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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended May 31, 1994
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Commission File Number 1-8862
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MARK IV INDUSTRIES, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 23-1733979
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 John James Audubon Parkway, P.O. Box 810, Amherst, New York 14226-0810
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(Address of principal executive offices) (Zip Code)
(716) 689-4972
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's class of
common stock as of the latest practicable date.
Class Outstanding at July 1, 1994
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Common stock $.01 par value 42,748,334
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MARK IV INDUSTRIES, INC.
INDEX
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Part I. Financial Information Page No.
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Consolidated Condensed Balance Sheets as of
May 31, 1994 and February 28, 1994 3
Consolidated Statements of Income and Retained Earnings
For the Three Month Periods Ended May 31, 1994 and 1993 4
Consolidated Statements of Cash Flows
For the Three Month Periods Ended May 31, 1994 and 1993 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II. Other Information
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Item 6(a) Exhibits 9
Item 6(b) Reports on Form 8-K 9
Signature Page 10
Exhibit Index 11
Exhibit 11 - Statement Regarding Computation of
Per Share Earnings 12
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MARK IV INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
May 31, February 28,
1994 1994
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ASSETS (Unaudited)
Current Assets:
Cash $ 400 $ 500
Accounts receivable 316,900 275,100
Inventories 262,700 265,000
Other current assets 44,900 42,100
---------- ----------
Total current assets 624,900 582,700
Pension related and other
non-current assets 141,100 126,300
Property, plant and equipment, net 364,600 365,300
Cost in excess of net assets acquired and
deferred charges 206,900 208,000
---------- ----------
TOTAL ASSETS $1,337,500 $1,282,300
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current
maturities of debt $ 51,600 $ 45,000
Accounts payable 110,700 99,700
Compensation related liabilities 43,000 43,100
Accrued interest 10,600 13,600
Accrued expenses and other liabilities 66,600 67,000
Income taxes payable 6,600 1,500
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Total current liabilities 289,100 269,900
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Long-Term Debt:
Senior debt 215,000 195,000
Subordinated debentures 372,200 372,200
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Total long-term debt 587,200 567,200
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Other non-current liabilities 97,900 99,800
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Stockholders' Equity:
Common stock 400 400
Additional paid-in capital 262,200 261,500
Retained earnings 104,500 88,600
Foreign currency translation adjustment (3,800) (5,100)
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Total stockholders' equity 363,300 345,400
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $1,337,500 $1,282,300
========== ==========
The accompanying notes are an integral part of these financial statements.
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MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED)
For the Three Month Periods Ended May 31, 1994 and 1993
(Amounts in thousands, except per share data)
1994 1993
---- ----
Net sales $363,800 $287,800
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Operating costs:
Cost of products sold 236,100 185,800
Selling and administration 67,800 53,500
Research and development 7,600 7,100
Depreciation and amortization 11,400 8,500
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Total operating costs 322,900 254,900
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Operating income 40,900 32,900
Interest expense, net 12,900 11,300
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Income from continuing operations
before provision for income taxes 28,000 21,600
Provision for income taxes 10,900 8,000
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Income from continuing operations 17,100 13,600
Income from discontinued operations - -
Extraordinary items - (21,700)
Cumulative effect of accounting change - (26,000)
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Net income (loss) 17,100 (34,100)
Retained earnings - beginning of the period 88,600 128,300
Cash dividends of $.0275 and $.024 per share (1,200) (1,000)
-------- --------
Retained earnings - end of the period $104,500 $ 93,200
======== ========
Net income per share of common stock:
Primary:
Income from continuing operations $ .40 $ .32
Income from discontinued operations - -
Extraordinary items - (.51)
Cumulative effect of accounting change - (.62)
-------- --------
Net income (loss) $ .40 $ (.81)
======== ========
Fully-diluted:
Income from continuing operations $ .36 $ .29
Income from discontinued operations - -
Extraordinary items - (.43)
Cumulative effect of accounting change - (.51)
-------- --------
Net income (loss) $ .36 $ (.65)
======== ========
Weighted average number of shares outstanding:
Primary 42,725 42,236
======== ========
Fully-diluted 50,939 50,552
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The accompanying notes are an integral part of these financial statements.
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MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Month Periods Ended May 31, 1994 and 1993
(Dollars in thousands)
1994 1993
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Cash flows from operating activities:
Income from continuing operations $ 17,100 $ 13,600
Items not affecting cash:
Depreciation and amortization 11,400 8,500
Pensions and other (2,500) (2,700)
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Net cash provided by earnings 26,000 19,400
Changes in assets and liabilities, net of
effects of acquisitions and divestitures:
Accounts receivable (41,800) (20,600)
Inventories 2,400 (8,300)
Other assets (2,800) (8,000)
Accounts payable 10,700 7,700
Other liabilities (800) (8,400)
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Net cash used in continuing operations (6,300) (18,200)
Discontinued operations, before non-cash items - 1,100
Extraordinary items, before deferred charges - (30,100)
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Net cash used in operating activities (6,300) (47,200)
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Cash flows from investing activities:
Acquisitions and divestitures, net (5,500) (1,500)
Purchase of plant and equipment (8,500) (10,600)
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Net cash used in investing activities (14,000) (12,100)
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Cash flows from financing activities:
Credit agreement borrowings, net 18,400 (20,000)
Purchases of subordinated debt - (190,200)
Issuance of subordinated debt - 258,000
Other changes in debt, net 2,900 11,900
Common stock transactions 300 300
Cash dividends paid (1,200) (1,000)
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Net cash provided by financing activities 20,400 59,000
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Effect of exchange rate fluctuations (200) -
Net decrease in cash (100) (300)
Cash and cash equivalents:
Beginning of the period 500 2,700
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End of the period $ 400 $ 2,400
======== ========
The accompanying notes are an integral part of these financial statements.
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MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. In the opinion of the Company's management, the accompanying unaudited
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position
of the Company at May 31, 1994, and the results of its operations and
its cash flows for the three month periods ended May 31, 1994 and 1993.
Such results are not necessarily indicative of the results to be
expected for the full year.
2. Inventories consist of the following components (dollars in thousands):
May 31, February 28,
1994 1994
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Raw materials, parts and sub-assemblies $ 78,100 $ 67,700
Work-in-process 45,900 43,500
Finished goods 141,300 157,100
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265,300 268,300
Less progress billings 2,600 3,300
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Inventories $262,700 $265,000
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Since physical inventories taken during the year do not necessarily
coincide with the end of a quarter, management has estimated the
composition of inventories with respect to raw materials, work-in-
process and finished goods. It is management's opinion that this
estimate represents a reasonable approximation of the inventory
breakdown as of May 31, 1994. The amounts at February 28, 1994
are based upon the audited balance sheet at that date.
3. Property, plant and equipment is stated at cost and consists of the
following components (dollars in thousands):
May 31, February 28,
1994 1994
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Land and land improvements $ 35,700 $ 35,700
Buildings 116,600 115,700
Machinery and equipment 333,900 324,700
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Total property, plant and equipment 486,200 476,100
Less accumulated depreciation 121,600 110,800
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Property, plant and equipment, net $364,600 $365,300
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4. For purposes of cash flows, the Company considers overnight investments
as cash equivalents. The Company paid interest of approximately
$16,300,000 and $18,000,000 in the three month periods ended May 31,
1994 and 1993, respectively. Of such amounts, interest of approximately
$400,000 and $700,000 was allocated to discontinued operations for the
three month periods ended May 31, 1994 and 1993, respectively. The
Company also paid income taxes of approximately $4,300,000 and
$4,000,000 in the three month periods ended May 31, 1994 and 1993,
respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
Net cash provided by earnings from continuing operations was
approximately $26,000,000 for the three month period ended May 31, 1994, an
increase of approximately $6,600,000 (34%) over the three month period ended
May 31, 1993. As of May 31, 1994, the Company had working capital of
approximately $335,800,000, an increase of approximately $23,000,000 (7%) from
February 28, 1994. The increase in working capital was primarily in the
Company's Power and Fluid Transfer segment to support higher business levels.
The Company has borrowing availability under its primary credit
agreements of $193,200,000 and additional availability under its various
domestic and foreign demand lines of credit of approximately $60,600,000 as of
May 31, 1994. Current and long-term debt at May 31, 1994 increased
approximately $26,600,000 from the total amount as of February 28, 1994. Such
increase was caused primarily by the increased working capital requirements
identified above. Despite this increase in debt in absolute terms, the
Company's long-term debt as a percentage of total capitalization actually
decreased slightly to 61.8% at May 31, 1994.
It is anticipated that further debt reduction will be achieved through
cash generated from operations and reduced working capital requirements.
Management believes that cash generated from operations should be sufficient
to support the Company's working capital requirements and anticipated capital
expenditures for the foreseeable future.
Results of Operations
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The Company classifies its operations in three core business segments:
Power and Fluid Transfer, Transportation, and Professional Audio. The
Company's current business strategy is focused upon the enhancement of its
three core business segments through internal growth, cost control and quality
improvement programs, and strategic acquisitions, with an emphasis on
expanding the Company's international presence.
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Net sales for the three month period ended May 31, 1994 increased
approximately $76,000,000 (26%) over the comparable period last year. If the
sales of PTI in the three month period preceding its acquisition had been
included in the results of operation as of May 31, 1993, sales in the current
period would have increased approximately $33,500,000 (10%) over such pro
forma results. Excluding the sales of the PTI business in the current period,
the internal sales growth of the Company's Power and Fluid Transfer segment
was primarily responsible for the Company's increased sales in the current
period. Sales in the Company's Transportation segment in the current period
were comparable to the prior year's three month period, with current orders
and backlogs at record high levels. Sales in the Professional Audio segment
in the current period were down from the prior year's three month period,
primarily as a result of the continued European recession in the markets
served by this segment.
The cost of products sold as a percentage of consolidated net sales for
the three month period ended May 31, 1994 was 64.9%, compared to 64.6% for the
three month period ended May 31, 1993. Selling and administration costs as a
percentage of consolidated net sales were 18.6% for each of the three month
periods ended May 31, 1994 and 1993.
Research and development costs increased by $500,000 (7%) for the three
month period ended May 31, 1994 as compared to the three month period ended
May 31, 1993. The increase is primarily caused by the PTI acquisition. As a
percentage of consolidated net sales, such costs were approximately 2% in each
period presented. This consistent level of investment reflects the Company's
continuing emphasis on new product development.
Depreciation and amortization expense for the three month period ended
May 31, 1994 increased by $2,900,000 (34.1%) over the comparable period in the
prior year. The current year amount includes $350,000 related to the
restricted stock grants made in the second half of fiscal 1994. The remaining
increase is primarily the result of the PTI acquisition.
Net interest expense for the three month period ended May 31, 1994
increased by approximately $1,600,000 (14.2%) as compared to the three month
period ended May 31, 1993. The increase is primarily attributable to the
increased debt as a result of the PTI acquisition in the second quarter of
fiscal 1994, as well as slightly higher economic interest rates in the three
month period ended May 31, 1994 as compared to the three month period ended
May 31, 1993.
The Company's provision for income taxes as a percentage of pre-tax
accounting income was approximately 38.9% for the three month period ended May
31, 1994, as compared to 37.0% in the comparable period last year. The higher
rate in the current period is primarily the result of increased income in
foreign locations with higher statutory tax rates than in the U.S.
As a result of all of the above, the Company's income from continuing
operations for the three month period ended May 31, 1994 increased $3,500,000
(26%) over the comparable period last year.
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As a result of the debt extinguishment in the first quarter of fiscal
1994, the Company incurred extraordinary losses, net of related tax benefits,
of $21,700,000. Additionally, the Company's adoption of SFAS No. 106 in
fiscal 1994 resulted in the recognition of a net of tax charge of $26,000,000
as the cumulative effect of the accounting change in the three month period
ended May 31, 1993. The extraordinary losses and one-time charge resulted in
a net loss of $34,100,000 in the three month period ended May 31, 1993 in
comparison to the net income of $17,100,000 earned in the current period.
Impact of Inflation
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Generally, the Company has been able to pass on or offset inflation-
related cost increases; consequently, inflation has had no material impact on
income from operations.
Part II. OTHER INFORMATION
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Items 1, 2, 3, 4 and 5 are inapplicable and have been omitted.
Item 6(a) - Exhibits
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Exhibit No.
11 Statement Regarding Computation of Per Share Earnings
Item 6(b) Reports on Form 8-K
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None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARK IV INDUSTRIES, INC.
Registrant
DATE: July, 1994 /s/ Sal H. Alfiero
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Sal H. Alfiero
Chairman of the Board
DATE: July 6, 1994 /s/ Clement R. Arrison
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Clement R. Arrison
President
DATE: July 6, 1994 /s/ William P. Montague
------------------- --------------------------
William P. Montague
Executive Vice President
and Chief Financial Officer
DATE: July 6, 1994 /s/ John J. Byrne
------------------- --------------------------
John J. Byrne
Vice President-Finance
DATE: July 6, 1994 /s/ Richard L. Grenolds
------------------- --------------------------
Richard L. Grenolds
Vice President and
Chief Accounting Officer
<PAGE>11
EXHIBIT INDEX
Description
- -----------
11* Statement Regarding Computation of Per Share Earnings
_______________
* Filed herewith by direct transmission pursuant to the EDGAR program.
<PAGE>1
EXHIBIT 11
MARK IV INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (UNAUDITED)
For the Three Month Periods Ended May 31, 1994 and 1993
(Amounts in thousands, except per share data)
1994 1993
---- ----
PRIMARY
Shares outstanding:
Weighted average number of
shares outstanding 42,725 42,236
Net effect of dilutive stock
options (1) 268 337
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Total 42,993 42,573
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Income from continuing operations $ 17,100 $ 13,600
======== ========
Income per share from continuing
operations (2) $ .40 $ .32
======== ========
Extraordinary items $ - $(21,700)
======== ========
Loss per share from extraordinary items (2) $ - $ (.51)
======== ========
Cumulative effect of a change in
accounting principle $ - $(26,000)
======== ========
Loss per share from the cumulative
effect of a change in accounting
principle (2) $ - $ (.61)
======== ========
Net income (loss) $ 17,100 $(34,100)
======== ========
Net income (loss) per share (2) $ .40 $ (.80)
======== ========
<PAGE>2
1994 1993
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FULLY-DILUTED
Shares outstanding:
Weighted average number of
shares outstanding 42,725 42,236
Shares issuable upon conversion of
the Company's 6-1/4% Convertible
Subordinated Debentures 7,944 7,952
Net effect of dilutive stock
options (1) 270 364
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Total 50,939 50,552
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Income from continuing operations $ 17,100 $ 13,600
Interest on Convertible Subordinated
Debentures, less tax effect 1,100 1,200
-------- --------
Income from continuing operations
applicable to fully-diluted shares $ 18,200 $ 14,800
======== ========
Income per share from continuing
operations $ .36 $ .29
======== ========
Extraordinary items $ - $(21,700)
======== ========
Loss per share from extraordinary items $ - $ (.43)
======== ========
Cumulative effect of a change in
accounting principle $ - $(26,000)
======== ========
Loss per share from the cumulative
effect of a change in accounting principle $ - $ (.51)
======== ========
Net income (loss) $ 18,200 $(32,900)
======== ========
Net income (loss) per share $ .36 $ (.65)
======== ========
- ------------------------------------
(1) The net effects for the three month periods ended May 31, 1994 and
1993 are based upon the treasury stock method using the average market
price during the periods for the primary amounts, and the higher of
the average market price or the market price at the end of the period
for the fully-diluted amounts.
(2) Primary earnings per share have been reported in the Company's
financial statements based only upon the shares of common stock
outstanding, since the dilutive effect of the stock options
is not considered to be material.
