UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Quarterly Period Ended May 31, 1995
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period From _____ to ______.
Commission File Number 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
--- ---
Number of shares outstanding of each class of the Registrant's common stock,
as of the latest practicable date:
Class Outstanding at July 6, 1995
----- ---------------------------
Common stock $.01 par value 60,153,934
<PAGE>2
MARK IV INDUSTRIES, INC.
INDEX
Part I. Financial Information Page No.
- ------------------------------ --------
Consolidated Condensed Balance Sheets as of
May 31, 1995 and February 28, 1995 3
Consolidated Statements of Income and Retained Earnings
For the Three Month Periods Ended May 31, 1995 and 1994 4
Consolidated Statements of Cash Flows
For the Three Month Periods Ended May 31, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information 11
- ---------------------------
Signature Page 12
Exhibit Index 13
<PAGE>3
MARK IV INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
May 31, February 28,
1995 1995
ASSETS (Unaudited)
------ ----------- -----------
Current Assets:
Cash $ 900 $ 800
Accounts receivable 421,300 383,700
Inventories 375,300 361,900
Other current assets 66,200 58,600
Total current assets 863,700 805,000
Pension related and other
non-current assets 204,000 197,100
Property, plant and equipment, net 494,900 487,900
Cost in excess of net assets acquired 355,400 356,400
TOTAL ASSETS $1,918,000 $1,846,400
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current
maturities of debt $ 80,500 $ 67,300
Accounts payable 182,800 174,000
Compensation related liabilities 67,300 70,400
Other current liabilities 114,800 113,600
Total current liabilities 445,400 425,300
Long-Term Debt:
Senior debt 371,300 352,700
Subordinated debentures 258,000 258,000
Total long-term debt 629,300 610,700
Other non-current liabilities 184,500 174,900
Stockholders' Equity:
Common stock 600 600
Additional paid-in capital 550,200 550,200
Retained earnings 113,600 90,800
Foreign currency translation adjustment (5,600) (6,100)
Total stockholders' equity 658,800 635,500
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $1,918,000 $1,846,400
The accompanying notes are an integral part of these financial statements.
<PAGE>4
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED)
For the Three Month Periods Ended May 31, 1995 and 1994
(Amounts in thousands, except per share data)
1995 1994
---- ----
Net sales $518,500 $363,800
Operating costs:
Cost of products sold 345,800 236,100
Selling and administration 90,400 67,800
Research and development 10,800 7,600
Depreciation and amortization 16,200 11,400
Total operating costs 463,200 322,900
Operating income 55,300 40,900
Interest expense 15,000 12,900
Income before provision for taxes 40,300 28,000
Provision for income taxes 15,700 10,900
NET INCOME 24,600 17,100
Retained earnings - beginning of the period 90,800 88,600
Cash dividends of $.03 and $.026 per share (1,800) (1,200)
Retained earnings - end of the period $113,600 $104,500
Net income per share of common stock:
Primary $ .41 $ .38
Fully-diluted $ .41 $ .34
Weighted average number of shares outstanding:
Primary 60,100 44,900
Fully-diluted 60,500 53,500
The accompanying notes are an integral part of these financial statements.
<PAGE>5
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Month Periods Ended May 31, 1995 and 1994
(Dollars in thousands)
1995 1994
---- ----
Cash flows from operating activities:
Net income $ 24,600 $ 17,100
Items not affecting cash:
Depreciation and amortization 16,200 11,400
Pension and compensation related items (2,600) (3,600)
Deferred income taxes 7,200 1,100
Net cash provided by earnings 45,400 26,000
Changes in assets and liabilities, net
of effects of businesses acquired and
discontinued:
Accounts receivable (32,700) (41,800)
Inventories (12,000) 2,400
Accounts payable 6,000 10,700
Other items, net (13,100) (3,600)
Net cash used in
operating activities (6,400) (6,300)
Cash flows from investing activities:
Acquisitions (4,300) (10,800)
Divestitures and asset sales 600 5,300
Purchase of plant and equipment, net (16,900) (8,500)
Net cash used in investing activities (20,600) (14,000)
Cash flows from financing activities:
Credit agreement borrowings, net 30,400 18,400
Other changes in long-term debt, net (14,900) (3,500)
Changes in short-term bank borrowings 13,900 6,400
Common stock transactions (400) 300
Cash dividends paid (1,800) (1,200)
Net cash provided by
financing activities 27,200 20,400
Effect of exchange rate fluctuations (100) (200)
Net increase (decrease) in cash 100 (100)
Cash and cash equivalents:
Beginning of the year 800 500
End of the year $ 900 $ 400
The accompanying notes are an integral part of these financial statements.
<PAGE>6
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, 1995, and the results of its operations and
its cash flows for the three month periods ended May 31, 1995 and 1994.
Such results are not necessarily indicative of the results to be
expected for the full year.
2. On November 4, 1994, the Company acquired substantially all of the stock
of Purolator Products Company (Purolator) for a cash purchase price of
$25.00 per share, or a total cost, including expenses, of approximately
$286.3 million. Purolator is a manufacturer of a broad range of filters
and separation systems used in automotive (principally aftermarket),
marine, heating, ventilating, air conditioning, and high-technology
liquid-filtration applications, and specialized industrial filters and
separation systems. Purolator is a significant addition to the
Company's Power and Fluid Transfer business segment.
The acquisition has been accounted for under the purchase method, and
the financial position of Purolator is included in the consolidated
results of operations for the three month period ended May 31, 1995, and
in the consolidated balance sheets of the Company as of May 31, 1995 and
February 28, 1995 based upon a preliminary determination and allocation
of the purchase price. Such amounts will be finalized upon additional
analysis and asset valuation determinations to be made by the Company
and various outside appraisal firms during fiscal 1996. The final
changes are not expected to have a significant impact on the Company's
results of operations as reported herein.
The following table presents the pro forma consolidated condensed
results of operations for the Company's three month period ended May 31,
1994 as if the following transactions had occurred at the beginning of
the period: (i) the consummation of the acquisition of Purolator in
November 1994 and the borrowings under the 1994 Credit Agreement in
connection therewith; and (ii) the consummation of the Equity Offering
in December 1994 and the application of the estimated net proceeds
therefor. The pro forma amounts do not purport to be indicative of the
results that actually would have been obtained had the transactions
identified above actually taken place at the beginning of that period,
nor are they intended to be a projection of future results (dollars in
thousands, except per share amounts):
Three Months Ended
May 31, 1994
Net sales $478,900
Income before interest and taxes $ 49,300
Net income $ 20,100
Net income per share:
Primary $ .39
Fully-diluted $ .35
<PAGE>7
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. Accounts receivable are presented net of allowances for doubtful
accounts of $19,100,000 and $18,600,000 at May 31, 1995 and February 28,
1995, respectively.
4. Inventories consist of the following components (dollars in thousands):
May 31, February 28,
1995 1995
Raw materials, parts and sub-assemblies $102,000 $103,500
Work-in-process 62,100 60,200
Finished goods 211,200 198,200
Inventories $375,300 $361,900
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, 1995. The amounts at February 28, 1995 are
based upon the audited balance sheet at that date.
5. Property, plant and equipment is stated at cost and consists of the
following components (dollars in thousands):
May 31, February 28,
1995 1995
Land and land improvements $ 41,600 $ 41,500
Buildings 146,200 145,300
Machinery and equipment 469,600 451,600
Total property, plant and equipment 657,400 638,400
Less accumulated depreciation 162,500 150,500
Property, plant and equipment, net $494,900 $487,900
<PAGE>8
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. Long-term debt consists of the following at May 31, 1995 and February
28, 1995 (dollars in thousands):
May 31, February 28,
1995 1995
Senior Debt:
Credit Agreement $ 330,000 $ 300,000
Multi-Currency Agreement 38,600 38,300
Other items 29,600 42,500
Total 398,200 380,800
Less Current maturities (5,800) (8,600)
Less amounts allocated to
discontinued operations (21,100) (19,500)
Net senior debt 371,300 352,700
8-3/4% Senior Subordinated Notes 258,000 258,000
Total long-term debt 629,300 610,700
Total stockholders equity 658,800 635,500
Total capitalization $1,288,100 $1,246,200
Long-term debt as a percentage
of total capitalization 48.9% 49.0%
7. In May 1995, the Company's Board of Directors adopted a Shareholders
Rights Plan under which Preferred Stock Purchase Rights were distributed
as a dividend at a rate of one Right for each share of Common Stock held
as of the close of business on June 2, 1995. The Rights will expire at
the close of business on June 2, 2005.
Each Right will entitle the holder to buy one one-hundredth of a newly-
issued share of Mark IV Industries, Inc. Series A Junior Participating
Preferred Stock at an exercise price of $80.00 The Rights will detach
from the Common Stock and will initially become exercisable for such
shares of Preferred Stock if a person or group acquires beneficial
ownership of, or commences a tender or exchange offer which would result
in such person or group beneficially owning, 20 percent or more of the
Company's Common Stock, except through a tender or exchange offer for
all shares which the Board determines to be fair and otherwise in the
best interest of the Company and its stockholders.
8. For purposes of cash flows, the Company considers overnight investments
as cash equivalents. The Company made cash interest payments of
approximately $21,800,000 and $16,300,000 in the three month periods
ended May 31, 1995 and 1994, respectively. The Company also made cash
income tax payments of approximately $5,400,000 and $4,300,000 in the
three month periods ended May 31, 1995 and 1994, respectively.
<PAGE>9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
Net cash provided by earnings was approximately $45,400,000 for the three
month period ended May 31, 1995, an increase of approximately $19,400,000
(75%) over the three month period ended May 31, 1994. As of May 31, 1995, the
Company had working capital of approximately $418,300,000 an increase of
approximately $38,600,000 (10%) from February 28, 1995. The increase in
working capital is substantially attributable to the Power and Fluid Transfer
segment to support higher business levels and temporary seasonal inventory and
accounts receivable increases.
The Company has borrowing availability under its primary credit agreements in
excess of $350,000,000 and additional availability under its various domestic
and foreign demand lines of credit of approximately $100,000,000 as of May 31,
1995. Long-term debt at May 31, 1995 increased approximately $18,600,000 (3%)
from the total amount as of February 28, 1995, primarily as a result of
increased borrowings to support the temporarily increased working capital
requirements.
Although the Company's long-term debt increased in absolute terms, as a
percentage of total capitalization it remained relatively constant at 49% as
of May 31, 1995, the same as at February 28, 1995. Debt reduction in the
balance of the fiscal year will be pursued through the use of 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
- ---------------------
The Company classifies its operations in two business segments: Power and
Fluid Transfer and Professional Audio. The Company's current business
strategy is focused upon the enhancement of its business segments through
internal growth, cost control and quality improvement programs and selective,
strategic acquisitions, with an emphasis on expanding the Company's
international presence.
The results of operations for the three month period ended May 31, 1995
include the results of operations of Purolator, which was acquired in November
1994.
Net sales for the three month period ended May 31, 1995 increased $154,700,000
(43%) over the comparable period last year. The increase was primarily due to
the inclusion of the results of operations of Purolator and several smaller
acquisitions for the period ended May 31, 1995, as well as internal sales
growth in both the Power and Fluid Transfer and Professional Audio segments.
Excluding the acquisitions, sales increased approximately $25,000,000 (7%) in
the three month period ended May 31, 1995, with $16,000,000 of the increase in
the Power and Fluid Transfer segment and $9,000,000 in the Professional Audio
segment. Foreign currency exchange rate movements had a $7,700,000 positive
effect on May 31, 1995 sales in comparison to May 31, 1994. Excluding
acquisitions and the positive effect of foreign currency movements, the
internal growth was $17,300,000 (5%) in the quarter ended May 31, 1995
compared to the quarter ended May 31, 1994.
<PAGE>10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The cost of products sold as a percentage of consolidated net sales increased
to 67% for the three month period ended May 31, 1995, as compared to 65% for
the three month period ended May 31, 1994. The increase in the percentage of
costs is primarily the result of the Purolator acquisition, due to its
historically lower gross margins.
Selling and Administration costs as a percentage of consolidated net sales
were 17.4% for the three month period ended May 31, 1995 as compared to 18.6%
for the three month period ended May 31, 1994. The reduced level of costs as
a percentage of sales is primarily a result of the inclusion of the Purolator
operations which tend to have a lower level of such costs after the
elimination of duplicate corporate and other costs. The reduction in the
level of costs also indicates the company's continued emphasis on cost control
has been successful in substantially offsetting the impact of inflation on
such costs.
Research and development costs increased by $3,200,000 (42%) for the three
month period ended May 31, 1995 as compared to the three month period ended
May 31, 1994. The increase was primarily attributable to the inclusion of the
results of operations of Purolator and several smaller acquisitions. As a
percentage of consolidated net sales, these expenses remained consistent at
approximately 2% in each period. This consistent level of investment reflects
the Company's continuing emphasis on new product development.
Depreciation and amortization expense increased by $4,800,000 (42%) for the
three month period ended May 31, 1995 as compared to the three month period
ended May 31, 1994. The increase is primarily attributable to the inclusion
of the results of operations of Purolator and several smaller acquisitions, as
well as depreciation resulting from fixed asset additions made in the second
half of fiscal 1995.
Interest expense for the three month period ended May 31, 1995 increased by
$2,100,000 (16%) as compared to the three month period ended May 31, 1994.
The increase is primarily due to an increase in the weighted average debt
outstanding resulting from borrowings incurred to finance the acquisition of
Purolator, net of the effects of the conversion of the Company's 6-1/4%
Convertible Subordinated Debentures and the equity offering which occurred in
the second half of fiscal 1995. Increases in economic rates on the Company's
domestic and foreign debt also contributed to increased interest expense in
the current period.
The Company's provision for income taxes as a percentage of pre-tax accounting
income for the three month periods ended May 31, 1995 and 1994 remained
relatively constant at approximately 39%. The benefit of increased domestic
income resulting from the acquisition of Purolator were substantially offset
by 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 net income for the three month
period ended May 31, 1995 increased $7,500,000 (44%) over the comparable
period last year.
<PAGE>11
Impact of Inflation
- -------------------
Generally, the Company has been able to pass on inflation-related cost
increases; consequently, inflation has had no material impact on income from
operations.
Part II. OTHER INFORMATION
- ---------------------------
Items 1, 2, 3, 4 and 5 are inapplicable and have been omitted.
Item 6(a) - Exhibits
- --------------------
Exhibit No.
11 Statement Regarding Computation of Per Share Earnings
27 Financial Data Schedule
Item 6(b) Reports on Form 8-K
- ------------------------------
The following report on Form 8-K was filed pertaining to events
occurring during the quarter ended May 31, 1995.
1. A current report on Form 8-K, dated May 24, 1995, was filed to
report under Items 5, pertaining to the adoption by the Company's
Board of Directors of the Shareholders Rights Plan pursuant to
which preferred stock purchase rights were to be issued by the
Company to the holders of record of shares of the Company's Common
Stock on June 2, 1995.
<PAGE>12
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 13, 1995 /s/ Sal H. Alfiero
Sal H. Alfiero
Chairman of the Board
DATE: July 13, 1995 /s/ Clement R. Arrison
Clement R. Arrison
President
DATE: July 13, 1995 /s/ William P. Montague
William P. Montague
Executive Vice President
and Chief Financial Officer
DATE: July 13, 1995 /s/ John J. Byrne
John J. Byrne
Vice President-Finance
DATE: July 13, 1995 /s/ Richard L. Grenolds
Richard L. Grenolds
Vice President and
Chief Accounting Officer
<PAGE>13
EXHIBIT INDEX
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Description
Page No.
11 Statement Regarding Computation of Per Share Earnings 14
27 Financial Data Schedule 15
EXHIBIT 11
MARK IV INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (UNAUDITED)
For the Three Month Periods Ended May 31, 1995 and 1994
(Amounts in thousands, except per share data)
Three Months
Ended May 31,
------------
1995 1994
PRIMARY
Shares outstanding:
Weighted average number of
shares outstanding 60,104 44,861
Net effect of dilutive stock
options (1) 323 281
Total 60,427 45,142
Net income $ 24,600 $ 17,100
Net income per share (2) $ .41 $ .38
FULLY-DILUTED
Shares outstanding:
Weighted average number of
shares outstanding 60,104 44,861
Shares issuable upon conversion of
the Company's 6-1/4% Convertible
Subordinated Debentures - 8,341
Net effect of dilutive stock
options (1) 367 284
Total 60,471 53,486
Net Income $ 24,600 $17,100
Interest on Convertible Subordinated
Debentures, less tax effect - 1,100
Net income $ 24,600 $18,200
Net income per share $ .41 $ .34
- ------------------------------------
(1) The net effects for the three month periods ended May 31, 1995 and 1994
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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Mark IV Industries, Inc. and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-END> MAY-31-1995
<CASH> 900
<SECURITIES> 0
<RECEIVABLES> 440,400
<ALLOWANCES> 19,100
<INVENTORY> 375,300
<CURRENT-ASSETS> 863,700
<PP&E> 657,400
<DEPRECIATION> 162,500
<TOTAL-ASSETS> 1,918,000
<CURRENT-LIABILITIES> 445,400
<BONDS> 629,300
<COMMON> 600
0
0
<OTHER-SE> 658,200
<TOTAL-LIABILITY-AND-EQUITY> 1,918,000
<SALES> 518,500
<TOTAL-REVENUES> 518,500
<CGS> 345,800
<TOTAL-COSTS> 463,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,000
<INCOME-PRETAX> 40,300
<INCOME-TAX> 15,700
<INCOME-CONTINUING> 24,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,600
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
