<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 18, 2000
UNITED DOMINION INDUSTRIES LIMITED
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Canada 1-8585 98-0125322
- ---------------------------- ------------------------ ----------------
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
2300 One First Union Center
Charlotte, North Carolina 28202-6039
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(Zip Code)
(704) 347-6800
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name or address, if changed from last report)
<PAGE> 2
Item 5. Other Events.
In connection with the proposed offering by United Dominion Industries,
Inc., a wholly owned indirect subsidiary of United Dominion Industries Limited
(the "Registrant"), of debt securities to be guaranteed by the Registrant and
its direct wholly owned subsidiary, United Dominion Holdings, Inc., the
Registrant has restated its consolidated financial statements at December 31,
1998 and 1997 and for the three-year period ended December 31, 1998 and at and
for the interim periods ended March 31, 1999, June 30, 1999 and September 30,
1999 solely:
- To include condensed consolidating financial information
segregating the Registrant and each of United Dominion
Holdings, Inc. and United Dominion Industries, Inc. from
nonguarantor subsidiaries, and
- For the financial statements at December 31, 1998 and 1997 and
for the three-year period ended December 31, 1998, to reflect
the application of Canadian Institute of Chartered Accountants
Handbook Section 3465 Income Taxes, which was adopted by the
Registrant during the quarter ended March 31, 1999.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements
Annual Financial Statements
---------------------------
Auditors' Report
Consolidated Statements of Financial Position as of December
31, 1998 and 1997
Consolidated Statements of Income for the Years Ended December
31, 1998, 1997 and 1996
Consolidated Statements of Changes in Shareholders' Equity for
the Years Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
Schedule II Allowance for Doubtful Accounts
Financial Statements at and for the Period Ended March 31, 1999
---------------------------------------------------------------
Consolidated Statements of Income for the Quarters Ended March
31, 1999 and 1998
<PAGE> 3
Consolidated Statements of Cash Flows for the Quarters Ended
March 31, 1999 and 1998
Consolidated Statements of Financial Position as of March 31,
1999 and December 31, 1999
Consolidated Statements of Retained Earnings for the Quarter
Ended March 31, 1999 and the Year Ended December 31, 1998
Notes to Financial Statements
Financial Statements at and for the Period Ended June 30, 1999
--------------------------------------------------------------
Consolidated Statements of Income for the Quarters and Six
Months Ended June 30, 1999 and 1998
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1999 and 1998
Consolidated Statements of Financial Position as of June 30,
1999 and December 31, 1999
Consolidated Statements of Retained Earnings for the Six
Months Ended June 30, 1999 and the Year Ended December 31,
1998
Notes to Financial Statements
Financial Statements at and for the Period Ended September 30, 1999
-------------------------------------------------------------------
Consolidated Statements of Income for the Quarters and Nine
Months Ended September 30, 1999 and 1998
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1999 and 1998
Consolidated Statements of Financial Position as of September
30, 1999 and December 31, 1999
Consolidated Statements of Retained Earnings for the Nine
Months Ended September 30, 1999 and the Year Ended December
31, 1998
Notes to Financial Statements
<PAGE> 4
(b) Pro Forma Financial Information
Not applicable.
(c) Exhibits*
Exhibit 23.1 Consent of KPMG LLP
* The Registrant is a foreign private issuer and accordingly
has not included financial data schedules.
<PAGE> 5
[Letterhead of KPMG LLP]
AUDITORS' REPORT
To the Shareholders of United Dominion Industries Limited
We have audited the consolidated statements of financial position of United
Dominion Industries Limited as at December 31, 1998 and 1997 and the related
consolidated statements of income, cash flows and changes in shareholders'
equity for each of the years in the three-year period ended December 31, 1998.
In connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule "Allowance for Doubtful Accounts".
These consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at December 31, 1998
and 1997 and the results of its operations and the changes in its financial
position for each of the years in the three-year period ended December 31, 1998
in accordance with generally accepted accounting principles. Also in our
opinion, based on our audits, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
The Company's consolidated financial statements as at December 31, 1998 and 1997
and for the three-year period ended December 31, 1998, were previously prepared
on the basis of accounting for income taxes in conformity with Canadian
Institute of Chartered Accountants Handbook Section 3470 Corporate Income Taxes.
As more fully described in Note 2 to the financial statements, the Company
changed its method of accounting for income taxes through the adoption of
Canadian Institute of Chartered Accountants Handbook Section 3465 Income Taxes
at the beginning of 1999 and has applied the provisions of Section 3465
retroactively. Consequently, the Company's financial statements referred to
above have been restated to conform with this adoption.
/s/ KPMG LLP
Chartered Accountants
Toronto, Canada
February 5, 1999
<PAGE> 6
UNITED DOMINION INDUSTRIES LIMITED
Consolidated Statements of Financial Position, Restated (note 2)
December 31, 1998 and 1997
(Amounts in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Assets
Current assets
Cash and short-term investments $ 123,455 $ 64,587
Accounts and notes receivable, less allowance for
doubtful accounts of $10,725 in 1998 and $10,114
in 1997 (note 11) 335,424 259,068
Inventories (note 5) 379,969 330,358
Other current assets 81,679 43,037
----------- -----------
Total current assets 920,527 697,050
Fixed assets (note 6) 317,853 301,256
Goodwill and other intangibles (notes 1 and 3) 774,820 668,718
Other assets (notes 3 and 4) 69,734 81,797
----------- -----------
$ 2,082,934 $ 1,748,821
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities
Notes payable to banks (note 7) $ 53,672 $ 74,436
Current portion of long-term debt (note 7) 51,665 41,131
Accounts payable 158,708 131,959
Accrued liabilities 194,682 176,748
Customer advances 23,181 13,932
----------- -----------
Total current liabilities 481,908 438,206
Long-term debt (note 7) 544,771 297,488
Other liabilities (note 10) 170,425 140,578
----------- -----------
1,197,104 876,272
----------- -----------
Shareholders' equity (note 9)
Common shares
Outstanding 40,520,982 shares in 1998 and
43,281,715 shares in 1997 557,574 591,502
Contributed surplus 4,057 1,859
Retained earnings 360,796 314,854
----------- -----------
922,427 908,215
Equity adjustment from foreign currency translation (notes 1 and 7) (36,597) (35,666)
----------- -----------
Total shareholders' equity 885,830 872,549
----------- -----------
$ 2,082,934 $ 1,748,821
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
UNITED DOMINION INDUSTRIES LIMITED
Consolidated Statements of Income, Restated (note 2)
Years Ended December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars, Except Per Share Data)
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Sales $ 2,020,374 $ 1,654,679 $ 1,433,068
----------- ----------- -----------
Costs and expenses
Cost of sales 1,401,802 1,168,654 1,009,315
Selling, general and administrative expenses 426,903 325,662 281,756
Goodwill and other intangibles amortization 21,459 15,791 12,808
Restructuring charges (notes 3 and 12) 16,336 -- --
----------- ----------- -----------
Total costs and expenses 1,866,500 1,510,107 1,303,879
----------- ----------- -----------
Operating income 153,874 144,572 129,189
Other income (expense)
Interest - net (note 8) (35,750) (18,544) (19,124)
Gain on sale of business (note 3) 11,285 -- 11,792
Other (note 3) (6,852) 7,700 (3,000)
----------- ----------- -----------
Income from continuing operations
before income taxes 122,557 133,728 118,857
Income tax provision (note 4) (22,869) (48,838) (49,405)
----------- ----------- -----------
Income from continuing operations 99,688 84,890 69,452
----------- ----------- -----------
Income from discontinued operations (note 3)
Earnings, net of applicable income tax expense of
$2,211 in 1997 and $11,402 in 1996 -- 3,088 17,397
Gain on disposal, net of applicable income tax
expense of $36,011 -- 53,086 --
----------- ----------- -----------
-- 56,174 17,397
----------- ----------- -----------
Net income $ 99,688 $ 141,064 $ 86,849
=========== =========== ===========
Earnings per common share (note 1)
Continuing operations $ 2.45 $ 1.91 $ 1.56
Discontinued operations -- 1.26 .39
----------- ----------- -----------
Net earnings $ 2.45 $ 3.17 $ 1.95
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 8
UNITED DOMINION INDUSTRIES LIMITED
Consolidated Statements of Changes in Shareholders' Equity, Restated (note 2)
Years Ended December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Common Shares
---------------------- Equity
Unamortized Adjustment/ Total
Shares Restricted Contributed Retained Currency Shareholders'
Issued Stock Surplus Earnings Translation Equity
--------- ------- ------ --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ 495,919 $ -- $ 736 $ 140,614 $(25,880) $ 611,389
Issuance of 5,175,000 shares 117,084 -- -- (3,478) -- 113,606
Stock options exercised (175,243 shares) 2,304 -- 673 -- -- 2,977
Restricted stock issued (268,783 shares) 6,518 (6,518) -- -- -- --
Amortization of restricted stock grants -- 1,231 -- -- -- 1,231
Net income for the year -- -- -- 86,849 -- 86,849
Cash dividends on
common shares - $.20 per share -- -- -- (9,050) -- (9,050)
Net effect of currency
translation adjustments -- -- -- -- (3,173) (3,173)
Effect of hedging transactions -- -- -- -- 2,925 2,925
--------- ------- ------ --------- -------- ---------
Balance, December 31, 1996 621,825 (5,287) 1,409 214,935 (26,128) 806,754
Repurchase of 2,067,540 shares (28,222) -- -- (28,732) -- (56,954)
Stock options exercised (110,255 shares) 1,780 -- 450 -- -- 2,230
Amortization of restricted stock grants -- 1,406 -- -- -- 1,406
Net income for the year -- -- -- 141,064 -- 141,064
Cash dividends on
common shares - $.28 per share -- -- -- (12,413) -- (12,413)
Net effect of currency
translation adjustments -- -- -- -- (13,187) (13,187)
Effect of hedging transactions -- -- -- -- 3,649 3,649
--------- ------- ------ --------- -------- ---------
Balance, December 31, 1997 595,383 (3,881) 1,859 314,854 (35,666) 872,549
Repurchase of 3,250,000 shares (44,433) -- -- (39,132) -- (83,565)
Stock options exercised (445,422 shares) 7,302 -- 2,198 -- -- 9,500
Incentive share election (43,845 shares) 1,219 -- -- -- -- 1,219
Amortization of restricted stock grants -- 1,984 -- -- -- 1,984
Net income for the year -- -- -- 99,688 -- 99,688
Cash dividends on
common shares - $.36 per share -- -- -- (14,614) -- (14,614)
Net effect of currency
translation adjustments -- -- -- -- (3,432) (3,432)
Effect of hedging transactions -- -- -- -- 2,501 2,501
--------- ------- ------ --------- -------- ---------
Balance, December 31, 1998 $ 559,471 $(1,897) $4,057 $ 360,796 $(36,597) $ 885,830
========= ======= ====== ========= ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 9
UNITED DOMINION INDUSTRIES LIMITED
Consolidated Statements of Cash Flows, Restated (note 2)
Years Ended December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash provided from operating activities
Income from continuing operations $ 99,688 $ 84,890 $ 69,452
Add (deduct) items not affecting cash
Depreciation 41,747 34,267 29,667
Amortization 23,118 16,570 13,501
Gain on sale of business (11,285) -- (11,792)
Deferred income taxes (5,899) 15,395 29,200
Other 2,358 315 (787)
Net decrease (increase) in working capital
other than cash (note 14) (36,258) (23,334) 4,141
Asset securitization (6,100) (10,400) 7,600
--------- --------- ---------
107,369 117,703 140,982
--------- --------- ---------
Cash used by investing activities
Additions to fixed assets (51,741) (60,596) (51,407)
Acquisitions of businesses (172,181) (364,148) (51,180)
Net proceeds from disposal of businesses 25,008 274,641 3,257
Proceeds from other assets 11,753 8,851 7,373
Other (9,439) (1,545) (8,598)
--------- --------- ---------
(196,600) (142,797) (100,555)
--------- --------- ---------
Cash provided from (used by) financing activities
Additional borrowings 331,907 119,020 41,218
Repayments of borrowings (92,931) (66,886) (157,168)
Issuance of common shares 7,302 1,780 113,036
Repurchase of common shares (83,565) (56,954) --
Dividends (14,614) (12,413) (9,050)
Other -- -- 2,500
--------- --------- ---------
148,099 (15,453) (9,464)
--------- --------- ---------
Cash provided from (used by) discontinued operations (note 3) -- (61,135) 28,132
--------- --------- ---------
Net increase (decrease) in cash and short-term investments 58,868 (101,682) 59,095
Cash and short-term investments at beginning of year 64,587 166,269 107,174
--------- --------- ---------
Cash and short-term investments at end of year $ 123,455 $ 64,587 $ 166,269
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 10
6
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
1. Summary of Significant Accounting Policies
General
The consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in Canada. These accounting
principles are in conformity with accounting principles generally
accepted in the United States except as indicated in note 14. The
preparation of financial statements in conformity with generally accepted
accounting principles requires 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 reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Consolidation
All subsidiary companies are consolidated and all significant
intercompany accounts and transactions have been eliminated in
consolidation. Investments in joint ventures are accounted for using the
proportionate consolidation method, however, the company's investments in
joint ventures are not considered to be material.
Consolidated Statements of Cash Flows
Cash and short-term investments include highly liquid investments with a
maturity of three months or less.
Inventories
Inventories are stated at the lower of cost (average or first-in,
first-out) or net realizable value.
Fixed Assets
Property, plant and equipment are recorded at cost. Major renewals and
betterments are capitalized; whereas, maintenance and repairs are
expensed as incurred. Cost of property sold or otherwise disposed and
related accumulated depreciation are removed from the accounts at the
time of disposal and any resulting gain or loss is included in income.
Depreciation of plant and equipment is determined on a straight-line
basis over the estimated useful lives of the assets. The average annual
rates of depreciation range from 4% for buildings to 10% for machinery
and equipment.
Goodwill and Other Intangibles
Goodwill, which represents the excess of purchase price over fair value
of net identifiable assets acquired, is amortized on a straight-line
basis over the expected periods to be benefited, generally 40 years. The
company assesses the recoverability of this intangible asset based
primarily upon an analysis of undiscounted future operating cash flows
from the acquired operations. Amounts assigned to other intangible
assets, primarily trademarks and patents, are based on independent
appraisals and are amortized on a straight-line basis over periods
ranging from seven to forty years. Accumulated amortization was $82,306
and $60,847 at December 31, 1998 and 1997, respectively.
<PAGE> 11
7
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
Foreign Currency Translation
The financial statements of those operations whose functional currency is
a foreign currency are translated into U.S. dollars using the current
rate method. Under this method, all assets and liabilities are translated
into U.S. dollars using current exchange rates and income statement items
are translated using weighted average exchange rates for the year. The
translation adjustment is included as a component of shareholders'
equity; whereas, gains and losses on foreign currency transactions are
included in income. Foreign currency transaction losses totaled $3,530,
$3,959 and $494 for 1998, 1997 and 1996, respectively.
Earnings Per Common Share
Earnings per common share are calculated by dividing net income by the
weighted average number of common shares outstanding during the year
(40,755,170 shares for 1998, 44,439,004 shares for 1997 and 44,513,445
shares for 1996). The assumed exercise of outstanding stock options would
not have a materially dilutive effect on reported earnings per common
share.
Reclassifications
Certain prior year amounts have been reclassified to conform with current
year presentation.
2. Restatement Related to Adoption of New Accounting Pronouncement
Effective January 1, 1999, the company adopted the Canadian Institute of
Chartered Accountants Handbook Section 3465, Income Taxes. This adoption
has been retroactively applied to all years presented in the accompanying
financial statements. The adoption of this pronouncement did not have a
material effect on the Consolidated Statement of Income for the year
ended December 31, 1998 and it has not been restated. For the year ended
December 31, 1997, the adoption of Section 3465 resulted in an increase
in the gain on disposal of discontinued operations (Note 3) and a related
increase in net income of $3,086, or $.07 per share. For the year ended
December 31, 1996, the adoption of Section 3465 resulted in an increase
in the income tax provision, and a related decrease in income from
continuing operations of $4,000, or $.09 per share, and a decrease in
earnings from discontinued operations (Note 3) of $4,071, also $.09 per
share, resulting in an aggregate decrease in net income of $8,071, or
$.18 per share. The adoption of Section 3465 decreased 1996 beginning
retained earnings approximately $6,466.
For the years ended December 31, 1998 and 1997, the adoption resulted in
certain reclassifications related to the cost basis of various amounts in
the Statements of Financial Position. The reclassifications resulted in
increases in fixed assets of $5,515 and accrued liabilities of $5,174 and
decreases in inventories of $468, other current assets of $288, goodwill
and other intangibles of $1,344, other assets of $33,801, other
liabilities of $24,109 and retained earnings of $11,451 as of December
31, 1998. At December 31, 1997, application of the provisions of Section
3465 resulted in increases in inventories of $23, other current assets of
$654, fixed assets of $6,554 and accrued liabilities of $5,067 and
decreases in accounts and notes receivable of $141, goodwill and other
intangibles of $568, other assets of $36,248, other liabilities of
$23,342 and retained earnings of $11,451.
<PAGE> 12
8
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
3. Acquisitions, Divestitures, Discontinued Operations and Restructuring
Acquisitions
In February 1998, the company acquired Radiodetection which designs and
manufactures portable pipe and cable locators and related equipment used
in the utility and telecommunication industries. In March, the company
acquired Tex-Steel Corporation, a manufacturer of custom steel doors and
frames for commercial and detention markets. In April, the company
acquired APV Ice Cream, a manufacturer of industrial ice cream production
equipment. In May, the company acquired Leading Edge, Inc. which
manufactures ceiling fans, air curtains and air circulators supplied to
the industrial and electrical distributor markets. In July, the company
acquired C&M, Inc., a manufacturer of powered roller conveyor systems
primarily servicing the corrugated and solid fiber carton industry. In
August, the company acquired Ling Dynamic Systems Limited which designs
and builds vibration test systems and related equipment. The cost of
these and other smaller acquisitions totaled approximately $172,000 and
resulted in an increase in working capital of approximately $27,000, an
increase in fixed assets of approximately $14,000, an increase in other
assets of approximately $1,000 and an increase in goodwill of
approximately $130,000.
In 1997, the company completed the purchase of the common stock of Core
Industries Inc (Core). Core was a manufacturer of valves, strainers and
backflow prevention products, agricultural equipment, electrical test and
measurement equipment and integrated assembly systems used in automobile
and other manufacturing applications. The total cost of the acquisition
was approximately $302,000.
If the acquisition of Core had occurred at the beginning of 1996,
unaudited proforma consolidated sales, net income and net earnings per
share for 1997 and 1996 would have been as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Sales $1,826,273 $1,693,752
Net income 144,422 94,160
Net earnings per share 3.25 2.12
</TABLE>
In 1997, the company also made several smaller product line acquisitions.
In January, the company acquired Lee Engineering which produces vertical
lifting equipment used in various industrial applications. In March, the
company acquired Trussbilt, a manufacturer of doors, frames and related
products for the security and detention markets. In April, the company
acquired Dominion Door, which produces steel doors, frames and pre-hung
windows for metal buildings. In September, the company acquired TIF
Instruments, a manufacturer of electronic test instruments used primarily
by the HVAC market. In September, the company also acquired Process
Machinery & Supply Company and Alliance Food Equipment Corp. Both
companies manufacture and recondition equipment for the ice cream
industry. In November, the company acquired Stow Manufacturing, a
manufacturer of light construction equipment. The cost of these and other
smaller acquisitions totaled approximately $68,000 and resulted in an
increase in working capital of approximately $25,000, an increase in
fixed assets of approximately $6,000 and an increase in goodwill of
approximately $37,000.
<PAGE> 13
9
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
In 1996, the company made several acquisitions, including the SPIG Group,
a privately-owned group of companies based in Italy serving Europe's
cooling tower and related component markets and Lunaire Limited, a
producer of heat process and environmental conditioning equipment. The
cost of these, and other smaller acquisitions, totaled approximately
$51,000.
The above mentioned acquisitions have been accounted for by the purchase
method and earnings have been included in the results of operations from
the dates of the acquisitions.
In 1997, the company initiated a tender offer for the shares of Imo
Industries Inc. (Imo). Imo's Board of Directors ultimately terminated the
merger agreement and, pursuant to the terms of the agreement, the company
received a $7,700 termination fee, net of expenses. In 1996, the company
recorded a charge of $3,000 related to expenses incurred in connection
with the failed bid to acquire Commercial Intertech Corp. The above
amounts are included in "Other income (expense)" in the Consolidated
Statements of Income.
Divestitures (other than Discontinued Operations)
In January 1998, the company sold its Little Falls Tank division of
Waukesha Cherry-Burrell for approximately $4,000 which equaled its book
value. In December 1998, the company sold the assets of its Marley Pump
motor product line and entered into various consulting and supply
arrangements for total proceeds of $17,500. The company recognized a
pre-tax gain on the sale of $11,285 which is included in "Other income
(expense)" in the Consolidated Statements of Income.
In December 1996, the company sold its Bredel hosepump operations based
in The Netherlands for approximately $28,000 and recognized a pre-tax
gain on the sale of $11,792 which is included in "Other income (expense)"
in the Consolidated Statements of Income.
Discontinued Operations
In 1997, the company sold Varco-Pruden, Centria and Windsor Door. These
units were part of the company's Building Products segment. The company
received approximately $240,000 in cash and recorded a net-of-tax gain of
$53,086 on the sale of these businesses. The results of operations of
these units and the related gain on sale have been separately classified
as "Income from discontinued operations" in the Consolidated Statements
of Income. The operating cash flows from these businesses have also been
separately classified in the Consolidated Statements of Cash Flows. The
"Cash provided from (used by) discontinued operations" in the
Consolidated Statement of Cash Flows for 1997 also includes approximately
$44,000 in income tax payments which were directly related to the gain on
the sale of discontinued operations.
At December 31, 1997, "Other assets" in the Consolidated Statements of
Financial Position includes $23,926 of assets to be realized from prior
years' divestiture activities. In 1998, the company incurred charges of
$6,852 related primarily to the write-down of these assets to their
estimated net realizable value. These charges are included in "Other
income (expense)" in the Consolidated Statements of Income.
<PAGE> 14
10
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
Restructuring Charges
In 1998 the company announced a company-wide cost reduction plan. The
plan includes the net reduction of its global workforce by over 500
positions, principally administrative personnel, rationalizations
involving 12 facilities and reduced discretionary spending. As of
December 31, 1998, over 85% of the affected employees had been
terminated. The company incurred charges in 1998 of $16,336 related to
the plan of which $13,474 related to severance and other employee costs
and $2,862 related to exit costs and asset write-downs. These charges are
included in "Restructuring charges" in the Consolidated Statements of
Income. Of the total charges, $7,012 has been spent and $9,324 remains
accrued in the Consolidated Statements of Financial Position at December
31, 1998. The majority of the remaining restructuring activities should
be completed within the first half of 1999.
4. Income Taxes
The provision for income taxes on income from continuing operations is
comprised of the following:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- --------
<S> <C> <C> <C>
Current
Canada $ 3,264 $ 2,961 $ 3,677
United States 23,169 9,674 9,447
Other countries 2,335 20,808 7,081
--------- --------- --------
28,768 33,443 20,205
--------- --------- --------
Deferred
Canada (7,241) (3,886) 733
United States 9,686 26,257 28,016
Other countries (8,344) (6,976) 451
--------- --------- --------
(5,899) 15,395 29,200
--------- --------- --------
$ 22,869 $ 48,838 $ 49,405
========= ========= ========
</TABLE>
The related income (loss) from continuing operations before income taxes
is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- --------
<S> <C> <C> <C>
Canada $ (13,501) $ (5,466) $ 10,485
United States 61,939 75,213 83,075
Other countries 74,119 63,981 25,297
--------- --------- --------
$ 122,557 $ 133,728 $118,857
========= ========= ========
</TABLE>
<PAGE> 15
11
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at December 31, 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 10,805 $ 7,223
Difference between tax on distributed and undistributed earnings 2,451 9,586
Accrued expenses not currently deductible 90,058 81,312
Other 4,240 537
--------- --------
Total gross deferred tax assets 107,554 98,658
Deferred tax liabilities:
Plant and equipment, principally due to differences in basis and depreciation (28,298) (23,878)
Intangible assets, principally due to differences in basis and amortization (12,341) (11,445)
Inventory, principally due to differences in basis (8,501) (7,511)
Other (13,078) (10,246)
--------- --------
Total gross deferred tax liabilities (62,218) (53,080)
--------- --------
Net deferred tax asset $ 45,336 $ 45,578
========= ========
</TABLE>
The difference between the company's effective income tax rate and the
statutory rate on income from continuing operations is reconciled below.
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Income tax expense at U.S. statutory rate of 35% $ 42,895 $ 46,805 $ 41,600
State, provincial and other income taxes 3,464 3,570 3,712
Foreign tax refund (23,838) -- --
Canadian and foreign income taxes at
less than U.S. statutory rate (7,292) (7,577) (582)
Difference in book-tax asset basis 5,644 4,515 3,697
Other 1,996 1,525 978
-------- -------- --------
$ 22,869 $ 48,838 $ 49,405
======== ======== ========
</TABLE>
The company has Canadian net operating loss carryforwards for income tax
purposes of approximately $25,000 which expire in 2003, 2004 and 2005.
"Other Assets" in the Consolidated Statements of Financial Position
include $2,451 and $9,586 at December 31, 1998 and 1997, respectively,
primarily representing German taxes refundable to the company when German
earnings are repatriated.
Income taxes paid totaled $53,085, $71,240 and $19,157 for 1998, 1997 and
1996, respectively.
<PAGE> 16
12
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
5. Inventories
Inventories at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Raw materials $111,994 $102,061
Work-in-process 99,402 88,075
Finished products 168,573 140,222
-------- --------
$379,969 $330,358
======== ========
</TABLE>
6. Fixed Assets
Fixed assets are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation Net
-------- ------------ --------
<S> <C> <C> <C>
December 31, 1998:
Land $ 11,215 $ -- $ 11,215
Plant 129,267 46,485 82,782
Machinery and equipment 394,222 184,320 209,902
Construction in progress 13,954 -- 13,954
-------- -------- --------
$548,658 $230,805 $317,853
======== ======== ========
December 31, 1997:
Land $ 10,607 $ -- $ 10,607
Plant 116,208 38,382 77,826
Machinery and equipment 321,649 151,101 170,548
Construction in progress 42,275 -- 42,275
-------- -------- --------
$490,739 $189,483 $301,256
======== ======== ========
</TABLE>
7. Debt
Short-term
At December 31, 1998 and 1997, the weighted average interest rate on the
company's notes payable to banks was 4.9% and 5.3%, respectively. At
December 31, 1998, the company had available approximately $170,000 of
unused short-term borrowing facilities.
<PAGE> 17
13
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
Long-term
The company's long-term debt at December 31, 1998 and 1997 is summarized
as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Revolving credit bank notes $ 35,958 $ 49,939
Senior notes due 2002 - 6.80% 93,600 117,000
Senior notes due 2002 - 8.25% 50,000 62,500
Senior notes due 2007 - 7.67% 50,000 50,000
Senior notes due 2008 - 6.64% 110,000 --
Commercial paper 162,556 --
Multi-currency revolving notes 39,718 3,000
Other notes payable in installments
through 2020 at interest rates varying
from 4.8% to 10.0% 54,604 56,180
-------- --------
596,436 338,619
Less current portion of long-term debt 51,665 41,131
-------- --------
$544,771 $297,488
======== ========
</TABLE>
The company has a revolving credit agreement (revolver) with a group of
banks. This agreement gives the company the ability to borrow up to
$450,000 through July 2002. Borrowings under the revolver are available
in U.S. dollars and Deutsche Marks (DM) at the U.S. prime interest rate
or LIBOR plus a margin. The margin ranges from .17% to .325% and is
determined by a leverage ratio and the amount of utilization under the
credit facility. The weighted average interest rates on the borrowings
under this agreement were 4.9% and 4.6% during 1998 and 1997,
respectively. At December 31, 1998, $35,958 of the revolver borrowings
were denominated in DM. The DM borrowings are designated as a hedge of
the company's net investment in German subsidiaries and foreign exchange
gains and losses on these borrowings are reflected in "Equity adjustment
from foreign currency translation" in the Consolidated Statements of
Financial Position. The company also pays an annual facility fee on the
amount of this facility ranging from .08% to .125%, depending upon a
leverage ratio. The company further pays an annual utilization fee on the
amount of loans outstanding of up to .05%, depending on leverage and
amount of utilization. At December 31, 1998, the margin, facility fee and
utilization fee were .25 %, .10% and 0%, respectively.
The 6.80% senior notes are currently payable in annual installments of
$23,400. The 8.25% senior notes are currently payable in annual
installments of $12,500. The 7.67% senior notes are payable in annual
installments of $10,000 beginning in 2003. The 6.64% senior notes are
payable in full in 2008.
During 1998, the company entered into an open-ended program whereby up to
Cdn $250,000 of commercial paper can be issued. While the commercial
paper is typically due in 30 - 60 days, with a maximum maturity of one
year, it is the company's intention to continually refinance these
borrowings. The company maintains unutilized long-term committed credit
facilities sufficient to refinance the commercial paper outstanding.
Therefore, the amounts outstanding at December 31, 1998 (U.S. $162,556)
are included in long-term debt in the Consolidated Statements of
Financial Position. Interest rates on the commercial paper ranged from
4.7% to 6.1% with a weighted average of 5.2% in 1998.
<PAGE> 18
14
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
The company has a $40,000 multi-currency revolving credit agreement with
a bank which expires in June 1999. The agreement allows the company to
designate subsidiaries to borrow under the facility at interest rates,
margins and facility fees identical to the revolver discussed above. At
December 31, 1998, $39,718 had been borrowed under this facility. This
amount is included in long-term debt since the company has the capacity
and intends to refinance this facility and extend its term prior to the
expiration of the agreement.
At December 31, 1998, the company had available approximately $220,000 of
unused long-term revolving credit commitments.
Various loan agreements contain covenants with respect to net worth,
indebtedness and other items. The company has complied with all
provisions of these agreements at December 31, 1998.
Future principal payments on long-term debt are as follows:
<TABLE>
<S> <C>
1999 $ 51,665
2000 47,072
2001 78,274
2002 234,824
2003 410
Thereafter 184,191
--------
$ 596,436
=========
</TABLE>
The fair value of the company's long-term debt is estimated based on the
current rates available to the company for debt of the same remaining
maturities. Since the company's fixed rate debt carries interest rates
which are higher than current market rates, the estimated fair value of
the company's long-term debt was approximately $621,000 and $349,000 at
December 31, 1998 and 1997, respectively.
8. Interest Expense - Net
Net interest expense is composed of the following:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Interest on long-term debt $ 35,749 $ 22,441 $ 21,767
Other interest expense 3,117 3,757 2,028
Interest income (3,116) (7,654) (4,671)
-------- -------- --------
$ 35,750 $ 18,544 $ 19,124
======== ======== ========
</TABLE>
Net interest paid totaled $33,082, $20,104 and $17,555 for 1998, 1997 and
1996, respectively.
<PAGE> 19
15
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
9. Capital Stock
The company is incorporated under the Canada Business Corporations Act
and is authorized to issue an unlimited number of common and preferred
shares of no par value.
The company has a stock option and restricted stock plan under which
options for a term not exceeding 10 years may be granted to key employees
and directors to purchase common shares of the company at a price not
less than 100% of their fair market value at the date of grant. Common
shares reserved for exercise of these options or the issuance of
restricted stock may not at any time exceed 10% of the number of common
shares then outstanding. Transactions involving the plan are summarized
below.
<TABLE>
<CAPTION>
Options Weighted-
------------------------ Average
Available for Option Price Exercise
Future Grant Granted Per Share Price
------------ --------- ---------------- ---------
(Cdn.) (Cdn.)
<S> <C> <C> <C> <C>
Outstanding at December 31, 1997 1,083,222 2,129,720 $ 9.375 - $38.87 $ 28.02
Exercised -- (445,422) $ 9.375 - $36.65 $ 23.60
Granted (435,250) 435,250 $28.95 - $40.00 $ 35.26
Expired 21,100 (21,100) $26.375 - $36.65 $ 29.76
------- ---------
Outstanding at December 31, 1998 669,072 2,098,448 $ 9.375 - $40.00 $ 30.44
======= =========
Exercisable at December 31, 1998 1,414,503 $ 9.375 - $40.00 $ 28.27
=========
</TABLE>
At December 31, 1998, the weighted-average remaining contractual life for
options outstanding was six years and nine months.
The restricted stock issued during 1996 had a fair value at the date of
grant of $6,518 or U.S. $24.25 per share. The sale of this stock is
restricted for two to five years from the date of the grant. Compensation
expense related to these shares is recorded over the restriction period
and amounted to $1,984, $1,406 and $1,231 in 1998, 1997 and 1996,
respectively.
The company's management incentive plans contain a feature that allows
participants the opportunity to elect to receive restricted common shares
in lieu of a portion of their cash bonuses. The number of shares issued
is increased by a multiple in order to provide participants an incentive
to elect to receive shares. A total of 43,845 shares were issued in 1998
to participants who made such share elections.
<PAGE> 20
16
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
10. Benefit Plans
The company and its subsidiaries have defined benefit pension plans
covering approximately one half of all employees. Plans covering eligible
salaried employees call for benefits to be paid at retirement based
primarily upon years of service and their compensation rates near
retirement. Plans covering hourly employees generally provide benefits of
stated amounts for each year of service. Contributions to the plans
reflect benefits attributed to employees' services to date and also for
benefits expected to be earned in the future. Assets of the plans consist
primarily of cash and cash equivalents, common and preferred stocks,
government bonds, investment-grade corporate bonds and other fixed income
investments. The company also provides, through non-qualified plans,
supplemental pension payments in excess of the qualified plan limits
imposed by income tax regulations. These non-qualified plans are
unfunded.
The following tables set forth the change in projected benefit
obligation, change in plan assets and the funded status of the company's
North American benefit plans as of December 31, 1998 and 1997.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------------- --------------------
1998 1997 1998 1997
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year $ 167,993 $ 161,271 $ 26,883 $ 19,100
Service cost 3,917 4,557 729 738
Interest cost 14,162 13,233 2,216 1,777
Plan participants' contributions 17 18 -- --
Plan amendment -- -- 1,446 --
Actuarial (gain) loss 2,403 (512) 3,588 6,428
Acquisition -- 11,664 -- --
Benefits paid (9,759) (9,131) (1,203) (1,160)
Curtailments -- (3,897) -- --
Settlements -- (9,210) -- --
--------- --------- -------- --------
Benefit obligation at end of year 178,733 167,993 33,659 26,883
--------- --------- -------- --------
Change in plan assets
Fair value of plan assets at beginning of year 205,953 173,957
Return on plan assets 12,894 30,534
Acquisition -- 18,415
Employer contribution 3,070 3,170
Plan participants' contributions 17 18
Benefits paid (9,759) (9,131)
Settlements -- (11,010)
--------- ---------
Fair value of plan assets at end of year 212,175 205,953
--------- ---------
Funded status 33,442 37,960 (33,659) (26,883)
Unrecognized net actuarial (gain) loss (23,933) (28,386) 7,551 8,153
Unrecognized prior service cost 3,327 1,755 5,476 4,144
Unrecognized net transition obligation 27 37 1,502 1,670
--------- --------- -------- --------
Prepaid (accrued) benefit cost $ 12,863 $ 11,366 $(19,130) $(12,916)
========= ========= ======== ========
</TABLE>
<PAGE> 21
17
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
The weighted-average discount rate used to measure the projected benefit
obligation is 8.5%, the average rate of increase in future compensation
levels is approximately 5% and the expected long-term rate of return on
assets is 8.5%. The company amortizes prior service cost and unrecognized
gains and losses using the straight-line method over the average future
service life of active participants.
The components of net periodic benefit cost are as follows:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
-------------------------------- ------------------------
1998 1997 1996 1998 1997 1996
-------- -------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 3,917 $ 4,557 $ 4,807 $ 729 $ 738 $ 639
Interest cost 14,162 13,233 12,948 2,216 1,777 1,309
Expected return on plan assets (16,067) (13,858) (12,600) -- -- --
Amortization (879) (682) 335 1,680 1,509 976
-------- -------- -------- ------ ------ ------
Net periodic benefit cost $ 1,133 $ 3,250 $ 5,490 $4,625 $4,024 $2,924
======== ======== ======== ====== ====== ======
</TABLE>
A number of the company's operating units have defined contribution plans
pursuant to Section 401(k) of the U.S. Internal Revenue Code. The total
expense of these plans was $5,475, $3,893 and $3,816 for the years ended
December 31, 1998, 1997 and 1996, respectively.
The company's German operations have pension plans, which in accordance
with applicable laws, are unfunded. The weighted average discount rate
used to measure the projected benefit obligation of the German plans is
7% and the rate of increase in future compensation levels is 3.5% for
1998 and 3% for 1997.
The status of the German plans at December 31, 1998 and 1997 is as
follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year $ 16,421 $ 18,192
Service cost 376 875
Interest cost 1,126 1,089
Amendments -- (261)
Actuarial loss 265 228
Benefits paid (726) (817)
Foreign exchange rate changes 530 (2,885)
-------- --------
Benefit obligation at end of year $ 17,992 $ 16,421
======== ========
</TABLE>
The components of net periodic benefit cost are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Service cost $ 376 $ 875 $ 387
Interest cost 1,126 1,089 1,213
Amortization of prior service cost 134 136 157
------ ------ ------
Net periodic benefit cost $1,636 $2,100 $1,757
====== ====== ======
</TABLE>
Of the above accrued pension cost, $16,167 and $14,947 at December 31,
1998 and 1997, respectively, is included in "Other liabilities" in the
Consolidated Statements of Financial Position.
<PAGE> 22
18
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
The company provides certain postretirement health care and life
insurance benefits to a limited number of employees. The costs associated
with these benefits are not significant and are recorded on a
"pay-as-you-go" or cash basis.
11. Commitments and Contingencies
A number of claims and lawsuits seeking unspecified damages and other
relief are pending against the company. It is impossible at this time for
the company to predict with any certainty the outcome of such litigation.
However, management is of the opinion, based upon information presently
available, that it is unlikely that any liability, to the extent not
provided for through insurance or otherwise, would be material in
relation to the company's consolidated financial position.
The company has been named along with several other parties in a number
of administrative proceedings maintained by federal and state agencies
arising out of alleged releases or contributions of hazardous substances
into the environment. None of the proceedings is, in the opinion of
management, either individually or viewed in connection with all the
proceedings, material to the company's liquidity, consolidated operating
results, or consolidated financial position. While the company has
participated and in the future will participate in the funding of clean
up costs in connection with certain of the proceedings, it does not
believe that material monetary sanctions will be imposed against it as a
result of any of the proceedings.
The company has an agreement to sell certain qualifying accounts
receivable to a financial institution on a revolving basis. The amount
sold as of December 31, 1998 and 1997 was $62,000 and $68,100,
respectively. The amount sold at any time must be supported by available
credit under the revolver. Certain of the company's operations have
entered into agreements with third party finance companies to provide
wholesale financing of their product to distributors. The company is
responsible for the repurchase of new product in the event it is acquired
by the finance companies through repossession. At December 31, 1998, the
total amount of new product financed under these agreements is
approximately $15,000. At December 31, 1998, the company also has sold
approximately $12,000 of receivables under recourse agreements. Reserves
have been provided for any anticipated losses under these agreements.
In the normal course of business, letters of credit and bank guarantees
are issued by banks for account of the company, which in the opinion of
management, have no material effect on the company's financial position.
At December 31, 1998, the company was contingently liable for $82,000
under these arrangements.
The company does not trade in financial instruments and does not engage
in speculation. However, it does enter into a limited range and number of
derivative financial instrument contracts. The company also has a program
in place to manage foreign currency risk. As part of that program, the
company has entered into a limited number of foreign currency forward
exchange contracts to hedge anticipated foreign currency transactions
during the next twelve months. Also, the company sometimes enters into
forward exchange contracts to hedge specific foreign currency
transactions or intercompany loan payments. The company's foreign
exchange contracts do not subject the company to risk due to exchange
rate movements because gains and losses on these contracts offset losses
and gains on the transactions being hedged. As of December 31, 1998, the
company's German operations had approximately DM 72 million ($42,000) of
forward exchange contracts outstanding which are designed to convert the
receipt of foreign currencies from sales outside of Germany into DM. The
forward exchange contracts generally have maturities which do not exceed
one year and exchange rates are agreed to at the inception of the
contracts.
<PAGE> 23
19
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
The company has operating leases covering machinery, equipment, office,
warehouse and manufacturing facilities. Future minimum lease payments
under operating leases at December 31, 1998 are as follows:
<TABLE>
<S> <C>
1999 $ 13,485
2000 12,134
2001 7,456
2002 4,602
2003 3,031
Thereafter 6,933
--------
$ 47,641
========
</TABLE>
12. Business Segments
The company operates in the following industry segments:
Flow Technology - air dehydration and filtration equipment and
related parts and services for compressed air systems; valves,
strainers and back flow prevention products; water system and
submersible petroleum pumps; leak detection equipment; rotary
positive displacement pumps and related fluid handling equipment for
sanitary and industrial markets; ice cream equipment; process
equipment and integrated systems; water cooling towers and related
components; fiberglass panels and pultruded products and cast-iron
boilers.
Machinery - light and heavy duty soil, sanitary landfill and asphalt
compaction equipment; asphalt recyclers and pavers; light
construction equipment; tillage equipment; foraging wagons; and grain
drills and augers.
Specialty Engineered Products - steel doors and frames; electric
resistance heating products; air circulation equipment; machined
critical parts for aerospace markets; metal forming equipment;
loading dock equipment; powered roller conveyor systems; and vertical
lifting equipment.
Test Instrumentation - air supply houses; heat process and
environmental conditioning equipment; electrical test and measurement
equipment; refrigerant leak detection and recovery systems; vibration
test systems; portable pipe and cable locators; and integrated
assembly systems used in automobile and other manufacturing
applications.
The significant accounting policies of the above segments are the same as
those described in note 1. Intersegment sales are recorded at current
market prices. The company does not include income taxes or net interest
expense in the determination of segment profit. Information about the
company's segments, certain geographic information and a reconciliation
of segment profit to net income is shown below.
<PAGE> 24
20
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Year ended December 31, 1998
----------------------------------------------------------------------------------------
Sales (2)
------------------------------------ (3) (2) Depreciation
(1) Segment Capital and
Assets Gross Intersegment Net profit expenditures amortization
---------- ---------- ------------ ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Industry segment
Flow Technology $ 943,703 $ 945,828 $ 16 $ 945,812 $ 96,594 $21,145 $38,161
Machinery 272,115 454,460 -- 454,460 51,000 12,270 7,287
Specialty Engineered Products 259,387 349,070 30 349,040 38,887 10,537 10,595
Test Instrumentation 305,383 271,062 -- 271,062 20,893 4,482 7,691
---------- ---------- ---------- ---------- -------- ------- -------
$1,780,588 $2,020,420 $ 46 $2,020,374 $207,374 $48,434 $63,734
========== ========== ========== ========== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Fixed assets
and goodwill Net sales
------------ ----------
<S> <C> <C>
Geographic information
United States $ 930,577 $1,510,721
Germany 24,283 176,350
Other Countries 137,813 333,303
---------- ----------
$1,092,673 $2,020,374
========== ==========
</TABLE>
<TABLE>
<S> <C>
Reconciliation of segment profit to net income
Segment profit $ 207,374
Corporate expenses (30,231)
Corporate restructuring charges (6,788)
Interest - net (35,750)
Other expense - net (12,048)
---------
Income before income taxes 122,557
Income tax provision (22,869)
---------
Net income $ 99,688
=========
</TABLE>
(1) Assets exclude $302,346 of corporate amounts.
(2) Capital expenditures and depreciation and amortization exclude $3,307 and
$1,131, respectively, of corporate amounts.
(3) Includes restructuring costs of $7,786, $275, $443 and $1,044 for the
Flow Technology, Machinery, Specialty Engineered Products and Test
Instrumentation segments, respectively. Flow Technology also includes an
$11,285 gain on sale of business (see note 3) while Specialty Engineered
Products includes a $6,000 charge related to settlement of litigation.
<PAGE> 25
21
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Year ended December 31, 1997
----------------------------------------------------------------------------------------
Sales (2)
------------------------------------ (3) (2) Depreciation
(1) Segment Capital and
Assets Gross Intersegment Net profit expenditures amortization
---------- ---------- ------------ ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Industry segment
Flow Technology $ 904,442 $ 845,716 $ -- $ 845,716 $ 79,443 $26,383 $32,573
Machinery 234,249 363,690 -- 363,690 42,460 8,200 5,246
Specialty Engineered Products 183,184 310,340 -- 310,340 41,618 10,202 9,034
Test Instrumentation 183,842 123,508 -- 123,508 11,509 1,708 2,700
---------- ---------- ---------- ---------- --------- ------- -------
1,505,717 1,643,254 -- 1,643,254 175,030 46,493 49,553
Divested businesses 4,536 11,425 -- 11,425 (353) 203 307
---------- ---------- ---------- ---------- --------- ------- -------
$1,510,253 $1,654,679 $ -- $1,654,679 $ 174,677 $46,696 $49,860
========== ========== ========== ========== ========= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Fixed assets
and goodwill Net sales
------------ ----------
<S> <C> <C>
Geographic information
United States $ 880,844 $1,263,308
Germany 22,425 162,468
Other Countries 62,169 217,478
Divested businesses 4,536 11,425
---------- ----------
$ 969,974 $1,654,679
========== ==========
</TABLE>
<TABLE>
<S> <C>
Reconciliation of segment profit to net income
Segment profit $ 174,677
Corporate expenses (29,485)
Interest - net (18,544)
Other income - net 7,080
---------
Income from continuing operations before income taxes 133,728
Income tax provision (48,838)
---------
Income from continuing operations 84,890
Income from discontinued operations 56,174
---------
Net income $ 141,064
=========
</TABLE>
(1) Assets exclude $238,568 of corporate amounts.
(2) Capital expenditures and depreciation and amortization exclude $13,900
and $977, respectively, of corporate amounts.
<PAGE> 26
22
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Year ended December 31, 1996
----------------------------------------------------------------------------------------
Sales (2)
------------------------------------ (3) (2) Depreciation
(1) Segment Capital and
Assets Gross Intersegment Net profit expenditures amortization
---------- ---------- ------------ ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Industry segment
Flow Technology $ 698,255 $ 776,690 $ 4 $ 776,686 $ 92,596 $27,476 $27,692
Machinery 164,980 323,609 -- 323,609 29,620 10,441 4,626
Specialty Engineered Products 156,637 256,921 -- 256,921 27,578 9,088 7,944
Test Instrumentation 43,933 48,983 -- 48,983 5,388 555 999
---------- ---------- ---------- ---------- -------- ------- -------
1,063,805 1,406,203 4 1,406,199 155,182 47,560 41,261
Divested businesses 6,098 26,869 -- 26,869 17,123 767 981
---------- ---------- ---------- ---------- -------- ------- -------
$1,069,903 $1,433,072 $ 4 $1,433,068 $172,305 $48,327 $42,242
========== ========== ========== ========== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Fixed assets
and goodwill Net sales
------------ ----------
<S> <C> <C>
Geographic information
United States $ 583,364 $1,066,509
Germany 24,889 160,966
Other Countries 60,445 178,724
Discontinued operations 80,743 --
Divested business 6,098 26,869
---------- ----------
$ 755,539 $1,433,068
========== ==========
</TABLE>
<TABLE>
<S> <C>
Reconciliation of segment profit to net income
Segment profit $ 172,305
Corporate expenses (23,794)
Interest - net (19,124)
Other expense - net (10,530)
---------
Income from continuing operations before income taxes 118,857
Income tax provision (49,405)
---------
Income from continuing operations 69,452
Income from discontinued operations 17,397
---------
Net income $ 86,849
=========
</TABLE>
(1) Assets exclude $517,000 of corporate amounts and amounts related to
discontinued operations.
(2) Capital expenditures and depreciation and amortization exclude $3,080 and
$926, respectively, of corporate amounts.
(3) Divested businesses includes an $11,792 gain on sale of business (see
note 3).
<PAGE> 27
23
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
13. Year 2000
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range
from minor errors to significant systems failure which could affect a
company's ability to conduct normal business operations. The company has
developed and is implementing a process involving a phased approach
designed to mitigate the expected effects of the Year 2000 Issue on the
company. As of December 31, 1998, the identification and assessment
phases of the Year 2000 process, which address the Year 2000 readiness of
the company's computer systems and of third parties, such as customers,
suppliers and others, are ongoing. The company has commenced the
remediation phase, which is intended to modify, retire or replace
computer systems identified to date which are not Year 2000 ready.
However, it is not possible to be certain that all aspects of the Year
2000 Issue affecting the company, including those related to the efforts
of customers, suppliers, or other third parties, will be fully resolved
by January 1, 2000.
14. Differences Between Canadian and United States Accounting Principles
United States Accounting Differences
Generally accepted accounting principles (GAAP) in Canada allow for the
reduction of stated capital of outstanding common shares with a
corresponding offset to deficit. This reclassification, which the company
made in 1990, is not permitted by United States GAAP and would result in
an increase in capital stock and a reduction in retained earnings at
December 31, 1998 and 1997 of $128,093. Canadian GAAP also permits
expenses related to the issue of capital stock, net of income taxes, to
be deducted from retained earnings while United States GAAP requires such
expenses to be deducted from the proceeds of stock issuances credited to
capital stock. This reclassification would reduce capital stock and
increase retained earnings by $20,905 at December 31, 1998 and 1997.
Under Canadian GAAP, the discount rate used for computing the benefit
obligation and the service and interest cost components of net periodic
pension expense represents management's best estimate of the long-term
rate of return on pension fund assets; whereas, under United States GAAP,
the discount rate reflects the rate at which pension benefits can be
effectively settled at the date of the financial statements.
United States GAAP requires accruing the cost of providing postretirement
benefits other than pensions to employees and their beneficiaries (e.g.
health care benefits) during the years that the employee renders the
necessary service. The company records expense on a "pay-as-you-go" basis
for benefits paid on behalf of retired employees. The accumulated benefit
obligation not recorded by the company totaled approximately $15,000 and
$14,000 at December 31, 1998 and 1997, respectively.
<PAGE> 28
24
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
Beginning in 1997, United States GAAP requires the dual presentation of
basic and diluted earnings per share. Diluted earnings per share reflects
the assumed exercise of dilutive securities such as the company's stock
options.
The following table reflects the impact on net income, weighted average
shares outstanding and net earnings per share of complying with United
States GAAP as it pertains to the items noted above.
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net income
Canadian GAAP $ 99,688 $ 141,064 $ 86,849
United States GAAP 97,139 138,500 84,319
Weighted average shares outstanding (000's)
Canadian GAAP 40,755 44,439 44,513
Less restricted stock outstanding (123) (269) (235)
----------- ----------- -----------
United States GAAP - Basic 40,632 44,170 44,278
Effect of dilutive securities:
Restricted stock 123 269 235
Employee stock options 281 303 227
----------- ----------- -----------
United States GAAP - Diluted 41,036 44,742 44,740
=========== =========== ===========
Net earnings per share
Canadian GAAP
Continuing operations $ 2.45 $ 1.91 $ 1.56
Discontinued operations -- 1.26 .39
----------- ----------- -----------
Net earnings $ 2.45 $ 3.17 $ 1.95
=========== =========== ===========
United States GAAP - Basic
Continuing operations $ 2.39 $ 1.86 $ 1.51
Discontinued operations -- 1.28 .39
----------- ----------- -----------
Net earnings $ 2.39 $ 3.14 $ 1.90
=========== =========== ===========
United States GAAP - Diluted
Continuing operations $ 2.37 $ 1.84 $ 1.50
Discontinued operations -- 1.26 .38
----------- ----------- -----------
Net earnings $ 2.37 $ 3.10 $ 1.88
=========== =========== ===========
</TABLE>
<PAGE> 29
25
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
The following is a reconciliation of net income under Canadian GAAP to
net income under United States GAAP.
<TABLE>
<CAPTION>
1998 1997 1996
-------- --------- --------
<S> <C> <C> <C>
Net income under Canadian GAAP $ 99,688 $ 141,064 $ 86,849
Increased (decreased) by:
Pension expense (1,483) (1,470) (1,198)
Postretirement benefits (745) (1,170) (963)
Other (321) 76 (369)
-------- --------- --------
Net income under United States GAAP $ 97,139 $ 138,500 $ 84,319
======== ========= ========
</TABLE>
Beginning in 1998, United States GAAP requires reporting on comprehensive
income. Comprehensive income is defined as the change in equity of a
company from transactions and other events from non-owner sources. For
the years ended December 31, 1998, 1997 and 1996, comprehensive income is
as follows.
<TABLE>
<CAPTION>
1998 1997 1996
-------- --------- --------
<S> <C> <C> <C>
Net income under United States GAAP $ 97,139 $ 138,500 $ 84,319
Foreign currency translation adjustments,
net of tax (576) (6,055) (153)
-------- --------- --------
Comprehensive income under United States GAAP $ 96,563 $ 132,445 $ 84,166
======== ========= ========
</TABLE>
The application of United States GAAP previously discussed would result
in increases in other (non-current) liabilities of approximately $6,000
and common shares of approximately $107,000 and decreases in goodwill of
approximately $1,000, accrued liabilities of approximately $1,000 and
retained earnings of approximately $113,000 as of December 31, 1998. At
December 31, 1997, the application of United States GAAP would result in
increases in other (non-current) liabilities of approximately $7,000 and
common shares of approximately $107,000 and decreases in goodwill of
approximately $1,000 and retained earnings of approximately $115,000.
<PAGE> 30
26
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
Additional United States Disclosure Requirements
The company's accounting for stock options is essentially the same as the
intrinsic value method prescribed by existing accounting pronouncements
effective in the United States. Beginning in 1996 however, United States
GAAP encouraged, but did not require companies to record compensation
cost for stock option plans at fair value. The United States accounting
pronouncement does require the disclosure of proforma net income and
earnings per share information as if the company had accounted for its
employee stock options issued beginning in 1995 under the fair value
method. Accordingly, the fair value of the options issued have been
estimated at the date of grant using a Black-Scholes option pricing model
with the following assumptions for 1998, 1997 and 1996, respectively:
risk-free interest rates of 5.1%, 6.2% and 5.7%; dividend yields of 1.6%,
1.0% and .8%; volatility factors of the expected market price of the
company's common stock of .39, .33 and .34; and a weighted-average
expected life of the options of eight years. The weighted-average
grant-date fair values of options issued in 1998, 1997 and 1996 was
$12.60, $12.43 and $11.08, respectively. For purposes of proforma
disclosures, the estimated fair value of the options is amortized to
expense over the options' vesting period which ranges from six months to
three years. Retroactive application of the fair value method to prior
years is not permitted, therefore the full effect of the fair value
method will not be reflected in the proforma disclosures until it has
been applied to all nonvested options. Assuming the company had accounted
for its stock options issued under the fair value method, United States
GAAP proforma net income and basic and diluted earnings per share for the
years ended December 31, 1998, 1997 and 1996 would have been $93,977,
$2.31 and $2.29; $136,091, $3.08 and $3.04; and $82,869, $1.87 and $1.85,
respectively.
United States GAAP requires disclosure of changes during the year in
non-cash working capital balances pertaining to operating activities. The
following table reflects such changes for the years ended December 31,
1998, 1997 and 1996.
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Decrease (increase) in current assets
Accounts and notes receivable $(39,063) $ (7,582) $(30,278)
Inventories (21,184) (15,124) 32,239
Other current assets (9,359) (4,937) 5,955
Increase (decrease) in current liabilities
Accounts payable and accrued liabilities 27,148 5,140 (844)
Customer advances 6,200 (831) (2,931)
-------- -------- --------
$(36,258) $(23,334) $ 4,141
======== ======== ========
</TABLE>
<PAGE> 31
27
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements, Restated (note 2)
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
Beginning in 1998, United States GAAP requires disclosure of the effect
of a one-percentage point increase or decrease in the assumed health care
cost trend rates on the aggregate of the service and interest cost
components of net periodic postretirement health care benefit cost and
the accumulated postretirement benefit obligation for health care
benefits. The following table reflects such effects. Since the company is
on a pay-as-you-go basis, this disclosure relates to the proforma
disclosures contained in the reconciliation of net income previously
discussed.
<TABLE>
<CAPTION>
1-Percentage 1-Percentage
Point Increase Point Decrease
-------------- --------------
<S> <C> <C>
Effect on total of service and interest
cost components $ 57 $ (42)
Effect on postretirement benefit
obligation 128 (115)
</TABLE>
15. Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
Net Net Earnings
Sales Gross Profit* Income Per Share
----------------------- ------------------- ------------------ -------------------
1998 1997 1998 1997 1998 1997 1998 1997
---------- ---------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter $ 444,135 $ 322,809 $129,872 $ 93,275 $14,327 $ 11,171 $ .35 $ .25
Second Quarter 523,692 395,926 161,329 116,041 26,608 76,436 .65 1.70
Third Quarter 524,755 441,337 159,691 124,928 21,378 26,673 .52 .60
Fourth Quarter 527,792 494,607 167,680 151,781 37,375 26,784 .92 .62
---------- ---------- -------- -------- ------- -------- -------- --------
Total $2,020,374 $1,654,679 $618,572 $486,025 $99,688 $141,064 $ 2.45 $ 3.17
========== ========== ======== ======== ======= ======== ======== ========
</TABLE>
*Represents sales less cost of sales
16. Supplemental Condensed Consolidating Financial Information
United Dominion Industries Limited and its wholly owned subsidiary,
United Dominion Holdings, Inc., are guarantors of certain senior debt
issued by United Dominion Industries, Inc. The following is summarized
condensed consolidating financial information segregating the parent and
guarantor subsidiaries from nonguarantor subsidiaries. The guarantor
subsidiaries are wholly owned subsidiaries of the company and guarantees
are full, unconditional and joint and several. Separate financial
statements and other disclosures of the guarantor subsidiaries are not
presented because management believes these financial statements would
not provide relevant material additional information to users.
<PAGE> 32
28
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
December 31, 1998
---------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION --
ASSETS
Inventories $ 1,539 $ -- $ 51,624 $ 313,985 $ 12,821 $ 379,969
Other current assets 18,874 97 84,588 491,949 (54,950) 540,558
---------------------------------------------------------------------------------
Total current assets 20,413 97 136,212 805,934 (42,129) 920,527
Fixed assets - net 930 -- 106,693 210,230 -- 317,853
Goodwill and other intangibles 747 -- 121,037 653,036 -- 774,820
Intercompany notes receivable -- -- 117,958 336,560 (454,518) --
Other assets 1,074,143 312,369 1,197,181 507,838 (3,021,797) 69,734
---------------------------------------------------------------------------------
Total assets $ 1,096,233 $ 312,466 $ 1,679,081 $ 2,513,598 $(3,518,444) $ 2,082,934
=================================================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities $ 8,090 $ 1,538 $ 139,932 $ 381,534 $ (49,186) $ 481,908
Long-term debt 198,780 -- 313,544 32,447 -- 544,771
Intercompany notes payable -- -- 336,560 117,958 (454,518) --
Other liabilities 3,533 -- 572,750 106,141 (511,999) 170,425
---------------------------------------------------------------------------------
Total liabilities 210,403 1,538 1,362,786 638,080 (1,015,703) 1,197,104
---------------------------------------------------------------------------------
Shareholders' equity 885,830 310,928 316,295 1,875,518 (2,502,741) 885,830
---------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 1,096,233 $ 312,466 $ 1,679,081 $ 2,513,598 $(3,518,444) $ 2,082,934
=================================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
---------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION
ASSETS
Inventories $ -- $ -- $ 44,216 $ 271,667 $ 14,475 $ 330,358
Other current assets 1,973 97 61,589 319,205 (16,172) 366,692
---------------------------------------------------------------------------------
Total current assets 1,973 97 105,805 590,872 (1,697) 697,050
Fixed assets - net -- -- 98,380 202,876 -- 301,256
Goodwill and other intangibles -- -- 81,098 587,620 -- 668,718
Intercompany notes receivable -- -- 106,939 341,156 (448,095) --
Other assets 950,359 290,270 1,120,316 437,575 (2,716,723) 81,797
---------------------------------------------------------------------------------
Total assets $ 952,332 $ 290,367 $ 1,512,538 $ 2,160,099 $(3,166,515) $ 1,748,821
=================================================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities $ 33,082 $ 1,000 $ 147,937 $ 266,624 $ (10,437) $ 438,206
Long-term debt -- -- 253,703 43,785 -- 297,488
Intercompany notes payable 42,822 -- 333,730 71,543 (448,095) --
Other liabilities 3,879 -- 531,148 67,042 (461,491) 140,578
---------------------------------------------------------------------------------
Total liabilities 79,783 1,000 1,266,518 448,994 (920,023) 876,272
---------------------------------------------------------------------------------
Shareholders' equity 872,549 289,367 246,020 1,711,105 (2,246,492) 872,549
---------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 952,332 $ 290,367 $ 1,512,538 $ 2,160,099 $(3,166,515) $ 1,748,821
=================================================================================
</TABLE>
<PAGE> 33
29
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
December 31, 1998
---------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Sales $ -- $ -- $ 392,154 $ 1,638,545 $ (10,325) $ 2,020,374
Costs and expenses
Cost of sales -- -- 275,332 1,136,795 (10,325) 1,401,802
Selling, general and administrative
expenses 2,973 -- 70,457 351,345 2,128 426,903
Goodwill and other intangibles
amortization 4 -- 2,867 18,588 -- 21,459
Restructuring charges -- -- 8,637 7,699 -- 16,336
---------------------------------------------------------------------------------
Total costs and expenses 2,977 -- 357,293 1,514,427 (8,197) 1,866,500
---------------------------------------------------------------------------------
Operating income (loss) (2,977) -- 34,861 124,118 (2,128) 153,874
Other income (expense)
Equity in earnings of subsidiaries 111,474 72,440 75,406 -- (259,320) --
Interest - net (9,071) -- (53,065) 26,386 -- (35,750)
Gain on sale of business -- -- -- 11,285 -- 11,285
Other (5,000) -- 5,583 1,680 (9,115) (6,852)
---------------------------------------------------------------------------------
Income before income taxes 94,426 72,440 62,785 163,469 (270,563) 122,557
Income tax provision 5,262 54 4,151 (35,982) 3,646 (22,869)
---------------------------------------------------------------------------------
Net income $ 99,688 $ 72,494 $ 66,936 $ 127,487 $ (266,917) $ 99,688
=================================================================================
CASH FLOWS
Net cash provided from (used by) operating
activities $ 987 $ -- $ (32,144) $ 138,526 $ -- $ 107,369
Cash flows from investing activities:
Additions to fixed assets -- -- (18,479) (33,262) -- (51,741)
Acquisition of businesses (53,661) -- (56,284) (62,236) -- (172,181)
Net proceeds from disposal of businesses -- -- 3,434 21,574 -- 25,008
Other, net -- -- 11,636 (9,322) -- 2,314
---------------------------------------------------------------------------------
Net cash used by investing activities (53,661) -- (59,693) (83,246) -- (196,600)
---------------------------------------------------------------------------------
Cash flows from financing activities:
Additional borrowings (repayments) 174,812 -- 64,343 (179) -- 238,976
Issuance of common shares 7,302 -- -- -- -- 7,302
Repurchase of common shares (83,565) -- -- -- -- (83,565)
Increase (decrease) in net payable
to affiliates (51,989) -- 25,573 26,416 -- --
Dividends (to) from affiliates 40,900 -- -- (40,900) -- --
Contribution of capital (to) from
affiliates (19,723) -- -- 19,723 -- --
Other, net (14,614) -- -- -- -- (14,614)
---------------------------------------------------------------------------------
Net cash provided from financing
activities 53,123 -- 89,916 5,060 -- 148,099
---------------------------------------------------------------------------------
Net increase (decrease) in cash during
the period 449 -- (1,921) 60,340 -- 58,868
Cash at beginning of period (342) 97 14,879 49,953 -- 64,587
---------------------------------------------------------------------------------
Cash at end of period $ 107 $ 97 $ 12,958 $ 110,293 $ -- $ 123,455
=================================================================================
</TABLE>
<PAGE> 34
30
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
December 31, 1997
---------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Sales $ -- $ -- $ 354,151 $ 1,303,876 $ (3,348) $ 1,654,679
Costs and expenses
Cost of sales -- -- 254,800 917,202 (3,348) 1,168,654
Selling, general and administrative expenses 3,561 -- 82,534 239,567 -- 325,662
Goodwill and other intangibles amortization -- -- 2,440 13,351 -- 15,791
---------------------------------------------------------------------------------
Total costs and expenses 3,561 -- 339,774 1,170,120 (3,348) 1,510,107
---------------------------------------------------------------------------------
Operating income (loss) (3,561) -- 14,377 133,756 -- 144,572
Other income (expense)
Equity in earnings of subsidiaries 144,063 111,219 61,451 -- (316,733) --
Interest - net (4,103) 76 (45,788) 31,271 -- (18,544)
Other -- -- 12,343 133 (4,776) 7,700
---------------------------------------------------------------------------------
Income from continuing operations
before income taxes 136,399 111,295 42,383 165,160 (321,509) 133,728
Income tax provision 1,579 (1,483) 7,654 (58,498) 1,910 (48,838)
---------------------------------------------------------------------------------
Income from continuing operations 137,978 109,812 50,037 106,662 (319,599) 84,890
Income from discontinued operations
Earnings, net of applicable income tax
expense -- -- 5,728 (2,640) -- 3,088
Gain on disposal, net of applicable
income tax expense -- -- 53,086 -- -- 53,086
---------------------------------------------------------------------------------
-- -- 58,814 (2,640) -- 56,174
---------------------------------------------------------------------------------
Net income $ 137,978 $ 109,812 $ 108,851 $ 104,022 $ (319,599) $ 141,064
=================================================================================
CASH FLOWS
Net cash provided from (used by) operating
activities $ (586) $ -- $ (26,910) $ 145,199 $ -- $ 117,703
Cash flows from investing activities:
Additions to fixed assets -- -- (14,831) (45,765) -- (60,596)
Acquisition of businesses (3,025) -- (50,822) (310,301) -- (364,148)
Net proceeds from disposal of businesses 22,039 -- 251,402 1,200 -- 274,641
Other, net -- -- 8,770 (1,464) -- 7,306
---------------------------------------------------------------------------------
Net cash provided from (used by)
investing activities 19,014 -- 194,519 (356,330) -- (142,797)
---------------------------------------------------------------------------------
Cash flows from financing activities:
Additional borrowings (repayments) (42,357) -- 87,293 7,198 -- 52,134
Issuance of common shares 1,780 -- -- -- -- 1,780
Repurchase of common shares (56,954) -- -- -- -- (56,954)
Increase (decrease) in net payable to
affiliates 11,575 70 30,180 (41,825) -- --
Dividends (to) from affiliates 468,825 27 (335,859) (132,993) -- --
Contribution of capital (to) from affiliates (389,450) -- -- 389,450 -- --
Dividends (12,413) -- -- -- -- (12,413)
=================================================================================
Net cash provided from (used by)
financing activities (18,994) 97 (218,386) 221,830 -- (15,453)
---------------------------------------------------------------------------------
Cash used by discontinued operations -- -- (60,553) (582) -- (61,135)
---------------------------------------------------------------------------------
Net increase (decrease) in cash during the period (566) 97 (111,330) 10,117 -- (101,682)
Cash at beginning of period 224 -- 126,209 39,836 -- 166,269
---------------------------------------------------------------------------------
Cash at end of period $ (342) $ 97 $ 14,879 $ 49,953 $ -- $ 64,587
=================================================================================
</TABLE>
<PAGE> 35
31
UNITED DOMINION INDUSTRIES LIMITED
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(Amounts in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
December 31, 1996
---------------------------------------------------------------
United United
Dominion Dominion Non-
Industries Industries, Guarantor
Limited Inc. Subsidiaries Eliminations Consolidated
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Sales $ -- $ 320,313 $ 1,118,789 $ (6,034) $ 1,433,068
Costs and expenses
Cost of sales -- 233,271 782,078 (6,034) 1,009,315
Selling, general and administrative expenses 1,990 77,689 202,077 -- 281,756
Goodwill and other intangibles amortization -- 2,039 10,769 -- 12,808
---------------------------------------------------------------
Total costs and expenses 1,990 312,999 994,924 (6,034) 1,303,879
---------------------------------------------------------------
Operating income (loss) (1,990) 7,314 123,865 -- 129,189
Other income (expense)
Equity in earnings of subsidiaries 86,176 68,488 -- (154,664) --
Interest - net 3,698 (38,693) 15,871 -- (19,124)
Gain on sale of business 6,807 4,985 -- -- 11,792
Other -- 303 -- (3,303) (3,000)
---------------------------------------------------------------
Income from continuing operations
before income taxes 94,691 42,397 139,736 (157,967) 118,857
Income tax provision (3,771) 10,014 (56,969) 1,321 (49,405)
---------------------------------------------------------------
Income from continuing operations 90,920 52,411 82,767 (156,646) 69,452
Earnings from discontinued operations, net of
applicable income tax expense -- 16,649 748 -- 17,397
---------------------------------------------------------------
Net income $ 90,920 $ 69,060 $ 83,515 $(156,646) $ 86,849
===============================================================
CASH FLOWS
Net cash provided from (used by) operating activities $ (263) $ (27,515) $ 168,760 $ -- $ 140,982
Cash flows from investing activities:
Additions to fixed assets -- (27,860) (23,547) -- (51,407)
Acquisition of businesses (8,193) (17,528) (25,459) -- (51,180)
Net proceeds from disposal of businesses -- 386 2,871 -- 3,257
Other, net 7,365 (8,831) 241 -- (1,225)
---------------------------------------------------------------
Net cash used by investing activities (828) (53,833) (45,894) -- (100,555)
---------------------------------------------------------------
Cash flows from financing activities:
Additional borrowings (repayments) -- (130,098) 14,148 -- (115,950)
Issuance of common shares 113,036 -- -- -- 113,036
Increase (decrease) in net payable to affiliates 43,320 94,234 (137,554) -- --
Dividends (to) from affiliates -- 160,455 (160,455) -- --
Contribution of capital (to) from affiliates (147,073) -- 147,073 -- --
Dividends (9,050) -- 2,500 -- (6,550)
---------------------------------------------------------------
Net cash provided from (used by)
financing activities 233 124,591 (134,288) -- (9,464)
---------------------------------------------------------------
Cash provided from (used by) discontinued operations -- 27,883 249 -- 28,132
---------------------------------------------------------------
Net increase (decrease) in cash during the period (858) 71,126 (11,173) -- 59,095
Cash at beginning of period 1,082 55,083 51,009 -- 107,174
---------------------------------------------------------------
Cash at end of period $ 224 $ 126,209 $ 39,836 $ -- $ 166,269
===============================================================
</TABLE>
<PAGE> 36
UNITED DOMINION INDUSTRIES LIMITED
SCHEDULE II - ALLOWANCE FOR DOUBTFUL ACCOUNTS
Years Ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
Balance, Additions
beginning of charged to Write-off of Balance, end
Description year income receivables Other (1) of year
----------- ---------------- ------------ ------------- --------- --------
<S> <C> <C> <C> <C> <C>
1998:
Reserve deducted from
assets: Allowance for
doubtful accounts $10,114 $1,991 $(1,358) $ 22 $10,725
======= ====== ======== ======= =======
1997:
Reserve deducted from
assets: Allowance for
doubtful accounts $ 9,919 $4,104 $(3,156) $(753) $10,114
======= ====== ======== ====== =======
1996:
Reserve deducted from
assets: Allowance for
doubtful accounts $ 9,814 $1,767 $(2,287) $ 625 $ 9,919
======= ====== ======== ====== =======
</TABLE>
(1) In 1997, relates primarily to the sale of Varco-Pruden, Windsor Door
and Centria partially offset by the acquisition of Core Industries.
<PAGE> 37
UNITED DOMINION INDUSTRIES LIMITED
Consolidated Statements of Income
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Quarters Ended March 31, 1999 and 1998
(Stated in Thousands of U.S. Dollars)
Quarters Ended
- ---------------------------------------------------------------------------------
Mar. 31, Mar. 31,
1999 1998
- ---------------------------------------------------------------------------------
<S> <C> <C>
Sales $478,404 $444,135
- ---------------------------------------------------------------------------------
Costs and expenses
Cost of sales 336,737 314,263
Selling, general and administrative expenses 104,125 93,424
Goodwill and other intangibles amortization 5,688 4,941
- ---------------------------------------------------------------------------------
Total costs and expenses 446,550 412,628
- ---------------------------------------------------------------------------------
Operating income 31,854 31,507
Other expense
Interest -- net (9,295) (7,899)
Other -- (500)
- ---------------------------------------------------------------------------------
Income before income taxes 22,559 23,108
Income tax provision (8,572) (8,781)
- ---------------------------------------------------------------------------------
Net income $ 13,987 $ 14,327
=================================================================================
Earnings per common share $ 0.35 $ 0.35
=================================================================================
Average common shares outstanding (thousands) 40,331 41,027
=================================================================================
</TABLE>
See accompanying notes.
<PAGE> 38
UNITED DOMINION INDUSTRIES LIMITED
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
For the Quarters Ended March 31, 1999 and 1998
(Stated in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
1999 1998
- ----------------------------------------------------------------------------------
<S> <C> <C>
Cash provided from (used by) operating activities
Income from operations $ 13,987 $ 14,327
Add items not affecting cash
Depreciation 11,755 9,586
Amortization 6,227 5,122
Deferred income taxes 407 421
Other 345 675
Net increase in working capital other than cash (23,317) (43,819)
Asset securitization 3,900 (11,900)
- ----------------------------------------------------------------------------------
13,304 (25,588)
- ----------------------------------------------------------------------------------
Cash provided from (used by) investing activities
Additions to fixed assets (9,572) (15,706)
Acquisition of businesses (12,052) (100,778)
Net proceeds from disposal of businesses -- 10,131
Proceeds from (investments in) other assets 1,076 (162)
Other (455) (1,319)
- ----------------------------------------------------------------------------------
(21,003) (107,834)
- ----------------------------------------------------------------------------------
Cash provided from (used by) financing activities
Net additional borrowings 16,421 198,599
Issuance of common stock 175 4,296
Repurchase of common stock (16,477) (78,658)
Dividends (3,615) (3,645)
- ----------------------------------------------------------------------------------
(3,496) 120,592
- ----------------------------------------------------------------------------------
Decrease in cash during the period (11,195) (12,830)
Cash at beginning of period 123,455 64,587
- ----------------------------------------------------------------------------------
Cash at end of period $112,260 $ 51,757
==================================================================================
</TABLE>
See accompanying notes.
<PAGE> 39
UNITED DOMINION INDUSTRIES LIMITED
Consolidated Statements of Financial Position
- --------------------------------------------------------------------------------
As of March 31, 1999 and December 31, 1998
(Stated in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Mar. 31, Dec. 31,
1999 1998
(Restated)
- -------------------------------------------------------------------------------------
<S> <C> <C>
Current assets
Cash and short-term investments $ 112,260 $ 123,455
Accounts and notes receivable 303,697 335,424
Inventories @ 389,216 379,969
Other current assets 83,052 81,679
- -------------------------------------------------------------------------------------
Total current assets 888,225 920,527
Fixed assets 315,602 317,853
Goodwill and other intangibles 780,872 774,820
Other assets 66,366 69,734
- -------------------------------------------------------------------------------------
$2,051,065 $2,082,934
=====================================================================================
Current liabilities
Notes payable to banks $ 43,208 $ 53,672
Current portion of long-term debt 47,662 51,665
Accounts payable 158,333 158,708
Accrued liabilities 156,138 194,682
Customer advances 15,782 23,181
- -------------------------------------------------------------------------------------
Total current liabilities 421,123 481,908
Long-term debt 574,022 544,771
Other liabilities 173,284 170,425
- -------------------------------------------------------------------------------------
1,168,429 1,197,104
- -------------------------------------------------------------------------------------
Shareholders' equity
Common shares 547,515 557,574
Contributed surplus 4,212 4,057
Retained earnings 366,269 360,796
- -------------------------------------------------------------------------------------
917,996 922,427
Equity adjustment from foreign currency translation (35,360) (36,597)
- -------------------------------------------------------------------------------------
Total shareholders' equity 882,636 885,830
- -------------------------------------------------------------------------------------
$2,051,065 $2,082,934
=====================================================================================
@ Inventories consist of:
Raw materials $ 113,011 $ 111,994
Work-in-process 109,662 99,402
Finished goods 166,543 168,573
- -------------------------------------------------------------------------------------
$ 389,216 $ 379,969
=====================================================================================
</TABLE>
See accompanying notes.
<PAGE> 40
UNITED DOMINION INDUSTRIES LIMITED
Consolidated Statements of Retained Earnings
- --------------------------------------------------------------------------------
For the Quarter Ended March 31, 1999 and the Year Ended December 31,1998
(Stated in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Mar. 31, Dec. 31,
1999 1998
(Restated)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of period $360,796 $326,305
Cumulative effect of accounting change -- (11,451)
Net income 13,987 99,688
Dividends (3,615) (14,614)
Buyback of common shares (4,899) (39,132)
- ---------------------------------------------------------------------------------
Balance at end of period $366,269 $360,796
=================================================================================
</TABLE>
See accompanying notes.
<PAGE> 41
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
1. New accounting guidelines issued in Canada adopt the asset and liability
approach to accounting for income taxes. The company has elected to adopt
this new standard effective January 1, 1999. The 1998 statements of
financial position and retained earnings have been restated to reflect the
retroactive application of the new rules. This restatement does not
materially affect net income or net earnings per share as previously
reported for 1998, therefore they have not been restated.
2. Information about the company's operating segments is as follows:
<TABLE>
<CAPTION>
Quarters Ended
March 31,
--------------------------
1999 1998
---- ----
<S> <C> <C>
Sales
Flow Technology $227,969 $217,130
Machinery 89,317 95,172
Specialty Engineered Products 86,520 75,718
Test Instrumentation 74,598 56,115
=========================
$478,404 $444,135
=========================
Segment Profit
Flow Technology $ 19,938 $ 17,023
Machinery 4,115 8,510
Specialty Engineered Products 9,672 8,946
Test Instrumentation 5,402 4,183
=========================
$ 39,127 $ 38,662
=========================
Reconciliation of Segment Profit
to Net Income
Segment profit $ 39,127 $ 38,662
Corporate expenses (5,259) (6,705)
Interest - net (9,295) (7,899)
Other expense (2,014) (950)
-------------------------
Income before taxes 22,559 23,108
Income taxes (8,572) (8,781)
-------------------------
Net income $ 13,987 $ 14,327
=========================
</TABLE>
<PAGE> 42
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
3. In the opinion of management, these financial statements reflect all
adjustments necessary for the fair statement of results of the interim
periods presented.
Generally accepted accounting principles (GAAP) in Canada allow for the
reduction of stated capital of outstanding common shares with a
corresponding offset to retained earnings. This reclassification, which
the company made in 1990, is not permitted by United States GAAP and would
result in an increase in capital stock and a reduction in retained
earnings of $128,093 at March 31, 1999 and December 31, 1998. Canadian
GAAP also permits expenses related to the issuance of capital stock, net
of income taxes, to be deducted from retained earnings while United States
GAAP requires such expenses to be deducted from the proceeds of stock
issuances credited to capital stock. This reclassification would reduce
capital stock and increase retained earnings by $20,905 at March 31, 1999
and December 31, 1998.
Under Canadian GAAP, the discount rate used for computing the benefit
obligation and the service and interest cost components of the net
periodic pension expense represents management's best estimate of the
long-term rate of return on pension fund assets; whereas, under United
States GAAP the discount rate reflects the rate at which pension benefits
can be effectively settled at the date of the financial statements.
United States GAAP requires accruing the cost of providing postretirement
benefits other than pensions to employees and their beneficiaries (i.e.
health care benefits) during the years that the employee renders the
necessary service. The company records expense on a "pay-as-you-go" basis
for benefits paid on behalf of retired employees.
Canadian GAAP allows for the capitalization and subsequent amortization of
start-up costs for new facilities and joint ventures. Effective January 1,
1999, United States GAAP requires the expensing of these costs as incurred
as well as the expensing of any previously capitalized costs. As of
January 1, 1999, United States GAAP would require the company to expense
approximately $1 million, net of tax, of unamortized costs that had been
capitalized in prior years.
United States GAAP requires the dual presentation of basic and diluted
earnings per share. Diluted earnings per share reflects the assumed
exercise of dilutive securities such as the company's stock options.
<PAGE> 43
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
The following table reflects the impact on net income, weighted average
shares outstanding and net earnings per share of complying with United
States GAAP as it pertains to the items noted above.
<TABLE>
<CAPTION>
Quarters Ended
March 31,
-----------------------
1999 1998
----- ----
<S> <C> <C>
Net income:
Canadian GAAP $13,987 $14,327
United States GAAP 12,503 13,731
Weighted average shares
outstanding (000's)
Canadian GAAP 40,331 41,027
Less restricted stock outstanding (184) (193)
------------------------
United States GAAP - Basic 40,147 40,834
Effect of dilutive securities
Restricted stock 184 193
Employee stock options 120 356
========================
United States GAAP - Diluted 40,451 41,383
========================
Net earnings per share:
Canadian GAAP $ 0.35 $ 0.35
========================
United States GAAP - Basic $ 0.31 $ 0.34
========================
United States GAAP - Diluted $ 0.31 $ 0.33
========================
</TABLE>
The application of United States GAAP discussed above would result in
increases in other (non-current) liabilities of approximately $6,000 and
common shares of approximately $107,000 and decreases in goodwill of
approximately $2,000 and retained earnings of approximately $115,000 as of
March 31, 1999.
United States GAAP requires reporting on comprehensive income.
Comprehensive income is defined as the change in equity of a company from
transactions and other events from nonowner sources, such as foreign
currency translation adjustments. For the three months ended March 31,
1999 and 1998, comprehensive income totaled $13,740 and $12,438,
respectively.
4. The following is summarized condensed consolidating financial information
segregating the parent and guarantor subsidiaries from nonguarantor
subsidiaries. The guarantor subsidiaries are wholly owned subsidiaries of
the company and guarantees are full, unconditional and joint and several.
Separate financial statements and other disclosures of the guarantor
subsidiaries are not presented because management believes these financial
statements would not provide relevant material additional information to
users.
<PAGE> 44
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter Ended March 31, 1999
-------------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
RESULTS OF OPERATIONS Industries, Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
------------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 3,979 $ -- $ 95,367 $ 384,084 $ (5,026) $ 478,404
Costs and expenses
Cost of sales 3,216 -- 67,527 271,020 (5,026) 336,737
Selling, general and administrative
expenses 905 -- 21,341 81,879 104,125
Goodwill and other intangibles
amortization 10 -- 721 4,957 5,688
-----------------------------------------------------------------------------------
Total costs and expenses 4,131 -- 89,589 357,856 (5,026) 446,550
-----------------------------------------------------------------------------------
Operating income (152) -- 5,778 26,228 -- 31,854
Other income (expense)
Equity in earnings of subsidiaries 16,196 6,243 5,128 -- (27,567) --
Interest - net (2,517) -- (8,913) 2,135 (9,295)
Other -- -- 1,680 423 (2,103) --
-----------------------------------------------------------------------------------
Income before income taxes 13,527 6,243 3,673 28,786 (29,670) 22,559
Income tax provision 460 -- 709 (10,582) 841 (8,572)
-----------------------------------------------------------------------------------
Net income $ 13,987 $ 6,243 $ 4,382 $ 18,204 $ (28,829) $ 13,987
===================================================================================
<CAPTION>
Quarter Ended March 31, 1998
-------------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries, Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
------------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ -- $ -- $ 88,728 $ 357,992 $ (2,585) $ 444,135
Costs and expenses
Cost of sales -- -- 63,499 253,349 (2,585) 314,263
Selling, general and administrative
expenses 273 -- 21,723 71,428 -- 93,424
Goodwill and other intangibles
amortization -- -- 671 4,270 -- 4,941
-----------------------------------------------------------------------------------
Total costs and expenses 273 -- 85,893 329,047 (2,585) 412,628
-----------------------------------------------------------------------------------
Operating income (273) -- 2,835 28,945 -- 31,507
Other income (expense)
Equity in earnings of subsidiaries 16,368 5,760 6,668 -- (28,796) --
Interest - net (1,790) -- (8,647) 2,538 -- (7,899)
Other -- -- 628 33 (1,161) (500)
-----------------------------------------------------------------------------------
Income before income taxes 14,305 5,760 1,484 31,516 (29,957) 23,108
Income tax provision 22 -- 1,558 (10,825) 464 (8,781)
-----------------------------------------------------------------------------------
Net income $ 14,327 $ 5,760 $ 3,042 $ 20,691 $(29,493) $ 14,327
===================================================================================
</TABLE>
<PAGE> 45
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999
-------------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
CASH FLOWS Industries, Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
------------ ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities $ 564 $ -- $ 24,252 $ (11,512) $ -- $ 13,304
-------------------------------------------------------------------------------------
Net cash provided from (used by)
investing activities
Additions to fixed assets (75) -- (2,982) (6,515) -- (9,572)
Acquisition of businesses - -- (10,256) (1,796) -- (12,052)
Other, net - -- -- 621 -- 621
-------------------------------------------------------------------------------------
(75) -- (13,238) (7,690) -- (21,003)
-------------------------------------------------------------------------------------
Net cash provided from (used by)
financing activities
Additional borrowings (repayments) (15,845) -- 35,754 (3,488) -- 16,421
Issuance of common shares 175 -- -- -- -- 175
Repurchase of common shares (16,477) -- -- -- -- (16,477)
Increase (decrease) in net payable
to affiliates 5,190 -- (41,157) 35,967 -- --
Dividends (to) from affiliates 34,300 -- -- (34,300) -- --
Other, net (3,615) -- -- -- -- (3,615)
-------------------------------------------------------------------------------------
3,728 -- (5,403) (1,821) -- (3,496)
-------------------------------------------------------------------------------------
Net increase (decrease) in cash during
the period 4,217 -- 5,611 (21,023) -- (11,195)
Cash at beginning of period 107 97 12,958 110,293 123,455
-------------------------------------------------------------------------------------
Cash at end of period $ 4,324 $ 97 $ 18,569 $ 89,270 $ -- $ 112,260
=====================================================================================
<CAPTION>
Three Months Ended March 31, 1998
-------------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries, Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
------------ ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net cash used in operating activities $ (341) $ -- $ (22,414) $ (2,833) $ -- $ (25,588)
-------------------------------------------------------------------------------------
Net cash provided from (used by)
investing activities
Additions to fixed assets -- -- (7,613) (8,093) -- (15,706)
Acquisition of businesses (53,641) -- (9,931) (37,206) -- (100,778)
Net proceeds from disposal of
businesses -- -- 6,057 4,074 -- 10,131
Other, net -- -- 18 (1,499) -- (1,481)
-------------------------------------------------------------------------------------
(53,641) -- (11,469) (42,724) -- (107,834)
-------------------------------------------------------------------------------------
Net cash provided from (used by)
financing activities
Additional borrowings (repayments) 129,904 -- 67,500 1,195 -- 198,599
Issuance of common shares 4,296 -- -- -- -- 4,296
Repurchase of common shares (78,658) -- -- -- -- (78,658)
Increase (decrease) in net payable
to affiliates (19,420) -- (36,008) 55,428 -- --
Dividends (to) from affiliates 40,900 -- -- (40,900) -- --
Contribution of capital (to) from
affiliates (20,655) -- -- 20,655 -- --
Other, net (3,645) -- -- -- -- (3,645)
-------------------------------------------------------------------------------------
52,722 -- 31,492 36,378 -- 120,592
-------------------------------------------------------------------------------------
Net decrease in cash during the period (1,260) -- (2,391) (9,179) -- (12,830)
Cash at beginning of period (342) 97 14,879 49,953 64,587
-------------------------------------------------------------------------------------
Cash at end of period $ (1,602) $ 97 $ 12,488 $ 40,774 $ -- $ 51,757
=====================================================================================
</TABLE>
<PAGE> 46
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, 1999
---------------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
FINANCIAL POSITION Industries, Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
-------------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Inventories $ 2,050 $ -- $ 51,169 $ 324,687 $ 11,310 $ 389,216
Other current assets 19,835 97 86,375 441,762 (49,060) 499,009
--------------------------------------------------------------------------------------
Total current assets 21,885 97 137,544 766,449 (37,750) 888,225
Fixed assets - net 966 -- 106,373 208,263 -- 315,602
Goodwill and other intangibles 753 -- 126,721 653,398 -- 780,872
Intercompany notes receivable -- -- 117,796 342,702 (460,498) --
Other assets 1,065,962 329,770 1,222,545 437,275 (2,989,186) 66,366
--------------------------------------------------------------------------------------
$ 1,089,566 $ 329,867 $1,710,979 $ 2,408,087 $(3,487,434) $2,051,065
======================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 6,243 $ 1,415 $ 151,068 $ 305,698 $ (43,301) $ 421,123
Long-term debt 184,829 -- 353,423 35,770 -- 574,022
Intercompany notes payable -- -- 342,702 117,796 (460,498) --
Other liabilities 15,858 -- 556,771 55,336 (454,681) 173,284
--------------------------------------------------------------------------------------
206,930 1,415 1,403,964 514,600 (958,480) 1,168,429
--------------------------------------------------------------------------------------
Total shareholders' equity 882,636 328,452 307,015 1,893,487 (2,528,954) 882,636
--------------------------------------------------------------------------------------
$ 1,089,566 $ 329,867 $1,710,979 $ 2,408,087 $(3,487,434) $2,051,065
======================================================================================
<CAPTION>
December 31, 1998
---------------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries, Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
-------------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Inventories $ 1,539 $ -- $ 51,624 $ 313,985 $ 12,821 $ 379,969
Other current assets 18,874 97 84,588 491,949 (54,950) 540,558
--------------------------------------------------------------------------------------
Total current assets 20,413 97 136,212 805,934 (42,129) 920,527
Fixed assets - net 930 -- 106,693 210,230 -- 317,853
Goodwill and other intangibles 747 -- 121,037 653,036 -- 774,820
Intercompany notes receivable -- -- 117,958 336,560 (454,518) --
Other assets 1,074,143 312,369 1,197,181 507,838 (3,021,797) 69,734
--------------------------------------------------------------------------------------
$ 1,096,233 $ 312,466 $1,679,081 $ 2,513,598 $(3,518,444) $2,082,934
======================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 8,090 $ 1,538 $ 139,932 $ 381,534 $ (49,186) $ 481,908
Long-term debt 198,780 -- 313,544 32,447 -- 544,771
Intercompany notes payable -- -- 336,560 117,958 (454,518) --
Other liabilities 3,533 -- 572,750 106,141 (511,999) 170,425
--------------------------------------------------------------------------------------
210,403 1,538 1,362,786 638,080 (1,015,703) 1,197,104
--------------------------------------------------------------------------------------
Total shareholders' equity 885,830 310,928 316,295 1,875,518 (2,502,741) 885,830
--------------------------------------------------------------------------------------
$ 1,096,233 $ 312,466 $1,679,081 $ 2,513,598 $(3,518,444) $2,082,934
======================================================================================
</TABLE>
<PAGE> 47
UNITED DOMINION INDUSTRIES LIMITED
Consolidated Statements of Income
- --------------------------------------------------------------------------------
For the Quarters and Six Months Ended June 30, 1999 and 1998
(Stated in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Quarters Ended Six Months Ended
- --------------------------------------------------------------------------------------------------------------
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 549,272 $ 523,692 $ 1,027,676 $ 967,827
- --------------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of sales 382,754 362,363 719,491 676,626
Selling, general and administrative expenses 105,981 107,254 210,106 200,678
Goodwill and other intangibles amortization 5,749 5,192 11,437 10,133
Restructuring charges 1,362 -- 1,362 --
- --------------------------------------------------------------------------------------------------------------
Total costs and expenses 495,846 474,809 942,396 887,437
- --------------------------------------------------------------------------------------------------------------
Operating income 53,426 48,883 85,280 80,390
Other income (expense)
Interest -- net (9,317) (8,997) (18,612) (16,896)
Other -- 3,148 -- 2,648
- --------------------------------------------------------------------------------------------------------------
Income before income taxes 44,109 43,034 66,668 66,142
Income tax provision (16,761) (16,426) (25,334) (25,207)
- --------------------------------------------------------------------------------------------------------------
Net income $ 27,348 $ 26,608 $ 41,334 $ 40,935
==============================================================================================================
Earnings per common share $ 0.69 $ 0.65 $ 1.03 $ 1.00
==============================================================================================================
Average common shares outstanding (thousands) 39,753 40,698 40,041 40,845
==============================================================================================================
</TABLE>
See accompanying notes.
<PAGE> 48
UNITED DOMINION INDUSTRIES LIMITED
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 1999 and 1998
(Stated in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------------------------------------------
<S> <C> <C>
Cash provided from (used by) operating activities
Net income $ 41,334 $ 40,935
Add (deduct) items not affecting cash
Depreciation 23,504 19,865
Amortization 12,956 10,753
Deferred income taxes (2,457) 43
Other 760 398
Net increase in working capital other than cash (56,649) (50,070)
Asset securitization (2,900) (5,000)
- ---------------------------------------------------------------------------------
16,548 16,924
- ---------------------------------------------------------------------------------
Cash provided from (used by) investing activities
Additions to fixed assets (26,525) (26,324)
Acquisition of businesses (14,162) (140,119)
Net proceeds from disposal of businesses -- 7,508
Proceeds from (investments in) other assets (4,318) 10,067
Other (241) (1,708)
- ---------------------------------------------------------------------------------
(45,246) (150,576)
- ---------------------------------------------------------------------------------
Cash provided from (used by) financing activities
Net additional borrowings 42,278 229,923
Issuance of common stock 1,473 6,722
Repurchase of common stock (24,955) (78,799)
Dividends (7,210) (7,298)
- ---------------------------------------------------------------------------------
11,586 150,548
- ---------------------------------------------------------------------------------
Increase (decrease) in cash during the period (17,112) 16,896
Cash at beginning of period 123,455 64,587
- ---------------------------------------------------------------------------------
Cash at end of period $ 106,343 $ 81,483
=================================================================================
</TABLE>
See accompanying notes.
<PAGE> 49
UNITED DOMINION INDUSTRIES LIMITED
Consolidated Statements of Financial Position
- --------------------------------------------------------------------------------
As of June 30, 1999 and December 31, 1998
(Stated in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
June 30, Dec. 31,
1999 1998
(Restated)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Current assets
Cash and short-term investments $ 106,343 $ 123,455
Accounts and notes receivable 336,915 335,424
Inventories @ 376,715 379,969
Other current assets 87,423 81,679
- -----------------------------------------------------------------------------------------
Total current assets 907,396 920,527
Fixed assets 316,480 317,853
Goodwill and other intangibles 777,909 774,820
Other assets 73,783 69,734
- -----------------------------------------------------------------------------------------
$ 2,075,568 $ 2,082,934
=========================================================================================
Current liabilities
Notes payable to banks $ 74,669 $ 53,672
Current portion of long-term debt 47,454 51,665
Accounts payable 152,962 158,708
Accrued liabilities 153,429 194,682
Customer advances 9,221 23,181
- -----------------------------------------------------------------------------------------
Total current liabilities 437,735 481,908
Long-term debt 569,413 544,771
Other liabilities 172,553 170,425
- -----------------------------------------------------------------------------------------
1,179,701 1,197,104
- -----------------------------------------------------------------------------------------
Shareholders' equity
Common shares 544,338 557,574
Contributed surplus 4,255 4,057
Retained earnings 386,352 360,796
- -----------------------------------------------------------------------------------------
934,945 922,427
Equity adjustment from foreign currency translation (39,078) (36,597)
- -----------------------------------------------------------------------------------------
Total shareholders' equity 895,867 885,830
- -----------------------------------------------------------------------------------------
$ 2,075,568 $ 2,082,934
=========================================================================================
@ Inventories consist of:
Raw materials $ 116,903 $ 111,994
Work-in-process 107,238 99,402
Finished goods 152,574 168,573
- -----------------------------------------------------------------------------------------
$ 376,715 $ 379,969
=========================================================================================
</TABLE>
See accompanying notes.
<PAGE> 50
UNITED DOMINION INDUSTRIES LIMITED
Consolidated Statements of Retained Earnings
- -------------------------------------------------------------------------------
For the Six Months Ended June 30, 1999 and the Year Ended December 31, 1998
(Stated in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
June 30, Dec. 31,
1999 1998
(Restated)
- -------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of period $ 360,796 $ 326,305
Cumulative effect of accounting change -- (11,451)
Net income 41,334 99,688
Dividends (7,210) (14,614)
Buyback of common shares (8,568) (39,132)
- -------------------------------------------------------------------
Balance at end of period $ 386,352 $ 360,796
===================================================================
</TABLE>
See accompanying notes.
<PAGE> 51
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
1. New accounting guidelines issued in Canada adopt the asset and liability
approach to accounting for income taxes. The company has elected to adopt
this new standard effective January 1, 1999. The 1998 statements of
financial position and retained earnings have been restated to reflect the
retroactive application of the new rules. This restatement does not
materially affect net income or net earnings per share as previously
reported for 1998, therefore they have not been restated.
2. Information about the company's operating segments is as follows:
<TABLE>
<CAPTION>
Quarters Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1999 1998 1999 1998
--------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Sales
Flow Technology $ 229,433 $ 232,513 $ 457,402 $ 449,644
Machinery 152,798 146,122 242,115 241,294
Specialty Engineered Products 87,470 75,877 173,990 151,595
Test Instrumentation 79,571 69,180 154,169 125,294
--------- ----------- ----------- ---------
$ 549,272 $ 523,692 $ 1,027,676 $ 967,827
========= =========== =========== =========
Segment Profit
Flow Technology $ 21,427 $ 20,454 $ 41,365 $ 37,476
Machinery 23,630 22,146 27,745 30,656
Specialty Engineered Products 9,695 8,709 19,367 17,654
Test Instrumentation 6,185 6,579 11,587 10,763
--------- ----------- ----------- ---------
$ 60,937 $ 57,888 $ 100,064 $ 96,549
========= =========== =========== =========
Reconciliation of Segment Profit
to Net Income
Segment profit $ 60,937 $ 57,888 $ 100,064 $ 96,549
Corporate expenses (6,016) (7,480) (11,275) (14,185)
Interest - net (9,317) (8,997) (18,612) (16,896)
Other income (expense) (1,495) 1,623 (3,509) 674
--------- ----------- ----------- ---------
Income before taxes 44,109 43,034 66,668 66,142
Income taxes (16,761) (16,426) (25,334) (25,207)
--------- ----------- ----------- ---------
Net income $ 27,348 $ 26,608 $ 41,334 $ 40,935
========= =========== =========== =========
</TABLE>
<PAGE> 52
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
3. In the opinion of management, these financial statements reflect all
adjustments necessary for the fair statement of results of the interim
periods presented. Certain prior year amounts have been reclassified to
conform with current year presentation.
Generally accepted accounting principles (GAAP) in Canada allow for the
reduction of stated capital of outstanding common shares with a
corresponding offset to retained earnings. This reclassification, which the
company made in 1990, is not permitted by United States GAAP and would
result in an increase in capital stock and a reduction in retained earnings
of $128,093 at June 30, 1999 and December 31, 1998. Canadian GAAP also
permits expenses related to the issuance of capital stock, net of income
taxes, to be deducted from retained earnings while United States GAAP
requires such expenses to be deducted from the proceeds of stock issuances
credited to capital stock. This reclassification would reduce capital stock
and increase retained earnings by $20,905 at June 30, 1999 and December 31,
1998.
Under Canadian GAAP, the discount rate used for computing the benefit
obligation and the service and interest cost components of the net periodic
pension expense represents management's best estimate of the long-term rate
of return on pension fund assets; whereas, under United States GAAP the
discount rate reflects the rate at which pension benefits can be
effectively settled at the date of the financial statements.
United States GAAP requires accruing the cost of providing postretirement
benefits other than pensions to employees and their beneficiaries (i.e.
health care benefits) during the years that the employee renders the
necessary service. The company records expense on a "pay-as-you-go" basis
for benefits paid on behalf of retired employees.
Canadian GAAP allows for the capitalization and subsequent amortization of
start-up costs for new facilities and joint ventures. Effective January 1,
1999, United States GAAP requires the expensing of these costs as incurred
as well as the expensing of any previously capitalized costs. As of January
1, 1999, United States GAAP would require the company to expense
approximately $1 million, net of tax, of unamortized costs that had been
capitalized in prior years.
United States GAAP requires the dual presentation of basic and diluted
earnings per share. Diluted earnings per share reflects the assumed
exercise of dilutive securities such as the company's stock options.
<PAGE> 53
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
The following table reflects the impact on net income, weighted average
shares outstanding and net earnings per share of complying with United
States GAAP as it pertains to the items noted above.
<TABLE>
<CAPTION>
Quarters Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income:
Canadian GAAP $ 27,348 $ 26,608 $ 41,334 $ 40,935
United States GAAP 26,867 26,022 39,370 39,753
Weighted average shares
outstanding (000's)
Canadian GAAP 39,753 40,698 40,041 40,845
Less restricted stock outstanding (173) (118) (179) (156)
-------- -------- -------- --------
United States GAAP - Basic 39,580 40,580 39,862 40,689
Effect of dilutive securities
Restricted stock 173 118 179 156
Employee stock options 260 450 192 403
-------- -------- -------- --------
United States GAAP - Diluted 40,013 41,148 40,233 41,248
======== ======== ======== ========
Net earnings per share:
Canadian GAAP $ 0.69 $ 0.65 $ 1.03 $ 1.00
======== ======== ======== ========
United States GAAP - Basic $ 0.68 $ 0.64 $ 0.99 $ 0.98
======== ======== ======== ========
United States GAAP - Diluted $ 0.67 $ 0.63 $ 0.98 $ 0.96
======== ======== ======== ========
</TABLE>
The application of United States GAAP discussed above would result in
increases in other (non-current) liabilities of approximately $6,000 and
common shares of approximately $107,000 and decreases in goodwill of
approximately $2,000 and retained earnings of approximately $115,000 as of
June 30, 1999.
United States GAAP requires reporting on comprehensive income.
Comprehensive income is defined as the change in equity of a company from
transactions and other events from nonowner sources, such as foreign
currency translation adjustments. For the three and six months ended June
30, 1999, comprehensive income totaled $24,562 and $37,832, respectively.
For the three and six months ended June 30, 1998, comprehensive income
totaled $25,005 and $37,443, respectively.
4. The following is summarized condensed consolidating financial information
segregating the parent and guarantor subsidiaries from nonguarantor
subsidiaries. The guarantor subsidiaries are wholly owned subsidiaries of
the company and guarantees are full, unconditional and joint and several.
Separate financial statements and other disclosures of the guarantor
subsidiaries are not presented because management believes these financial
statements would not provide relevant material additional information to
users.
<PAGE> 54
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter Ended June 30, 1999
-----------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Sales $ 4,835 $ -- $ 104,135 $ 446,484 $ (6,182) $ 549,272
Costs and expenses
Cost of sales 3,863 -- 72,548 312,525 (6,182) 382,754
Selling, general and administrative
expenses 939 -- 25,377 79,665 -- 105,981
Goodwill and other intangibles
amortization 13 -- 810 4,926 -- 5,749
Restructuring charges -- -- -- 1,362 -- 1,362
-----------------------------------------------------------------------------------
Total costs and expenses 4,815 -- 98,735 398,478 (6,182) 495,846
-----------------------------------------------------------------------------------
Operating income 20 -- 5,400 48,006 -- 53,426
Other income (expense)
Equity in earnings of subsidiaries 28,791 19,038 19,618 -- (67,447) --
Interest - net (2,298) -- (13,297) 6,278 -- (9,317)
Other -- -- 1,070 2 (1,072) --
-----------------------------------------------------------------------------------
Income before income taxes 26,513 19,038 12,791 54,286 (68,519) 44,109
Income tax provision 834 -- 3,738 (21,762) 429 (16,761)
-----------------------------------------------------------------------------------
Net income $ 27,347 $ 19,038 $ 16,529 $ 32,524 $ (68,090) $ 27,348
===================================================================================
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended June 30, 1998
---------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ -- $ -- $ 93,952 $ 431,765 $ (2,025) $ 523,692
Costs and expenses
Cost of sales -- -- 66,408 297,980 (2,025) 362,363
Selling, general and administrative
expenses 218 -- 27,179 79,857 -- 107,254
Goodwill and other intangibles
amortization -- -- 738 4,454 -- 5,192
-----------------------------------------------------------------------------------
Total costs and expenses 218 -- 94,325 382,291 (2,025) 474,809
-----------------------------------------------------------------------------------
Operating income (218) -- (373) 49,474 -- 48,883
Other income (expense)
Equity in earnings of subsidiaries 28,012 18,046 16,955 -- (63,013) --
Interest - net (2,220) -- (9,114) 2,337 -- (8,997)
Other -- -- 4,940 230 (2,022) 3,148
-----------------------------------------------------------------------------------
Income before income taxes 25,574 18,046 12,408 52,041 (65,035) 43,034
Income tax provision 1,034 -- 981 (19,270) 829 (16,426)
-----------------------------------------------------------------------------------
Net income $ 26,608 $ 18,046 $ 13,389 $ 32,771 $ (64,206) $ 26,608
===================================================================================
</TABLE>
<PAGE> 55
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
-----------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 8,814 $ -- $ 199,502 $ 830,568 $ (11,208) $ 1,027,676
Costs and expenses
Cost of sales 7,079 -- 140,075 583,545 (11,208) 719,491
Selling, general and administrative
expenses 1,844 -- 46,718 161,544 210,106
Goodwill and other intangibles
amortization 23 -- 1,531 9,883 11,437
Restructuring charges -- -- -- 1,362 1,362
-----------------------------------------------------------------------------------
Total costs and expenses 8,946 -- 188,324 756,334 (11,208) 942,396
-----------------------------------------------------------------------------------
Operating income (132) -- 11,178 74,234 -- 85,280
Other income (expense)
Equity in earnings of subsidiaries 44,987 25,281 24,746 -- (95,014) --
Interest - net (4,815) -- (22,210) 8,413 (18,612)
Other -- -- 2,750 425 (3,175) --
-----------------------------------------------------------------------------------
Income before income taxes 40,040 25,281 16,464 83,072 (98,189) 66,668
Income tax provision 1,294 -- 4,447 (32,345) 1,270 (25,334)
-----------------------------------------------------------------------------------
Net income $ 41,334 $ 25,281 $ 20,911 $ 50,727 $ (96,919) $ 41,334
===================================================================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1998
---------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ -- $ -- $ 182,680 $ 789,757 $ (4,610) $ 967,827
Costs and expenses
Cost of sales -- -- 129,907 551,329 (4,610) 676,626
Selling, general and administrative
expenses 491 -- 48,902 151,285 -- 200,678
Goodwill and other intangibles
amortization -- -- 1,409 8,724 -- 10,133
-----------------------------------------------------------------------------------
Total costs and expenses 491 -- 180,218 711,338 (4,610) 887,437
-----------------------------------------------------------------------------------
Operating income (491) -- 2,462 78,419 -- 80,390
Other income (expense)
Equity in earnings of subsidiaries 44,380 23,806 23,623 -- (91,809) --
Interest - net (4,010) -- (17,761) 4,875 -- (16,896)
Other -- -- 5,568 263 (3,183) 2,648
-----------------------------------------------------------------------------------
Income before income taxes 39,879 23,806 13,892 83,557 (94,992) 66,142
Income tax provision 1,056 -- 2,539 (30,095) 1,293 (25,207)
-----------------------------------------------------------------------------------
Net income $ 40,935 $ 23,806 $ 16,431 $ 53,462 $ (93,699) $ 40,935
===================================================================================
</TABLE>
<PAGE> 56
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
-----------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities $ (2,628) $ -- $ (7,827) $ 27,003 $ -- $ 16,548
-----------------------------------------------------------------------------------
Net cash provided from (used by) investing
activities
Additions to fixed assets (162) -- (6,918) (19,445) -- (26,525)
Acquisition of businesses -- -- (12,366) (1,796) -- (14,162)
Other, net 18 -- (1,747) (2,830) -- (4,559)
-----------------------------------------------------------------------------------
(144) -- (21,031) (24,071) -- (45,246)
-----------------------------------------------------------------------------------
Net cash provided from (used by) financing
activities
Additional borrowings (repayments) (18,546) -- 67,619 (6,795) -- 42,278
Issuance of common shares 1,473 -- -- -- -- 1,473
Repurchase of common shares (24,955) -- -- -- -- (24,955)
Increase (decrease) in net payable to
affiliates 5,475 -- (38,924) 33,449 -- --
Dividends (to) from affiliates 45,782 -- -- (45,782) -- --
Other, net (7,210) -- -- -- -- (7,210)
-----------------------------------------------------------------------------------
2,019 -- 28,695 (19,128) -- 11,586
-----------------------------------------------------------------------------------
Net increase (decrease) in cash during
the period (753) -- (163) (16,196) -- (17,112)
Cash at beginning of period 107 97 12,958 110,293 -- 123,455
-----------------------------------------------------------------------------------
Cash at end of period $ (646) $ 97 $ 12,795 $ 94,097 $ -- $ 106,343
===================================================================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1998
---------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities $ (1,969) $ -- $ (9,659) $ 28,552 $ -- $ 16,924
-----------------------------------------------------------------------------------
Net cash provided from (used by) investing
activities
Additions to fixed assets -- -- (11,261) (15,063) -- (26,324)
Acquisition of businesses (53,661) -- (49,252) (37,206) -- (140,119)
Net proceeds from disposal of businesses -- -- 3,434 4,074 -- 7,508
Other, net -- -- 10,190 (1,831) -- 8,359
-----------------------------------------------------------------------------------
(53,661) -- (46,889) (50,026) -- (150,576)
------------------------------------------------------------------------------
Net cash provided from (used by) financing
activities
Additional borrowings (repayments) 136,149 -- 99,123 (5,349) -- 229,923
Issuance of common shares 6,722 -- -- -- -- 6,722
Repurchase of common shares (78,799) -- -- -- -- (78,799)
Increase (decrease) in net payable to
affiliates (20,169) -- (41,827) 61,996 -- --
Dividends (to) from affiliates 40,900 -- -- (40,900) -- --
Contribution of capital (to) from
affiliates (20,655) -- -- 20,655 -- --
Other, net (7,298) -- -- -- -- (7,298)
-----------------------------------------------------------------------------------
56,850 -- 57,296 36,402 -- 150,548
-----------------------------------------------------------------------------------
Net increase (decrease) in cash during the
period 1,220 -- 748 14,928 -- 16,896
Cash at beginning of period (342) 97 14,879 49,953 -- 64,587
-----------------------------------------------------------------------------------
Cash at end of period $ 878 $ 97 $ 15,627 $ 64,881 $ -- $ 81,483
===================================================================================
</TABLE>
<PAGE> 57
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, 1999
-----------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION
ASSETS
Inventories $ 2,793 $ -- $ 49,958 $ 312,654 $ 11,310 $ 376,715
Other current assets 18,902 97 101,144 458,583 (48,045) 530,681
-----------------------------------------------------------------------------------
Total current assets 21,695 97 151,102 771,237 (36,735) 907,396
Fixed assets - net 996 -- 106,826 208,658 -- 316,480
Goodwill and other intangibles 758 -- 126,245 650,906 -- 777,909
Intercompany notes receivable -- -- 116,008 350,364 (466,372) --
Other assets 1,075,501 345,177 1,251,892 436,772 (3,035,559) 73,783
-----------------------------------------------------------------------------------
$ 1,098,950 $ 345,274 $ 1,752,073 $ 2,417,937 $ (3,538,666) $ 2,075,568
===================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 6,193 $ 1,416 $ 168,263 $ 304,149 $ (42,286) $ 437,735
Long-term debt 185,634 -- 351,501 32,278 -- 569,413
Intercompany notes payable -- -- 350,364 116,008 (466,372) --
Other liabilities 11,256 -- 549,519 49,634 (437,856) 172,553
-----------------------------------------------------------------------------------
203,083 1,416 1,419,647 502,069 (946,514) 1,179,701
-----------------------------------------------------------------------------------
Total shareholders' equity 895,867 343,858 332,426 1,915,868 (2,592,152) 895,867
-----------------------------------------------------------------------------------
$ 1,098,950 $345,274 $ 1,752,073 $ 2,417,937 $(3,538,666) $ 2,075,568
===================================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
---------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Inventories $ 1,539 $ -- $ 51,624 $ 313,985 $ 12,821 $ 379,969
Other current assets 18,874 97 84,588 491,949 (54,950) 540,558
-----------------------------------------------------------------------------------
Total current assets 20,413 97 136,212 805,934 (42,129) 920,527
Fixed assets - net 930 -- 106,693 210,230 -- 317,853
Goodwill and other intangibles 747 -- 121,037 653,036 -- 774,820
Intercompany notes receivable -- -- 117,958 336,560 (454,518) --
Other assets 1,074,143 312,369 1,197,181 507,838 (3,021,797) 69,734
-----------------------------------------------------------------------------------
$ 1,096,233 $312,466 $ 1,679,081 $ 2,513,598 $(3,518,444) $ 2,082,934
===================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 8,090 $ 1,538 $ 139,932 $ 381,534 $ (49,186) $ 481,908
Long-term debt 198,780 -- 313,544 32,447 -- 544,771
Intercompany notes payable -- -- 336,560 117,958 (454,518) --
Other liabilities 3,533 -- 572,750 106,141 (511,999) 170,425
-----------------------------------------------------------------------------------
210,403 1,538 1,362,786 638,080 (1,015,703) 1,197,104
-----------------------------------------------------------------------------------
Total shareholders' equity 885,830 310,928 316,295 1,875,518 (2,502,741) 885,830
-----------------------------------------------------------------------------------
$ 1,096,233 $312,466 $ 1,679,081 $ 2,513,598 $(3,518,444) $ 2,082,934
===================================================================================
</TABLE>
<PAGE> 58
UNITED DOMINION INDUSTRIES LIMITED
Consolidated Statements of Income
- --------------------------------------------------------------------------------
For the Quarters and Nine Months Ended September 30, 1999 and 1998
(Stated in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Quarters Ended Nine Months Ended
- --------------------------------------------------------------------------------------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 546,998 $ 524,755 $ 1,574,674 $ 1,492,582
- --------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of sales 376,052 365,064 1,095,543 1,041,690
Selling, general and administrative expenses 112,404 108,518 322,510 309,196
Goodwill and other intangibles amortization 6,102 5,559 17,539 15,692
Restructuring charges 3,239 1,287 4,601 1,287
- --------------------------------------------------------------------------------------------------------
Total costs and expenses 497,797 480,428 1,440,193 1,367,865
- --------------------------------------------------------------------------------------------------------
Operating income 49,201 44,327 134,481 124,717
Other income (expense)
Interest -- net (9,384) (9,285) (27,996) (26,181)
Other (1,500) (500) (1,500) 2,148
- --------------------------------------------------------------------------------------------------------
Income before income taxes 38,317 34,542 104,985 100,684
Income tax provision (10,361) (13,164) (35,695) (38,371)
- --------------------------------------------------------------------------------------------------------
Net income $ 27,956 $ 21,378 $ 69,290 $ 62,313
========================================================================================================
Earnings per common share $ 0.71 $ 0.52 $ 1.74 $ 1.53
========================================================================================================
Average common shares outstanding (thousands) 39,454 40,750 39,843 40,813
========================================================================================================
</TABLE>
See accompanying notes.
<PAGE> 59
UNITED DOMINION INDUSTRIES LIMITED
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
For the Nine Months Ended September 30, 1999 and 1998
(Stated in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------------------------
<S> <C> <C>
Cash provided from (used by) operating activities
Net income $ 69,290 $ 62,313
Add (deduct) items not affecting cash
Depreciation 35,612 31,020
Amortization 19,466 16,667
Deferred income taxes 2,906 (47)
Other 1,174 487
Net increase in working capital other than cash (30,471) (59,231)
Asset securitization (300) (2,600)
- -----------------------------------------------------------------------------
97,677 48,609
- -----------------------------------------------------------------------------
Cash provided from (used by) investing activities
Additions to fixed assets (45,388) (36,547)
Acquisition of businesses (136,146) (171,846)
Net proceeds from disposal of businesses -- 7,508
Proceeds from (investments in) other assets (4,414) 9,434
Other (259) (4,157)
- -----------------------------------------------------------------------------
(186,207) (195,608)
- -----------------------------------------------------------------------------
Cash provided from (used by) financing activities
Net additional borrowings 94,025 247,164
Issuance of common stock 1,537 7,110
Repurchase of common stock (38,476) (78,811)
Dividends (10,770) (10,961)
- -----------------------------------------------------------------------------
46,316 164,502
- -----------------------------------------------------------------------------
Increase (decrease) in cash during the period (42,214) 17,503
Cash at beginning of period 123,455 64,587
- -----------------------------------------------------------------------------
Cash at end of period $ 81,241 $ 82,090
=============================================================================
</TABLE>
See accompanying notes.
<PAGE> 60
UNITED DOMINION INDUSTRIES LIMITED
Consolidated Statements of Financial Position
- --------------------------------------------------------------------------------
As of September 30, 1999 and December 31, 1998
(Stated in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
September 30, Dec. 31,
1999 1998
(Restated)
- -------------------------------------------------------------------------------------
<S> <C> <C>
Current assets
Cash and short-term investments $ 81,241 $ 123,455
Accounts and notes receivable 375,725 335,424
Inventories @ 405,596 379,969
Other current assets 53,892 81,679
- -------------------------------------------------------------------------------------
Total current assets 916,454 920,527
Fixed assets 347,752 317,853
Goodwill and other intangibles 852,581 774,820
Other assets 77,684 69,734
- -------------------------------------------------------------------------------------
$ 2,194,471 $ 2,082,934
=====================================================================================
Current liabilities
Notes payable to banks $ 75,128 $ 53,672
Current portion of long-term debt 46,445 51,665
Accounts payable 171,399 158,708
Accrued liabilities 161,971 194,682
Customer advances 14,319 23,181
- -------------------------------------------------------------------------------------
Total current liabilities 469,262 481,908
Long-term debt 624,011 544,771
Other liabilities 198,211 170,425
- -------------------------------------------------------------------------------------
1,291,484 1,197,104
- -------------------------------------------------------------------------------------
Shareholders' equity
Common shares 537,038 557,574
Contributed surplus 4,260 4,057
Retained earnings 404,905 360,796
- -------------------------------------------------------------------------------------
946,203 922,427
Equity adjustment from foreign currency translation (43,216) (36,597)
- -------------------------------------------------------------------------------------
Total shareholders' equity 902,987 885,830
- -------------------------------------------------------------------------------------
$ 2,194,471 $ 2,082,934
=====================================================================================
@ Inventories consist of:
Raw materials $ 118,242 $ 111,994
Work-in-process 107,918 99,402
Finished goods 179,436 168,573
- -------------------------------------------------------------------------------------
$ 405,596 $ 379,969
=====================================================================================
</TABLE>
See accompanying notes.
<PAGE> 61
UNITED DOMINION INDUSTRIES LIMITED
Consolidated Statements of Retained Earnings
- --------------------------------------------------------------------------------
For the Nine Months Ended September 30, 1999 and the Year Ended December 31,1998
(Stated in Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
September 30, Dec. 31,
1999 1998
(Restated)
- -------------------------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of period $ 360,796 $ 314,854
Net income 69,290 99,688
Dividends (10,770) (14,614)
Buyback of common shares (14,411) (39,132)
- -------------------------------------------------------------------------------------
Balance at end of period $ 404,905 $ 360,796
=====================================================================================
</TABLE>
See accompanying notes.
<PAGE> 62
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
1. New accounting guidelines issued in Canada adopt the asset and liability
approach to accounting for income taxes. The company has elected to adopt
this new standard effective January 1, 1999. The 1998 statements of
financial position and retained earnings have been restated to reflect the
retroactive application of the new rules. This restatement does not
materially affect net income, cash flows or net earnings per share as
previously reported for 1998, therefore they have not been restated.
At December 31, 1998, the adoption resulted in certain reclassifications
related to the cost basis of various amounts in the Statement of Financial
Position. The reclassifications resulted in increases in fixed assets of
$5,515 and accrued liabilities of $5,174 and decreases in inventories of
$468, other current assets of $288, goodwill and other intangibles of
$1,344, other assets of $33,801, other liabilities of $24,109 and retained
earnings of $11,451.
2. In 1998, the company began incurring restructuring charges related to a
company-wide cost reduction program. In 1999, additional restructuring
charges have been incurred primarily related to further plant
rationalization initiatives. The charges incurred to date relate primarily
to facility closure and relocation costs along with the corresponding
transitional production inefficiencies and severance and other employee
related costs.
3. Information about the company's operating segments is as follows:
<TABLE>
<CAPTION>
Quarters Ended Nine Months Ended
September 30, September 30,
------------------------ --------------------------
1999 1998 1999 1998
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales
Flow Technology $ 250,612 $ 239,046 $ 708,014 $ 688,690
Machinery 120,391 121,170 362,506 362,463
Specialty Engineered Products 99,814 94,608 273,804 246,203
Test Instrumentation 76,181 69,931 230,350 195,226
========= =========== =========== ===========
$ 546,998 $ 524,755 $ 1,574,674 $ 1,492,582
========= =========== =========== ===========
Segment Profit
Flow Technology $ 23,468 $ 21,729 $ 64,833 $ 59,205
Machinery 17,020 14,523 44,765 45,179
Specialty Engineered Products 10,414 11,870 29,781 29,524
Test Instrumentation 6,126 4,590 17,713 15,353
========= =========== =========== ===========
$ 57,028 $ 52,712 $ 157,092 $ 149,261
========= =========== =========== ===========
Reconciliation of Segment Profit
to Net Income
Segment profit $ 57,028 $ 52,712 $ 157,092 $ 149,261
Corporate expenses (6,319) (7,668) (17,594) (21,853)
Interest - net (9,384) (9,285) (27,996) (26,181)
Other expense (3,008) (1,217) (6,517) (543)
--------- ----------- ----------- -----------
Income before taxes 38,317 34,542 104,985 100,684
Income taxes (10,361) (13,164) (35,695) (38,371)
--------- ----------- ----------- -----------
Net income $ 27,956 $ 21,378 $ 69,290 $ 62,313
========= =========== =========== ===========
</TABLE>
<PAGE> 63
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
4. In the opinion of management, these financial statements reflect all
adjustments necessary for the fair statement of results of the interim
periods presented. Certain prior year amounts have been reclassified to
conform with current year presentation.
Generally accepted accounting principles (GAAP) in Canada allow for the
reduction of stated capital of outstanding common shares with a
corresponding offset to retained earnings. This reclassification, which the
company made in 1990, is not permitted by United States GAAP and would
result in an increase in capital stock and a reduction in retained earnings
of $128,093 at September 30, 1999 and December 31, 1998. Canadian GAAP also
permits expenses related to the issuance of capital stock, net of income
taxes, to be deducted from retained earnings while United States GAAP
requires such expenses to be deducted from the proceeds of stock issuances
credited to capital stock. This reclassification would reduce capital stock
and increase retained earnings by $20,905 at September 30, 1999 and
December 31, 1998.
Under Canadian GAAP, the discount rate used for computing the benefit
obligation and the service and interest cost components of the net periodic
pension expense represents management's best estimate of the long-term rate
of return on pension fund assets; whereas, under United States GAAP the
discount rate reflects the rate at which pension benefits can be
effectively settled at the date of the financial statements.
United States GAAP requires accruing the cost of providing postretirement
benefits other than pensions to employees and their beneficiaries (i.e.
health care benefits) during the years that the employee renders the
necessary service. The company records expense on a "pay-as-you-go" basis
for benefits paid on behalf of retired employees.
Canadian GAAP allows for the capitalization and subsequent amortization of
start-up costs for new facilities and joint ventures. Effective January 1,
1999, United States GAAP requires the expensing of these costs as incurred
as well as the expensing of any previously capitalized costs. As of January
1, 1999, United States GAAP would require the company to expense
approximately $1 million, net of tax, of unamortized costs that had been
capitalized in prior years.
United States GAAP requires the dual presentation of basic and diluted
earnings per share. Diluted earnings per share reflects the assumed
exercise of dilutive securities such as the company's stock options.
<PAGE> 64
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
The following table reflects the impact on net income, weighted average
shares outstanding and net earnings per share of complying with United
States GAAP as it pertains to the items noted above.
<TABLE>
<CAPTION>
Quarters Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income:
Canadian GAAP $ 27,956 $ 21,378 $ 69,290 $ 62,313
United States GAAP 27,475 20,753 66,845 60,506
Weighted average shares
outstanding (000's)
Canadian GAAP 39,454 40,750 39,843 40,813
Less restricted stock outstanding (174) (118) (177) (143)
-------- -------- -------- --------
United States GAAP - Basic 39,280 40,632 39,666 40,670
Effect of dilutive securities
Restricted stock 174 118 177 143
Employee stock options 219 201 201 337
======== ======== ======== ========
United States GAAP - Diluted 39,673 40,951 40,044 41,150
======== ======== ======== ========
Net earnings per share:
Canadian GAAP $ 0.71 $ 0.52 $ 1.74 $ 1.53
======== ======== ======== ========
United States GAAP - Basic $ 0.70 $ 0.51 $ 1.69 $ 1.49
======== ======== ======== ========
United States GAAP - Diluted $ 0.69 $ 0.51 $ 1.67 $ 1.47
======== ======== ======== ========
</TABLE>
The application of United States GAAP discussed above would result in
increases in other (non-current) liabilities of approximately $6,000 and
common shares of approximately $107,000 and decreases in goodwill of
approximately $2,000, other (non-current) assets of approximately $1,000
and retained earnings of approximately $116,000 as of September 30, 1999.
United States GAAP requires reporting on comprehensive income.
Comprehensive income is defined as the change in equity of a company from
transactions and other events from nonowner sources, such as foreign
currency translation adjustments. For the three and nine months ended
September 30, 1999, comprehensive income totaled $24,909 and $62,741,
respectively. For the three and nine months ended September 30, 1998,
comprehensive income totaled $20,854 and $58,297, respectively.
5. The following is summarized condensed consolidating financial information
segregating the parent and guarantor subsidiaries from nonguarantor
subsidiaries. The guarantor subsidiaries are wholly owned subsidiaries of
the company and guarantees are full, unconditional and joint and several.
Separate financial statements and other disclosures of the guarantor
subsidiaries are not presented because management believes these financial
statements would not provide relevant material additional information to
users.
<PAGE> 65
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1999
---------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Sales $ 15,254 $ -- $ 302,438 $ 1,273,636 $ (16,654) $1,574,674
Costs and expenses
Cost of sales 12,078 -- 213,881 886,238 (16,654) 1,095,543
Selling, general and administrative
expenses 2,802 -- 70,875 248,833 322,510
Goodwill and other intangibles
amortization 33 -- 2,364 15,142 17,539
Restructuring charges -- -- 2,000 2,601 4,601
--------------------------------------------------------------------------------
Total costs and expenses 14,913 -- 289,120 1,152,814 (16,654) 1,440,193
--------------------------------------------------------------------------------
Operating income 341 -- 13,318 120,822 -- 134,481
Other income (expense)
Equity in earnings of subsidiaries 70,879 42,002 43,020 -- (155,901) --
Interest - net (7,047) -- (36,128) 15,179 (27,996)
Other -- -- 4,183 (823) (4,860) (1,500)
--------------------------------------------------------------------------------
Income before income taxes 64,173 42,002 24,393 135,178 (160,761) 104,985
Income tax provision 5,117 -- 9,901 (52,657) 1,944 (35,695)
--------------------------------------------------------------------------------
Net income $ 69,290 $ 42,002 $ 34,294 $ 82,521 $ (158,817) $ 69,290
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
---------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ -- $ -- $ 284,867 $ 1,214,923 $ (7,208) $1,492,582
Costs and expenses
Cost of sales -- -- 201,887 847,011 (7,208) 1,041,690
Selling, general and administrative
expenses 1,012 -- 69,602 238,582 -- 309,196
Goodwill and other intangibles
amortization -- -- 2,137 13,555 -- 15,692
Restructuring charges -- -- 328 959 -- 1,287
--------------------------------------------------------------------------------
Total costs and expenses 1,012 -- 273,954 1,100,107 (7,208) 1,367,865
--------------------------------------------------------------------------------
Operating income (1,012) -- 10,913 114,816 -- 124,717
Other income (expense)
Equity in earnings of subsidiaries 68,532 38,552 30,629 -- (137,713) --
Interest - net (6,309) -- (27,166) 7,294 -- (26,181)
Other -- -- 7,984 789 (6,625) 2,148
--------------------------------------------------------------------------------
Income before income taxes 61,211 38,552 22,360 122,899 (144,338) 100,684
Income tax provision 1,102 -- 6,314 (48,502) 2,715 (38,371)
--------------------------------------------------------------------------------
Net income $ 62,313 $ 38,552 $ 28,674 $ 74,397 $ (141,623) $ 62,313
================================================================================
</TABLE>
<PAGE> 66
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1999
---------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS
Net cash provided by (used in)
operating activities $ (5,997) $ -- $ (17,360) $ 121,034 $ -- $ 97,677
--------------------------------------------------------------------------------
Net cash provided from (used by)
investing activities
Additions to fixed assets (332) -- (11,056) (34,000) -- (45,388)
Acquisition of businesses (22,038) -- (22,042) (92,066) -- (136,146)
Other, net 15 -- (1,160) (3,528) -- (4,673)
--------------------------------------------------------------------------------
(22,355) -- (34,258) (129,594) -- (186,207)
--------------------------------------------------------------------------------
Net cash provided from (used by)
financing activities
Additional borrowings (repayments) 23,969 -- 74,741 (4,685) -- 94,025
Issuance of common shares 1,537 -- -- -- -- 1,537
Repurchase of common shares (38,476) -- -- -- -- (38,476)
Increase (decrease) in net payable
to affiliates 6,151 -- (24,122) 17,971 -- --
Dividends (to) from affiliates 45,782 -- -- (45,782) -- --
Other, net (10,770) -- -- -- -- (10,770)
--------------------------------------------------------------------------------
28,193 -- 50,619 (32,496) -- 46,316
--------------------------------------------------------------------------------
Net increase (decrease) in cash during
the period (159) -- (999) (41,056) -- (42,214)
Cash at beginning of period 107 97 12,958 110,293 -- 123,455
--------------------------------------------------------------------------------
Cash at end of period $ (52) $ 97 $ 11,959 $ 69,237 $ -- $ 81,241
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
---------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities $ 969 $ -- $ (15,211) $ 62,851 $ -- $ 48,609
--------------------------------------------------------------------------------
Net cash provided from (used by)
investing activities
Additions to fixed assets -- -- (14,139) (22,408) -- (36,547)
Acquisition of businesses (53,661) -- (56,064) (62,121) -- (171,846)
Net proceeds from disposal of
businesses -- -- 3,434 4,074 -- 7,508
Other, net -- -- 10,007 (4,730) -- 5,277
--------------------------------------------------------------------------------
(53,661) -- (56,762) (85,185) -- (195,608)
--------------------------------------------------------------------------------
Net cash provided from (used by)
financing activities
Additional borrowings (repayments) 153,597 -- 93,123 444 -- 247,164
Issuance of common shares 7,110 -- -- -- -- 7,110
Repurchase of common shares (78,811) -- -- -- -- (78,811)
Increase (decrease) in net payable
to affiliates (38,629) -- (23,803) 62,432 -- --
Dividends (to) from affiliates 40,900 -- -- (40,900) -- --
Contribution of capital (to) from
affiliates (20,655) -- -- 20,655 -- --
Other, net (10,961) -- -- -- -- (10,961)
--------------------------------------------------------------------------------
52,551 -- 69,320 42,631 -- 164,502
--------------------------------------------------------------------------------
Net increase (decrease) in cash during
the period (141) -- (2,653) 20,297 -- 17,503
Cash at beginning of period (342) 97 14,879 49,953 -- 64,587
--------------------------------------------------------------------------------
Cash at end of period $ (483) $ 97 $ 12,226 $ 70,250 $ -- $ 82,090
================================================================================
</TABLE>
<PAGE> 67
UNITED DOMINION INDUSTRIES LIMITED
Notes to Financial Statements
(Stated in Thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, 1999
---------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION
ASSETS
Inventories $ 4,284 $ -- $ 50,641 $ 339,361 $ 11,310 $ 405,596
Other current assets 13,283 97 114,596 430,106 (47,224) 510,858
--------------------------------------------------------------------------------
Total current assets 17,567 97 165,237 769,467 (35,914) 916,454
Fixed assets - net 2,276 -- 107,388 238,088 -- 347,752
Goodwill and other intangibles 19,138 -- 134,023 699,420 -- 852,581
Intercompany notes receivable -- -- 117,633 351,634 (469,267) --
Other assets 1,112,913 361,898 1,267,803 439,677 (3,104,607) 77,684
--------------------------------------------------------------------------------
$1,151,894 $ 361,995 $1,792,084 $ 2,498,286 $(3,609,788 $2,194,471
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 9,196 $ 1,416 $ 167,646 $ 334,277 $ (43,273) $ 469,262
Long-term debt 228,413 -- 363,206 32,392 -- 624,011
Intercompany notes payable -- -- 351,634 117,633 (469,267) --
Other liabilities 11,298 -- 568,204 72,027 (453,318) 198,211
--------------------------------------------------------------------------------
248,907 1,416 1,450,690 556,329 (965,858) 1,291,484
--------------------------------------------------------------------------------
Total shareholders' equity 902,987 360,579 341,394 1,941,957 (2,643,930) 902,987
--------------------------------------------------------------------------------
$1,151,894 $ 361,995 $1,792,084 $ 2,498,286 $(3,609,788 $2,194,471
================================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
---------------------------------------------------------------------------------
United United United
Dominion Dominion Dominion Non-
Industries Holdings, Industries, Guarantor
Limited Inc. Inc. Subsidiaries Eliminations Consolidated
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Inventories $ 1,539 $ -- $ 51,624 $ 313,985 $ 12,821 $ 379,969
Other current assets 18,874 97 84,588 491,949 (54,950) 540,558
--------------------------------------------------------------------------------
Total current assets 20,413 97 136,212 805,934 (42,129) 920,527
Fixed assets - net 930 -- 106,693 210,230 -- 317,853
Goodwill and other intangibles 747 -- 121,037 653,036 -- 774,820
Intercompany notes receivable -- -- 117,958 336,560 (454,518) --
Other assets 1,074,143 312,369 1,197,181 507,838 (3,021,797) 69,734
--------------------------------------------------------------------------------
$1,096,233 $ 312,466 $1,679,081 $ 2,513,598 $(3,518,444 $2,082,934
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 8,090 $ 1,538 $ 139,932 $ 381,534 $ (49,186) $ 481,908
Long-term debt 198,780 -- 313,544 32,447 -- 544,771
Intercompany notes payable -- -- 336,560 117,958 (454,518) --
Other liabilities 3,533 -- 572,750 106,141 (511,999) 170,425
--------------------------------------------------------------------------------
210,403 1,538 1,362,786 638,080 (1,015,703) 1,197,104
--------------------------------------------------------------------------------
Total shareholders' equity 885,830 310,928 316,295 1,875,518 (2,502,741) 885,830
--------------------------------------------------------------------------------
$1,096,233 $ 312,466 $1,679,081 $ 2,513,598 $(3,518,444 $2,082,934
================================================================================
</TABLE>
<PAGE> 68
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: January 18, 2000
UNITED DOMINION INDUSTRIES LIMITED
By: /s/ William Dries
-----------------------------------
William Dries
Senior Vice President and Chief
Financial Officer
By: /s/ Richard L. Magee
-----------------------------------
Richard L. Magee
Vice President and Secretary
<PAGE> 69
EXHIBIT INDEX
Exhibit No. Exhibit
----------- -------
23.1 Consent of KPMG LLP
<PAGE> 1
Exhibit 23.1
[Letterhead of KPMG LLP]
ACCOUNTANTS' CONSENT
The Shareholders
United Dominion Industries Limited:
We consent to incorporation by reference in the registration statements (Nos.
33-46701, 2-92247, 33-65044, 33-97696, 333-1824 and 333-8230) on Form S-8 of
United Dominion Industries Limited of our report dated February 5, 1999,
relating to the consolidated statements of financial position of United Dominion
Industries Limited as at December 31, 1998, and 1997, and the related
consolidated statements of income, cash flows and changes in shareholders'
equity for each of the years in the three-year period ended December 31, 1998
and related schedule, which report appears in this Form 8-K of United Dominion
Industries Limited.
Our report dated February 5, 1999, contains an explanatory paragraph that states
that the Company's consolidated financial statements as at December 31, 1998 and
1997 and for the three-year period ended December 31, 1998, were previously
prepared on the basis of accounting for income taxes in conformity with Canadian
Institute of Chartered Accountants Handbook Section 3470 CORPORATE INCOME TAXES.
The Company changed its method of accounting for income taxes through the
adoption of Canadian Institute of Chartered Accountants Handbook Section 3465
INCOME TAXES at the beginning of 1999 and has applied the provisions of Section
3465 retroactively. Consequently, the Company's financial statements referred to
above have been restated to conform with this adoption.
KPMG LLP
/s/ KPMG LLP
Chartered Accountants
Toronto, Canada
January 17, 2000
