independent company. The historical consolidated financial statements of
Lanier contained in this document reflect periods during which Lanier did not
operate as an independent company, and certain assumptions were made in
preparing such financial statements. Therefore, the historical consolidated
financial statements may not necessarily reflect the consolidated results of
operations or financial position that would have existed had Lanier been an
independent company.
The following unaudited pro forma consolidated financial statements of
Lanier make adjustments to the historical consolidated balance sheet at July 2,
1999 as if the Distribution had occurred on July 2, 1999, and the historical
consolidated income statements for the fiscal year ended July 2, 1999, as if the
Distribution had occurred on July 4, 1998.
The unaudited pro forma consolidated financial statements of Lanier should
be read in conjunction with the historical Consolidated Financial Statements of
Lanier and the Notes thereto contained elsewhere in this document. The pro forma
consolidated financial information is presented for informational purposes only
and may not necessarily reflect the future earnings, results of operations or
financial position of Lanier or what the earnings, results of operations or
financial position would have been had Lanier's businesses been operated as an
independent company for the periods indicated.
24
<PAGE> 38
LANIER WORLDWIDE, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JULY 2, 1999
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................... $ 18,209 -- $ 18,209
Trade receivables................................... 348,604 -- 348,604
Receivables from parent............................. 194,521 $(194,521)(A) --
Inventories......................................... 166,404 -- 166,404
Prepaid expenses.................................... 17,107 -- 17,107
Deferred income taxes............................... 39,276 6,906(B) 46,182
---------- --------- ----------
TOTAL CURRENT ASSETS........................ 784,121 (187,615) 596,506
OTHER ASSETS
Rental equipment-net................................ 140,718 -- 140,718
Property, plant and equipment-net................... 42,755 -- 42,755
Notes receivables-net............................... 203,657 -- 203,657
Intangibles-net..................................... 125,504 -- 125,504
Other............................................... 40,953 -- 40,953
---------- ----------
TOTAL OTHER ASSETS.......................... 553,587 -- 553,587
---------- --------- ----------
TOTAL ASSETS.......................................... $1,337,708 $(187,615) $1,150,093
========== ========= ==========
LIABILITIES AND SHAREHOLDER EQUITY
CURRENT LIABILITIES
Notes payable....................................... $ 138,011 -- $ 138,011
Trade payables...................................... 86,815 -- 86,815
Accrued compensation................................ 38,964 -- 38,964
Retirement plan accounts............................ 39,066 -- 39,066
Accrued interest and sundry taxes................... 21,772 $ 27,708(B) 49,480
Other accrued items................................. 33,610 7,000(B) 40,610
Unearned service income............................. 57,898 -- 57,898
Income taxes........................................ 15,460 -- 15,460
Long-term debt-current portion...................... 2,582 -- 2,582
---------- --------- ----------
TOTAL CURRENT LIABILITIES................... 434,178 34,708 468,886
OTHER LIABILITIES
Deferred income taxes............................... 16,170 -- 16,170
Long-term debt...................................... 4,622 572,994(C) 577,616
SHAREHOLDER EQUITY
Common Stock, $1.00 par value, 1,000,000 shares
authorized; issued and outstanding 41,893
shares........................................... 42 843(D) 885
Additional paid-in capital.......................... 329,679 (209,604)(E) 120,075
Retained earnings................................... 586,556 (586,556)(E) --
Accumulated comprehensive loss...................... (33,539) -- (33,539)
---------- --------- ----------
Total Shareholder Equity.................... 882,738 (795,317) 87,421
---------- --------- ----------
TOTAL LIABILITIES AND SHAREHOLDER EQUITY.............. $1,337,708 $(187,615) $1,150,093
========== ========= ==========
</TABLE>
25
<PAGE> 39
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
The following adjustments were made to Lanier's July 2, 1999 historical
consolidated balance sheet to give effect to the Distribution as if it had
occurred on that date.
(A) Settlement of intercompany accounts between Harris and Lanier.
(B) Accruals for additional interest expense, additional administrative expenses
expected to be incurred by Lanier as a publicly traded corporation, and the
related tax benefit resulting from these expenses.
(C) To reflect additional new debt of Lanier to be incurred on or prior to the
Distribution Date under the Credit Facility. Pro forma debt is subject to
change and correspondingly may be revised prior to the Distribution Date.
(D) To reflect additional Lanier Shares to be distributed after giving effect to
the Distribution, Lanier Shares retained by Harris and the conversion of
performance share awards of Harris. Pro forma par value is $.01 and
500,000,000 shares of Lanier Common Stock are authorized.
(E) To reflect pro forma income adjustments, settlement of intercompany loans
and a dividend to be paid by Lanier to Harris immediately prior to the
Distribution. The aggregate amount of such dividend will be the sum of: (i)
$700 million; plus (ii) any cash retained by Lanier on the Distribution
Date; less (iii) the amount of debt retained or assumed by Lanier; and less
(iv) amounts owed by Lanier under Lanier's European asset securitization
facility.
26
<PAGE> 40
LANIER WORLDWIDE, INC.
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE FISCAL YEAR ENDED JULY 2, 1999
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
REVENUE
Product sales and rentals......................... $ 807,468 -- $ 807,468
Service income.................................... 623,020 -- 623,020
Finance income.................................... 38,132 -- 38,132
---------- ----------
1,468,620 -- 1,468,620
COSTS AND EXPENSES
Cost of product sales and rentals................. 547,929 -- 547,929
Cost of service................................... 349,448 -- 349,448
Selling and administrative expenses............... 438,516 $(17,974)(A) 420,542
Interest expenses................................. 22,692 27,708(B) 50,400
Other-net......................................... (1,235) 8,440(C) 7,205
---------- -------- ----------
1,357,350 18,174 1,375,524
---------- -------- ----------
Income before income taxes........................ 111,270 (18,174) 93,096
Income taxes...................................... 40,000 (6,906)(D) 33,094
---------- -------- ----------
NET INCOME........................................ $ 71,270 $(11,268) $ 60,002
========== ======== ==========
Net income per share.............................. $ 0.68(E)
==========
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
The following adjustments were made to Lanier's historical consolidated income
statement for the fiscal year ended July 2, 1999.
(A) The pro forma adjustments to administrative expense reflect the estimate of
$7.0 million for additional legal, audit and other similar expenses that
Lanier is expected to incur as a publicly traded corporation. Allocation of
Harris expense is made as a percentage of Lanier's net sales. Prior to the
Distribution, Harris charged Lanier for certain administrative expenses.
This expense ($25.0 million) has been eliminated as a pro forma adjustment.
(B) Adjustment to interest expense to reflect additional long-term debt of
Lanier using an annual estimated interest rate of 7.2% assuming $700 million
of indebtedness net of cash on July 4, 1998.
(C) Adjustment to eliminate interest income on loans from Lanier to Harris that
will be repaid to Lanier prior to the distribution date.
(D) Adjustment for income tax provision related to pretax adjustments.
(E) Net income per share is computed based on 88,857,000 shares, which
represents the approximate number of Lanier Shares expected to be
distributed in the Distribution based on the number of Harris shares
outstanding as of July 2, 1999, the retention of Lanier Shares by Harris and
conversion of Harris performance share awards.
27
<PAGE> 41
LANIER WORLDWIDE, INC.
SELECTED FINANCIAL DATA
The selected historical consolidated financial data of Lanier set forth
below is qualified in its entirety by, and should be read in conjunction with,
the Consolidated Financial Statements of Lanier, including the Notes thereto,
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this document. The income statement data for
each of the three fiscal years ended July 2, 1999 and the balance sheet data as
of July 2, 1999 and July 3, 1998 are derived from, and are qualified by
reference to, the consolidated financial statements included elsewhere in this
document that have been audited by Ernst & Young LLP, Lanier's independent
certified public accountants.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------------------------------------------------
JULY 2, JULY 3, JUNE 27, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue
Product sales and
rentals................ $ 807,468 $ 721,791 $ 704,282 $ 719,803 $ 674,694
Service income............ 623,020 532,986 465,732 396,159 348,850
Finance income............ 38,132 33,558 29,871 28,760 27,543
---------- ---------- ---------- ---------- ----------
1,468,620 1,288,335 1,199,885 1,144,722 1,051,087
Costs and Expenses
Cost of product sales and
rentals................ 547,929 453,968 426,042 448,845 415,121
Cost of service........... 349,448 304,901 255,705 219,042 194,322
Selling and administrative
expenses............... 438,516 410,452 399,470 370,004 349,840
Restructuring expenses.... -- 8,500 -- -- --
Interest expenses......... 22,692 8,236 8,797 11,010 11,485
Other -- net.............. (1,235) 2,877 7,964 5,218 (2,428)
---------- ---------- ---------- ---------- ----------
1,357,350 1,188,934 1,097,978 1,054,119 968,340
---------- ---------- ---------- ---------- ----------
Income before income
taxes..................... 111,270 99,401 101,907 90,603 82,747
Income taxes................ 40,000 36,604 38,208 33,331 30,454
---------- ---------- ---------- ---------- ----------
Net Income.................. $ 71,270 $ 62,797 $ 63,699 $ 57,272 $ 52,293
========== ========== ========== ========== ==========
Financial Position (end of
period)
Total assets................ $1,337,708 $1,123,296 $1,075,307 $1,056,814 $1,011,404
Long-term debt.............. 4,622 3,660 3,990 4,103 4,192
Shareholder equity.......... 882,738 803,657 750,157 689,240 635,113
</TABLE>
28
<PAGE> 42
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Unaudited Pro
Forma Consolidated Financial Statements," "Selected Financial Data," the
Consolidated Financial Statements of Lanier, including the Notes thereto, and
the other financial information appearing elsewhere in this document. Except for
the historical information contained herein, the discussions in this document
contain forward-looking statements that involve risks and uncertainties.
Lanier's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed under "Risk Factors" beginning on page 7, as well as
those discussed elsewhere in this document.
GENERAL
Lanier is a worldwide supplier of office equipment and facilities
management services. On April 13, 1999 Lanier's parent company, Harris,
announced that it would spin Lanier off into a separate publicly traded company.
Harris intends to accomplish this transaction through a U.S. tax-free
distribution of Lanier stock to Harris shareholders.
Lanier and its subsidiaries form one of the world's largest independent
suppliers of copiers, facsimiles and other related automated office imaging
equipment. With over 1,600 sales and service locations in more than 100
countries, Lanier markets these products and related services, parts and
supplies to customers both on a direct sales basis and through a worldwide
network of independent dealers, Lanier's centralized sales and service
organizations give it a competitive advantage in the pursuit of national and
global account business. Lanier provides customers with a wide array of
customized document management solutions including black and white digital and
analog copiers, color copiers, facsimile machines, multi-function devices,
dictation equipment, computer based health care information management systems,
associated parts and supplies, and a variety of related outsourcing services,
including legal support services. Lanier sources substantially all of these
products from a variety of manufacturers, seeking out the "best-of-breed."
In March 1997, Lanier acquired Quorum Group, Inc., a litigation services
company (the "Quorum Acquisition"). In July 1998, Lanier acquired the Copying
Systems Division of Agfa-Gevaert Group ("Agfa") for $168.3 million (the "Agfa
Acquisition"). The sale of Agfa private label products has added $201.5 million
in revenues for the year ended July 2, 1999. The combined effect of these sales
and the additional sales force presence provided by the Agfa Acquisition has
effectively doubled Lanier's sales and market size in the European office
equipment market.
In May 1999, Lanier sold its electronic medical transcription services
business to MedQuist Transcriptions, Ltd. for approximately $34.0 million. The
sale resulted in a pre-tax gain of $21.5 million. In June 1999, Lanier sold its
direct sales operations in France which resulted in a $4.0 million pre-tax loss.
CERTAIN COMPONENTS OF NET INCOME
Lanier derives its revenues from three primary sources: (i) sales of
equipment and related supplies, parts and services; (ii) consulting and other
professional services; and (iii) finance income from its captive leasing
company. Revenues generated by these areas depend upon a number of factors, such
as the technological competitiveness of its product line, demand for and price
of equipment, Lanier's reputation for providing timely and reliable service,
Lanier's competition in the industry and general economic conditions.
Net Sales. Net sales consists of revenue from product sales, rentals and
service revenue, net of any returns and finance income.
Cost of Goods Sold. Cost of goods sold consists primarily of the cost of
new equipment, cost of supplies and parts, labor costs to provide services,
rental equipment depreciation and other direct operating costs. Lanier
depreciates its rental equipment primarily over periods of three to five years
on a straight-line basis.
29
<PAGE> 43
Operating Expenses. Operating expenses consist of selling, administrative,
engineering and general expenses, including salaries, wages and related expenses
paid to employees, advertising costs, employee training costs, occupancy of
leased space directly related to sales or service, and other selling expenses.
Operating expenses also include all overhead expenses related to Lanier's
corporate offices, such as salaries, taxes and benefits, occupancy of corporate
leased space, training and travel expenses.
Other Income and Expense. Other income and expense consists of provisions
for bad debts, interest expense, amortization of goodwill, royalties and other
miscellaneous items of income and expense.
RESULTS OF OPERATIONS
Operating expenses include charges by Harris to Lanier for Lanier's
proportionate share of legal, financial, and other administrative expenses.
Following the Distribution, Lanier plans to acquire these services independently
of Harris. Although it is not possible to predict accurately what relationship
the future expense will bear to the historic expense for these items, Lanier
does not expect that the acquisition of these services from sources independent
of Harris will have any material adverse effect.
Interest expense reflected in the historical financial statements is
related to currently outstanding debt. Future interest expense will be
significantly higher as a result of debt incurred related to the Distribution.
See "-- Credit Facility" on page 33.
FISCAL YEAR ENDED JULY 2, 1999 COMPARED TO FISCAL YEAR ENDED JULY 3, 1998
Net Sales. Net sales increased 14.0% to $1,430.5 million in fiscal year
1999 from $1,254.8 million in fiscal year 1998. This increase is primarily
attributable to the Agfa Acquisition, which was completed at the beginning of
the first quarter.
Product sales and rental revenue increased 11.9% to $807.5 million for the
fiscal year compared to $721.8 million for the prior fiscal year. Increased
sales and rentals resulting from the Agfa Acquisition were $101.3 million for
the fiscal year. The increase in product sales and rental revenues from the Agfa
Acquisition was partially offset by increased competition and by the continued
market transition from analog to digital copier technology. This transition has
resulted in a market-wide excess supply of analog copiers, which is driving down
prices on used and re-manufactured equipment.
Service revenue increased 16.9% to $623.0 million for the fiscal year from
$533.0 for the prior fiscal year. This increase is primarily due to the Agfa
Acquisition, which contributed $100.2 million of service revenue for the fiscal
year.
Sales from Lanier's operations outside of the United States increased by
53.2% to $569.2 million for the fiscal year compared to $371.5 million for the
prior fiscal year. Sales from Agfa private label products and services in Europe
and the United Kingdom provided $201.5 million for the fiscal year. Sales in the
United States decreased 2.5 % to $861.3 million for the fiscal year from $883.8
million for the prior fiscal year.
Gross Margin. Gross margin on product and rental revenue declined to 32.2%
of net sales for the fiscal year compared to 37.1% prior fiscal year. This
decline was primarily a result of increased price competition on analog products
coupled with lower overall margins on digital products. Margins were also
impacted by management's decision to record a pre-tax charge to earnings of $8.0
million in order to write down certain components of Lanier's inventory to their
net realizable values. This action was primarily a result of the fact that the
shift in technology in the document imaging industry from analog products to
digital products has occurred at a much more rapid rate than either the industry
or Lanier's management had anticipated, resulting in an excess supply of analog
and older generation digital products. Lanier's sales of used analog products
decreased 33% in unit terms during fiscal year 1999, while placements of digital
products increased by over 300% in unit terms during the same period. This trend
has accelerated during the third and fourth quarters of fiscal year 1999. In the
month of April 1999, for the first time, sales of Lanier's digital products
exceeded sales of its analog products. Additionally, in recent months, Lanier
has observed a dramatic decline in demand for analog products. Lanier also
recorded a $2.0 million inventory charge related to a discontinued product line
which is described below
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under "Other Income and Expense". Service margins increased to 43.9% compared to
42.8% of net sales for the prior fiscal year. This increase was the result of
reductions in personnel and related compensation expenses following Lanier's
restructuring actions and cost containment programs, which were initiated in
fiscal year 1998 and completed in fiscal year 1999.
Operating Expenses. Selling and administrative expenses increased 6.8% to
$438.5 million for the fiscal year compared to $410.5 million for the prior
fiscal year. Selling and marketing expenses increased by $19.9 million in total
dollars as a result of the Agfa Acquisition, but decreased from 16.8% to 16.1%
of net sales. General and administrative expenses increased by $10.3 million in
total dollars as a result of the Agfa Acquisition, but decreased from 14.3% to
13.3% of net sales. This increase included $5.0 million of non-recurring
integration costs related to the Agfa Acquisition.
Other Income and Expense. Finance income increased $4.6 million for the
fiscal year over the prior fiscal year due to increased customer leasing.
Interest expense increased to $22.7 million as compared to $8.2 million during
the prior fiscal year primarily due to borrowings used to fund the Agfa
Acquisition. Other-net expense decreased $4.1 million for the fiscal year over
the prior fiscal year due primarily to the gain from sale of Lanier's electronic
medical transcription services to Medquist, offset by an increased provision for
doubtful accounts, loss from the sale of Lanier's direct sales operations in
France, and write-off of its investment in a technology-related company.
Lanier's management determined that its investment in this technology-related
company had been significantly impaired due to developments related to this
company and Lanier's decision to discontinue the product line which utilized the
software sold by the company. Lanier therefore recorded an impairment charge of
$7.7 million before tax relating to these assets in 1999.
Net Income. Net income increased 13.5% to $71.3 million for the fiscal year
compared to $62.8 million in the prior fiscal year. Net income for domestic
operations declined 8.1% to $48.7 million as compared to $53.0 million during
the prior fiscal year. Net income from international operations increased 130.6%
to $22.6 million from $9.8 million during the prior fiscal year. This increase
primarily resulted from the income generated by European operations from the
sale of Agfa products and services.
FISCAL YEAR ENDED JULY 3, 1998 COMPARED TO FISCAL YEAR ENDED JUNE 27, 1997
Net Sales. Net sales increased 7.2% to $1,254.8 million in fiscal year 1998
from $1,170.0 million in fiscal year 1997. Product sales and rental revenue in
Lanier's core business increased by $17.5 million. Of this amount, $8.6 million
resulted from the acquisition of six copy and dictation companies. The remainder
of the increase resulted from internal growth.
Service related revenue increased by $67.3 million, or 14.4%, to $533.0
million. The facilities management product line contributed $36.2 million of
this increase, primarily as a result of having a full year of revenue in fiscal
year 1998 as a result of the Quorum Acquisition. The incremental fiscal year
1998 revenue over fiscal year 1997 revenue resulting from the Quorum
Acquisition, which was completed during the third quarter of fiscal year 1997,
was $20.5 million. Lanier also acquired two other facilities management
companies in fiscal year 1998 which resulted in $6.6 million of incremental
revenue for the period. The remainder of the service revenue increase was a
result of growth in equipment service revenue and transcription services.
Lanier's sales outside the United States increased 2.6% to $371.5 million
in fiscal 1998 compared to $362.2 million in fiscal year 1997. Lanier's European
operation experienced a $12.8 million decrease, while sales in the Latin
American region increased $11.8 million. Lanier's operations in Australia,
Canada and the United Kingdom contributed to a smaller increase.
Gross Margin. Gross Margin decreased from 41.7% of net sales in fiscal year
1997 to 39.5% of net sales in fiscal year 1998. Gross margins were lower in
fiscal year 1998 as a result of increasing price competition throughout the
copier industry. Margin pressure has also resulted from the lower margin
outsourcing and service based businesses becoming a larger portion of Lanier's
revenue.
Operating Expenses. Selling, administrative and general expenses for fiscal
year 1998 remained relatively constant in absolute dollars but decreased as a
percentage of net sales from 34.1% in fiscal year 1997 to 32.7% in
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fiscal year 1998. Selling, administrative and general expenses all contributed
to reduced operating expenses as a percentage of net sales.
Restructuring Charge. In fiscal year 1998, Lanier recorded a charge to
income of $8.5 million ($5.3 million after tax) related to the restructuring of
the organization. These cash charges reflect the costs of severance payments and
out-placement services for terminated employees. Of the total amount,
approximately $3.0 million was used in the U.S. operations and approximately
$5.5 million was used in the European operations.
Other Income and Expense. Finance income increased $3.7 million in fiscal
year 1998 due to increased customer leasing. Interest expense decreased by $0.6
million from fiscal year 1997 due to a favorable average interest rate of 8.4%
in 1998 as compared to 9.2% in 1997. Other-net expense decreased $5.1 million in
fiscal year 1998 due primarily to lower provisions for doubtful accounts and
prior year expenses associated with acquisitions of new businesses.
Net Income. Net income for fiscal year 1998 decreased 1.4% to $62.8 million
from $63.7 million in fiscal year 1997. Fiscal year 1998 net income attributable
to domestic operations increased 0.6% to $53.0 million from $52.7 million in the
prior year. Net income attributable to international operations in 1998
decreased 10.9% to $9.8 million compared to $11 million in fiscal 1997.
RESTATEMENT OF FINANCIAL RESULTS
In connection with its internal audit reviews in early 1999, Lanier
detected accounting misstatements by a former employee at one of its foreign
subsidiaries. These misstatements resulted in an overstatement of earnings over
the past five fiscal years in an aggregate amount of $10.0 million before income
taxes and any potential recovery. The financial statements included in this
document reflect the correction of such misstatements. Lanier management has
completed its investigation of these matters and believes that no further
correction will be required.
LIQUIDITY AND CAPITAL RESOURCES
Lanier's net cash flow provided by operating activities was $88.4 million,
$146.4 million and $106.1 million in fiscal years 1999, 1998 and 1997,
respectively. The decrease in fiscal year 1999 operating cash flows was
primarily due to cash transfers and repayment of intercompany loans to Harris
offset by a $61.9 million reduction in inventory levels during the period.
Lanier used $253.0 million, $98.4 million and $107.5 million net cash in
investing activities during fiscal years 1999, 1998 and 1997 respectively.
During fiscal year 1999, Lanier used $171.1 million for acquiring new
businesses, $168.3 million of which related to the Agfa Acquisition.
Cash provided by financing activities was $90.1 million for the fiscal year
ended July 2, 1999, consisting of financing used in the Agfa Acquisition, net of
positive cash flows during the remainder of the fiscal year.
Lanier has no material commitments other than its supply agreements with
its vendors. Lanier will continue to make additional investment in facilities,
equipment and computer equipment in order to support its revenue growth.
Lanier's cash flow from operations, together with anticipated borrowing
arrangements, is expected to adequately finance its operating cash requirements
and capital expenditures for the next fiscal year. Lanier expects to fund future
acquisitions and long-term growth primarily with cash flows from operations,
borrowings under the Credit Facility and possible future sales of additional
equity or debt securities.
Capital expenditures for plant and equipment were $18.4 million for the
fiscal year ended July 2, 1999, up $2.6 million from the total fiscal year 1998
expenditures. For the fiscal year ended July 2, 1999, $63.5 million was invested
in equipment for rental to customers, which is slightly less than the amount
invested for the fiscal year ended July 3, 1998.
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CREDIT FACILITY
Prior to the Distribution, Lanier will incur debt under the Credit Facility
in connection with the payment of a dividend by Lanier to Harris immediately
prior to the Distribution. As a result of this incurrence of debt and the
assumption by Lanier of certain of Harris' indebtedness relating to Lanier's
business, Lanier will have approximately $700 million of indebtedness net of
cash on the Distribution Date. The terms of the Credit Facility will include
customary affirmative and negative covenants that will, among other things,
require Lanier to satisfy certain financial tests and maintain certain financial
ratios, and may limit Lanier's ability to declare and pay dividends and
distributions on the Lanier Shares.
Lanier may also incur additional indebtedness under the Credit Facility
from time to time for general corporate purposes, including working capital,
capital expenditures and future acquisitions.
In the fourth quarter of fiscal year 1999, Lanier sold receivables totaling
$36.5 million under its European asset securitization agreement. This
transaction is treated as a sale of receivables and therefore is not reflected
on the balance sheet. This amount is included in determining indebtedness as
stipulated in the dividend formula described in "Relationship Between Harris and
Lanier Following the Distribution -- Distribution Agreement" beginning on page
19.
IMPACT OF FOREIGN EXCHANGE
Lanier's international business is transacted in local currency. The impact
of translating the assets and liabilities of these operations to U.S. dollars is
included as a component of shareholder equity. At July 2, 1999 the cumulative
translation adjustment reduced Shareholder Equity by $33.5 million compared to a
reduction of $31.0 million at July 3, 1998.
Lanier utilizes exchange rate agreements with suppliers and foreign
currency hedging instruments to minimize the risks of international
transactions. Gains and losses resulting from currency rate fluctuations did not
have a material effect on Lanier's results in fiscal years 1999, 1998 or 1997.
SEASONALITY AND INFLATION
Lanier's management does not believe that Lanier's business is subject to
significant fluctuations based on seasonal effects.
Lanier's management does not believe that the rate of inflation has had a
material effect on the operating results of Lanier because, to the extent
feasible, Lanier has consistently followed a practice of adjusting its prices to
reflect the impact of inflation on wages and salaries for employees and costs of
purchased materials and services.
MARKET RISK
Impact of Foreign Exchange. Lanier's international sales are generally
denominated in the currency of the customer, which exposes Lanier to
fluctuations in foreign currency exchange rates and to other material risks
associated with international operations. Lanier has not in the past suffered a
material adverse impact from currency fluctuations for any of the periods under
consideration. Lanier's risk from such activities has been reduced because
Lanier has been able to pay the expenses of its international operations in
local currencies, which has lessened the need for conversion into U.S. dollars.
In addition, Lanier utilizes exchange rate agreements which provided limited
protection against currency exchange risks. Factors that could impact the
effectiveness of Lanier's hedging program include volatility of currency markets
and the cost and availability of hedging instruments. A 10 percent adverse
change in currency exchange rates for Lanier's foreign currency derivatives held
at July 2, 1999 would have an impact of approximately $15.7 million on the fair
value of such instruments. This quantification of exposure to the market risk
associated with foreign exchange financial instruments does not take into
account the offsetting impact of changes in the fair value of Lanier's foreign
denominated assets, liabilities, and firm commitments.
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Gains and losses resulting from currency rate fluctuations did not have a
material effect on Lanier's results of operations in fiscal years 1999, 1998 or
1997, but Lanier's risk in this area may increase in this regard as Lanier's
international sales increase in volume and geographic distribution. The impact
of translating the assets and liabilities of those operations into U.S. dollars
is included as a component of Shareholder Equity.
Interest Rate Risk. The financial statements included in this document were
prepared based upon Lanier's current financing structure. Under this structure,
Harris provides financing to Lanier via its own lines of credit. Following the
Distribution, Lanier will arrange its own capital structure independent of
Harris. Although it is not possible to predict accurately the exact nature of
this capital structure or its related expense, Lanier does not expect an adverse
effect from this change.
IMPACT OF YEAR 2000
The year 2000 statements set forth below are designated as "Year 2000
Readiness Disclosures" pursuant to the Year 2000 Information and Readiness
Disclosure Act.
Certain software and hardware systems are time sensitive. Older
time-sensitive systems often use a two-digit dating convention (e.g., "00"
rather than "2000") that could result in system failure and disruption of
operations as the year 2000 approaches. The Year 2000 problem will impact
Lanier, its vendors and suppliers, customers, and other third parties that
interface with Lanier.
With regard to the Year 2000 problem, more than 40 project initiatives of
varying magnitudes have been identified throughout Lanier and its various
business operations. These initiatives relate to four basic aspects of Lanier
and its various business operations: internal information technology ("IT")
systems, including sales order processing, contract management, financial
systems and service management; internal non-IT systems, including office
equipment and test equipment; products; and material third-party relationships.
Each project has been assigned a leader and prioritized based on the size
of the task and the perceived business risk. A steering team comprising senior
management in key functional areas including accounting, finance, legal, quality
and new processes and information management has been established to monitor and
oversee the progress of each project. In addition, Lanier has established a Year
2000 Task Force to manage Lanier's overall internal readiness and its business
continuity planning efforts, and has created a web site at www.lanier.com, on
which it provides detailed information and updates concerning year 2000 issues,
Lanier's efforts to address such issues, and the year 2000 compliance of its
products and internal systems. Lanier expects to have substantially completed
all of its Year 2000 initiatives by the end of the quarter ending October 1,
1999.
Internal IT Systems. Lanier has determined it needs to replace or modify
several of its software systems and is in the process of replacing or
outsourcing many of its time-sensitive software systems. In addition, Lanier has
programs for reprogramming other time-sensitive software and equipment. For
example, Lanier has replaced its accounts receivable and payable systems and its
internal purchasing system. Lanier has upgraded its general ledger system to be
Year 2000 compliant and has modified its sales order processing system, billing
system and its contract management system to be Year 2000 compliant. As a
result, Lanier believes that it will be 100% complete with its internal IT
systems by the end of the quarter ending October 1, 1999.
Internal Non-IT Systems. Lanier believes that a limited number of its
non-IT systems, such as office equipment and test equipment with date-sensitive
software and embedded microprocessors may be affected. Lanier believes that its
exposure related to non-IT systems is minimal and that a disruption of any of
these systems will not materially inhibit its ability to conduct business
operations.
Products. Lanier has initiated formal programs to advise and work with
customers to resolve Year 2000 problems. All of Lanier's current product
offerings are Year 2000 compliant. Customers who own older generation products
which are not Year 2000 compliant have been notified of the issue and, wherever
possible, been given suggestions for manual overrides of the particular product.
However, Lanier believes it has no material exposure to contingencies related to
the Year 2000 issue for the products it has sold. Lanier has Year 2000 exposure
in its operating systems and business systems; including engineering, order
fulfillment, program management, financial and administrative functions. It is
Lanier's belief that the greatest potential risk from the
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Year 2000 issue could be its inability to meet commitment dates on delivery of
product and has focused the majority of Lanier's effort and dedicated resources
to address this issue. In addition, Lanier believes that a limited number of the
non-information technology systems, such as office equipment and test equipment
with date-sensitive software and embedded microprocessors may be affected, and
evaluation and remediation are underway.
Material Third-Party Relationships. Lanier has also initiated
communications with significant suppliers, customers, and other relevant third
parties to identify and minimize disruptions to Lanier's operations and to
assist in resolving Year 2000 issues. Lanier has identified 40 key suppliers and
performed an in-depth analysis of the product lines provided to Lanier in order
to ensure that such products are Year 2000 compliant. Additionally, Lanier has
identified critical parts and components necessary to support its existing
product lines and is building safety stocks of these items prior to the end of
the calendar year 1999. However, there can be no certainty that the systems and
products of other companies on which Lanier relies will not have an adverse
effect on Lanier's operations.
Lanier believes it has diligently addressed the Year 2000 issues and that
it will satisfactorily resolve significant Year 2000 problems. Lanier
anticipates completing substantially all of its Year 2000 projects by the end of
the quarter ending October 1, 1999. In the event Lanier falls short of these
milestones, additional internal resources will be focused on completing these
projects or developing contingency plans.
The estimated cost for resolving Year 2000 issues is approximately $11.5
million with an approximate remaining balance of $0.4 million planned for fiscal
year 2000. These costs are generally not incremental to existing information
technology budgets; internal resources were re-deployed and timetables for
implementation of replacement systems were accelerated. The largest portion of
this expenditure is being used to replace existing software and hardware.
Approximately $5.2 million of the above total is related to investments in
hardware or other capitalizable costs or operating leases which will be
amortized in current or future periods. Estimates of the Year 2000 related costs
are based on numerous assumptions and there is no certainty that estimates will
be achieved and actual costs could be materially greater than anticipated.
Specific factors that might cause such differences include, but are not limited
to, the continuing availability of personnel trained in this area, the ability
to timely identify and correct all relevant computer programs, and similar
uncertainties.
Lanier is working to identify and analyze the most likely worst-case
scenarios, any of which could have a material adverse effect on Lanier's ability
to provide products and services to its customers. These possible scenarios
include the failure of water and power supplies, the failure of communications
and financial systems, major transportation disruptions, and lack of Year 2000
readiness of third-party vendors and customers. Lanier continues to develop
contingency plans to address potential Year 2000 problems relating to the
infrastructure and Lanier's business partners. These plans are expected to be
completed no later than September 30, 1999. Despite such efforts, an
infrastructure problem or combination of the above-mentioned Year 2000 problems
not within Lanier's control could have a material adverse impact on Lanier's
business and its results of operations.
EURO CONVERSION
On January 1, 1999, certain member nations of the EMU adopted a common
currency, the Euro. For a three-year transition period, both the Euro and
individual participants' currencies will remain in circulation. After January 1,
2002, the Euro will be the sole legal tender for EMU countries. The adoption of
the Euro affects a multitude of financial systems and business applications as
the commerce of these nations will be transacted in the Euro and the existing
national currency. For fiscal year 1999, approximately 20.7% of Lanier's
revenues were derived from EMU countries.
Lanier is currently addressing Euro-related issues and its impact on
information systems, currency exchange rate risk, taxation, contracts,
competition, and pricing. For the fiscal year ended July 2, 1999, Lanier did not
experience an adverse impact or material expense related to the adoption of the
Euro. All cost associated with the adoption of the Euro has been expensed by
Lanier as incurred. Lanier expects to complete the Euro-related systems
conversion during the quarter ending October 1, 1999.
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LANIER'S BUSINESS
GENERAL
Lanier and its subsidiaries form one of the world's largest independent
suppliers of copiers, facsimiles and other related automated office imaging
equipment. With over 1,600 sales and service locations in more than 100
countries, Lanier markets these products and related services, parts and
supplies to customers both on a direct sales basis and through a worldwide
network of independent dealers. Lanier provides customers with a wide array of
customized document management solutions including black and white digital and
analog copiers, color copiers, facsimile machines, multi-function devices,
dictation equipment, computer based health care information management systems,
associated parts and supplies, and a variety of related outsourcing services,
including legal support services. Lanier sources substantially all of these
products from a variety of manufacturers, seeking out the "best-of-breed."
Selected products undergo rigorous testing by Lanier, and upgrades are often
recommended to the manufacturers in order to meet Lanier's demanding standards.
Lanier targets sales of its products to four primary markets: (i)
global/national or "key" accounts; (ii) major accounts; (iii) commercial users;
and (iv) specific vertical industries, such as the health care and legal
industries. Some of Lanier's national customers include Abbott Laboratories,
Corning, Inc., CountryWide Home Loans, Federal Express, Merck & Company, Inc.,
Minnesota Mining & Manufacturing Co. and the National Aeronautics & Space
Administration (NASA).
Lanier, headquartered in Atlanta, Georgia, was founded in 1934 as The
Lanier Company, a Southeastern distributor of "Ediphone" dictation machines.
Lanier entered the copier business in 1955 as an independent distributor of 3M
"Thermofax" dry process copiers. In 1977, Lanier was spun-off as a separate
public company from its then-parent corporation, Oxford Industries. Lanier, then
known as Lanier Business Products, was subsequently acquired by Harris in 1983.
In 1985, Lanier was incorporated in Delaware as Harris/3M Document Products,
Inc., a joint enterprise between Lanier Business Products, Inc., a subsidiary of
Harris, and the Minnesota Mining and Manufacturing Co. Harris purchased 3M's
interest in that venture in 1989 and changed the name of the company to Lanier
Worldwide, Inc.
INDUSTRY OVERVIEW
The document imaging and management industry consists of the production and
supply of various imaging products and supplies, as well as the provision of
pre-sale consulting services and after-market product services. Lanier's
competitors include the distribution units of large office equipment
manufacturers and other independent distributors. According to industry sources,
the total global market for its document imaging and management products and
services will grow from approximately $75 billion in 1999 to approximately $97
billion in 2002.
Companies in the document imaging industry sell products primarily through
three channels of distribution: (i) direct customer sales; (ii) dealer sales;
and (iii) retail sales. Direct customer sales include sales calls by sales force
personnel, sales through telephone marketing and internet sales. Dealer sales
result from customer calls performed by independent or company-owned dealer
outlets. Retail sales include sales of low-end products, typically through
national retail outlets or local smaller retailers.
Traditionally, the products offered by companies in the document imaging
industry have used analog technology. Lanier's management believes, however,
that customers' increasing use of digital technology will eventually lead to the
replacement of analog products with digital products. According to industry
sources, approximately 378,000 digital copiers were sold in the United States in
1998 (or approximately 19.6% of new copiers shipped in 1998), an increase of
1,114% since the end of 1996. Industry sources predict that, by the end of 2003,
approximately 87% of all new copier placements will be digital machines. Digital
products, unlike analog products, can connect and communicate with other office
imaging equipment, enabling customers to more efficiently connect and utilize
their document management solutions over a wide array of configurations. Digital
products may also offer a wider array of more useful features, such as higher
quality copies, color capability, finishing capability and multi-function
capability. The market trend toward digital technology has also led document
management companies to include training for sales, service, maintenance and
help desk personnel with respect to the new digital products.
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As document imaging products and services have become more complex and
service-intensive, customers have begun to seek outsourcing services, such as
facilities management services, and professional services that require expertise
in document imaging and management, such as consulting services and systems
integration services.
The document imaging industry as a whole remains highly fragmented, with
only a few large companies. Many customers purchase products through independent
dealers that operate only in a particular geographic area. As digital technology
replaces analog technology, many of these independent dealers may not have the
training to sell or service the new technology. Further, as customers
consolidate their accounts in order to integrate their document management
solutions, they may seek providers that have a larger geographic scope. Thus,
smaller independent dealers may determine to sell to larger companies in the
industry who have more training capability and cover a larger geographic area.
Further, the fragmented nature of the industry allows for consolidation in order
to achieve economies of scale and lower operating expenses on a company-wide
basis.
LANIER PRODUCTS AND SERVICES
Lanier offers its customers a comprehensive solution to their document
management needs through products and services that take advantage of
technological advancements and Lanier's experience in the document imaging and
management industry.
PRODUCTS
Lanier offers a full range of document copiers, from desktop units to high
speed and high volume systems. Within this range, Lanier offers both color
copiers and black and white copiers, as well as both analog and digital copiers.
Lanier offers several devices that perform more than one traditional function,
such as Hewlett-Packard "mopiers" that can print multiple original copies direct
from the customer's networked systems as a finished (i.e., stapled, collated,
etc.) document product.
Lanier also offers a full range of facsimile machines. Lanier offers
multi-function products that can meet customers' facsimile needs, as well as
traditional stand-alone machines.
Finally, Lanier offers a range of both digital and analog dictation
products.
SERVICES
Product Support. Lanier's service force provides a range of product-support
services from traditional on-site repairs to after-market supplies such as toner
and paper products. Lanier supports many of its customers with around the clock,
seven days a week on-site service, and supports all of its customers' service
and help needs with a sophisticated logistics, call reception/dispatch and
multi-level help desk and hotline. Additionally, Lanier provides customer
application training and support if needed by the customer.
Lanier has a worldwide service force of approximately 2,900 employees.
Lanier continually trains its sales force on new products, technologies, and
sales techniques. Because of the industry trend toward digital technology and
new systems, Lanier's management believes that its training and instruction
services, as well as its help desk and hotline, provide Lanier with an advantage
over its competitors.
Outsourcing Services. Lanier provides its customers with a wide range of
consulting and professional services, such as facilities management, systems
integration and other consulting services.
Through its facilities management services, Lanier can equip, staff and
manage most aspects of a customer's reprographic and document management needs
at the customer's facility. In addition to copying and printing, Lanier provides
file room maintenance, decentralized copier management, facility mail and
courier services and address list maintenance. Lanier seeks to work with the
customer to identify methods in which Lanier can help meet all of the customer's
document management needs, whether by implementation of new products or by
systems integration.
Lanier's systems integration services offer customers the ability to
leverage Lanier's substantial experience in the areas of connectivity and
efficiency of document management networks. Lanier helps customers enhance
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the performance of their network by either adding new or enhanced technology
products or increasing the efficiency of the current system. As an example,
Lanier offers its health care clients a system that allows its customers to
connect a digital dictation station with the hospital database containing
patient records in order to enable doctors to view a patient's information while
at the same time dictating a diagnosis or prescription for the patient.
DOCutivity(TM) Approach. Lanier has implemented its DOCutivity(TM) approach
in order to improve its customers' document management productivity by
strategically integrating Lanier's products and services. DOCutivity(TM)
streamlines the process for customers and allows Lanier to provide each customer
with customized document analysis that will allow the customer to improve its
document productivity and efficiency. Each member of the Lanier sales force is
trained in the DOCutivity(TM) approach and analysis.
Through the DOCutivity(TM) approach, Lanier assesses the customer's
document management challenges and goals, while extensively analyzing the
customer's existing capabilities. Lanier's sales personnel examine the
customer's office and workgroup functions and determine the financial impact of
implementing a new, more productive and efficient document management solution
for the customer. Lanier's sales personnel then offer solutions to the customer
based on Lanier's extensive industry knowledge and experience, for an improved
document management strategy.
For example, one recent oil refinery customer sought to replace its analog
copiers supplied by multiple vendors on a cost-effective basis. Lanier sales
personnel used the DOCutivity(TM) analysis to implement a strategy to: (i)
reduce the customer's high cost of copying and print cartridges associated with
multiple vendors; (ii) improve efficiency by eliminating manual distribution of
documents; and (iii) eliminate redundancy in the document management cycle.
Lanier proposed an all-digital, multi-function device configuration connected to
the customer's Local Area Network. Through this configuration, Lanier helped the
customer (i) reduce costs by capturing original prints and their corresponding
replication and (ii) eliminate redundancy by combining the creation of originals
with both duplication and distribution. Overall, Lanier estimated that the
DOCutivity(TM) approach saved the customer approximately $144,000 per year in
excess costs.
PRODUCT FINANCING
A portion of Lanier's operating income arises from the financing of its
customers' purchases of Lanier products. On average, 46% of Lanier's aggregate
sales in the United States, Puerto Rico, Canada and Australia are financed
through leases that typically have a term of 3 years. In Europe, 16% of Lanier's
sales derive from rental arrangements that differ from leases primarily because
customers may terminate the rental agreement more quickly and easily. Lanier's
ability to provide financing at competitive rates and realize operating income
is highly dependent upon its own costs of borrowing, which, in turn, depend upon
Lanier's credit standing. Significant changes in such standing could reduce the
profitability of Lanier's financing business and/or make Lanier's financing less
attractive to customers. Lanier cannot be certain that it can maintain credit
standing sufficient to realize profits on the portion of its revenues derived
from financing arrangements.
LANIER'S TARGET MARKETS
Lanier targets four primary markets: (i) global/national or "key" accounts;
(ii) major accounts; (iii) commercial accounts; and (iv) specific vertical
industry markets, such as the health care and legal industry.
National or "key" accounts are large corporations that tend to require full
document imaging and management throughout the customer's entire organization,
whether that organization is regional, national or global. Lanier management has
targeted these accounts with multiple sales and service entries as a growth
vehicle for Lanier because these accounts tend to generate substantial and
recurring revenues over longer-term contracts.
Some of Lanier's national or "key" accounts include Abbott Laboratories,
Corning, Inc., Countrywide Home Loans, Federal Express, Merck & Company, Inc.,
Minnesota Mining & Manufacturing Co. and the National Aeronautics & Space
Administration (NASA).
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Lanier has set specific criteria to define major accounts and identified a
list of these accounts in each district. Management is then focused on these
accounts utilizing major account representatives and the DOCutivity(TM)
methodology.
Lanier has also targeted commercial accounts, which are local or small
businesses. Sales to commercial accounts typically consist of the sale of Lanier
products, coupled with a maintenance and supply agreement.
Lanier also targets specific vertical industries that tend to involve more
intensive use of Lanier's products, such as the health care and legal
industries. Because of its heavy use of documents, Lanier sales and service
personnel target the legal market for the full range of Lanier products and
services. Lanier management believes that Lanier has a reputation for quality
products and superior after-sales service and support within the legal market.
Because of the legal market's use of multiple products that Lanier sells and
services, Lanier management believes that the legal market represents a
significant source for cross-selling opportunities.
Similarly, Lanier targets the health care industry because Lanier's
management believes it offers continued growth opportunities. Over 50% of the
hospitals in the United States use Lanier digital dictation systems, often in
multiple areas of the hospital. As digital systems become more accepted in other
areas of Lanier products (particularly copiers), management believes that Lanier
can leverage its reputation for digital dictation systems with these hospitals
in order to become the provider of choice for other products. In addition, the
increased complexity and connective nature of these products will allow Lanier
to offer to its health care customers its expertise in systems integration and
other consulting services.
STRATEGY
Lanier's goal is to become the leading global provider of document imaging
products and related services and support. In order to accomplish this goal,
Lanier intends to use the following strategies:
- continue to cultivate its "best of breed" sourcing and distribution
relationships;
- deliver integrated document management solutions to its customers;
- focus on customer satisfaction and retention;
- maintain and develop its effective marketing initiatives;
- attract, retain and incentivize its employees; and
- continue to add revenue and operating income through selective
acquisitions.
Cultivate Sourcing and Distribution Relationships
Lanier has historically sought out the "best of breed" in its products by
sourcing products from a variety of manufacturers. Selected products undergo
rigorous testing by Lanier, and Lanier often recommends upgrades to its
suppliers. Lanier intends to continue to seek the best products available
throughout the world in order to offer the best possible products to its
customers. In particular, in order to maintain pace with the industry-wide shift
to digital products, Lanier intends to expand its offering of digital document
imaging products. Lanier believes that its current supplier relationships will
allow it to offer high-quality document imaging products in each segment of the
digital market. Lanier also intends to explore new relationships as
manufacturers develop new multi-function digital machines.
Deliver Integrated Document Management Solutions
Lanier sales personnel have been trained to approach every sales
opportunity using the DOCutivity(TM) sales method. Lanier seeks to offer its
customers a full range of products and services and to address its customers'
document production and management needs through an integrated document
solution. Management believes that this integrated DOCutivity(TM) approach
enables Lanier to be more successful in securing larger, national customers that
seek such comprehensive document solutions and generate substantial and
recurring revenues over longer term contracts. Management also believes that its
DOCutivity(TM) approach allows Lanier to cross sell its products and services,
as they comprise components of an integrated solution. Additionally, management
believes that as
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<PAGE> 53
document management technology grows more complex, many customers, particularly
legal and other professional service providers, will seek to outsource more of
their document management functions. Lanier seeks to continue to grow its
facilities management business in order to meet the growth in this document
outsourcing market.
Focus on Customer Satisfaction
Lanier focuses on customer satisfaction as an opportunity to grow its
business through continuing and expanding its sales with existing customers.
Lanier analyzes its clients' document production and management needs and
challenges through the eyes of its customers, an approach Lanier refers to as
Customer Vision(TM). Management believes that this perspective allows Lanier to
align its business practices and processes with the way that its customers wish
to do business, build customer loyalty and foster long term customer
relationships. Lanier provides the Performance Promise(TM), which Lanier
believes is the document management industry's first and most comprehensive
product guarantee that covers all product lines and guarantees product
performance with 99% uptime, as well as a service availability guarantee. Lanier
also offers a 24 hour, seven day a week help desk to provide customer service
support by highly trained personnel that management believes helps contribute to
its reputation as a leading service provider in the industry. Lanier believes
that it has achieved customer satisfaction levels exceeding 90% in each of its
target markets in each of the last two fiscal years and has received customer
satisfaction awards from several of its customers, including Abbott
Laboratories, DuPont, Kinko's and Pacific Bell.
Maintain and Develop Effective Marketing Initiatives
Lanier believes that it has a high quality sales force that is trained in
effective sales techniques, sophisticated document imaging products, such as
digital and multi-function machines, and Lanier's DOCutivity(TM) sales approach.
Lanier seeks to capitalize on its trained sales force by cross selling its
products and services to its customers through the integrated DOCutivity(TM)
approach. Management also seeks to grow its business by marketing its global
presence to multi-national customers that seek a worldwide product and service
provider. Lanier is also expanding its low cost telemarketing initiative, which
currently accounts for a majority of the sales of its supplies and lower end
products. Lanier is also seeking to develop marketing and sales of its products
over the Internet.
Attract, Retain and Incentivize Employees
Management believes that Lanier can stimulate internal growth by continuing
to attract and retain high quality employees. Management also believes that
Lanier can increase the productivity of its sales personnel through the use of
performance benchmarks and other incentive opportunities. Lanier management
believes that the ability to offer equity incentives to its employees that match
Lanier's performance as a stand-alone company will aid its efforts to increase
its employees' productivity.
Grow through Selective Acquisitions
Lanier will actively seek strategic acquisitions that complement its
existing businesses, either in Lanier's existing markets or in new markets.
Lanier seeks acquisition targets that embody a similar culture to Lanier's and
that management believes it can successfully integrate into Lanier's existing
businesses. Lanier seeks to make acquisitions that will enable Lanier to
leverage cost saving opportunities and increase revenue and operating income.
During the last three fiscal years, Lanier has acquired 18 businesses, including
the Copying Systems Division of Agfa in July 1998. The Agfa Acquisition added
$201.5 million in revenues for the fiscal year ended July 2, 1999, and doubled
Lanier's sales and market size in the European office equipment market.
EMPLOYEES
Lanier employs approximately 8,700 individuals throughout the world,
including 2,100 sales personnel. None of Lanier's United States employees is
covered by a collective bargaining agreement. Management believes that Lanier
has good relations with its employees.
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SALES AND MARKETING
Lanier distributes its sales personnel both geographically and by target
market. Lanier operates domestically from 106 district offices in the United
States and operates internationally through subsidiaries and branches located in
27 countries throughout the world. Lanier is represented through independent
distributors in over 80 additional countries. Overall, Lanier operates over
1,600 sales and service locations throughout the world. Lanier's Global Accounts
Program enables its international customers to make supplier and equipment
selections on a worldwide basis through one agreement in order to improve the
customer's purchasing power, office productivity and operating efficiency.
Lanier has separate sales groups focused on each of its target markets, with
sales personnel dedicated to each of the global/national, major, commercial,
health care and legal target markets.
INTERNATIONAL OPERATIONS
Net sales from international operations were $569.2 million, or 39.8% of
Lanier's total net sales for fiscal year 1999 compared with $371.5 million, or
29.6%, for fiscal year 1998. Foreign operations represented 50.4% of long-lived
assets as of July 2, 1999, compared to 23.0% of long-lived assets as of July 3,
1998. Lanier's products are primarily produced in Asia.
The particular economic, social and political conditions for business
conducted outside of the United States differ from those encountered by domestic
operations. Management of Lanier believes that the composite business risk for
Lanier's international operations as a whole is somewhat greater than that faced
by its domestic operations as a whole. Lanier's international operations are
subject to political, economic and other risks inherent in operating in
countries outside the United States, including possible adverse government
regulation, imposition of import and export duties and quotas, currency
restrictions, price controls, potentially burdensome taxation and/or other
restrictive government actions. See "Risk Factors -- Lanier is Subject to Risks
Related to International Operations" on page 11. Nevertheless, Lanier's
management believes that these risks are offset by the diversification of
Lanier's international operations.
Financial information regarding Lanier's domestic and international
operations is contained in Note O to Lanier's Consolidated Financial Statements.
SUPPLIERS
Lanier sources its products from multiple suppliers throughout the world,
including Ricoh, Toshiba, Canon, Sharp and Okidata. Although Lanier has
contractual relationships with many of its suppliers, Lanier continually seeks
the best products to offer to its customers and does not enter into exclusive
arrangements with any of its suppliers. Management does not believe that Lanier
depends on any one particular supplier.
TRADEMARKS AND LICENSES
Lanier distributes its products principally under the Lanier trademark.
Lanier expects to begin selling and servicing Hewlett-Packard's Mopier line of
products under the Hewlett-Packard trademark, in addition to products sold under
the Lanier trademark.
COMPETITION
Lanier operates in highly competitive markets. Lanier's competitors include
the distribution units of large office equipment manufacturers and independent
distributors, as well as office superstores and consumer electronics chains. As
digital and other new technology develops, Lanier may find itself competing with
new distribution channels, including computer distributors and value added
resellers, for products containing new technology. Principal areas of
competition in these markets include price and product capabilities, quality and
speed of post-sales service support, availability of equipment, parts and
supplies, speed of delivery, financing terms and availability of financing,
leasing or rental programs.
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PROPERTIES
Lanier generally leases its business properties, with the exception of two
facilities that consist of a total of approximately 200,000 square feet located
in Wilmington, Delaware and Tucker, Georgia, neither of which are material to
the operations of Lanier as a whole. Lanier leases a total of approximately 1.6
million square feet of space for its business operations in the United States.
Management of Lanier believes that the properties Lanier occupies are, in
general, suitable and adequate for the purpose for which Lanier utilizes them.
LEGAL PROCEEDINGS
In 1992, the General Services Administration of the United States federal
government (the "GSA") commenced an audit of 48 Multiple Award Schedule
Contracts between Lanier and the GSA. In 1998, the GSA notified Lanier that the
United States federal government might be entitled to a refund with respect to
payments under six of such contracts. Lanier and the GSA have continued
discussions as to the amount of any such refund, which Lanier believes in the
aggregate will not be material to its results of operations or financial
condition.
From time to time, as a normal incident of the nature and kind of business
in which Lanier is engaged, various claims or charges may be asserted and
litigation commenced against Lanier. The amounts claimed may be substantial but
may bear no reasonable relationship to the merits of the claim or the extent of
any real risk or final award. In the opinion of Lanier's management, final
judgments, if any, which might be rendered against Lanier in any current claim
or litigation are either adequately reserved for or would not have a material
adverse effect on Lanier's results of operations or financial condition.
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LANIER'S MANAGEMENT
BOARD OF DIRECTORS
The following table sets forth information as to the persons who are
expected to serve as directors of Lanier following the Distribution. As provided
in Lanier's restated certificate of incorporation, Lanier's board of directors
will be divided into three classes. The table sets forth the names of the
directors of each class and their original terms. Directors in each class
initially will serve until the annual meeting of shareholders held in the year
in which the term for such class expires and will serve thereafter for
three-year terms. Lanier initially intends to have a board of directors that
will consist of nine directors, two of whom are officers of Lanier. Additional
directors will be added to Lanier's board of directors prior to the
Distribution. Information concerning directors selected through the date hereof
is set forth below:
<TABLE>
<CAPTION>
TERM POSITION WITH LANIER AND PRINCIPAL
NAME AGE EXPIRES POSITION BUSINESS AFFILIATIONS DURING PAST FIVE YEARS
---- --- ------- -------- --------------------------------------------
<S> <C> <C> <C> <C>
Wesley E. Cantrell............. 64 2002 Chairman of the Chief Executive Officer since March, 1987.
Board and Chief President, Lanier Business Products, 1977 to
Executive Officer 1987. Executive Vice President and National
Sales Manager, 1972 to 1977. Vice President,
1966 to 1972. Employed by Lanier since 1955.
Member of the board of directors of Ann
Taylor Stores Corp., Environmental Design
International Ltd. and Impact Ministries, a
not-for-profit organization, and member of
the advisory board of First Union National
Bank of Atlanta.
C. Lance Herrin................ 57 2001 President and Chief Chief Operating Officer since July, 1998.
Operating Officer Executive Vice President and General
Manager - U.S. Operations, 1993 to 1998.
Executive Vice President and General
Manager - Imaging Systems Division, 1987 to
1993. Executive Vice President, Lanier
Business Products, 1982 to 1987. Senior Vice
President, 1981 to 1982. Vice President,
1977 to 1981. Employed by Lanier since 1967.
Sidney E. Harris............... 49 2000 Director Dean, J. Mack Robinson College of Business,
Georgia State University since 1997. From
1987 through July 1997, Professor of
Management at the Peter F. Drucker Graduate
Management Center at the Claremont Graduate
School, Claremont, California. Director of
TransAmerica Investors, Inc., ServiceMaster
Company and Amresco, Inc.
David H. Hughes................ 55 2001 Director Chairman and Chief Executive Officer of
Hughes Supply, Inc. since November 1986.
Director of SunTrust Bank, Inc. and Brown &
Brown, Inc.
</TABLE>
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<PAGE> 57
<TABLE>
<CAPTION>
TERM POSITION WITH LANIER AND PRINCIPAL
NAME AGE EXPIRES POSITION BUSINESS AFFILIATIONS DURING PAST FIVE YEARS
---- --- ------- -------- --------------------------------------------
<S> <C> <C> <C> <C>
Amos R. McMullian.............. 61 2000 Director Chairman and Chief Executive Officer of
Flowers Industries, Inc. Employed by Flowers
Industries, Inc. (or its predecessors) since
1963. Director of Keebler Foods Company.
Clarence B. Rogers, Jr......... 69 2002 Director Chairman of the Executive Committee of the
Board of Directors of Equifax, Inc. Director
of Sears Roebuck & Co., Morgan Stanley Dean
Witter & Co., Briggs & Stratton Corporation,
Oxford Industries, Inc. and ChoicePoint Inc.
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS
Lanier's board of directors will establish three standing committees to
assist in the discharge of its responsibilities. The principal functions of each
committee are described below.
AUDIT COMMITTEE
The Audit Committee will assist the board of directors in ensuring that
Lanier's financial, auditing and reporting practices, procedures and controls
are within acceptable limits of sound practice and in accordance with applicable
laws and regulations. The Audit Committee will meet periodically with the
independent auditors, together with representatives of management, as
appropriate, for the purpose of reviewing the scope and results of the annual
audit of the financial statements and the recommendations of the auditors. The
Audit Committee will also evaluate the professional competency of the financial
staff and internal auditors, review the scope of the internal audit program,
review the nature and extent of non-audit professional services performed by the
auditors and annually recommend to the board of directors the firm of
independent public accountants to be selected as auditors of Lanier. From time
to time the Audit Committee may also undertake special projects, such as
reviewing Lanier's environmental policies.
NOMINATING AND COMPENSATION COMMITTEE
The Nominating and Compensation Committee will review and evaluate plans
for the development, training and utilization of Lanier's management resources;
review Lanier's compensation philosophy and will establish the compensation of
officers of Lanier other than the chief executive officer and president, whose
compensation will be recommended by the Nominating and Compensation Committee
and approved by all of the outside directors; and administer Lanier's stock
incentive and stock based compensation plans and other incentive plans. The
Nominating and Compensation Committee will also oversee the financial
administration and operation of Lanier's various retirement and pension plans,
including the selection and review of the performance of the investment funds
and the independent investment advisors for the plans.
The Nominating and Compensation Committee will manage succession at the
executive officer level and identify and promote candidates for and to executive
positions; identify, evaluate and recommend director nominees to the board of
directors to fill vacancies and to be elected at the annual meeting of the
stockholders; recommend directors' compensation and benefit plans to the board
of directors; recommend committees of the board of directors and committee
members; set meeting schedules for the board of directors and recommend meeting
schedules for the committees; and facilitate the board of directors' evaluation
of its effectiveness. The committee will consider suggestions for director
nominees from all sources, including stockholders. Any stockholder suggestion,
together with an appropriate biographical summary, should be sent to the
Secretary of Lanier. In addition, Lanier's bylaws establish certain requirements
concerning stockholder nominations for election of directors, including that
notice of such nominations be delivered to the Secretary of Lanier not less than
90 nor more than 120 days prior to the date of the annual meeting of
stockholders. Each notice of
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nomination is required to contain the name and address of the stockholder who
intends to make the nomination; the name, address and written consent of the
nominee and such other nominee information as would be required to be disclosed
in a proxy solicitation.
EXECUTIVE COMMITTEE
The Executive Committee will be authorized to evaluate and review Lanier's
financial position, capital structure, significant capital asset transactions,
major acquisitions and divestitures, and during the intervals between the
meetings of the board of directors, to the extent permitted by law, to exercise
all of the powers of the board of directors (except for certain matters reserved
for the board of directors) in the management of the business of Lanier.
DIRECTORS' COMPENSATION
Non-employee directors will receive an annual retainer fee of $30,000. In
addition, non-employee directors who serve on the standing committees will
receive an additional annual fee of $1,500 for their services on each committee,
or $3,000 if serving as chairperson of a committee.
Each non-employee director will also receive $1,000 for attendance at each
board meeting. In addition, each non-employee director will receive $800 for
attendance at each committee meeting and for participation in a telephonic or
video conference meeting. Each non-employee director will also be reimbursed for
out-of-pocket expenses incurred in connection with attendance at board and
committee meetings. In addition, each non-employee director will be provided
travel, accident and disability insurance in the event that the director is
involved in an accident while traveling on business relating to Lanier.
Under the Lanier Stock Plan, which will be adopted in connection with the
Distribution, each non-employee director will be granted an option to purchase
10,000 Lanier Shares on the later of the Distribution Date or the date such
director joins Lanier's board of directors and thereafter, beginning in 2000,
will automatically be granted an option to purchase 2,000 Lanier Shares on the
first business day of the month following the month in which the annual meeting
is held. The options will be non-statutory options for tax purposes and will be
priced at 100% of the fair market value on the date of grant. Fifty percent of
the options will become exercisable on the first anniversary of the date of
grant and 25% on each of the next two succeeding anniversary dates; however, any
options outstanding for more than one year at the time a Change in Control (as
defined in the Lanier Stock Plan) of Lanier occurs will become immediately
exercisable. In the event of a director's retirement, vested options may be
exercised for three years thereafter, and, in the event of a director's death or
disability, options then exercisable may be exercised for twelve months
thereafter. In no event may such options be exercisable more than ten years
after the date of grant. Neither Lanier's board of directors nor any committee
of the board of directors has any discretion with respect to options granted to
non-employee directors.
Under the Lanier Directors Deferred Compensation Plan (the "Directors
Plan"), which will be adopted in connection with the Distribution, each
non-employee director may also elect to defer all or a portion of his or her
fees. A director's account will be credited with a number of units of Lanier
common stock equivalents based upon the fair market value of the Lanier Shares
on the date the fees otherwise would be paid. Once amounts are deferred they are
only payable following a director's resignation, retirement or death. Each
Lanier common stock unit will be credited with dividend equivalents, which are
deemed reinvested in additional Lanier common stock units on the dividend
payment date. Amounts deferred under the Directors Plan will be paid in whole
shares of Lanier common stock and in cash for any factional shares as soon as
practicable following resignation, retirement or death. Within ninety days
following a Change in Control (as defined in the Directors' Plan), Lanier shall
pay to each director (or former director) a cash lump sum payment equal to the
then remaining balance in each such director's account.
In connection with the Distribution, each of the directors and executive
officers (including those named in the Summary Compensation Table below) will
enter into an indemnification agreement with Lanier pursuant to which each
director and executive officer shall be indemnified against expenses (including
attorneys' fees, judgments, fines, and amounts paid in settlement) actually and
reasonably incurred in connection with any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal or administrative or
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<PAGE> 59
investigative, to which he or she was, is, or is threatened to be made a party
by reason of being or having been such a director or officer, to the full extent
allowable under Delaware law.
Lanier has adopted a policy that directors retire from the board of
directors effective at the end of the month in which they reach age seventy-two.
In addition, a director is expected to automatically tender his or her
resignation in the event of retirement or other significant change in status
from the positions held at the time of election to the board of directors,
although the board of directors may opt to have such director continue to serve
on the board of directors.
EXECUTIVE OFFICERS
Listed below is certain information concerning individuals who are expected
to serve as executive officers of Lanier following the Distribution. These
individuals are currently responsible for the management of Lanier's business as
conducted in its capacity as a subsidiary of Harris.
<TABLE>
<CAPTION>
POSITION WITH LANIER AND PRINCIPAL
NAME AGE CURRENT POSITION BUSINESS AFFILIATIONS DURING PAST FIVE YEARS
---- --- ---------------- --------------------------------------------
<S> <C> <C> <C>
Wesley E. Cantrell.......... 64 Chairman of the Board and Chief Executive Officer since March, 1987.
Chief Executive Officer President, Lanier Business Products, 1977 to
1987. Executive Vice President and National
Sales Manager, 1972 to 1977. Vice President,
1966 to 1972. Employed by Lanier since 1955.
Member of the board of directors of Ann
Taylor Stores Corp., Environmental Design
International Ltd. and Impact Ministries, a
not-for-profit organization, and member of
the advisory board of First Union National
Bank of Atlanta.
C. Lance Herrin............. 57 President and Chief Chief Operating Officer since July, 1998.
Operating Officer Executive Vice President and General
Manager -- U.S. Operations, 1993 to 1998.
Executive Vice President and General
Manager -- Imaging Systems Division, 1987 to
1993. Executive Vice President, Lanier
Business Products, 1982 to 1987. Senior Vice
President, 1981 to 1982. Vice President,
1977 to 1981. Employed by Lanier since 1967.
James A. MacLennan.......... 40 Executive Vice President, Executive Vice President and Chief Financial
Chief Financial Officer Officer since November, 1998. Vice
President, Finance, 1997 to 1998. Vice
President Accounting, Noble Drilling Corp.,
1995 to 1997. Director-Risk/Audit, Noble
Drilling Corp., 1993 to 1995. Financial
Reporting Manager, Esso Australia, Ltd.,
1990 to 1993. Affiliate Advisor, Exxon Co.,
Intl., 1987 to 1990. Financial Analyst, Esso
UK, 1985 to 1987.
David J. Marini............. 45 Executive Vice President and General Manager, Worldwide Field Operations,
General Manager, Worldwide since July, 1998. Executive Vice President
Field Operations since 1991. Vice President, Scientific
Calculations Division of Harris Corporation,
1983 to 1991.
Paul M. Anderson............ 50 Vice President-Worldwide Vice President, Worldwide Marketing since
Marketing July, 1998. Vice President since 1989.
Employed by Lanier since 1972.
</TABLE>
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<TABLE>
<CAPTION>
POSITION WITH LANIER AND PRINCIPAL
NAME AGE CURRENT POSITION BUSINESS AFFILIATIONS DURING PAST FIVE YEARS
---- --- ---------------- --------------------------------------------
<S> <C> <C> <C>
Vera M. Arthur.............. 43 Vice President-Human Vice President, Human Resources since April,
Resources 1999. Vice President, Marketing, 1993 to
1999. Various management positions, 1986 to
1993. International Marketing Services
Manager, Sangamo Weston, 1984 to 1986.
Export Operations Manager, Lanier Business
Products, 1979 to 1984.
Brian R. Bergin............. 52 Vice President-Worldwide Vice President, Worldwide Sourcing and
Sourcing and Development Development since November, 1998. Vice
President since 1992. Employed by Lanier
since 1976.
J. Michael Kelly............ 52 Vice President, General Corporate Secretary since January, 1999,
Counsel and Secretary Vice President since 1989. General Counsel
since 1987. Counsel, Harris Corporation,
1980 to 1987.
Timothy A. Vellek........... 43 Vice President-Worldwide Vice President, Worldwide Service since
Service August, 1998. Vice President since 1991.
Employed by Lanier since 1978.
</TABLE>
There is no family relationship between any of Lanier's executive officers
or directors and there are no arrangements or understandings between any of
Lanier's executive officers or directors and any other person pursuant to which
any of them was elected an officer or director, other than arrangements or
understandings with directors or officers of Lanier acting solely in their
capacities as such. Generally, following the Distribution, Lanier's executive
officers will be elected annually and will serve at the pleasure of Lanier's
board of directors.
Lanier has established suggested stock ownership guidelines for its
Chairman and Chief Executive Officer, President and Chief Operating Officer and
certain vice presidents. Target ownership levels are based on the officer's base
salary (three times base salary for the Chairman and Chief Executive Officer,
two and one half times base salary for the President and Chief Operating
Officer, two times base salary for executive vice presidents and up to one times
base salary for certain vice presidents). Attainment of the target levels may be
spread over a five year period and the suggested ownership level is 25% of
target after two years and an additional 25% each year thereafter. All shares
owned (or beneficially owned) by the officer will be counted towards the target,
including, for example, shares owned for the officer's account under a qualified
retirement plan.
HISTORICAL COMPENSATION OF LANIER EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
annual and long-term compensation for services to Lanier for Lanier's chief
executive officer and the other four most highly compensated executives of
Lanier. During the fiscal years ended July 2, 1999, July 3, 1998 and June 27,
1997, the individuals were compensated in accordance with Harris' plans and
policies. All references in the following tables to stock and stock options
relate to awards of stock and stock options granted by Harris. Harris has not
granted stock appreciation rights. Such amounts do not reflect the compensation
such persons will receive following the Distribution. All share data have been
adjusted to reflect a two-for-one stock split effected by Harris in September
1997. Harris options held by Lanier employees will be replaced by Lanier
Options. The option price and number of shares subject to each Lanier Option
will be adjusted so that the aggregate difference between the market price and
the option price will be equal for the Harris Options and the Lanier Options.
The number of Lanier Shares subject to each Lanier Option will be determined by
multiplying the number of shares subject to each Harris Option by the Lanier
Option Adjustment Ratio, and the option price of each Lanier Option will be
determined by dividing the price of each Harris option by the Lanier Option
Adjustment Ratio.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------------------
AWARDS PAYOUT
---------- ------------
ANNUAL COMPENSATION UNDERLYING
-------------------------------------- OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL FISCAL OTHER ANNUAL SARS PAYOUT(3)(4) COMPENSATION(5)
POSITION YEAR SALARY($) BONUS($) COMPENSATION(1) (#) ($) ($)
------------------ ------ --------- -------- --------------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Wesley E. Cantrell....... 1999 337,886 (2) 24,000 25,000 -- 27,879
Chairman and 1998 312,115 352,501 26,400 25,986 407,100 26,386
Chief Executive Officer 1997 300,000 403,100 15,200 25,988 302,500 25,411
C. Lance Herrin.......... 1999 228,077 (2) 9,600 10,000 -- 20,412
President and Chief 1998 218,077 255,585 10,560 8,000 159,300 20,046
Operating Officer 1997 206,154 292,320 6,080 8,000 176,000 7,677
James A. MacLennan(6).... 1999 165,385 (2) 0 1,800 -- 8,281
Executive Vice
President 1998 152,462 48,921 0 0 0 1,968
Chief Financial Officer 1997 43,269 12,499 0 0 0 132
David J. Marini.......... 1999 182,115 (2) 7,200 8,000 -- 11,793
Executive Vice
President 1998 169,038 181,070 7,920 13,658 119,475 11,538
and General Manager, 1997 161,539 174,825 4,560 11,040 137,500 3,451
Worldwide Field
Operations
Paul M. Anderson......... 1999 124,615 (2) 1,920 3,300 -- 10,382
Vice President -- 1998 88,654 122,283 2,640 2,000 39,825 7,443
Worldwide Marketing 1997 81,200 123,468 1,520 2,000 63,800 4,141
</TABLE>
- ---------------
(1) None of the executive officers named in the Summary Compensation Table
received personal benefits in excess of the lesser of $50,000 or 10% of
annual salary and bonus for fiscal 1999, 1998, or 1997; the amounts reported
represent dividend equivalent payments on outstanding performance shares
granted under the Harris Stock Incentive Plan for which the performance
period had not expired.
(2) Bonuses for the fiscal year ended July 2, 1999 have not yet been determined
by Lanier.
(3) The value of the performance shares earned for the three year performance
period ended July 3, 1998 (Mr. Cantrell -- 9,200 shares; Mr. Herrin -- 3,600
shares; Mr. Marini -- 2,700 shares; and Mr. Anderson -- 900 shares) is based
upon the closing price of Harris common stock on July 2, 1998 (the last
trading day of fiscal year 1998). LTIP payouts have not yet been determined
for the fiscal year ended July 2, 1999.
(4) Payouts for fiscal 1997 were made pursuant to grants under the Lanier Long
Term Incentive Plan for key employees. The payments reflected in the table
for fiscal year 1997 are for performance during the three-year performance
period ended June 27, 1997.
(5) Amounts reported include:
(i) Contributions to the Lanier Savings Incentive Plan for fiscal year
1999: Mr. Cantrell -- $5,209; Mr. Herrin -- $5,258, Mr.
MacLennan -- $3,863, Mr. Marini -- $4,931 and Mr. Anderson -- $5,194; for
fiscal year 1998: Mr. Cantrell -- $5,935, Mr. Herrin -- $7,415, Mr.
MacLennan -- $847, Mr. Marini -- $6,403 and Mr. Anderson -- $6,034; for
fiscal year 1997; Mr. Cantrell -- $4,500, Mr. Herrin -- $4,500, Mr.
MacLennan -- $132, Mr. Marini -- $2,729 and Mr. Anderson -- $3,247.
(ii) Contributions to the Lanier Supplemental Executive Retirement
Savings Plan for fiscal year 1999: Mr. Cantrell -- $17,686, Mr.
Herrin -- $11,509, Mr. MacLennan -- $3,939, Mr. Marini -- $5,737 and Mr.
Anderson -- $3,529; for fiscal year 1998: Mr. Cantrell -- $15,537, Mr.
Herrin -- $7,681, Mr. MacLennan -- $920, Mr. Marini -- $4,398, and Mr.
Anderson -- $363.
(iii) The taxable portion of premiums on life insurance provided for
fiscal year 1999: Mr. Cantrell -- $4,984, Mr. Herrin -- $3,645, Mr.
MacLennan -- $479, Mr. Marini -- $1,125 and Mr. Anderson -- $1,659; for
fiscal year 1998: Mr. Cantrell -- $4,914, Mr. Herrin -- $4,950, Mr.
MacLennan -- $201,
48
<PAGE> 62
Mr. Marini -- $737, and Mr. Anderson -- $1,046; for fiscal year 1997: Mr.
Cantrell -- $4,914, Mr. Herrin -- $3,177, and Mr. Anderson -- $894.
(6) Mr. MacLennan commenced employment with Lanier in March 1997; the amounts
reported for fiscal year 1997 reflect less than a full year of employment.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Shown below is additional information on grants of stock options made under
the Harris Stock Incentive Plan during Harris' fiscal year 1999. The amounts
shown for potential realizable values are based upon assumed annualized rates of
Harris stock price appreciation of five percent and ten percent over the full
ten year term (or shorter term) of the options, as required by the Commission,
and are not intended to represent or forecast possible future appreciation, if
any, of the price of Harris common stock.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
--------------------------------------------------------- AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION --------------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
---- ------------ ------------ ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Wesley E. Cantrell... 25,000 3.23 34.06 8/28/08 535,543 1,357,171
C. Lance Herrin...... 10,000 1.29 34.06 8/28/08 214,217 542,869
James A. MacLennan... 1,800 0.23 38.56 11/24/08 43,653 110,626
David J. Marini...... 8,000 1.03 34.06 8/28/08 171,374 434,295
Paul M. Anderson..... 3,300 0.43 34.06 8/28/08 70,692 179,147
</TABLE>
- ---------------
(1) All stock option grants were made under the Harris Stock Incentive Plan. The
term of each stock option is generally ten years and is exercisable in
installments of 50% after one year, 75% after two years, and 100% after
three years. The exercise price is the closing price of a share of Harris
common stock on the date of the grant. The exercise price may be paid in
cash and/or shares of Harris common stock, or "cashless exercise" procedures
may be used. If shares of Harris common stock are delivered in payment of
the exercise price, a Restoration Stock Option ("RSO") is granted equal to
the number of shares used to exercise the stock option. The expiration date
of these options is the same as the expiration date of the underlying
options. RSO grants are non-qualified, and are exercisable commencing six
months after the date of grant at the market value on the grant date. In the
event of a change of control, outstanding options become immediately
exercisable.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
Shown below is information with respect to the number of Harris shares
acquired upon exercise of stock options and the aggregate gains realized on
exercises during fiscal year 1999 for those executive officers of Lanier named
in the Summary Compensation Table. The table also sets forth the number of
shares covered by exercisable and unexercisable options held by such executives
on July 2, 1999 and the aggregate gains that would have been realized had these
options been exercised on July 2, 1999, even though these options were not
49
<PAGE> 63
exercised, and the unexercisable options could not have been exercised on July
2, 1999. These options were granted under the Harris Stock Incentive Plan.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
HARRIS SHARES VALUE FISCAL YEAR-END (#) FISCAL YEAR-END(2)($)
ACQUIRED ON REALIZED(1) --------------------------- ---------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wesley E. Cantrell.... 0 0 107,070 40,000 1,210,345 176,250
C. Lance Herrin....... 0 0 30,000 16,000 403,810 70,500
James A. MacLennan.... 0 0 0 1,800 0 1,463
David J. Marini....... 0 0 16,170 12,500 28,125 55,531
Paul M. Anderson...... 0 0 4,500 4,800 33,156 21,875
</TABLE>
- ---------------
(1) Market value on the date of exercise of Harris shares covered by exercised
options, less option exercise price.
(2) Market value of Harris shares underlying in-the-money options on July 2,
1999, less option exercise price. The market value is based on the July 2,
1999 closing price of $39.38 per share of the Harris common stock reported
as New York Exchange Composite Transactions.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
Shown below is information with respect to awards of performance shares
granted under the Harris Stock Incentive Plan during Harris fiscal year 1999 to
those Lanier executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUT UNDER
PERFORMANCE OR NON-STOCK PRICE-BASED PLANS
OTHER PERIOD ------------------------------------------
UNTIL THRESHOLD MAXIMUM
NUMBER OF MATURATION HARRIS TARGET HARRIS
NAME HARRIS SHARES OR PAYOUT SHARES(#) HARRIS SHARES(#) SHARES(#)
---- ------------- -------------- --------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
Wesley E. Cantrell......... 5,000 6/30/01 0 5,000 10,000
C. Lance Herrin............ 2,000 6/30/01 0 2,000 4,000
James A. MacLennan......... 0 -- 0 0 0
David J. Marini............ 1,500 6/30/01 0 1,500 3,000
Paul M. Anderson........... 0 -- 0 0 0
</TABLE>
Awards of performance shares under the Harris Stock Incentive Plan to
participants are made at the beginning of each performance period and are earned
based on the performance of Lanier, Harris or some combination thereof. The
Harris Stock Incentive Plan is designed to motivate key employees to maximize
stockholder value by aligning their interests with stockholder interests. For
Lanier executives the payout is determined by the Management Development and
Compensation Committee of Harris' board of directors based upon financial
performance compared with strategic plan objectives. Performance criteria
include Lanier's net income and return on capital during the three-year
strategic plan cycle. Share payouts are made following the determination of the
committee and range from zero to a maximum of 200% of the original shares
awarded. Participants receive quarterly cash payments on the performance share
awards in an amount equal to dividends paid to stockholders on the Harris
shares.
LANIER DEFINED BENEFIT RETIREMENT PLANS
Lanier's domestic defined benefit retirement program consists of (i) a
tax-qualified, funded pension plan, the Lanier Pension Equity Plan (the "PEP"),
which is available to substantially all of the United States employees of Lanier
and its participating subsidiaries and affiliated companies, and (ii) for
executive officers and other key employees, one non-qualified, unfunded Lanier
Supplemental Executive Retirement Plan (the "SERP") that provides benefits
which, but for certain limits imposed by the Internal Revenue Code on
tax-qualified plans,
50
<PAGE> 64
would be provided under the PEP. The PEP is a defined benefit plan. The PEP and
the SERP are fully paid by Lanier, and employees become vested upon the
completion of five years of service.
In July 1997, the PEP was amended to provide for a lump-sum retirement
benefit calculated by reference to a formula based upon final average pay, age
and years of service. However, if the determination of benefits payable to
individuals currently eligible for retirement or nearing retirement under the
revised PEP, including Mr. Cantrell and Mr. Herrin, would result in a reduction
of future benefit accruals under the PEP as in effect prior to the July 1997
amendment, the benefits payable to such a person would be as calculated under
the PEP without giving effect to the July 1997 amendment. Such employees will
receive annual pension benefits determined by adding (a) 1.22% of the average of
the employee's five highest consecutive years' compensation in the last ten
calendar years before retirement ("five-year average compensation") multiplied
by the lesser of the employee's years of service or 30 and (b) 0.33% of that
part of the employee's five-year average compensation in excess of a certain
amount, multiplied by the lesser of the employee's years of service or 30 (the
"Pre-July 1997 Formula"). Benefits are computed as a straight life annuity, but
may be converted to a lump sum or other form.
The pension benefits for Mr. MacLennan, Mr. Marini and Mr. Anderson under
the PEP is based on the July 1997 amendment and is stated as a lump sum benefit.
The formula for the lump sum benefit is the product of the employee's PEP
credits times the employee's five-year average compensation plus 50% of the
five-year average compensation in excess of a certain amount. PEP credits are
awarded for age and service performed on or after July 1, 1997 and for the
frozen accrued benefit calculated under Pre-July 1997 Formula described above
determined as of June 30, 1997. Benefits are computed as a lump sum but may be
converted to a straight life annuity or other form.
The following table sets forth the estimated annual benefits under the PEP
and the SERP for Mr. Cantrell and Mr. Herrin calculating annual benefits under
the terms of the PEP (as in effect prior to the July 1997 amendment) and the
SERP payable at age 65 or older.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
HIGHEST CONSECUTIVE FOR CREDITED YEARS OF SERVICE
5-YEAR AVERAGE --------------------------------------------
COMPENSATION 15 20 25 30
------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 250,000....................................... $ 56,600 $ 75,400 $ 94,300 $113,200
500,000...................................... 114,700 152,900 191,200 229,400
750,000...................................... 172,800 230,400 288,100 345,700
1,000,000...................................... 231,000 307,900 384,900 461,900
1,250,000...................................... 289,100 385,400 481,800 578,200
</TABLE>
The following table sets forth the estimated annual benefits under the PEP
and the SERP for Mr. MacLennan, Mr. Marini and Mr. Anderson, calculating
benefits under the terms of the PEP (as in effect after the July 1997 amendment)
and the SERP payable at age 65 or older:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS FOR
HIGHEST CONSECUTIVE CREDITED YEARS OF SERVICE
5-YEAR AVERAGE --------------------------------------------
COMPENSATION 15 20 25 30
------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 250,000....................................... $ 51,260 $ 60,580 $ 69,900 $ 76,114
500,000...................................... 104,884 123,954 143,024 155,737
750,000...................................... 158,508 187,328 216,148 235,361
1,000,000...................................... 212,132 250,702 289,271 314,984
1,250,000...................................... 265,756 314,075 362,395 394,608
</TABLE>
Executives have estimated credited years of service under the PEP and the
SERP as follows:
Wesley E. Cantrell -- 30 years
C. Lance Herrin -- 28 years
James A. MacLennan -- 2 years
51
<PAGE> 65
David J. Marini -- 7 years
Paul M. Anderson -- 29 years
Executives have estimated five-year average compensation under the PEP and
the SERP as follows:
<TABLE>
<S> <C>
Wesley E. Cantrell.......................................... $880,962
C. Lance Herrin............................................. $509,811
James A. MacLennan.......................................... $207,817
David J. Marini............................................. $391,592
Paul M. Anderson............................................ $208,048
</TABLE>
Compensation as in effect prior to the July 1997 amendment consists of base
salary, bonuses and sales commissions and, for periods prior to 1998, income
recognized upon the exercise of Harris stock options. Compensation as in effect
after the July 1997 amendment consists of gross income, including salary,
bonuses, sales commissions, vacation pay, compensation received while on an
authorized leave of absence, and short-term disability payments, but excluding
severance pay, payments made in consideration of a release of employment with
Lanier, payments attributable to domestic or foreign assignment differential,
any contest payments, any expense-related reimbursement, and payments made under
any long-term incentive plan, including income for the exercise of stock options
or the value of life insurance includible in the participant's gross income. For
periods prior to 1998, income recognized upon the exercise of Harris stock
options is included. Base salary includes certain deferred amounts.
Benefits under the PEP and the SERP are not subject to any deduction for
Social Security or other offset amounts.
LONG-TERM COMPENSATION
Equity-based incentive compensation for Lanier executives will be provided
under the Lanier Stock Plan, which will be adopted by Harris as the sole
stockholder of Lanier prior to the Distribution. The Lanier Stock Plan will
permit the granting of (1) stock based on performance criteria, (2) restricted
stock, (3) stock options, including incentive stock options, (4) stock
appreciation rights (freestanding or in tandem with stock options) and (5) other
awards valued by reference to, or otherwise based on, Lanier Share Awards
granted pursuant to the Lanier Stock Plan, as determined and approved by a
committee comprising of at least two non-employee directors (the "Committee").
Incentives will be awarded in the form of stock options, which provide
value to the executives only when the price of Lanier Shares increases above the
option grant price. Options may vest based on established performance criteria.
In connection with the Distribution, stock options granted to Lanier
employees under the Harris Stock Incentive Plan will be replaced by Lanier
Options. The option price and number of shares subject to each Lanier Option
will be adjusted so that the aggregate difference between the market price and
the option price will be equal for the Harris Options and the Lanier Options.
The number of Lanier Shares subject to each Lanier Option will be determined by
multiplying the number of shares subject to each Harris Option by the Lanier
Option Adjustment Ratio and the option price of each Lanier Option will be
determined by dividing the price of each Harris Option by the Lanier Option
Adjustment Ratio.
Incentives may also be awarded in the form of performance share awards. The
Lanier Stock Plan will provide for the Committee to determine the applicable
performance goals utilizing one or more of the performance criteria set forth in
the Lanier Stock Plan, Lanier's strategic planning process and a period of time
(generally, three fiscal years) during which Lanier's performance is to be
measured. The Committee then will assign to each participant a number of
performance shares and establish a mechanism for computing the number of
performance shares that can be earned during the period based on Lanier's
performance. If the performance goals are satisfied the participant will receive
a number of Lanier Shares equal to the number of performance shares.
52
<PAGE> 66
In connection with the Distribution, performance share awards granted to
Lanier employees under the Harris Stock Incentive Plan will be canceled and
replacement performance shares will be awarded under the Lanier Stock Plan by
multiplying the number of performance shares by the Lanier Option Adjustment
Ratio.
Cash-based long-term incentive compensation for Lanier executives will be
provided under the Lanier Long-Term Incentive Plan (the "LTIP") which is
currently in effect. The LTIP will permit the granting of cash awards based on
performance criteria. Awards granted pursuant to the LTIP will be determined and
approved by the Committee.
The LTIP will provide for the Committee to determine the applicable
performance criteria utilizing Lanier's strategic planning process and a period
of time (generally, three fiscal years) during which Lanier's performance is to
be measured. The Committee then will assign to each participant a cash award
target and establish a mechanism for computing the amount of the cash award that
can be earned during the period based on Lanier's performance.
The maximum amount that may be awarded to a participant each year is 200%
of such target award based on the degree of achievement of the performance
goals. The maximum incentive award payable to any executive officer in any year
will be $2,000,000. Upon the occurrence of a Change in Control (as defined in
the LTIP), Lanier will pay an amount equal to the target award for the
performance period. An employee may elect to defer all or a portion of any award
until normal retirement age. Interest will be paid on the amount deferred based
on the average long-term treasury bill rate. Deferred awards are payable in a
lump sum or installments as elected by the employee. Stock options and
performance share awards made under the Lanier Stock Plan or cash awards paid
under the LTIP are intended to satisfy the exemption for performance-based
compensation under Section 162(m) of the Internal Revenue Code.
LANIER DEFINED CONTRIBUTION RETIREMENT PLANS
Lanier's defined contribution retirement program consists of (i) a
tax-qualified funded defined contribution plan, the Lanier Savings Incentive
Plan (the "SIP"), which is available to substantially all of the United States
employees of Lanier and its participating subsidiaries and affiliated companies
and (ii) for executive officers and other key employees the non-qualified
unfunded Lanier Supplemental Executive Retirement Savings Plan (the "SIP SERP")
that provides benefits, which, but for certain limits imposed by the Internal
Revenue Code on tax-qualified plans, would be provided under the SIP. The SIP
will be funded by employee contributions and matching contributions (with
certain limitations) by Lanier, which may be made in cash or Lanier common
stock. An employee's interest in Lanier's contributions will vest based on the
employee's years of service and a five-year vesting schedule.
Benefits payable to an employee upon retirement will be based on the
contributions made by the employee, the contributions made by Lanier, if any,
and the performance of the employee's chosen investments. Therefore, Lanier
cannot estimate the annual benefits which will be payable to participate in the
SIP and the SIP SERP upon retirement at normal retirement age.
KEY CONTRIBUTOR PLAN
Lanier's Key Contributor Plan (the "Key Contributor Plan"), which is
currently in effect, links a portion of total compensation for certain key
employees to the attainment of corporate financial objectives as approved by the
Committee. Under the Key Contributor Plan, a target annual incentive award is
established for each participant with quarterly targets. The maximum incentive
amount that may be awarded to a participant each year is 120% of such target
award based on the degree of achievement of pre-established performance goals,
which may include any combination of the following: Lanier's revenue, earnings
per share of common stock, net income, return on equity, return on capital,
return on assets or total shareholder return or cash flow. The maximum annual
incentive award payable to any executive officer of Lanier is $2,000,000. The
awards are paid quarterly dependent upon attainment of quarterly performance
targets or the annual performance targets. Upon the occurrence of a Change in
Control (as defined in the Key Contributor Plan), Lanier will pay any annual
incentive awards to participants as soon as practicable in an amount not less
than the target annual incentive
53
<PAGE> 67
award as approved for the fiscal year. It is intended that the incentive awards
satisfy the exemption for performance-based compensation under Section 162(m) of
the Internal Revenue Code.
SEVERANCE AND CHANGE IN CONTROL AGREEMENTS
In connection with the Distribution, the executive officers of Lanier will
enter into Executive Severance Agreements ("Severance Agreement") which will
provide certain officers of Lanier with severance benefits in the event the
officer's employment is terminated by Lanier without Cause or by the executive
for Good Reason within two years following a Change in Control (all terms as
defined in the Severance Agreement). Under the Severance Agreement, the
executive agrees not to voluntarily terminate his or her employment with Lanier
during the six-month period following a Change in Control. The lump sum
severance benefit payable under the Severance Agreement equals the sum of (a)
the executive's unpaid base salary through date of termination, a pro rata
annual bonus (as determined under the Severance Agreement) and any compensation
deferred by the executive other than under a tax-qualified plan; and (b) from
one to three times the executive's highest annual rate of base salary during the
12-month period prior to the date of termination and from one to three times the
greater of the executive's highest annual bonus in the last three years, the
executive's target bonus for the year during which the Change in Control
occurred, or the executive's target bonus for the year in which the executive's
employment is terminated. In addition, the executive receives the same level of
medical, dental, accident, disability, life insurance and any similar benefits
(or the highest level of coverage provided to active executives, if more
favorable) or the cash equivalent to the value of such benefits if the executive
is prevented from participating in the plans for a period of two years following
termination. The executive also receives reimbursement for any relocation
expense related to pursuit of other business opportunities incurred within two
years following the date of termination, for recruitment or placement services
of up to $4,000 and for professional financial or tax planning services of up to
$5,000. The Severance Agreement also provides for a tax gross-up payment to the
executive in the event that payment of any severance benefits are subject to
excise tax imposed under Section 4999 of the Internal Revenue Code. In addition,
Lanier shall reimburse the executive for any legal fees and costs with respect
to any dispute arising under the Severance Agreement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
All of the outstanding Lanier Shares are, and prior to the Distribution
will be, held beneficially and of record by Harris. After the Distribution,
Harris will retain approximately 10% of the outstanding Lanier Shares. The
following table sets forth each person or entity, other than Harris, that is
expected to own beneficially more than 5% of the Lanier Shares outstanding
immediately following the Distribution, based on the ownership of Harris common
stock as known to Lanier.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS(1)
------------------- -------------------- -----------
<S> <C> <C>
The Prudential Insurance Company of America............. 7,965,692(2) 9.0%
751 Broad Street
Newark, New Jersey 07102-3777
J.P. Morgan & Co. Incorporated.......................... 4,971,371(3) 5.6%
60 Wall Street
New York, NY 10260
</TABLE>
- ---------------
(1) Based on the number of Lanier Shares expected to be outstanding on the
Distribution Date.
(2) The information is based on an Amended Schedule 13G with respect to Harris
common stock filed by The Prudential Insurance Company of America
("Prudential") with the Commission on May 7, 1999 in which Prudential states
that it has sole dispositive and voting power with respect to 1,095,000 of
the Harris shares, shared dispositive power with respect to 6,867,693 of the
Harris shares and shares voting power with respect to 6,843,035 of the
Harris shares.
54
<PAGE> 68
(3) The information is based on a Schedule 13G with respect to Harris common
stock filed by J.P. Morgan & Co. Incorporated ("J.P. Morgan") with the
Commission on February 22, 1999 in which J.P. Morgan states that it has sole
dispositive power with respect to 4,717,071 of the Harris shares, sole
voting power with respect to 3,509,011 of the Harris shares, shared
dispositive power with respect to 209,700 of the Harris shares and shared
voting power with respect to 99,300 of the Harris shares.
55
<PAGE> 69
BENEFICIAL OWNERSHIP OF MANAGEMENT
All of the outstanding Lanier Shares are, and prior to the Distribution
will be, held beneficially and of record by Harris and no director or executive
of Lanier owns any Lanier Shares. The following table sets forth information
concerning the Lanier Shares that are projected to be beneficially owned after
the Distribution by each of the directors and each of the executive officers
named in the Summary Compensation Table and by all directors and executive
officers as a group. The projections are based on the number of Harris shares
held by such persons as of June 18, 1999 and reflect the Distribution Ratio of
one Lanier Share for every share of common stock of Harris held on the Record
Date.
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
SHARES DEFERRED EXERCISABLE
BENEFICIALLY STOCK WITHIN PERCENT
NAME OF BENEFICIAL OWNER OWNED(1)(2) UNITS(3) 60 DAYS(4) OF CLASS(5)
------------------------ ------------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Wesley E. Cantrell..................... 74,692 445 22,500 *
C. Lance Herrin........................ 16,052 195 9,000 *
Sidney E. Harris....................... 0 0 0 *
David H. Hughes........................ 0 0 0 *
Amos R. McMullian...................... 0 0 0 *
Clarence B. Rogers, Jr................. 0 0 0 *
James A. MacLennan..................... 114 93 0 *
David J. Marini........................ 20,185 0 7,000 *
Paul M. Anderson....................... 2,942 76 2,650 *
All executive officers and directors
as a group (13 persons).............. 119,311 831 46,450 *
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated, and subject to community property laws where
applicable, Lanier believes that each of the persons named in the table has
sole voting and investment power with respect to the Lanier Shares indicated
as beneficially owned. The information is based on information supplied by
the directors and executive officers.
(2) The Lanier Shares reported include performance shares expected to be awarded
under Lanier's Stock Plan to be adopted in connection with the Distribution,
as discussed above under "Long-Term Compensation," and assumes a Lanier
Option Adjustment Ratio of 1:1. Under the Lanier's Stock Plan, the named
individuals would have sole voting power but no investment power, as
follows: Mr. Cantrell -- 25,000; Mr. Herrin -- 10,000; Mr. Marini -- 7,500;
and Mr. Anderson -- 2,000.
(3) The Lanier Shares reported are amounts deferred in the form of stock
equivalent units under the Lanier Supplemental Executive Retirement Savings
Plan, as discussed above under "Lanier Defined Contribution Retirement
Plans." The deferred stock equivalent units are settled in cash following,
or under certain circumstances prior to, retirement, and may not be voted or
transferred.
(4) The Lanier Shares reported relate to Lanier Options expected to be awarded
under Lanier's Stock Plan, as discussed above under "Long-Term
Compensation," and assumes a Lanier Option Adjustment Ratio of 1:1. The
Lanier Shares reported can be acquired through exercise of such Lanier
Options on or prior to September 1, 1999.
(5) Based on the number of Lanier Shares expected to be outstanding on the
Distribution Date.
DESCRIPTION OF LANIER'S CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
Under Lanier's restated certificate of incorporation, the total number of
shares of all classes of stock that Lanier has authority to issue is
525,000,000, of which 25,000,000 are shares of preferred stock, without par
value, and 500,000,000 are shares of common stock, par value $0.01 per share.
Based on the number of Harris shares outstanding at -, 1999, - Lanier Shares,
constituting approximately 90% of the Lanier Shares outstanding as of the
Distribution Date, will be issued to stockholders of Harris. Harris will retain
- - Lanier Shares, or approximately 10% of the outstanding Lanier Shares. All of
the Lanier Shares to be distributed to Harris stockholders in the Distribution
will be fully paid and non-assessable. - Lanier Shares have been reserved for
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issuance under Lanier's Stock Plan. No shares of preferred stock have been
issued, although shares of preferred stock have been reserved for issuance under
the Rights Agreement (as defined below).
The following summary of certain terms of Lanier's capital stock describes
material provisions of, but does not purport to be complete and is subject to,
and qualified in its entirety by, Lanier's restated certificate of incorporation
and Lanier's bylaws, the forms of which are included as exhibits to the
Registration Statement, and by applicable provisions of law.
COMMON STOCK
The holders of the Lanier Shares will be entitled to one vote for each
share on all matters voted on by stockholders, and the holders of such shares
will possess all voting power, except as otherwise required by law or provided
in any resolution adopted by Lanier's board of directors with respect to any
series of preferred stock of Lanier. There are no cumulative voting rights.
Accordingly, the holders of a majority of the Lanier Shares voting for the
election of directors can elect all of the directors, if they choose to do so,
subject to any rights of the holders of preferred stock to elect directors.
Subject to any preferential or other rights of any outstanding series of
preferred stock of Lanier that may be designated by Lanier's board of directors,
the holders of the Lanier Shares will be entitled to such dividends as may be
declared from time to time by Lanier's board of directors from funds available
therefor, and upon liquidation will be entitled to receive pro rata all assets
of Lanier available for distribution to such holders. See "Risk
Factors -- Uncertainty of Dividends" on page 11 and "Dividend Policies" on page
23.
PREFERRED STOCK
Lanier's board of directors is authorized without further stockholder
approval (except as may be required by applicable law or New York Stock Exchange
regulations) to provide for the issuance of shares of preferred stock, in one or
more series, and to fix for each such series such voting powers, designations,
preferences and relative, participating, optional and other special rights, and
such qualifications, limitations or restrictions, as are stated in the
resolution adopted by Lanier's board of directors providing for the issuance of
such series and as are permitted by the Delaware General Corporation Law. See
"Certain Anti-Takeover Provisions of Lanier's Certificate of Incorporation,
Bylaws and Rights Agreement and Delaware Law -- Preferred Stock" beginning on
page 60. Should Lanier's board of directors elect to exercise this authority,
the rights and privileges of holders of the Lanier Shares could be made subject
to the rights and privileges of any such series of preferred stock. Presently,
Lanier has no plans to issue any preferred stock, except that Lanier's
Stockholder Protection Rights Agreement (the "Rights Agreement") provides for
the issuance of shares of participating preferred stock under the circumstances
specified in the Rights Agreement, upon exercise or exchange of rights (the
"Rights") issued thereunder. See "Certain Anti-Takeover Provisions of Lanier's
Certificate of Incorporation, Bylaws and Rights Agreement and Delaware
Law -- Stockholder Protection Rights Agreement" beginning on page 60.
NO PREEMPTIVE RIGHTS
No holder of any stock of Lanier of any class authorized at the
Distribution Date will have any preemptive right to subscribe to any securities
of Lanier of any kind or class.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for Lanier immediately following the
Distribution will be ChaseMellon Shareholder Services, L.L.C.
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CERTAIN ANTI-TAKEOVER PROVISIONS
OF LANIER'S CERTIFICATE OF INCORPORATION, BYLAWS AND
RIGHTS AGREEMENT AND DELAWARE LAW
GENERAL
Lanier's restated certificate of incorporation, Lanier's bylaws, the Rights
Agreement and the Delaware General Corporation Law contain certain provisions
that could delay or make more difficult an acquisition of control of Lanier not
approved by Lanier's board of directors, whether by means of a tender offer,
open market purchases, a proxy contest or otherwise. These provisions have been
implemented to enable Lanier, particularly (but not exclusively) in the initial
years of its existence as an independent, publicly owned company, to develop its
business in a manner which will foster its long-term growth without disruption
caused by the threat of a takeover not deemed by Lanier's board of directors to
be in the best interests of Lanier and its stockholders. See also
"-- Stockholder Protection Rights Agreement" beginning on page 60. These
provisions could have the effect of discouraging third parties from making
proposals involving an acquisition or change of control of Lanier, although such
a proposal, if made, might be considered desirable by a majority of Lanier's
stockholders. These provisions may also have the effect of making it more
difficult for third parties to cause the replacement of the current management
of Lanier without the concurrence of Lanier's board of directors. In addition,
certain provisions of the Tax Disaffiliation Agreement to be entered into by
Harris and Lanier may also have the effect of discouraging third parties from
making proposals involving an acquisition or change of control of Lanier prior
to the second anniversary of the Distribution Date. See "Relationship Between
Harris and Lanier Following the Distribution -- Tax Disaffiliation Agreement"
beginning on page 20. Set forth below is a description of the provisions
contained in Lanier's restated certificate of incorporation and bylaws, the
Rights Agreement and the Delaware General Corporation law that could impede or
delay an acquisition of control of Lanier that Lanier's board of directors has
not approved. This description is intended as a summary only and is qualified in
its entirety by reference to Lanier's restated certificate of incorporation,
Lanier's bylaws and the Rights Agreement, the forms of which are included as
exhibits to the Registration Statement, as well as the Delaware General
Corporation law.
CLASSIFIED BOARD OF DIRECTORS
Lanier's restated certificate of incorporation provides for Lanier's board
of directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of Lanier's board of
directors will be elected each year. The first class of directors will initially
serve a one-year term, and the second class of directors will initially serve a
two-year term. Thereafter, each class of directors will be elected for a
three-year term. See "Lanier's Management -- Board of Directors" beginning on
page 43.
This provision could prevent a party who acquires control of a majority of
the outstanding voting stock from obtaining control of Lanier's board of
directors until the second annual stockholders meeting following the date on
which the acquiror obtains the controlling stock interest and could have the
effect of discouraging a potential acquiror from making a tender offer or
otherwise attempting to obtain control of Lanier and could thus increase the
likelihood that incumbent directors will retain their positions.
NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES
Lanier's restated certificate of incorporation and bylaws provide that the
number of directors shall be fixed only by resolution at Lanier's board of
directors from time to time. Lanier's restated certificate of incorporation
provides that the directors may be removed by stockholders only both for cause
and by the affirmative vote of at least 80% of the shares entitled to vote.
Lanier's restated certificate of incorporation and bylaws provide that
vacancies on the board of directors may be filled only by a majority vote of the
remaining directors or by the sole remaining director.
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STOCKHOLDER ACTION
Lanier's restated certificate of incorporation provides that stockholder
action may be taken only at an annual or special meeting of stockholders and
that stockholders may not act by written consent. Lanier's restated certificate
of incorporation and bylaws provide that special meetings of stockholders may be
called only by Lanier's board of directors. Stockholders are not permitted to
call a special meeting or to require Lanier's board of directors to call a
special meeting of stockholders.
ADVANCE NOTICE FOR STOCKHOLDER PROPOSALS OR NOMINATIONS AT MEETINGS
Lanier's bylaws establish an advance notice procedure for stockholder
proposals to be brought before any annual or special meeting of stockholders and
for nominations by stockholders of candidates for election as directors at an
annual meeting or a special meeting at which directors are to be elected.
Subject to any other applicable requirements, including, without limitation,
Rule 14a-8 under the Exchange Act, only such business may be conducted at a
meeting of stockholders as has been brought before the meeting by, or at the
direction of, Lanier's board of directors, or by a stockholder who has given
Lanier's Secretary timely written notice, in proper form, of the stockholder's
intention to bring that business before the meeting. The presiding officer at
such meeting has the authority to make such determinations. Only persons who are
nominated by, or at the direction of, Lanier's board of directors, or who are
nominated by a stockholder who has given timely written notice, in proper form,
to Lanier's Secretary prior to a meeting at which directors are to be elected
will be eligible for election as directors of Lanier.
To be timely, notice of nominations or other business to be brought before
any meeting must be delivered to Lanier's Secretary not less than 90 days nor
more than 120 days prior to the first anniversary date of the annual meeting for
the preceding year; provided, however, that if the annual meeting is not
scheduled to be held within a period that commences 30 days before and ends 30
days after such anniversary date, such advance notice shall be given by the
later of (i) the close of business on the date 90 days prior to the date of the
annual meeting or (ii) the close of business on the tenth day following the date
that the meeting date is first publicly announced or disclosed.
Any stockholder who gives notice of a proposal must provide the text of the
proposal to be presented, a brief written statement of the reasons why he or she
favors the proposal, the stockholder's name and address, the number and class of
all shares of each class of Lanier stock owned, any material interest the
stockholder may have in the proposal (other than as a Lanier stockholder) and,
in the case of any person that holds Lanier stock through a nominee or "street
name" holder of record of such stock, evidence establishing such person's
indirect ownership of Lanier stock and entitlement to vote on the matter
proposed at the annual meeting.
The notice of any nomination for election as a director must set forth the
name of the nominee, the number and class of all shares of each class of Lanier
capital stock beneficially owned by the nominee, the information regarding the
nominee required by paragraphs (a), (e) and (f) of Item 401 of Regulation S-K
adopted by the Commission, the signed consent of each nominee to serve as a
director if elected, the nominating stockholder's name and address, the number
and class of shares of Lanier stock owned by such nominating stockholder and, in
the case of any person that holds Lanier stock through a nominee or "street
name" holder of record of such stock, evidence establishing such person's
indirect ownership of Lanier stock and entitlement to vote on the matter
proposed at the annual meeting.
AMENDMENTS TO BYLAWS
Lanier's restated certificate of incorporation provides that only Lanier's
board of directors or the holders of 80% of the shares of Lanier's capital stock
entitled to vote at an annual or special meeting of stockholders have the power
to amend or repeal Lanier's bylaws.
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
Any proposal to amend, alter, change or repeal any provision of Lanier's
restated certificate of incorporation requires approval by the affirmative vote
of a majority of the voting power of all of the shares of Lanier's capital
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stock entitled to vote on such matters, with the exception of certain provisions
of Lanier's restated certificate of incorporation which require a vote of 80% or
more of such voting power.
PREFERRED STOCK
Lanier's restated certificate of incorporation authorizes Lanier's board of
directors by resolution to issue one or more series of Preferred Stock and to
determine, with respect to any series of preferred stock, the terms and rights
of such series.
Lanier believes that the availability of the preferred stock will provide
Lanier with increased flexibility in structuring possible future financing and
acquisitions and in meeting other corporate needs which might arise. Having such
authorized shares available for issuance will allow Lanier to issue shares of
preferred stock without the expense and delay of a special stockholders'
meeting. The authorized shares of preferred stock, as well as Lanier Shares,
will be available for issuance without further action by Lanier's stockholders,
unless such action is required by applicable law or the rules of the New York
Stock Exchange or any other stock exchange on which Lanier's securities may be
listed. Although Lanier's board of directors has no intention at the present
time of doing so, it would have the power (subject to applicable law) to issue a
series of preferred stock that could, depending on the terms of such series,
impede the completion of a merger, tender offer or other takeover attempt. For
instance, subject to applicable law, such series of preferred stock might impede
a business combination by including class voting rights which would enable the
holder to block such a transaction. See "-- Stockholder Protection Rights
Agreement" below.
STOCKHOLDER PROTECTION RIGHTS AGREEMENT
Each share of Lanier Common Stock has attached to it one right (a "Right").
Each Right entitles its registered holder to purchase from Lanier, on or after
the Separation Time (as hereinafter defined), one one-hundredth of a share of
Participating Preferred Stock, no par value (the "Participating Preferred"), for
$- (the "Exercise Price"), subject to adjustment. The Rights will not trade
separately from the Lanier Common Stock until the Separation Time.
The Rights will be evidenced by common stock certificates until the earlier
of (either, the "Separation Time") (i) the close of business on the tenth
business day (or such later date as Lanier's board of directors may from time to
time fix by resolution adopted prior to the Separation Time that would otherwise
have occurred) after the date on which any Person (as defined in the Rights
Agreement) commences a tender or exchange offer which, if consummated, would
result in such Person's becoming an Acquiring Person (as defined below) and (ii)
the first date (the "Stock Acquisition Date") of public announcement by Lanier
(by any means) that a Person has become an Acquiring Person; provided that if a
tender or exchange offer referred to in clause (i) is canceled, terminated or
otherwise withdrawn prior to the Separation Time without the purchase of any
shares of stock pursuant thereto, such offer shall be deemed never to have been
made. An Acquiring Person is any Person who is the Beneficial Owner (as defined
in the Rights Agreement) of 15% or more of the outstanding Lanier Shares,
excluding (i) Lanier, any majority-owned subsidiary of Lanier or any employee
stock ownership or other employee benefit plan of Lanier or a subsidiary of
Lanier (or any entity or trustee holding shares of Lanier common stock pursuant
to the terms of any such plan or for the purpose of funding any such plan or
funding other employee benefits for employees of Lanier or any subsidiary of
Lanier), (ii) any Person who is the beneficial owner of 15% or more of the
outstanding shares of Lanier Common Stock on the date of the Rights Agreement or
any Person who became the Beneficial Owner of 15% or more of the outstanding
Lanier Shares solely as a result of an acquisition of Lanier Shares by Lanier,
until such time as such Person acquires additional Lanier Shares other than
through a dividend or stock split, (iii) any Person who becomes an Acquiring
Person without any plan or intent to seek or affect control of Lanier if such
Person, upon notice by Lanier, promptly divests sufficient securities to reduce
its Beneficial Ownership below 15% or (iv) any Person who Beneficially Owns
Lanier Shares that were solely (A) acquired upon exercise of an option granted
by Lanier in connection with an agreement to merge with, or acquire, Lanier
entered into prior to a Stock Acquisition Date, (B) owned by such Person and its
Affiliates and Associates (as defined in the Rights Agreement) at the time of
such grant or (C) amounting to less than 1% of the outstanding Lanier Shares,
acquired by Affiliates and Associates of such Person after the time of such
grant.
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The Rights Agreement provides that, until the Separation Time, the Rights
will be transferred with and only with the Lanier common stock. Lanier Share
certificates issued after the Record Time but prior to the Separation Time shall
evidence one Right for each share of Lanier common stock represented thereby and
shall contain a legend incorporating by reference the terms of the Rights
Agreement (as it may be amended from time to time). Promptly following the
Separation Time, separate certificates evidencing the Rights ("Rights
Certificates") will be mailed to holders of record of Lanier Shares at the
Separation Time.
The Rights will not be exercisable until the Separation Time. The Rights
will expire on the earliest of (i) the Exchange Time (as defined below), (ii)
the close of business on the tenth anniversary of the Record Time, unless
extended by action of Lanier's board of directors, (iii) the date on which the
Rights are redeemed as described below and (iv) immediately prior to the
effective time of a consolidation, merger or share exchange of Lanier (A) into
another corporation or (B) with another corporation where Lanier is the
surviving corporation but Lanier Shares are converted into cash or securities of
another corporation, in either case pursuant to an agreement that Lanier entered
into prior to a Stock Acquisition Date (in any such case, the "Expiration
Time").
The Exercise Price and the number of Rights outstanding, or in certain
circumstances the securities purchasable upon exercise of the Rights, may be
adjusted from time to time to prevent dilution in the event of a common stock
dividend on, or a subdivision or a combination into a smaller number of shares
of, Lanier Common Stock, or the issuance or distribution of any securities or
assets in respect of, in lieu of or in exchange for Lanier Common Stock.
In the event that prior to the Expiration Time a Flip-in Date (as defined
below) occurs, each Right (other than Rights Beneficially Owned by the Acquiring
Person or any affiliate or associate thereof, which Rights shall become void)
shall constitute the right to purchase from Lanier, upon the exercise thereof in
accordance with the terms of the Rights Agreement, that number of shares of
Lanier Common Stock having an aggregate market price (as defined in the Rights
Agreement), on the Stock Acquisition Date equal to twice the Exercise Price for
an amount in cash equal to the then current Exercise Price. In addition,
Lanier's board of directors may, at its option, at any time after a Flip-in Date
and prior to the time that an Acquiring Person becomes the Beneficial Owner of
more than 50% of the outstanding shares of Lanier Common Stock, elect to
exchange all (but not less than all) the then outstanding Rights (other than
Rights Beneficially Owned by the Acquiring Person or its Affiliates or
Associates, which Rights become void) for shares of Lanier Common Stock at an
exchange ratio of one share of Lanier Common Stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date of the Separation Time (the "Exchange Ratio").
Immediately upon such action by Lanier's board of directors (the "Exchange
Time"), the right to exercise the Rights will terminate and each Right will
thereafter represent only the right to receive a number of shares of Lanier
Common Stock equal to the Exchange Ratio. A "Flip-In Date" is defined in the
Rights Agreement as any Stock Acquisition Date or such later date as Lanier's
board of directors may from time to time fix by resolution adopted prior to the
Flip-In Date that would otherwise have occurred.
Whenever Lanier becomes obligated under the preceding paragraph to issue
shares of Lanier Common Stock upon exercise of or in exchange for Rights,
Lanier, at its option, may substitute shares of participating preferred stock
for shares of Lanier Common Stock, at a ratio of one one-hundredth of a share of
the Participating Preferred for each share of Lanier Common Stock.
In the event that prior to the Expiration Time Lanier enters into,
consummates or permits to occur a transaction or series of transactions after
the time an Acquiring Person has become such in which, directly or indirectly,
(i) Lanier shall consolidate, merge or participate in a statutory share exchange
with any other Person if, at the time of the consolidation, merger or statutory
share exchange or at the time Lanier enters into any agreement with respect to a
consolidation, merger or share exchange, the Acquiring Person is the Beneficial
Owner of 90% or more of the outstanding shares of Lanier Common Stock or
controls Lanier's board of directors and either (A) any term of or arrangement
concerning the treatment of shares of Lanier Common Stock in such consolidation,
merger or statutory share exchange relating to the Acquiring Person is not
identical to the terms and arrangements relating to other holders of Lanier
Common Stock or (B) the person with whom the transaction or transactions occur
is the Acquiring Person or an affiliate or associate of the Acquiring Person or
(ii) Lanier or one or more of its subsidiaries sells or otherwise transfers
assets (A) aggregating more than 50% of the assets
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(measured by either book value or fair market value) or (B) generating more than
50% of the operating income or cash flow of Lanier and its subsidiaries taken as
a whole to any other Person (other than Lanier or one or more of its wholly
owned subsidiaries) or to two or more such Persons which are affiliated or
otherwise acting in concert, if, at the time of such sale or transfer of assets
or at the time Lanier (or any such subsidiary) enters into an agreement with
respect to such sale or transfer, the Acquiring Person controls Lanier's board
of directors (a "Flip-over Transaction or Event"), Lanier shall take such action
as shall be necessary to ensure, and shall not enter into, consummate or permit
to occur such Flip-over Transaction or Event until it shall have entered into a
supplemental agreement with the Person engaging in such Flip-over Transaction or
Event or the parent corporation thereof (the "Flip-over Entity"), for the
benefit of the holders of the Rights, provided that upon consummation or
occurrence of the Flip-over Transaction or Event (i) each Right shall thereafter
constitute the right to purchase from the Flip-over Entity, upon exercise
thereof in accordance with the terms of the Rights Agreement, that number of
shares of common stock of the Flip-over Entity having an aggregate market price
on the date of consummation or occurrence of such Flip-over Transaction or Event
equal to twice the Exercise Price for an amount in cash equal to the then
current Exercise Price and (ii) the Flip-over Entity shall thereafter be liable
for, and shall assume, by virtue of such Flip-over Transaction or Event and such
supplemental agreement, all the obligations and duties of Lanier pursuant to the
Rights Agreement.
Lanier's board of directors may, at its option, at any time prior to the
Flip-in Date, redeem all (but not less than all) the then outstanding Rights at
a redemption price of $.01 per Right. Immediately upon the action of Lanier's
board of directors to redeem the Rights, without any further action and without
any notice, the right to exercise the Rights will terminate and each Right will
thereafter represent only the right to receive the redemption price in cash or
securities of Lanier.
The holders of Rights will, solely by reason of their ownership of Rights,
have no rights as stockholders of Lanier, including the right to vote or to
receive dividends.
Lanier and the Rights Agent may from time to time supplement or amend the
Rights Agreement without the approval of any holders of Rights (i) prior to the
Flip-In Date, in any respect and (ii) on or after the Flip-In Date, to make any
changes that Lanier may deem necessary or desirable and which shall not
materially adversely affect the interests of the holders of Rights generally or
in order to cure any ambiguity or correct or supplement any inconsistent or
defective provision contained therein.
The Rights will not prevent a takeover of Lanier. However, the Rights may
cause substantial dilution to a person or group that acquires 15% or more of the
Lanier Shares unless the Rights are first redeemed by Lanier's board of
directors. Nevertheless, the rights should not interfere with a transaction that
is in the best interests of Lanier and its stockholders because the Rights can
be terminated on or prior to the Flip-in Date and before the transaction is
consummated.
As long as the rights are attached to Lanier Common Stock, Lanier will
issue one Right with each new share of Lanier Common Stock so that all shares
will have Rights attached. Lanier's board of directors has reserved - shares of
participating preferred stock for issuance upon exercise of the Rights.
The Rights Agreement (which includes as Exhibit A the forms of Rights
Certificate and Election to Exercise and as Exhibit B the form of Certificate of
Designation and Terms of the Participating Preferred Stock) is filed as an
exhibit to the Registration Statement. The foregoing description of the Rights
is qualified in its entirety by reference to the Rights Agreement and such
exhibits.
DELAWARE LAW
Under Section 203 of the Delaware General Corporation Law ("Section 203"),
which will be applicable to Lanier after the Distribution, certain "business
combinations" (defined generally to include mergers or consolidations between
the Delaware corporation and an interested stockholder and transactions with an
interested stockholder involving the assets or stock of the corporation or its
majority-owned subsidiaries and transactions which increase the interested
stockholder's percentage ownership of stock) between a publicly held Delaware
corporation and an "interested stockholder" (defined generally as those
stockholders who become beneficial owners of 15% or more of a Delaware
corporation's voting stock or their affiliates) are prohibited for a
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three-year period following the date that such stockholder became an interested
stockholder, unless (i) the corporation has elected in its certificate of
incorporation not to be so governed, (ii) either the business combination or the
proposed acquisition of stock resulting in the person becoming an interested
stockholder was approved by the board of directors of the corporation before the
other party to the business combination became an interested stockholder, (iii)
upon consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by officers who are also directors or held in employee benefit plans in which
the employees do not have a confidential right to tender or vote stock held by
the plan) or (iv) the business combination was approved by the board of
directors of the corporation and also ratified by two-thirds of the voting stock
which the interested stockholder did not own.
Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period, although the
stockholders may elect to exclude a corporation from the restrictions imposed
thereunder. Lanier's restated certificate of incorporation does not exclude
Lanier from restrictions imposed under Section 203. The provisions of Section
203 may encourage companies interested in acquiring Lanier to negotiate in
advance with Lanier's board of directors, since the stockholder approval
requirement would be avoided if a majority of the directors then in office
approved either the business combination or the transaction which results in the
stockholder becoming an interested stockholder. Such provisions also may have
the effect of preventing changes in the management of Lanier. It is possible
that such provisions could make it more difficult to accomplish transactions
which stockholders may otherwise deem to be in their best interests.
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
LIMITATION ON LIABILITY OF DIRECTORS
Pursuant to authority conferred by Section 102 of the Delaware General
Corporation Law, Article Eleventh of Lanier's restated certificate of
incorporation ("Article Eleventh") eliminates the personal liability of Lanier's
directors to Lanier or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent that such exemption from
liability or limitation thereof is not permitted under the Delaware General
Corporation Law as currently in effect or as it may hereafter be amended. Under
the Delaware General Corporation Law as in effect on the date hereof, Lanier's
directors remain liable for (i) any breach of the duty of loyalty to Lanier or
its stockholders, (ii) any act or omission not in good faith or which involves
intentional misconduct or a knowing violation of law, (iii) any violation of
Section 174 of the Delaware General Corporation Law, which proscribes the
payment of dividends and stock purchases or redemptions under certain
circumstances and (iv) any transaction from which directors derive an improper
personal benefit.
Article Eleventh provides that any future repeal or amendment of its terms
(including any amendment or repeal of this Article Eleventh made by virtue of
any change in the Delaware General Corporation Law) will not adversely affect
any rights of directors existing thereunder with respect to acts or omissions
occurring prior to such repeal or amendment.
INDEMNIFICATION
Lanier's bylaws and Section 145 of the Delaware General Corporation Law,
which allows, and in some cases requires, the indemnification of directors and
officers under certain circumstances, grant Lanier's directors and officers a
right to indemnification to the fullest extent permitted by law for all expenses
relating to civil, criminal, administrative or investigative procedures to which
they are a party (i) by reason of the fact that they are or were directors or
officers of Lanier or (ii) by reason of the fact that, while they are or were
directors or officers of Lanier, they are or were serving at the request of
Lanier as a director, officer or employee of another enterprise. Lanier's bylaws
further provide that an advancement for any such expenses shall only be made
upon delivery to Lanier by the indemnitee of an undertaking to repay all amounts
so advanced if it is ultimately determined that such indemnitee is not entitled
to be indemnified by Lanier.
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INDEMNIFICATION AGREEMENTS
In connection with the Distribution, Lanier will enter into indemnification
agreements with certain of its directors and officers. These agreements will
require Lanier to indemnify these directors and officers with respect to their
activities as directors or officers of Lanier or when serving at Lanier's
request as a director, officer or trustee of another corporation, trust or other
enterprise against expenses (including attorneys' fees, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by them in any
threatened, pending or completed suit or proceeding to which they are, or are
threatened to be made, parties as a result of their service to Lanier. Lanier
will agree to indemnify each indemnitee for any one or a combination of the
following, whichever is most advantageous to the indemnitee: (i) the benefits
provided by Lanier's restated certificate of incorporation and bylaws in effect
on the date of the indemnification agreement; (ii) the benefits provided by
Lanier's restated certificate of incorporation and bylaws at the time expenses
are incurred by the indemnitee; (iii) the benefits allowable under Delaware law
in effect on the date of the indemnification agreement; (iv) the benefits
allowable under the law of the jurisdiction under which Lanier exists at the
time expenses are incurred by the indemnitee; (v) the benefits available under
liability insurance obtained by Lanier; and (vi) such other benefits as may be
otherwise available to indemnitee under Lanier's existing practices. Under the
indemnification agreements, each indemnitee will continue to be indemnified even
after ceasing to occupy a position as an officer, director, employee or agent of
Lanier with respect to suits or proceedings arising out of acts or omissions
during his or her service to Lanier.
Each indemnitee will agree to notify Lanier promptly of any proceeding
brought or threatened and not to make any admission or settlement without
Lanier's consent, unless the indemnitee determines to undertake his or her own
defense and waives the benefits of the indemnification agreement.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The consolidated financial statements of Lanier Worldwide, Inc. and its
subsidiaries at July 2, 1999 and July 3, 1998, and for each of the three years
in the period ended July 2, 1999, appearing in this Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report appearing thereon elsewhere herein, and are included in reliance upon
such report given on the authority of such firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
Lanier has filed with the Commission the Registration Statement under the
Securities Exchange Act of 1934, as amended, with respect to the Lanier Common
Stock and the preferred stock purchase rights associated with each share of
Lanier Common Stock. This document does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto, to
which reference is hereby made. Statements made in this document as to the
contents of any contract, agreement or other document referred to herein are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
such exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.
The Registration Statement and the exhibits thereto filed by Lanier with
the Commission may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as at the Regional Offices of the Securities and Exchange
Commission at Seven World Trade Center, Thirteenth Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such information can be obtained by mail from the
Public Reference Branch of the Securities and Exchange Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
maintains a website that contains reports, proxy and information statements and
other information regarding statements regarding registrants that file
electronically with the Commission. The address of the Commission's website is
http://www.sec.gov. The address of Lanier's website is http://www.lanier.com.
64
<PAGE> 78
After the Distribution, Lanier will be required to comply with the
reporting requirements of the Exchange Act and to file with the Commission
reports, proxy statements and other information as required by the Exchange Act.
Additionally, Lanier will be required to provide annual reports containing
audited financial statements to its stockholders in connection with its annual
meetings of stockholders. After the Distribution, these reports, proxy
statements and other information will be available to be inspected and copied at
the public reference facilities of the Commission or obtained by mail or over
the Internet from the Commission, as described above. After the Distribution,
the Lanier Shares will be listed on the New York Stock Exchange. When the Lanier
Shares commence trading on the New York Stock Exchange, such reports, proxy
statements and other information will be available for inspection at the offices
of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
65
<PAGE> 79
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholder
Lanier Worldwide, Inc.
We have audited the accompanying consolidated balance sheets of Lanier
Worldwide, Inc. and subsidiaries as of July 2, 1999 and July 3, 1998, and the
related consolidated statements of income, changes in shareholder equity and
cash flows for each of the three fiscal years in the period ended July 2, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Lanier
Worldwide, Inc. and subsidiaries as of July 2, 1999 and July 3, 1998, and the
related consolidated statements of their operations and their cash flows for
each of the three fiscal years in the period ended July 2, 1999, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Orlando, Florida
July 27, 1999
F-1
<PAGE> 80
LANIER WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JULY 2, JULY 3,
1999 1998
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 18,209 $ 87,096
Trade receivables......................................... 348,604 319,048
Receivables from parent................................... 194,521 14,327
Inventories............................................... 166,404 201,642
Prepaid expenses.......................................... 17,107 8,899
Deferred income taxes..................................... 39,276 36,243
---------- ----------
TOTAL CURRENT ASSETS.............................. 784,121 667,255
OTHER ASSETS
Rental equipment, less allowance for depreciation
($205,232 in 1999 and $158,792 in 1998)................ 140,718 109,567
Property, plant and equipment, less allowance for
depreciation ($76,053 in 1999 and $65,830 in 1998)..... 42,755 45,839
Notes receivables-net..................................... 203,657 179,989
Intangibles, less accumulated amortization ($38,610 in
1999 and $28,241 in 1998).............................. 125,504 100,452
Other..................................................... 40,953 20,194
---------- ----------
TOTAL OTHER ASSETS................................ 553,587 456,041
---------- ----------
TOTAL ASSETS................................................ $1,337,708 $1,123,296
========== ==========
LIABILITIES AND SHAREHOLDER EQUITY
CURRENT LIABILITIES
Notes payable............................................. $ 138,011 $ 52,918
Trade payables............................................ 86,815 44,606
Retirement plan accounts.................................. 38,964 32,833
Accrued compensation...................................... 39,066 27,187
Accrued interest and sundry taxes......................... 21,772 13,681
Other accrued items....................................... 33,610 31,833
Unearned service income................................... 57,898 67,004
Income taxes.............................................. 15,460 5,659
Long-term debt-current portion............................ 2,582 2,192
---------- ----------
TOTAL CURRENT LIABILITIES......................... 434,178 277,913
OTHER LIABILITIES
Deferred income taxes..................................... 16,170 38,066
Long-term debt............................................ 4,622 3,660
SHAREHOLDER EQUITY
Preferred Stock, without par value: authorized 1,000,000
shares, issued-none.................................... -- --
Common Stock, $1.00 par value, 1,000,000 shares
authorized; issued and outstanding 41,893 shares in
1999 and 1998.......................................... 42 42
Additional paid-in capital................................ 329,679 313,054
Retained earnings......................................... 586,556 521,578
Accumulated other comprehensive loss...................... (33,539) (31,017)
---------- ----------
TOTAL SHAREHOLDER EQUITY.......................... 882,738 803,657
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER EQUITY.................... $1,337,708 $1,123,296
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
F-2
<PAGE> 81
LANIER WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------
JULY 2, JULY 3, JUNE 27,
1999 1998 1997
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUE
Product sales and rentals................................ $ 807,468 $ 721,791 $ 704,282
Service income........................................... 623,020 532,986 465,732
Finance income........................................... 38,132 33,558 29,871
---------- ---------- ----------
1,468,620 1,288,335 1,199,885
COST AND EXPENSES
Cost of product sales and rentals........................ 547,929 453,968 426,042
Cost of service.......................................... 349,448 304,901 255,705
Selling and administrative expenses...................... 438,516 410,452 399,470
Restructuring expenses................................... -- 8,500 --
Interest expense......................................... 22,692 8,236 8,797
Other-net................................................ (1,235) 2,877 7,964
---------- ---------- ----------
1,357,350 1,188,934 1,097,978
---------- ---------- ----------
Income before income taxes............................... 111,270 99,401 101,907
Income taxes............................................. 40,000 36,604 38,208
---------- ---------- ----------
NET INCOME................................................. $ 71,270 $ 62,797 $ 63,699
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE> 82
LANIER WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------
JULY 2, JULY 3, JUNE 27,
1999 1998 1997
--------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income................................................ $ 71,270 $ 62,797 $ 63,699
Adjustments to Net Income:
Depreciation............................................ 106,650 72,838 62,641
Amortization............................................ 9,910 6,326 5,571
Non-current deferred income taxes....................... (21,896) 5,270 3,970
Changes in assets and liabilities:
Trade receivables....................................... 36,438 8,730 (78,421)
Receivable from parent.................................. (180,194) 54,637 97,109
Inventories............................................. 61,897 3,151 (51,799)
Prepaid expenses........................................ (8,208) (1,077) (1,743)
Trade payables and accrued liabilities.................. (12,994) (13,559) 13,372
Unearned service income................................. (42,199) (19,194) 843
Income taxes............................................ 25,775 (11,574) (1,006)
Other................................................... 41,968 (21,985) (8,147)
--------- -------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES................. 88,417 146,360 106,089
INVESTING ACTIVITIES
Capital expenditures:
Cash paid for acquired business......................... (171,117) (13,966) (12,459)
Plant and equipment..................................... (18,375) (15,837) (34,527)
Rental equipment........................................ (63,466) (68,622) (60,529)
--------- -------- ---------
NET CASH USED IN INVESTING ACTIVITIES..................... (252,958) (98,425) (107,515)
FINANCING ACTIVITIES
Proceeds from borrowings.................................. 108,026 62,596 101,149
Payments of borrowings.................................... (17,963) (46,856) (91,469)
--------- -------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES................. 90,063 15,740 9,680
Effect of exchange rates on cash and cash equivalents..... 5,591 4,774 (1,263)
--------- -------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......... (68,887) 68,449 6,991
Cash and cash equivalents at beginning of year............ 87,096 18,647 11,656
--------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................. $ 18,209 $ 87,096 $ 18,647
========= ======== =========
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE> 83
LANIER WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER EQUITY
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------
JULY 2, JULY 3, JUNE 27,
1999 1998 1997
------------------ ------------------ ------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
Balance at beginning of year........ $ 42 $ 42 $ 41
Shares issued to affiliates (1,000
shares in 1997).................. -- -- 1
-------- -------- --------
Balance at end of year.............. 42 42 42
ADDITIONAL PAID IN CAPITAL
Balance at beginning of year........ 313,054 313,054 306,658
Capital contribution from parent.... 16,625 -- 6,396
-------- -------- --------
Balance at end of year.............. 329,679 313,054 313,054
RETAINED EARNINGS
Balance at beginning of year........ 521,578 458,781 395,082
Net income.......................... 71,270 $71,270 62,797 $62,797 63,699 $63,699
Dividend paid to parent............. (6,292) -- --
-------- -------- --------
Balance at end of year.............. 586,556 521,578 458,781
ACCUMULATED OTHER COMPREHENSIVE LOSS
Balance at beginning of year........ (31,017) (21,720) (12,541)
Change in cumulative translation
adjustments...................... (2,522) (2,522) (9,297) (9,297) (9,179) (9,179)
------- ------- -------
Total comprehensive income.......... $68,748 $53,500 $54,520
-------- ======= -------- ======= -------- =======
Balance at end of year.............. (33,539) (31,017) (21,720)
-------- -------- --------
Total Shareholder Equity.............. $882,738 $803,657 $750,157
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE> 84
LANIER WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 2, 1999
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -- The consolidated financial statements include the
accounts of Lanier Worldwide, Inc. and Subsidiaries ("Lanier"), including
certain subsidiaries partially or wholly owned by Harris that will be
transferred to Lanier prior to the distribution to shareholders. Lanier is a
wholly owned subsidiary of Harris Corporation ("Harris") that sells and leases
office equipment products and provides related services to this marketplace.
These statements have been prepared in conformity with generally accepted
accounting principles and require management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Significant intercompany
transactions and accounts have been eliminated.
Corporate expense allocations charged by Harris are based on a percentage of
Lanier's net sales. These amounts were $25.0 million in 1999, $22.6 million in
1998 and $21.1 million in 1997. Interest expense is provided on direct
borrowings of Lanier. Interest expense of Harris has not been allocated to
Lanier. It is not practicable to estimate what shareholder equity would have
been if Lanier had operated as an unaffiliated entity. In the opinion of
management, the allocation methods used are reasonable.
Lanier sells products to other affiliated operations of Harris. Sales to these
operations were not material.
FISCAL YEAR -- Fiscal years end on the Friday nearest June 30. The 1999 and 1997
fiscal years included 52 weeks while 1998 fiscal year included 53 weeks.
CASH EQUIVALENTS -- Cash equivalents are temporary cash investments with a
maturity of three months or less when purchased. These investments include
accrued interest and are carried at the lower of cost or market.
CREDIT POLICY -- Lanier performs periodic credit evaluations of its customers'
financial positions and generally does not require collateral, except in the
case of certain leases in which Lanier maintains a security interest in the
leased equipment.
INVENTORIES -- Inventories are carried at the lower of cost, determined by the
First-In-First-Out (FIFO) method, or market.
RENTAL EQUIPMENT -- Rental equipment and service parts are carried on the basis
of cost. Depreciation is computed by the straight-line method using estimated
useful lives of up to five years.
BUILDINGS, MACHINERY AND EQUIPMENT -- Buildings, machinery and equipment are
carried on the basis of cost. Depreciation is computed by the straight-line
method using the estimated useful lives of the assets.
REVENUE RECOGNITION -- Revenue is recognized from sales when a product is
shipped, from rentals as they accrue, and from services and maintenance when
performed. Unearned income on service contracts is amortized by the
straight-line method over the term of the contracts.
ADVERTISING -- Advertising and promotional costs are expensed when incurred.
Advertising expense was $15.6 million in 1999, $13.5 million in 1998 and $15.5
million in 1997.
INCOME TAXES -- Lanier follows the liability method of accounting for income
taxes and is included with its parent, Harris, in a consolidated federal income
tax return. Harris requires each of its businesses to provide taxes on financial
statement pre-tax income or loss at applicable statutory tax rates. Amounts
receivable or payable for current and prior years' income taxes are treated as
intercompany transactions in accordance with Harris policy. Deferred income
taxes resulting from temporary differences between the financial statements and
the tax basis of assets and liabilities are separately classified on the balance
sheets.
F-6
<PAGE> 85
ASSET IMPAIRMENT -- Lanier accounts for long-lived asset impairment under
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
This Statement requires that long-lived assets and certain identifiable
intangibles to be held and used be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. In performing the review for recoverability, Lanier estimates
the future cash flows expected to result from the use of the asset. If the sum
of the estimated expected cash flows is less than the carrying amount of the
asset, an impairment loss is recognized. Measurement of an impairment loss is
based on the estimated fair value of the asset. Long-lived assets to be disposed
of are recorded at the lower of their carrying amount or estimated fair value
less cost to sell.
INTANGIBLES -- Intangibles resulting from acquisitions are being amortized by
the straight-line method principally over periods between 15 and 40 years.
NEW ACCOUNTING STANDARDS -- In June 1998, the Financial Accounting Standards
Board issued FAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The statement establishes standards for recording derivative
financial instruments and the recognition of gains or losses resulting from
changes in the fair values of those instruments. Lanier plans to adopt the new
standard in fiscal 2000, however, Lanier has not determined the anticipated
impact of FAS No. 133.
FUTURES AND FORWARD CONTRACTS -- When Lanier sells products outside the United
States or enters into purchase commitments, transactions are frequently
denominated in currencies other than U.S. dollars. To minimize the impact on
revenue and cost from currency fluctuations, Lanier enters into currency
exchange agreements that qualify for hedge accounting treatment. It is Lanier's
policy not to speculate in foreign currencies. Currency exchange agreements are
designated as, and are effective as, hedges of foreign currency commitments. In
addition, these agreements are consistent with the designated currency of the
underlying transaction and mature on or before the underlying transaction. Gains
and losses on currency exchange agreements that qualify as hedges are deferred
and recognized as an adjustment of the carrying amount of the hedged asset,
liability or commitment. Gains and losses on currency exchange agreements that
do not qualify as hedges are recognized in income based on changes in the fair
market value of the currency exchange agreement.
FOREIGN CURRENCY TRANSLATION -- The functional currency for international
subsidiaries is the local currency. Assets and liabilities are translated at
current rates of exchange, and income and expense items are translated at the
weighted average exchange rate for the year. The resulting translation
adjustments are recorded as a separate component of accumulated other
comprehensive loss.
NOTE B -- ACQUISITION
On July 9, 1998, Lanier acquired the Copying Systems Division of the
Agfa-Gevaert Group which is a member of the Bayer Group, Leverkusen, Germany
(the "Agfa Acquisition"). The transaction was accounted for as a purchase. The
purchase price, which is subject to adjustment, was $168.3 million in cash. The
purchase price exceeded the fair value of net assets acquired by approximately
$46.0 million, which is being amortized on a straight-line basis over 20 years.
The results of the Agfa Acquisition are included in the accompanying
consolidated financial statements from the date of acquisition.
In connection with the Agfa Acquisition, Lanier accrued as a cost of the
purchase approximately $8.6 million in connection with the planned termination
of approximately 160 employees of Agfa, principally sales and technical
personnel. Lanier paid approximately $6.6 million in 1999 related to such
terminations.
The following summarized unaudited pro forma combined financial information
assumes the acquisition had occurred at the beginning of each period:
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR
ENDED ENDED
JULY 2, 1999 JULY 3, 1998
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $1,430,448 $1,519,754
Net income.................................................. $ 71,270 $ 66,021
</TABLE>
F-7
<PAGE> 86
Pro forma results include the effects of purchase accounting adjustments and
additional interest expense as if the debt incurred in connection with the
acquisition had been outstanding from the beginning of each period. The pro
forma financial information is not necessarily indicative of either the results
of operations that would have occurred had the acquisition taken place at the
beginning of the periods presented or of future results of combined operations.
NOTE C -- SALE OF BUSINESS
In May 1999, Lanier sold its electronic medical transcription services business
for approximately $34 million. The resulting pre-tax gain of $21.5 million is
reflected in Other Income in the accompanying Consolidated Statement of Income.
NOTE D -- RESTRUCTURING
In 1998, Lanier recorded a $8.5 million charge ($5.3 million after income tax)
for the restructuring of its operations. Restructuring provisions are for the
reduction of approximately 350 employees, primarily service and administrative.
All employee terminations occurred and were paid during fiscal 1999.
NOTE E -- RECEIVABLES
Receivables are summarized below:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Accounts receivable......................................... $280,749 $245,120
Notes receivable due within one year-net.................... 89,075 83,038
-------- --------
369,824 328,158
Less allowances for collection losses....................... 21,220 9,110
-------- --------
$348,604 $319,048
======== ========
</TABLE>
In May 1999, Lanier entered into an asset-backed securitization program with a
bank which provides for the sale of up to $100 million of eligible trade
receivables of designated European subsidiaries. Lanier accounts for the sale of
receivables under this securitization program in accordance with Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." Receivables sold under
this program are excluded from accounts receivable in the Consolidated Balance
Sheet. As of July 2, 1999, Lanier had sold approximately $36.5 million of trade
accounts receivable, without recourse, to a third party. Amounts received from
the sale of those receivables are net of applicable interest and an allowance
for credit losses. To the extent that actual credit losses are less than the
allowance for credit losses, the remaining amount will be paid to Lanier. Lanier
has retained the responsibility for servicing accounts receivable sold.
NOTE F -- INVENTORIES
Inventories are summarized below:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Finished products........................................... $109,082 $152,980
Parts....................................................... 53,766 47,223
Raw materials and supplies.................................. 3,556 1,439
-------- --------
$166,404 $201,642
======== ========
</TABLE>
At July 2, 1999, Lanier was committed to purchase $3.4 million of inventory from
suppliers. Management believes the cost of this inventory approximates current
market value.
F-8
<PAGE> 87
NOTE G -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are summarized below:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 854 $ 854
Buildings................................................... 20,073 18,982
Machinery and equipment..................................... 97,881 91,833
-------- --------
118,808 111,669
Less allowances for depreciation............................ 76,053 65,830
-------- --------
$ 42,755 $ 45,839
======== ========
</TABLE>
NOTE H -- CREDIT ARRANGEMENTS
Lanier has lines of credit for short-term borrowings aggregating $198.7 million
from various U.S. and foreign banks, of which $60.7 million was available on
July 2, 1999. These arrangements provide for borrowing at various interest
rates, are reviewed annually for renewal, and may be used on such terms as
Lanier and the banks mutually agree. These lines do not require compensating
balances. Short-term debt outstanding under these lines on July 2, 1999 was
$138.0 million. The weighted average interest rate for short-term debt was 5.1
percent at July 2, 1999 and 8.4 percent at July 3, 1998.
NOTE I -- LONG-TERM DEBT
Long-term debt includes the following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Bank notes.................................................. $ 919 $ 870
Other notes................................................. 2,094 1,624
Capital leases.............................................. 1,309 766
Revenue bonds............................................... 300 400
-------- --------
$ 4,622 $ 3,660
======== ========
</TABLE>
The weighted average interest rate for long-term debt was 7.4 percent at July 2,
1999 and 7.8 percent at July 3, 1998. Maturities of long-term debt for the five
years following 1999 are: $2.6 million in 2000, $2.2 million in 2001, $0.9
million in 2002, $0.6 million in 2003 and $0.1 million in 2004.
NOTE J -- INTEREST EXPENSE
Total interest expense was $22.7 million in 1999, $8.2 million in 1998 and $8.8
million in 1997. Interest paid was $22.4 million in 1999, $8.2 million in 1998
and $8.5 million in 1997.
NOTE K -- LEASE COMMITMENTS
Total rental expense amounted to $45.8 million in 1999, $40.9 million in 1998
and $33.2 million in 1997. Future minimum rental commitments under
non-cancelable operating leases, primarily used for land and buildings, amounted
to approximately $89.7 million at July 2, 1999. These commitments for the years
following 1999 are: 2000 -- $37.2 million, 2001 -- $21.0 million, 2002 -- $15.1
million, 2003 -- $10.2 million, 2004 -- $3.7 million and $2.5 million
thereafter.
F-9
<PAGE> 88
NOTE L -- CUSTOMER LEASING
Lanier's net investment in sales-type leases is as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Total minimum lease payments receivables.................... $347,759 $316,717
Residual value of equipment................................. 11,967 5,700
Less unearned finance income................................ 63,146 57,258
-------- --------
Present value of minimum lease payments receivable.......... 296,580 265,159
Less allowance for collection losses........................ 3,848 2,132
Less current portion........................................ 89,075 83,038
-------- --------
$203,657 $179,989
======== ========
</TABLE>
The amount of minimum rental payments receivable for sales-type leases for each
of the next five years are: 2000 -- $110.2 million, 2001 -- $108.6 million,
2002 -- $73.2 million, 2003 -- $36.3 million, and 2004 -- $19.5 million.
NOTE M -- RETIREMENT BENEFITS
Lanier has noncontributory defined benefit pension plans which cover employees
in the United States. Pension benefits are based principally on an employee's
years of service and compensation near retirement. Lanier's pension funding
policy is to deposit with an independent trustee amounts at least equal to those
required by law. A trust fund is maintained to provide pension benefits to plan
participants and beneficiaries.
F-10
<PAGE> 89
The projected benefit obligations, fair value of plan assets and net periodic
pension cost of Lanier's domestic pension plan include the following components:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
BENEFIT OBLIGATION AT THE BEGINNING OF YEAR............... $106,667 $ 94,692
Service cost.............................................. 5,365 3,903
Interest cost............................................. 7,544 7,391
Actuarial gain............................................ 795 6,875
Benefits paid............................................. (577) (6,194)
Settlements............................................... (17,057) --
-------- --------
BENEFIT OBLIGATION AT THE END OF YEAR..................... $102,737 $106,667
======== ========
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year............ $111,334 $ 86,981
Actual return on plan assets.............................. 6,811 26,032
Employer contribution..................................... -- 4,515
Benefits paid............................................. (577) (6,194)
Settlements............................................... (17,057) --
-------- --------
FAIR VALUE OF PLAN ASSETS AT END OF YEAR.................. $100,511 $111,334
======== ========
Funded status............................................. $ (2,226) $ 4,667
Unamortized prior service cost............................ (96) (106)
Unrecognized net actuarial loss........................... (12,092) (16,973)
Unrecognized transition obligation........................ (1,092) (1,367)
-------- --------
PREPAID (ACCRUED) BENEFIT COST............................ $(15,506) $(13,779)
======== ========
1999 1998 1997
-------- -------- --------
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost.............................................. $ 5,365 $ 3,903 $ 5,265
Interest cost............................................. 7,544 7,391 6,843
Expected return on plan assets............................ (8,707) (7,552) (6,177)
Amortization of unrecognized transition obligation........ (275) (275) (275)
Prior service cost recognized............................. (10) (10) (10)
Gain due to settlement.................................... (2,189) -- --
-------- -------- --------
Net periodic pension cost................................. $ 1,728 $ 3,457 $ 5,646
======== ======== ========
</TABLE>
The discount rates used in determining the actuarial present value of the
projected benefit obligations were 7.3 percent, 8.0 percent and 7.8 percent as
of July 2, 1999, July 3, 1998 and June 27, 1997, respectively. The expected
increase in compensation levels used in determining the actuarial present value
of the projected benefit obligations was 4.0 percent as of July 2, 1999 and July
3, 1998 and 4.5 percent as of June 27, 1997. The expected long-term rate of
return on assets, net of administrative expenses, used in determining net
pension expense was 10.0 percent for the fiscal years ended July 2, 1999 and
July 3, 1998 and 9.0 percent for the fiscal year ended June 27, 1997.
F-11
<PAGE> 90
Lanier has a Supplemental Executive Retirement Plan ("SERP") which provides
unfunded supplemental retirement benefits to certain executives. The SERP
provides for incremental pension payments partially to offset the reduction in
the amounts that would have been payable from Lanier's principal pension plan if
it were not for limitations imposed by federal income tax regulations. Expenses
of $1.0 million, $0.7 million, and $0.9 million were recognized in the fiscal
years ended July 2, 1999, July 3, 1998, and June 27, 1997, respectively. Amounts
accrued as of July 2, 1999 and July 3, 1998 related to the plan were $4.1
million and $3.0 million, respectively.
Retirement benefits include a fully funded savings plan for U.S. employees.
Employees may participate in the savings plan by contributing a portion of their
compensation. During the fiscal year ended June 27, 1997, Lanier matched 50% of
employee contributions up to 3 percent of each participating employee's
compensation. In fiscal year 1998, Lanier began matching 50 percent of employee
contributions up to 6 percent of each participating employee's compensation.
Matching contributions for the fiscal years ended July 2, 1999, July 3, 1998,
and June 27, 1997 were $4.9 million, $4.0 million, and $1.8 million,
respectively.
Retirement benefits also include an unfunded limited healthcare plan for
U.S.-based retirees and employees. Lanier accrues the estimated cost of these
medical benefits during an employee's active service life. Benefit obligations
and cost under this plan are not material.
In addition to the benefit plans for domestic employees disclosed above, Lanier
also has a number of benefits plans for its foreign employees. Expense relating
to these plans was approximately $1.6 million in 1999, $1.6 million in 1998 and
$1.5 million in 1997. Amounts accrued as of July 2, 1999 and July 3, 1998
related to these plans were $17.7 million and $12.4 million, respectively.
NOTE N -- INCOME TAXES
The provisions for income taxes are summarized below:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998 1997
-------------- -------- ------- --------
<S> <C> <C> <C>
Current:
United States............................................. $ 33,007 $22,516 $ 25,115
International............................................. 23,969 3,039 5,548
State and local........................................... 7,952 4,418 5,478
-------- ------- --------
64,928 29,973 36,141
-------- ------- --------
Deferred:
United States............................................. (12,575) 3,571 989
International............................................. (9,864) 2,159 1,092
State and local........................................... (2,489) 901 (14)
-------- ------- --------
(24,928) 6,631 2,067
-------- ------- --------
$ 40,000 $36,604 $ 38,208
======== ======= ========
</TABLE>
F-12
<PAGE> 91
The components of deferred income tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------- ----------------------
CURRENT NON-CURRENT CURRENT NON-CURRENT
------- ----------- ------- -----------
(IN THOUSANDS)
--------------
<S> <C> <C> <C> <C>
Inventory valuations.......................... $23,118 $ -- $14,850 $ --
Accruals...................................... 8,160 1,325 15,680 1,091
Depreciation.................................. -- 13,247 -- (37,915)
Leases........................................ (656) 8,873 (2,926) (12,595)
International tax loss carryforwards.......... -- 21,595 -- 6,501
All other-net............................... 8,654 (42,341) 8,639 11,353
------- -------- ------- --------
39,276 2,699 36,243 (31,565)
Valuation allowance........................... -- (18,869) -- (6,501)
------- -------- ------- --------
$39,276 $(16,170) $36,243 $(38,066)
======= ======== ======= ========
</TABLE>
A reconciliation of the statutory United States income tax rate to the effective
income tax rate follows:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Statutory U.S. income tax rate.............................. 35.0% 35.0% 35.0%
State taxes................................................. 3.2 3.5 3.5
Foreign Income.............................................. (1.5) (2.0) --
Other items................................................. (0.8) 0.3 (1.0)
----- ----- -----
Effective income tax rate................................... 35.9% 36.8% 37.5%
----- ----- -----
</TABLE>
United States income taxes have not been provided on $163.0 million of
undistributed earnings of international subsidiaries because of the Lanier's
intention to reinvest these earnings. The determination of unrecognized deferred
U.S. tax liability for the undistributed earnings of international subsidiaries
is not practicable.
At July 2, 1999, Lanier had net international income tax loss carryforwards of
approximately $57.0 million. Loss carryforwards of $29.1 million will expire
between the years 2000 and 2009. The remaining $27.9 million of loss
carryforwards available for an indefinite period of time. Lanier also had
approximately $3.0 million of foreign tax credit carryforwards which have been
fully offset by a valuation allowance in 1999.
Pretax income of international subsidiaries was $24.8 million in 1999, $21.4
million in 1998 and $20.5 million in 1997.
Income taxes paid were $39.0 million in 1999, $43.0 million in 1998 and $35.4
million in 1997.
NOTE O -- GEOGRAPHIC INFORMATION
Lanier operates exclusively in the office equipment industry. Substantially all
revenues result from the sale and rental of office equipment and related
services. All intercompany revenues are eliminated in computing revenues.
A summary of Lanier's operations by geographic area is summarized below:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(IN THOUSANDS)
--------------
<S> <C> <C> <C>
United States Operations
Net sales.............................................. $875,532 $902,034 $823,947
Long-lived assets...................................... $173,749 $212,461 $194,686
International
Net sales.............................................. $554,956 $352,743 $346,067
Long-lived assets...................................... $176,181 $ 63,591 $ 57,588
</TABLE>
Export sales included in U.S. Operations were $14.2 million in 1999, $18.3
million in 1998, and $16.1 million in 1997.
F-13
<PAGE> 92
NOTE P -- FINANCIAL INSTRUMENTS
The carrying values of cash equivalents, accounts receivable, notes receivable,
accounts payable, short-term debt and long-term debt approximate fair value.
Lanier uses foreign exchange contracts and options to hedge intercompany
accounts and off-balance-sheet foreign currency commitments. Specifically, these
foreign exchange contracts offset foreign currency denominated inventory and
purchase commitments from suppliers, accounts receivable from and future
committed sales to customers. Management believes the use of foreign currency
financial instruments should reduce the risks that arise from doing business in
international markets. Contracts are generally one year or less. At July 2,
1999, open foreign exchange contracts were $163.1 million (as described below),
of which $7.4 million were to hedge off-balance-sheet commitments. Additionally,
for the year ended July 2, 1999, Lanier purchased and sold $814.4 million of
foreign exchange forward and option contracts.
Deferred gains and losses are included on a net basis in the Consolidated
Balance Sheet as other assets and are recorded in income as part of the
underlying transaction when it is recognized.
At July 2, 1999, Lanier had $5.0 million in open option contracts. Total open
foreign exchange contracts at July 2, 1999, are described in the table below:
COMMITMENTS TO BUY FOREIGN CURRENCIES
(in millions)
<TABLE>
<CAPTION>
CONTRACT AMOUNT
--------------------- DEFERRED
FOREIGN GAINS MATURITIES
CURRENCY CURRENCY U.S. AND (LOSSES) (IN MONTHS)
-------- --------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Canadian Dollar............................... 1.4 0.9 -- 6
Swiss Franc................................... 40.5 27.5 (1.3) 3
Euro.......................................... 26.9 30.0 (2.1) 10
French Franc.................................. 1.0 0.2 -- 3
Italian Lira.................................. 10,123.0 5.4 -- 3
Japanese Yen.................................. 604.8 4.9 -- 1-3
Norwegian Krone............................... 13.3 1.7 -- 6
</TABLE>
COMMITMENTS TO SELL FOREIGN CURRENCIES
(in millions)
<TABLE>
<CAPTION>
CONTRACT AMOUNT
--------------------- DEFERRED
FOREIGN GAINS MATURITIES
CURRENCY CURRENCY U.S. AND (LOSSES) (IN MONTHS)
-------- --------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Austrian Schilling............................ 57.0 4.3 -- 3
Australian Dollar............................. 0.5 0.4 -- 12
Canadian Dollar............................... 25.7 16.8 (0.6) 1-6
Swiss Franc................................... 84.7 61.3 6.7 3
Czech Republic Koruna......................... 27.5 0.9 0.1 6
Danish Krone.................................. 19.2 2.9 0.2 10
Euro.......................................... 3.8 4.0 0.1 10
French Franc.................................. 3.7 0.6 -- 3
Swedish Krona................................. 10.7 1.3 -- 12
</TABLE>
NOTE Q -- DISTRIBUTION OF LANIER STOCK
On April 13, 1999, Harris announced that it would spin Lanier off as a separate
publicly traded company. Harris intends to accomplish this transaction through a
distribution of Lanier stock to Harris shareholders that is expected to be tax
free to such shareholders for U.S. federal income tax purposes. The transaction
is expected to take place in the first quarter of fiscal year 2000.
F-14
<PAGE> 93
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
EXHIBITS TO FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
---------------------------
LANIER WORLDWIDE, INC.
EXHIBIT INDEX
-------------
Exhibit No.
- -----------
2.1 Form of Distribution Agreement.*
3.1 Form of Amended and Restated Certificate of Incorporation of
Lanier Worldwide, Inc.**
3.2 Form of By-Laws of Lanier Worldwide, Inc.**
4.1 Form of Stockholder Protection Rights Agreement.**
4.2 Form of Certificate of Designation and Terms of Registrant's
Participating Preferred Stock.**
10.1 Form of Tax Disaffiliation Agreement.*
10.2 Form of Credit Agreement.*
10.3 Form of Transition Services Agreement.*
10.4 Form of Distribution Agreement (filed as Exhibit 2.1).
10.5 Form of Employee Benefits Compensation and Allocation
Agreement.*
10.6 Form of Registration Rights Agreement.**
10.7 Form of Stock Incentive Plan.*
12.1 Computation of Ratios of Earnings to Fixed Charges.
21.1 List of Subsidiaries.*
23.1 Consent of Independent Certified Public Accountants.
27.1 Financial Data Schedule.
- -------------
* To be filed by Amendment
** Previously filed.
<PAGE> 1
EXHIBIT 12.1
LANIER WORLDWIDE, INC. AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars, Except Ratios)
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------------
JULY 2, JULY 3, JUNE 27, JUNE 30,
1999 1998 1997 1996
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
EARNINGS:
Net Income........................... $ 71,270 $ 62,797 $ 63,699 $ 57,272
Plus: Income Taxes................... 40,000 36,604 38,208 33,331
Fixed Charges...................... 37,943 21,861 19,856 20,371
-------- -------- -------- --------
$149,213 $121,262 $121,763 $110,974
======== ======== ======== ========
FIXED CHARGES:
Interest expense..................... $ 22,692 $ 8,236 $ 8,797 $ 11,010
Plus: Portion of Rents Deemed
Representative of the Interest
Factor............................. 15,251 13,625 11,059 9,361
-------- -------- -------- --------
$ 37,943 $ 21,861 $ 19,856 $ 20,371
======== ======== ======== ========
RATIO OF EARNINGS TO FIXED CHARGES... 3.93 5.55 6.13 5.45
======== ======== ======== ========
</TABLE>
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Independent Certified
Public Accountants" and to the use of our report dated July 27, 1999 in the
Registration Statement on Form 10 of Lanier Worldwide, Inc. dated July 28, 1999.
/s/ Ernst & Young LLP
Orlando, Florida
July 28, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> JUL-02-1999 JUL-03-1998 JUN-27-1997
<PERIOD-END> JUL-02-1999 JUL-03-1998 JUN-27-1997
<CASH> 18,209 87,096 0
<SECURITIES> 0 0 0
<RECEIVABLES> 564,345 342,485 0
<ALLOWANCES> 21,220 9,110 0
<INVENTORY> 166,404 201,642 0
<CURRENT-ASSETS> 784,121 667,255 0
<PP&E> 464,758 380,028 0
<DEPRECIATION> 281,288 224,622 0
<TOTAL-ASSETS> 1,337,708 1,123,296 0
<CURRENT-LIABILITIES> 434,178 277,913 0
<BONDS> 4,622 3,660 0
0 0 0
0 0 0
<COMMON> 42 42 0
<OTHER-SE> 882,696 803,615 0
<TOTAL-LIABILITY-AND-EQUITY> 1,337,708 1,123,296 0
<SALES> 1,430,488 1,254,777 1,170,014
<TOTAL-REVENUES> 1,468,620 1,288,335 1,199,885
<CGS> 897,377 758,869 681,747
<TOTAL-COSTS> 438,516 410,452 399,470
<OTHER-EXPENSES> (1,235) 2,877 7,964
<LOSS-PROVISION> 0 8,500 0
<INTEREST-EXPENSE> 22,692 8,236 8,797
<INCOME-PRETAX> 111,270 99,401 101,907
<INCOME-TAX> 40,000 36,604 38,208
<INCOME-CONTINUING> 71,270 62,797 63,699
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 71,270 62,797 63,699
<EPS-BASIC> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
