<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1996
REGISTRATION STATEMENT NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
MARK IV INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT IS SPECIFIED IN ITS CHARTER)
DELAWARE 3052 23-1733979
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION CLASSIFICATION CODE NO.) IDENTIFICATION NUMBER)
OF INCORPORATION OR
ORGANIZATION)
501 JOHN JAMES AUDUBON PARKWAY
P.O. BOX 810
AMHERST, NEW YORK 14226-0810
(716) 689-4972
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
WILLIAM P. MONTAGUE
PRESIDENT
MARK IV INDUSTRIES, INC.
501 JOHN JAMES AUDUBON PARKWAY
P.O. BOX 810
AMHERST, NEW YORK 14226-0810
(716) 689-4972
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
DAVID L. FINKELMAN, ESQ. GERALD S. LIPPES, ESQ.
STROOCK & STROOCK & LAVAN LIPPES, SILVERSTEIN, MATHIAS & WEXLER
SEVEN HANOVER SQUARE LLP
NEW YORK, N.Y. 10004-2696 700 GUARANTY BUILDING
28 CHURCH STREET
BUFFALO, N.Y. 14202-3950
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
----------------
If the only securities being registered on this form are being in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AGGREGATE AGGREGATE AMOUNT OF
OF SECURITIES TO BE AMOUNT TO BE PRICE PER UNIT OFFERING REGISTRATION
REGISTERED REGISTERED (1) PRICE (1) FEE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7 3/4% Senior
Subordinated Notes due
2006.................. $250,000,000 100% $250,000,000 $86,207
- -----------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f).
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MARK IV INDUSTRIES, INC.
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K SHOWING LOCATION IN
PROSPECTUS OF THE INFORMATION REQUIRED BY PART I OF FORM S-4
<TABLE>
<S> <C>
1.Forepart of Registration and Outside
Front Cover Page of Prospectus.. Facing Page; Outside Front Cover Page;
Cross Reference Sheet; Inside Front
Cover Page
2.Inside Front and Outside Back Cover
Pages of Prospectus............. Inside Front Cover Page; Outside Back
Cover Page
3.Risk Factors, Ratio of Earnings to
Fixed Charges and Other Prospectus Summary; Selected Financial
Information..................... Information
4.Terms of the Transaction............ Prospectus Summary; The Exchange
Offer; Certain Federal Income Tax
Considerations; Description of the
Exchange Notes
5.Pro Forma Financial Information..... Prospectus Summary; Pro Forma
Financial Information
6.Material Contacts with the Company
Being Acquired.................. Not Applicable
7.Additional Information Required for
Reoffering by Persons and
Parties Deemed to be
Underwriters.................... Not Applicable
8.Interests of Named Experts and
Counsel......................... Not Applicable
9.Disclosure of Commission Position on
Indemnification for Securities
Act Liabilities................. Not Applicable
10.Information with Respect to S-3 Available Information; Prospectus
Registrants..................... Summary; Capitalization; Selected
Financial Information; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Principal
Securityholders; Description of the
Exchange Notes; Plan of Distribution;
Legal Matters; Experts; Consolidated
Financial Statements
11.Incorporation of Certain Information Incorporation of Certain Documents by
by Reference.................... Reference
12.Information with Respect to S-2 or
S-3 Registrants................. Not Applicable
13.Incorporation of Certain Information
by Reference.................... Not Applicable
14.Information with Respect to
Registrants Other Than S-3 or S-
2 Registrants................... Not Applicable
15.Information with Respect to S-3
Companies....................... Not Applicable
16.Information with Respect to S-2 or
S-3 Companies................... Not Applicable
17.Information with Respect to
Companies Other Than S-2 or S-3
Companies....................... Not Applicable
18.Information if Proxies, Consents or
Authorizations are to be
Solicited....................... Not Applicable
19.Information if Proxies, Consents or
Authorizations are not to be Prospectus Summary; Incorporation of
Solicited or in an Exchange Certain Documents by Reference;
Offer .......................... Management; Principal Securityholders;
The Exchange Offer
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 2, 1996
PROSPECTUS
[Logo of Mark IV Industries appears here]
OFFER TO EXCHANGE
7 3/4% SENIOR SUBORDINATED NOTES DUE 2006
FOR ANY AND ALL OUTSTANDING
7 3/4% SENIOR SUBORDINATED NOTES DUE 2006
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [DAY],
[DATE], 1996, UNLESS EXTENDED BY MARK IV INDUSTRIES, INC. As more fully
described herein under "The Exchange Offer--Expiration Date; Extensions;
Amendment," the time the Exchange Offer expires (including extensions, if any,
by Mark IV) is referred to as the "Expiration Date."
Mark IV Industries, Inc., a Delaware Corporation ("Mark IV" or the
"Company"), is hereby offering (the "Exchange Offer"), upon the terms and
subject to the conditions set forth in this prospectus (the "Prospectus") and
the accompanying letter of transmittal (the "Letter of Transmittal"), to
exchange $1,000 principal amount of its 7 3/4% Senior Subordinated Notes due
April 1, 2006 (the "Exchange Notes"), which exchange has been registered under
the Securities Act of 1933, as amended (the "Securities Act") pursuant to a
registration statement of which this Prospectus is a part (the "Registration
Statement"), for each $1,000 principal amount of its outstanding 7 3/4% Senior
Subordinated Notes due April 1, 2006 (the "Private Notes" and, collectively
with the Exchange Notes, the "Notes"), of which $250,000,000 in aggregate
principal amount was issued and sold on March 11, 1996 in a transaction exempt
from registration under the Securities Act (the "Private Offering") and is
outstanding on the date hereof.
The form and terms of the Exchange Notes are substantially identical in all
respects (including principal amount, interest rate, maturity and ranking) to
the form and terms of the Private Notes, except that (i) the Exchange Notes
will have been registered under the Securities Act and, therefore, will not
bear legends restricting the transfer thereof and (ii) holders of the Exchange
Notes will not be entitled to certain rights of holders of the Private Notes
under the Registration Rights Agreement (as defined), which rights will
terminate upon consummation of the Exchange Offer. The Exchange Notes will
evidence the same indebtedness as the Private Notes and will be issued pursuant
to, and entitled to the benefits of, the Indenture (as defined) governing the
Private Notes. The Exchange Offer is being made to satisfy the obligations of
the Company under the Registration Rights Agreement relating to the Private
Notes. See "The Exchange Offer" and "Description of the Exchange Notes."
The Exchange Notes will bear interest at the rate of 7 3/4% per annum,
payable semi-annually on April 1 and October 1 of each year, commencing October
1, 1996. The Exchange Notes will bear interest from and including the date of
issuance of the Private Notes (March 11, 1996). The Exchange Notes will not be
subject to redemption prior to their stated maturity. Upon a Change of Control
(as defined), holders of the Exchange Notes will have the right, subject to
certain restrictions and conditions, to require the Company to purchase all or
any of their Notes at 101% of the principal amount thereof plus accrued and
unpaid interest, if any, through the date of purchase. See "Description of the
Exchange Notes--Change of Control."
The Exchange Notes will be general unsecured obligations of the Company, will
be subordinated in right of payment to the prior payment in full of all
existing and future Senior Indebtedness (as defined) of the Company, and will
be effectively subordinated to the indebtedness of the Company's subsidiaries.
At January 31, 1996, after giving pro forma effect to the issuance and sale of
the Private Notes and the application of the net proceeds thereof to reduce
outstanding Senior Indebtedness of the Company, Senior Indebtedness of the
Company and its subsidiaries was approximately $168,700,000 (of which
approximately $52,800,000 was indebtedness of the Company's subsidiaries) and
subordinated indebtedness of the Company (including the Private Notes) was
approximately $508,000.00. Subject to certain restrictions, the Indenture
pursuant to which the Exchange Notes will be issued permits the Company to
incur additional indebtedness, but, until such time as the Exchange Notes are
rated Investment Grade (as defined), prohibits the incurrence by the Company of
any indebtedness that is senior to the Exchange Notes and subordinate to Senior
Indebtedness. See "Description of the Exchange Notes--Subordination."
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
<PAGE>
The Private Notes were originally issued and sold in the Private Offering in
reliance upon the exemption provided in Section 4(2) of the Securities Act and
Rule 144A of the Securities Act. Accordingly, the Private Notes may not be
reoffered, resold or otherwise pledged, hypothecated or transferred in the
United States or to a U.S. person unless registered under the Securities Act
or unless an applicable exemption from the registration requirements of the
Securities Act is available. Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to third parties, the Company
believes that the Exchange Notes issued pursuant to the Exchange Offer in
exchange for Private Notes may be offered for resale, resold and otherwise
transferred by a holder thereof (other than (i) an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act, (ii) a broker-dealer
who acquired Private Notes directly from the Company to resell pursuant to
Rule 144A or any other available exemption under the Securities Act or (iii) a
broker-dealer who acquired Private Notes as a result of market making or other
trading activities), without compliance with the registration and prospectus
delivery requirements of the Securities Act; provided that the holder is
acquiring Exchange Notes in the ordinary course of its business and is not
participating, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes. Holders of Private
Notes wishing to accept the Exchange Offer must represent to the Company, as
required by the Registration Rights Agreement, that such conditions have been
met. The Company believes that none of the registered holders of the Private
Notes is an affiliate (as such term is defined in Rule 405 under the
Securities Act) of the Company.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Private Notes must acknowledge that it will deliver a prospectus
in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Private Notes, where
such Private Notes were acquired by such broker-dealer as a result of market-
making or other trading activities. The Company has agreed to make this
Prospectus (as it may be amended or supplemented) available to any broker-
dealer, upon request, for use in connection with any such resale, for a period
of one year after the Registration Statement is declared effective by the
Commission or until such earlier date on which all the Exchange Notes are
freely tradeable. However, any broker-dealer who acquired the Private Notes
directly from the Company may not fulfill its prospectus delivery requirements
with this Prospectus, but must comply with the registration and prospectus
delivery requirements of the Securities Act. See "The Exchange Offer--Resale
of the Exchange Notes" and "Plan of Distribution."
The Company will not receive any proceeds from, and has agreed to bear the
expenses of, the Exchange Offer. No underwriter is being used in connection
with the Exchange Offer. See "The Exchange Offer--Resale of the Exchange
Notes."
Prior to the Exchange Offer, there has been no public market for the Notes.
The Exchange Notes will not be listed on any securities exchange, but the
Private Notes are eligible for trading in the Private Offerings, Resales and
Trading through Automated Linkages ("PORTAL") market of the National
Association of Securities Dealers, Inc. There can be no assurance that an
active market for the Notes will develop. To the extent that a market for the
Notes does develop, the market value of the Notes will depend on market
conditions (such as yields on alternative investments), general economic
conditions, the Company's financial condition and certain other factors. Such
conditions might cause the Notes, to the extent they are traded, to trade at a
significant discount from face value. In addition, any Private Notes not
tendered and accepted in the Exchange Offer will remain outstanding. To the
extent that the Private Notes are tendered and accepted in the Exchange Offer,
a holder's ability to sell untendered, and tendered but unaccepted, Private
Notes could be adversely affected. Following consummation of the Exchange
Offer, the holders of Private Notes will continue to be subject to the
existing restrictions on transfer thereof and the Company will have no further
obligation to such holders to provide for the registration under the
Securities Act of the Private Notes except under certain limited
circumstances. See "The Exchange Offer--Termination of Certain Rights."
The Company will accept for exchange any and all validly tendered Private
Notes not withdrawn prior to 5:00 p.m., New York City time, on the Expiration
Date. Tenders of Private Notes may be withdrawn at any time prior to 5:00 p.m.
on the Expiration Date. The Exchange Offer is not conditioned on any minimum
aggregate principal amount of Private Notes being tendered or accepted for
exchange; provided, however, Private Notes may be tendered only in integral
multiples of $1,000. The Exchange Offer is subject to certain customary
conditions. See "The Exchange Offer--Conditions."
----------------
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THE INFORMATION CONTAINED HEREIN IS AS OF THE DATE HEREOF AND
SUBJECT TO CHANGE, COMPLETION OR AMENDMENT WITHOUT NOTICE. NEITHER THE DELIVERY
OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL AT ANY TIME NOR
ANY EXCHANGE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
IN MAKING AN INVESTMENT DECISION REGARDING THE SECURITIES OFFERED HEREBY,
PROSPECTIVE INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE
TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE OFFERING IS
BEING MADE ON THE BASIS OF THIS PROSPECTUS. ANY DECISION TO EXCHANGE NOTES IN
THE EXCHANGE OFFER MUST BE BASED ON THE INFORMATION CONTAINED HEREIN.
The Exchange Notes will be available initially to qualified institutional
buyers only in book-entry form. The Company expects that the Exchange Notes
issued pursuant to the Exchange Offer will be issued in the form of a Global
Note (as defined), which will be deposited with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in its name or in
the name of Cede & Co., its nominee. Beneficial interests in the Global Note
representing the Exchange Notes will be shown on, and transfers thereof will be
effected through, records maintained by the Depositary and its participants.
After the initial issuance of the Global Note, Exchange Notes in certificated
form will be issued in exchange for the Global Note only in accordance with the
terms set forth in the Indenture. See "The Exchange Offer--Book Entry Transfer"
and "Description of the Exchange Notes--Book-Entry, Delivery and Form."
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 1
Incorporation of Certain Documents by Reference........................... 1
Prospectus Summary........................................................ 2
Use of Proceeds........................................................... 11
The Exchange Offer........................................................ 12
Capitalization............................................................ 20
Selected Financial Information............................................ 21
Pro Forma Financial Information........................................... 22
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 23
Business.................................................................. 30
Management................................................................ 37
Principal Securityholders................................................. 39
Description of the Exchange Notes......................................... 41
Certain Federal Income Tax Considerations................................. 56
Plan of Distribution...................................................... 57
Legal Matters............................................................. 58
Experts................................................................... 58
Index to Consolidated Financial Statements................................ F-1
</TABLE>
(iii)
<PAGE>
AVAILABLE INFORMATION
Mark IV Industries, Inc. ("Mark IV" or the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Reports, proxy statements and other information filed by
the Company with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices
located at Seven World Trade Center, New York, New York 10048, and Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such materials can be obtained from the Public Reference Section of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such materials can also be inspected at the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form S-
4 (together with all amendments, exhibits, annexes and schedules thereto, the
"Registration Statement") pursuant to the Securities Act, and the rules and
regulations promulgated thereunder, with respect to the securities being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and the securities offered hereby, reference is made to
the Registration Statement, including the exhibits filed as a part thereof and
otherwise incorporated therein. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete; with respect to such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made
to such exhibit for a more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by such
reference. Copies of the Registration Statement and the exhibits may be
inspected, without charge, at the offices of the Commission, or obtained at
prescribed rates from the Public Reference Section of the Commission at the
address set forth above.
The Company is required by the terms of the Indenture to furnish the Trustee
(as defined) with annual reports containing consolidated financial statements
audited by its independent certified public accountants and with quarterly
reports containing unaudited condensed consolidated financial statements for
each of the first three quarters of each fiscal year.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by the Company
pursuant to the Exchange Act are incorporated by reference in this Prospectus
and made a part hereof: the Company's Annual Report on Form 10-K for the fiscal
year ended February 28, 1995, as amended by Amendment No. 1 on Form 10-K/A
dated June 28, 1995; the Company's Quarterly Reports on Form 10-Q for the
fiscal quarters ended May 31, 1995, August 31, 1995 and November 30, 1995; the
Company's Current Report on Form 8-K dated May 17, 1995; and the Company's
Current Report on Form 8-K dated March 21, 1996, as amended by the Company's
Current Report on Form 8-K/A dated March 27, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the Offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which is also incorporated or deemed to be
incorporated by reference herein modifies, supersedes or replaces such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this Prospectus
is delivered, upon written or oral request of such person, a copy of any or all
of the documents which have been incorporated by reference in this Prospectus,
other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into the documents so incorporated. Any such request
should be directed to Investor Relations, Mark IV Industries, Inc., 501 John
James Audubon Parkway, P.O. Box 810, Amherst, New York 14226-0810 (telephone
number: (716) 689-4972).
1
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere or incorporated by reference in this Prospectus. Unless the context
otherwise requires, all references herein to the "Company" or "Mark IV" include
Mark IV Industries, Inc. and its subsidiaries.
THE COMPANY
Mark IV is a diversified manufacturer of a broad range of proprietary and
other power and fluid transfer products and systems which serve four distinct
markets: industrial; automotive aftermarket; automotive original equipment
manufacturers ("OEMs"); and infrastructure. Power and fluid transfer products
accounted for 90% of Mark IV's net sales in its fiscal year ended February 28,
1995 after giving pro forma effect to the Company's acquisition in November
1994 of Purolator Products Company ("Purolator"). Mark IV is also a leading
manufacturer of professional audio products.
Many of Mark IV's product groups have a significant, and in certain instances
the leading, share of their respective markets. Products manufactured by Mark
IV principally serve specialized needs in markets in which relatively few
manufacturers compete. These products are sold directly and through independent
distributors to other manufacturers and commercial users in the United States
and Europe and, to a lesser extent, in Canada, Latin America and the Far East.
Mark IV operates 75 manufacturing facilities and 52 distribution and sales
locations and employs approximately 17,000 people in 18 countries.
Mark IV's business strategy is focused on building the worldwide industrial,
automotive aftermarket and automotive OEM markets of its Power and Fluid
Transfer business segment through internal growth, continuation of cost control
and quality improvement programs, and selective strategic domestic and foreign
acquisitions. The Company's operating strategy emphasizes management for
continuous improvement, establishing co-operative programs with customers to
engineer, design and develop higher value added systems in addition to
individual products, and the introduction of new, more cost effective and
durable products.
In furtherance of these strategies, over its last five fiscal years Mark IV
has: (i) emphasized continuous product development, with over 50.0% of its
current sales arising from the introduction of new products or products which
have been redesigned; (ii) considerably enhanced its ability to provide a
broader range of products to its existing customers through its November 1994
acquisition of Purolator, a leading manufacturer of automotive and industrial
filtration products; (iii) significantly expanded its presence in Western
Europe through its June 1993 acquisition of Pirelli Trasmissioni Industriali,
S.p.A. ("PTI"), a leading Italian-based manufacturer of power transmission
products; (iv) substantially increased its domestic production capacity and
strengthened its market position in the power steering and garden hose markets
through the 1990 acquisition of Anchor Swan, a leading manufacturer of these
and other products; (v) established distribution centers to serve markets in
Central and South America and the Pacific Rim, and acquired manufacturing and
distribution facilities in Mexico; and (vi) implemented cost savings and
efficiency programs in its Power and Fluid Transfer segment which have
contributed to the improvement of the segment's operating income margins from
7.0% in fiscal 1989 to 11.2% in fiscal 1995. Mark IV believes that, having
established an efficient global manufacturing and distribution network, it is
well positioned to benefit from its leading domestic market position and its
increased presence in European and other foreign markets.
2
<PAGE>
RECENT DEVELOPMENTS
As part of the Company's strategy to become more focused in the worldwide
industrial, automotive aftermarket and automotive OEM markets of its Power and
Fluid Transfer segment, Mark IV is exploring the possibility of selling two of
its non-core businesses. In October 1995, the Company announced the possible
sale of its infrastructure business, the Transportation Products Group ("TPG"),
which currently has annual sales of approximately $225 million. In January
1996, the Company announced that it is also exploring the possible sale of its
professional audio business, Mark IV Audio, which currently has annual sales of
approximately $200 million. The potential sales of TPG and Mark IV Audio are in
their preliminary stages and, therefore, there can be no assurance that either
such sale will occur. If the Company were to consummate either or both such
sales, the net proceeds thereof would be used to reduce Senior Indebtedness, to
fund future acquisitions in core business areas, and/or, depending on market
prices and other relevant considerations, to repurchase outstanding shares of
the Company's Common Stock.
In furtherance of Mark IV's strategy of focusing on building the industrial
market of its Power and Fluid Transfer segment, on March 5, 1996 Mark IV
acquired the Imperial Eastman Division of The Pullman Company ("Imperial
Eastman") for a purchase price of approximately $78 million. Imperial Eastman
manufactures industrial hose and couplings products complementary to those
currently produced by Mark IV, and has current annual sales of approximately
$135 million.
RECENT FINANCIAL RESULTS
On March 26, 1996, the Company issued a press release announcing its results
of operations for its fiscal year ended February 29, 1996. The following table
summarizes such results of operations as compared to the results of operations
for fiscal 1995. Although the fiscal 1996 results are preliminary and subject
to the completion of the year-end audit, the Company does not believe the
actual results will be materially different.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
LAST DAY OF FEBRUARY
(DOLLARS IN THOUSANDS)
-------------------------
1995 1996
---------- -----------
(UNAUDITED)
<S> <C> <C>
Sales........................................... $1,603,300 $2,088,500
========== ==========
Operating Income(1)............................. $ 164,300 $ 212,600
========== ==========
Interest Expense................................ $ 53,900 $ 61,200
========== ==========
Net Income...................................... $ 66,800(2) $ 92,400
========== ==========
</TABLE>
- --------
(1) Represents income before interest expense and taxes.
(2) After extraordinary loss of $1.1 million relating to the early
extinguishment of debt.
3
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer.......... The Company is hereby offering to exchange $1,000
principal amount of Exchange Notes for each
$1,000 principal amount of Private Notes that are
properly tendered and accepted. The Company will
issue Exchange Notes on or promptly after
Expiration Date. As of the date hereof, there is
$250,000,000 aggregate principal amount of
Private Notes outstanding. See "The Exchange
Offer--Purpose of the Exchange Offer."
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued
to third parties, the Company believes that the
Exchange Notes issued pursuant to the Exchange
Offer in exchange for Private Notes may be
offered for resale, resold and otherwise
transferred by a holder thereof (other than (i)
an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act, (ii) a
broker-dealer who acquired Private Notes directly
from the Company to resell pursuant to Rule 144A
or any other available exemption under the
Securities Act or (iii) a broker-dealer who
acquired Private Notes as a result of market
making or other trading activities), without
compliance with the registration and prospectus
delivery requirements of the Securities Act;
provided that the holder is acquiring Exchange
Notes in the ordinary course of its business and
is not participating, and has no arrangement or
understanding with any person to participate, in
the distribution of the Exchange Notes. Holders
of Private Notes wishing to accept the Exchange
Offer must represent to the Company, as required
by the Registration Rights Agreement, that such
conditions have been met. The Company believes
that none of the registered holders of the
Private Notes is an affiliate (as such term is
defined in Rule 405 under the Securities Act) of
the Company.
Each broker-dealer that receives Exchange Notes
for its own account in exchange for Private Notes
must acknowledge that it will deliver a
prospectus in connection with any resale of such
Exchange Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to
time, may be used by a broker-dealer in
connection with resales of Exchange Notes
received in exchange for Private Notes, where
such Private Notes were acquired by such broker-
dealer as a result of market-making or other
trading activities. The Company has agreed to
make this Prospectus (as it may be amended or
supplemented) available to any broker-dealer,
upon request, for use in connection with any such
resale, for a period of one year after the
Registration Statement is declared effective by
the Commission or until such earlier date on
which all the Exchange Notes are freely
tradeable. However, any broker-dealer who
acquired the Private Notes
4
<PAGE>
directly from the Company other than as a result
of market-making activities or ordinary trading
activities may not fulfill its prospectus
delivery requirements with this Prospectus, but
must comply with the registration and prospectus
delivery requirements of the Securities Act. See
"The Exchange Offer--Resale of the Exchange
Notes."
Registration Rights The Private Notes were sold by the Company on
Agreement.................. March 11, 1996 to Bear, Stearns & Co. Inc. (the
"Initial Purchaser") pursuant to a Purchase
Agreement, dated March 5, 1996, by and between
the Company and the Initial Purchaser (the
"Purchase Agreement"). Pursuant to the Purchase
Agreement, the Company and the Initial Purchaser
entered into a Registration Rights Agreement,
dated as of March 11, 1996 (the "Registration
Rights Agreement"), which grants the holders of
the Private Notes certain exchange and
registration rights. The Exchange Offer is
intended to satisfy such rights, which will
terminate upon the consummation of the Exchange
Offer except under certain limited circumstances.
See "The Exchange Offer--Termination of Certain
Rights."
Holders of Private Notes who do not tender their
Private Notes in the Exchange Offer will continue
to hold such Private Notes and will be entitled
to all the rights and limitations applicable
thereto under the Indenture. All untendered, and
tendered but not unaccepted Private Notes will
continue to be subject to the restrictions on
transfer provided for in the Private Notes and
the Indenture. To the extent that Private Notes
are tendered and accepted in the Exchange Offer,
the trading market, if any, for the Private Notes
could be adversely affected.
Expiration Date............. The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1996, unless
the Exchange Offer is extended by the Company, in
its sole discretion, in which case the term
"Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended. See
"The Exchange Offer--Expiration Date; Extensions;
Amendments."
Accrued Interest on the
Exchange Notes and the
Private Notes..............
The Exchange Notes will bear interest from and
including the date of issuance of the Private
Notes (March 11, 1996). Holders whose Private
Notes are accepted for exchange will be deemed to
have waived the right to receive any interest
accrued on the Private Notes. See "The Exchange
Offer--Interest on the Exchange Notes."
Conditions to the Exchange The Exchange Offer is subject to certain
Offer...................... customary conditions that may be waived by the
Company. The Exchange Offer is not conditioned
upon any minimum aggregate principal amount of
Private Notes being tendered for exchange. See
"The Exchange Offer--Conditions."
5
<PAGE>
Procedures for Tendering
Private Notes..............
Each Holder of Private Notes wishing to accept
the Exchange Offer must complete, sign and date
the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or
such facsimile, together with such Private Notes
and any other required documentation to Fleet
National Bank, as exchange agent (the "Exchange
Agent"), at its address set forth herein. By
executing the Letter of Transmittal, the holder
will represent to and agree with the Company
that, among other things, (i) the Exchange Notes
to be acquired by such holder of Private Notes in
connection with the Exchange Offer are being
acquired by such holder in the ordinary course of
its business, (ii) such holder is not currently
participating and has no arrangement or
understanding with any person to participate in a
distribution of the Exchange Notes, (iii) if such
holder is a broker-dealer registered under the
Exchange Act or is participating in the Exchange
Offer for the purposes of distributing the
Exchange Notes, such holder will comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with a
secondary resale transaction of the Exchange
Notes acquired by such person and cannot rely on
the position of the staff of the Commission set
forth in no-action letters (see "The Exchange
Offer--Resale of Exchange Notes"), (iv) such
holder understands that a secondary resale
transaction described in clause (iii) above and
any resales of Exchange Notes obtained by such
holder in exchange for Private Notes acquired by
such holder directly from the Company should be
covered by an effective registration statement
containing the selling securityholder information
required by Item 507 or Item 508, as applicable,
of Regulation S-K of the Commission and (v) such
holder is not an "affiliate," as defined in Rule
405 under the Securities Act, of the Company. If
the holder is a broker-dealer that will receive
Exchange Notes for its own account in exchange
for Private Notes that were acquired as a result
of market-making activities or other trading
activities, such holder will be required to
acknowledge in the Letter of Transmittal that
such holder will deliver a prospectus in
connection with any resale of such Exchange
Notes; however, by so acknowledging and by
delivering a prospectus, such holder will not be
deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. See
"The Exchange Offer--Procedures for Tendering."
Special Procedures for
Beneficial Owners..........
Any beneficial owner whose Private Notes are
registered in the name of a broker, commercial
bank, trust company or other nominee and who
wishes to tender such Private Notes in the
Exchange Offer should contact such registered
holder promptly and instruct such registered
holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender
on such
6
<PAGE>
owner's own behalf, such owner must, prior to
completing and executing the Letter of
Transmittal and delivering such owner's Private
Notes, either make appropriate arrangements to
register ownership of the Private Notes in such
owner's name or obtain a properly completed bond
power from the registered holder. The transfer of
registered ownership may take considerable time
and may not be able to be completed prior to the
Expiration Date. See "The Exchange Offer--
Procedures for Tendering."
Guaranteed Delivery Holders of Private Notes who wish to tender their
Procedures................. Private Notes and whose Private Notes are not
immediately available or who cannot deliver their
Private Notes, the Letter of Transmittal or any
other documentation required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Private Notes
according to the guaranteed delivery procedures
set forth under "The Exchange Offer--Guaranteed
Delivery Procedures."
Acceptance of the Private
Notes and Delivery of the
Exchange Notes.............
Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Company
will accept for exchange any and all Private
Notes that are properly tendered in the Exchange
Offer prior to the Expiration Date. The Exchange
Notes issued pursuant to the Exchange Offer will
be delivered on the earliest practicable date
following the Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
Withdrawal Rights........... Tenders of Private Notes may be withdrawn at any
time prior to the Expiration Date. See "The
Exchange Offer--Withdrawal of Tenders."
Certain Federal Income Tax
Considerations.............
For a discussion of certain material federal
income tax considerations relating to the
exchange of the Exchange Notes for the Private
Notes, see "Certain Federal Income Tax
Considerations."
Exchange Agent.............. Fleet National Bank is serving as the Exchange
Agent in connection with the Exchange Offer.
7
<PAGE>
TERMS OF THE EXCHANGE NOTES
The Exchange Offer applies to $250,000,000 aggregate principal amount of the
Private Notes. The form and terms of the Exchange Notes are substantially
identical in all respects (including principal amount, interest rate, maturity
and ranking) to the form and terms of the Private Notes, except that (i) the
Exchange Notes will have been registered under the Securities Act and,
therefore, will not bear legends restricting the transfer thereof and (ii)
holders of the Exchange Notes will not be entitled to certain rights of holders
of the Private Notes under the Registration Rights Agreement, which rights will
terminate upon consummation of the Exchange Offer. The Exchange Notes will
evidence the same indebtedness as the Private Notes and will be issued pursuant
to, and entitled to the benefits of, the Indenture governing the Private Notes.
The Exchange Offer is being made to satisfy the obligations of the Company
under the Registration Rights Agreement relating to the Private Notes. For
further information and for definitions of certain capitalized terms used
below, see "The Exchange Offer" and "Description of the Exchange Notes."
Issuer...................... Mark IV Industries, Inc.
Securities Offered.......... $250,000,000 principal amount of 7 3/4% Senior
Subordinated Notes due April 1, 2006 (the
"Exchange Notes").
Maturity Date............... April 1, 2006.
Interest Rate............... The Exchange Notes will bear interest at a rate
of 7 3/4% per annum.
Interest Payment Dates...... Interest will accrue on the Exchange Notes from
and including the date of the initial issuance of
the Private Notes (March 11, 1996) and will be
payable semi-annually on each April 1 and October
1, commencing October 1, 1996.
Change of Control........... Upon a Change of Control, holders of the Exchange
Notes will have the right, subject to certain
restrictions and conditions, to require the
Company to purchase all or any portion of their
Exchange Notes at 101% of the principal amount
thereof plus accrued and unpaid interest, if any,
through the date of purchase. See "Description of
the Exchange Notes--Change of Control."
Subordination............... The Exchange Notes will be unsecured obligations
of the Company, will be subordinated in right of
payment to the prior payment in full of all
Senior Indebtedness of the Company, and will be
effectively subordinated to the indebtedness of
the Company's subsidiaries. At January 31, 1996,
after giving pro forma effect to the issuance and
sale of the Private Notes and the application of
the net proceeds thereof to reduce outstanding
Senior Indebtedness of the Company, Senior
Indebtedness of the Company and its subsidiaries
was approximately $168,700,000 (of which
approximately $52,800,000 was indebtedness of the
Company's subsidiaries) and subordinated
indebtedness of the Company (including the
Private Notes) was approximately $508,000,000.
Subject to certain restrictions, the Indenture
pursuant to which the Exchange Notes will be
issued permits the Company to incur additional
indebtedness, but, until such time as the
Exchange Notes are rated Investment Grade,
prohibits the incurrence by the Company of any
indebtedness that is senior to the Exchange Notes
and subordinate to Senior Indebtedness. See
"Description of the Exchange Notes--
Subordination."
8
<PAGE>
Certain Covenants........... The Indenture restricts, among other things, the
payment of dividends, the repurchase of capital
stock and the making of certain other Restricted
Payments (as defined), the incurrence of
additional indebtedness, the incurrence of
certain Liens (as defined) and certain mergers,
consolidations or sales of assets. Upon the
Exchange Notes being rated Investment Grade,
certain of the restrictions will no longer be
applicable. See "Description of the Exchange
Notes--Certain Covenants."
9
<PAGE>
SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following tables set forth summary consolidated financial data of the
Company for each of the three fiscal years in the period ended February 28,
1995, and for the nine month periods ended November 30, 1994 and 1995. Such
financial data are derived from the Company's consolidated financial statements
included elsewhere herein. The tables also set forth certain pro forma
unaudited consolidated income statement data for fiscal 1995, after giving
effect to the adjustments described in footnote (3) below.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED THE LAST DAY OF FEBRUARY, NOVEMBER 30,
----------------------------------------------- ----------------------
1993 1994(1) 1995(2) 1995(3) 1994(2) 1995
---------- ---------- ---------- ----------- ---------- ----------
PRO FORMA
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $1,085,700 $1,244,200 $1,603,300 $1,913,300 $1,118,300 $1,553,500
========== ========== ========== ========== ========== ==========
Operating income before
depreciation and
amortization........... $ 145,700 $ 173,500 $ 215,800 $ 251,000 $ 158,600 $ 212,300
Depreciation and
amortization........... 32,100 41,700 51,500 60,600 38,000 49,300
---------- ---------- ---------- ---------- ---------- ----------
Operating income (4).... $ 113,600 $ 131,800 $ 164,300 $ 190,400 $ 120,600 $ 163,000
========== ========== ========== ========== ========== ==========
Income from continuing
operations............. $ 39,100 $ 51,100 $ 67,900 $ 78,300 $ 50,300 $ 71,700
========== ========== ========== ========== ========== ==========
OTHER DATA:
Consolidated cash
flow/fixed charge
coverage ratio (5):
Actual................. 2.80x 3.46x 3.98x 3.89x 4.05x 4.66x
As adjusted (6)........ -- -- -- 3.76x -- 4.45x
Ratio of earnings to
fixed charges (5):
Actual................. 2.09x 2.50x 2.87x 2.85x 2.92x 3.38x
As adjusted (6)........ -- -- -- 2.75x -- 3.21x
Percentage of long-term
debt to total
capitalization......... 59.0% 62.2% 49.0% 49.0% 62.1% 47.2%
</TABLE>
<TABLE>
<CAPTION>
LAST DAY OF FEBRUARY, NOVEMBER 30, 1995
-------------------------------- ------------------------
1993 1994 1995 ACTUAL AS ADJUSTED(6)
---------- ---------- ---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $ 275,400 $ 312,800 $ 379,700 $ 433,000 $ 433,000
Total assets............ 1,124,800 1,282,300 1,846,400 1,961,000 1,965,300
Long-term debt.......... 497,100 567,200 610,700 630,500 634,800
Stockholders' equity.... 345,600 345,400 635,500 706,300 706,300
</TABLE>
- --------
(1) Includes the results of operations of the PTI business from its June 1993
acquisition date.
(2) Includes the results of operations of the Purolator business from its
November 1994 acquisition date.
(3) Presents pro forma data as if the acquisition of Purolator and the related
borrowings under the Company's previously existing $650 million credit
agreement (the "1994 Credit Agreement") in November 1994, and the public
offering of shares of the Company's Common Stock in December 1994 had all
occurred as of March 1, 1994, the beginning of fiscal 1995. See "Pro Forma
Financial Information."
(4) Represents income from continuing operations before interest expense and
taxes.
(5) See footnotes (4) and (6) to "Selected Financial Information" for
information as to methods of calculating cash flow and fixed charge ratios.
(6) As adjusted to reflect the interest expense on the Notes at an interest
rate of 7 3/4% per annum and the application of the net proceeds thereof to
reduce borrowings outstanding under the 1994 Credit Agreement.
10
<PAGE>
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the Exchange Notes offered
hereby. In consideration of issuing the Exchange Notes as contemplated in this
Prospectus, the Company will receive in exchange Private Notes in like
principal amount, the form and terms of which are the same as the form and
terms of the Exchange Notes, except as otherwise described herein. The Private
Notes surrendered in exchange for the Exchange Notes will be retired and
cancelled and cannot be reissued. Accordingly, issuance of the Exchange Notes
will not result in any increase in the indebtedness of the Company.
The net proceeds from the sale of the Private Notes, which were approximately
$244,100,000 (after deducting estimated expenses and discounts related to the
Private Offering), were used to reduce outstanding indebtedness under the
Company's new Credit Agreement (the "Credit Agreement") which was entered into
on March 8, 1996, prior to consummation of the Private Offering on March 11,
1996. The Credit Agreement replaced the Company's previously existing 1994
Credit Agreement. At March 8, 1996, borrowings under the Credit Agreement
totalled approximately $195,000,000 and the weighted average interest rate on
such borrowings was approximately 5.65%. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" for a summary of the terms of the Credit Agreement.
11
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Private Notes were sold by the Company on March 11, 1996 (the "Closing
Date") to the Initial Purchaser pursuant to the Purchase Agreement. The Initial
Purchaser subsequently sold the Private Notes to (i) "qualified institutional
buyers" ("QIBs"), as defined in Rule 144A under the Securities Act ("Rule
144A"), in reliance on Rule 144A. As a condition to the sale of the Private
Notes, the Company and the Initial Purchaser entered into the Registration
Rights Agreement on March 11, 1996. Pursuant to the Registration Rights
Agreement, the Company agreed that, unless the Exchange Offer is not permitted
by applicable law or Commission policy, it would (i) file with the Commission a
Registration Statement under the Securities Act with respect to the Exchange
Notes within 30 days after the Closing Date, (ii) use its best efforts to cause
such Registration Statement to become effective under the Securities Act within
120 days after the Closing Date and (iii) use its best efforts to consummate
the Exchange Offer within 30 business days after the Registration Statement has
become effective. A copy of the Registration Rights Agreement has been filed as
an exhibit to the Registration Statement. The Registration Statement is
intended to satisfy certain of the Company's obligations under the Registration
Rights Agreement and the Purchase Agreement.
RESALE OF THE EXCHANGE NOTES
With respect to the Exchange Notes, based upon an interpretation by the staff
of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder (other than (i) an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act, (ii) a
broker-dealer who purchased such Exchange Notes directly from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act, or (iii) a broker-dealer who acquired Private Notes as a result
of market making or other trading activities) who exchanges Private Notes for
Exchange Notes in the ordinary course of business and who is not participating,
does not intend to participate, and has no arrangement with any person to
participate, in a distribution of the Exchange Notes, will be allowed to resell
Exchange Notes to the public without further registration under the Securities
Act and without delivering to the purchasers of the Exchange Notes a prospectus
that satisfies the requirements of Section 10 of the Securities Act. However,
if any holder acquires Exchange Notes in the Exchange Offer for the purpose of
distributing or participating in the distribution of the Exchange Notes or is a
broker-dealer, such holder cannot rely on the position of the staff of the
Commission enumerated in certain no-action letters issued to third parties and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Private Notes, where such
Private Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Private Notes where
such Private Notes were acquired by such broker-dealer as a result of market-
making or other trading activities. Pursuant to the Registration Rights
Agreement, the Company has agreed to make this Prospectus, as it may be amended
or supplemented from time to time, available to broker-dealers for use in
connection with any resale for a period of one year after the Registration
Statement is declared effective or until such earlier date on which the
Exchange Notes are freely tradeable. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus and
in the Letter of Transmittal, the Company will accept any and all Private Notes
validly tendered and not withdrawn prior to the Expiration Date. The Company
will issue $1,000 principal amount of Exchange Notes in exchange for each
12
<PAGE>
$1,000 principal amount of outstanding Private Notes surrendered pursuant to
the Exchange Offer. Private Notes may be tendered only in integral multiples of
$1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Private Notes except that (i) the exchange will be registered under the
Securities Act and, therefore, the Exchange Notes will not bear legends
restricting the transfer thereof and (ii) holders of the Exchange Notes will
not be entitled to any of the rights of holders of Private Notes under the
Registration Rights Agreement, which rights will terminate upon the
consummation of the Exchange Offer except under certain limited circumstances.
See "--Termination of Certain Rights." The Exchange Notes will evidence the
same indebtedness as the Private Notes (which they replace) and will be issued
under, and be entitled to the benefits of, the Indenture, which also authorized
the issuance of the Private Notes, such that both series of Notes will be
treated as a single class of debt securities under the Indenture.
As of the date of this Prospectus, $250,000,000 in aggregate principal amount
of the Private Notes are outstanding and registered in the name of Cede & Co.,
as nominee for DTC. Only a registered holder of the Private Notes (or such
holder's legal representative or attorney-in-fact) as reflected on the records
of the Trustee under the Indenture may participate in the Exchange Offer. There
will be no fixed record date for determining registered holders of the Private
Notes entitled to participate in the Exchange Offer.
Holders of the Private Notes do not have any appraisal or dissenters' rights
under the Indenture in connection with the Exchange Offer. The Company intends
to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the Securities
Act, the Exchange Act and the rules and regulations of the Commission
thereunder.
The Company shall be deemed to have accepted validly tendered Private Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Private Notes for the purposes of receiving the Exchange Notes from the
Company.
Holders who tender Private Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Private
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1996, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will (i) notify the
Exchange Agent of any extension by oral or written notice, (ii) mail to the
registered holders an announcement thereof and (iii) issue a press release or
other public announcement, which shall include disclosure of the approximate
number of Private Notes deposited to date, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, amendment or termination of the
Exchange Offer, the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
The Company reserves the right, in its reasonable discretion, (i) to delay
accepting any Private Notes, (ii) to extend the Exchange Offer or (iii) if any
conditions set forth below under "--Conditions" shall not have been satisfied,
to terminate the Exchange Offer by giving oral or written notice of such delay,
extension
13
<PAGE>
or termination to the Exchange Agent. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders. If the Exchange Offer is
amended in a manner determined by the Company to constitute a material change,
the Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the amendment and the manner of disclosure
to the registered holders, if the Exchange Offer would otherwise expire during
such five to ten business day period.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest at a rate equal to 7 3/4% per annum.
Interest on the Exchange Notes will be payable semi-annually in arrears on each
April 1 and October 1, commencing October 1, 1996. Holders of Exchange Notes
will receive interest on October 1, 1996 from the date of initial issuance of
the Exchange Notes, plus an amount equal to the accrued interest on the Private
Notes from March 11, 1996, the date of initial issuance of the Private Notes,
to the date of exchange thereof for Exchange Notes. Holders of Private Notes
that are accepted for exchange will be deemed to have waived the right to
receive any interest accrued on the Private Notes.
PROCEDURES FOR TENDERING
Only a registered holder of Private Notes may tender such Private Notes in
the Exchange Offer. To tender in the Exchange Offer, a holder of Private Notes
must complete, sign and date the Letter of Transmittal, or a facsimile thereof,
have the signatures thereon guaranteed if required by the Letter of
Transmittal, and mail or otherwise deliver such Letter of Transmittal or such
facsimile to the Exchange Agent at the address set forth on the Outside Back
Cover Page of this Prospectus for receipt prior to the Expiration Date. In
addition, either (i) certificates for such Private Notes must be received by
the Exchange Agent along with the Letter of Transmittal, (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Private Notes, if such procedure is available, into the Exchange Agent's
account at the Depositary pursuant to the procedure for book-entry transfer
described below, must be received by the Exchange Agent prior to the Expiration
Date or (iii) the holder must comply with the guaranteed delivery procedures
described below.
The tender by a holder that is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR PRIVATE NOTES SHOULD BE SENT TO
THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
Any beneficial owner(s) of the Private Notes whose Private Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact the registered holder
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Private Notes, either make appropriate
arrangements to register ownership of the Private Notes in such owner's name or
obtain a properly completed bond power from the registered holder. The transfer
of registered ownership may take considerable time.
14
<PAGE>
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed
by an Eligible Institution (as defined) unless the Private Notes tendered
pursuant thereto are tendered (i) by a registered holder who has not completed
the box titled "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures
on a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be made by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act which is a member of
one of the recognized signature guarantee programs identified in the Letter of
Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Private Notes listed therein, such Private Notes must be endorsed
or accompanied by a properly completed bond power, signed by such registered
holder as such registered holder's name appears on such Private Notes.
If the Letter of Transmittal or any Private Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
The Exchange Agent and the Depositary have confirmed that any financial
institution that is a participant in the Depositary's system may utilize the
Depositary's Automated Tender Offer Program to tender Private Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Private Notes will be
determined by the Company in its reasonable discretion, which determination
will be final and binding. The Company reserves the absolute right to reject
any and all Private Notes not properly tendered or any Private Notes the
Company's acceptance of which would, in the opinion of counsel for the Company,
be unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Private Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Private Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Private Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Private Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived.
While the Company has no present plan to acquire any Private Notes that are
not tendered in the Exchange Offer or to file a registration statement to
permit resales of any Private Notes that are not tendered pursuant to the
Exchange Offer, the Company reserves the right in its sole discretion to
purchase or make offers for any Private Notes that remain outstanding
subsequent to the Expiration Date or, as set forth below under "--Conditions,"
to terminate the Exchange Offer and, to the extent permitted by applicable law,
purchase Private Notes in the open market, in privately negotiated transactions
or otherwise. The terms of any such purchases or offers could differ from the
terms of the Exchange Offer.
By tendering, each holder of Private Notes will represent to the Company
that, among other things, (i) Exchange Notes to be acquired by such holder of
Private Notes in connection with the Exchange Offer are being acquired by such
holder in the ordinary course of business of such holder, (ii) such holder (if
not a broker-dealer referred to in the last sentence of this paragraph) does
not intend to engage and will not engage in the distribution of the Exchange
Notes, (iii) such holder has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes, (iv) such holder
acknowledges and agrees that any person who is a broker-dealer registered under
the Exchange Act or is participating in the Exchange
15
<PAGE>
Offer for the purposes of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction of the Exchange Notes, acquired
by such person and cannot rely on the position of the staff of the Commission
set forth in certain no-action letters, (v) such holder understands that a
secondary resale transaction described in clause (iv) above and any resales of
Exchange Notes obtained by such holder in exchange for Private Notes acquired
by such holder directly from the Company should be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 or Item 508, as applicable, of Regulation S-K of the
Commission and (vi) such holder is not an "affiliate," as defined in Rule 405
under the Securities Act, of the Company. If the holder is a broker-dealer that
will receive Exchange Notes for such holder's own account in exchange for
Private Notes that were acquired as a result of market-making activities or
other trading activities, such holder will be required to acknowledge in the
Letter of Transmittal that such holder will deliver a copy of this Prospectus
(as it may be supplemented or amended) in connection with any resale of such
Exchange Notes; however, by so acknowledging and by delivering a prospectus,
such holder will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
RETURN OF PRIVATE NOTES
If any tendered Private Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Private Notes are
withdrawn or are submitted for a greater principal amount than the holders
desire to exchange, such unaccepted, withdrawn or non-exchanged Private Notes
will be returned without expense to the tendering holder thereof (or, in the
case of Private Notes tendered by book-entry transfer into the Exchange Agent's
account at the Depositary pursuant to the book-entry transfer procedures
described below, such Private Notes will be credited to an account maintained
with the Depositary) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Private Notes at DTC for purposes of the Exchange Offer within two
business days after the date of this Prospectus, and any financial institution
that is a participant in the Depositary's systems may make book-entry delivery
of Private Notes by causing DTC to transfer such Private Notes into the
Exchange Agent's account at DTC in accordance with DTC's procedures for
transfer. However, although delivery of Private Notes may be effected through
book-entry transfer at DTC, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at the
address set forth below under "--Exchange Agent" on or prior to the Expiration
Date or pursuant to the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Private Notes and (i) whose Private Notes
are not immediately available or (ii) who cannot deliver their Private Notes,
the Letter of Transmittal or any other required documents to the Exchange Agent
prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the holder, the certificate number(s) of such Private Notes and
the principal amount of Private Notes tendered, stating that the tender is
being made thereby and guaranteeing that, within five New York Stock
Exchange trading days after the Expiration Date, the Letter of Transmittal
(or a facsimile thereof), together with the certificate(s) representing the
Private Notes in proper form for transfer or a Book-Entry Confirmation, as
the case may be, and any other documents required by the Letter of
Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent; and
16
<PAGE>
(c) Such properly executed Letter of Transmittal (or facsimile thereof),
as well as the certificate(s) representing all tendered Private Notes in
proper form for transfer and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five New York Stock
Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Private Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Private Notes may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Private Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private
Notes to be withdrawn (including the certificate number or numbers and
principal amount of such Private Notes) and (iii) be signed by the holder in
the same manner as the original signature on the Letter of Transmittal by which
such Private Notes were tendered (including any required signature guarantees).
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, in its sole
discretion, whose determination shall be final and binding on all parties. Any
Private Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no Exchange Notes will be issued with
respect thereto unless the Private Notes so withdrawn are validly retendered.
Properly withdrawn Private Notes may be retendered by following one of the
procedures described above under "The Exchange Offer--Procedures for Tendering"
at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange the Exchange Notes for, any
Private Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of such Private Notes, if the Exchange Offer violates applicable
law, rules or regulations or an applicable interpretation of the staff of the
Commission.
If the Company determines in its reasonable discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Private
Notes and return all tendered Private Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Private Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders to
withdraw such Private Notes (see "--Withdrawal of Tenders") or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Private Notes that have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders of the Private Notes, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered holders, if the Exchange Offer would otherwise expire during
such five to ten business day period.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of holders of the Private Notes eligible to participate in the Exchange
Offer will terminate upon consummation of the Exchange Offer except with
respect to the Company's continuing obligations (i) to indemnify such holders
(including any broker-dealers) and certain parties related to such holders
against certain liabilities (including liabilities under the Securities Act),
(ii) to provide, upon the request of any holder of a transfer-restricted
17
<PAGE>
Private Note, the information required by Rule 144A(d)(4) under the Securities
Act in order to permit resales of such Private Notes pursuant to Rule 144A,
(iii) to use its best efforts to keep the Registration Statement effective to
the extent necessary to ensure that it is available for resales of Exchange
Notes by broker-dealers for a period of up to one year from the date the
Registration Statement is declared effective or until such earlier date on
which the Exchange Notes are freely tradeable and to provide copies of the
latest version of the Prospectus to such broker-dealers upon their request
during such period and (iv) to file a shelf registration statement as required
by the Registration Rights Agreement if any holder of transfer-restricted Notes
notifies the Company within 20 business days of the consummation of the
Exchange Offer that (A) such holder is prohibited by applicable law or
Commission policy from participating in the Exchange Offer, or (B) such holder
may not resell the Exchange Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and that this Prospectus is not
appropriate or available for such resales by such holder, or (C) that such
holder is a broker-dealer and holds Private Notes acquired directly from the
Company or one of its affiliates (see "--Liquidated Damages").
LIQUIDATED DAMAGES
The Registration Rights Agreement provides that (i) the Company will file the
Registration Statement with the Commission on or prior to 30 days after the
Closing Date, (ii) the Company will use its best efforts to have the
Registration Statement declared effective by the Commission on or prior to 120
days after the Closing Date, (iii) unless the Exchange Offer would not be
permitted by applicable law or Commission policy, the Company will commence the
Exchange Offer and use its best efforts to issue, on or prior to 30 business
days after the date on which the Registration Statement is declared effective
by the Commission, Exchange Notes in exchange for all Private Notes tendered
prior thereto in the Exchange Offer and (iv) if obligated to file a shelf
registration statement pursuant to the terms of the Registration Rights
Agreement (the "Shelf Registration Statement" and, collectively with the
Registration Statement, the "Registration Statements"), the Company will use
its best efforts to file such Shelf Registration Statement with the Commission
on or prior to 30 days after such filing obligation arises and to cause the
Shelf Registration to be declared effective by the Commission on or prior to
120 days after such obligation arises. If (a) the Company fails to file any of
the Registration Statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), or (c) the
Company fails to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Registration Statement, or (d)
the Shelf Registration Statement or the Registration Statement is declared
effective but thereafter ceases to be effective or usable in connection with
resales of Transfer Restricted Securities during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above a "Registration Default"), then the Company will pay
Liquidated Damages to each holder of Transfer Restricted Securities with
respect to the first 90-day period immediately following the occurrence of such
Registration Default in an amount equal to $.05 per week per $1,000 principal
amount of Notes constituting Transfer Restricted Securities held by such
Holder. The amount of the Liquidated Damages will increase by an additional
$.05 per week per $1,000 principal amount constituting Transfer Restricted
Securities with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of Liquidated Damages of $.50
per week per $1,000 principal amount of Notes constituting Transfer Restricted
Securities. All accrued Liquidated Damages will be paid by the Company on each
Damages Payment Date (as defined in the Indenture) to the Global Note Holder
(as defined in the Indenture) by wire transfer of immediately available funds
or by federal funds check and to Holders of Certificated Securities (as defined
in the Indenture) by mailing checks to their registered addresses. Following
the cure of all Registration Defaults, the accrual of Liquidated Damages will
cease. For purposes of the foregoing, "Transfer Restricted Securities" means
each Private Note and each Exchange Note, as applicable, until (i) the date on
which such Private Note has been exchanged by a person other than a broker-
dealer for an Exchange Note in the Exchange Offer, (ii) following the exchange
by a broker-dealer in the Exchange Offer of a Private Note for an Exchange
Note, the date on which such Exchange Note is sold to a purchaser who receives
from such broker-dealer on or prior to the date of such sale a copy of the
Prospectus, (iii) the
18
<PAGE>
date on which such Note has been effectively registered under the Securities
Act and disposed of in accordance with the Shelf Registration Statement or (iv)
the date on which such Note is distributed to the public pursuant to Rule 144
under the Securities Act.
Holders of Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Notes included in
the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$250,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and the Trustee, accounting and legal fees and printing costs,
among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of the Private Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
CONSEQUENCE OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Private
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
The Private Notes that are not exchanged for the Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such Private
Notes may be resold only (i) to a person whom the seller reasonably believes is
a QIB in a transaction meeting the requirements of Rule 144A, (ii) in a
transaction meeting the requirements of Rule 144 under the Securities Act,
(iii) outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Securities Act, (iv) in accordance with
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel if the Company so requests), (v) to the
Company or (vi) pursuant to an effective registration statement and, in each
case, in accordance with any applicable securities laws of any state of the
United States or any other applicable jurisdiction.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the Exchange Notes.
19
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company as of November 30, 1995, and as adjusted to give effect to the
sale of the Private Notes and the application of the estimated net proceeds to
repay a portion of amounts outstanding under the then existing 1994 Credit
Agreement. See "Use of Proceeds."
<TABLE>
<CAPTION>
NOVEMBER 30, 1995
(DOLLARS IN
THOUSANDS)
----------------------
AS
ACTUAL ADJUSTED
---------- ----------
<S> <C> <C>
Current maturities of long-term debt(1)................. $ 6,500 $ 6,500
========== ==========
Long-term debt, excluding current maturities(1):
Senior debt:
1994 Credit Agreement................................. $ 310,000 $ 65,900
Other................................................. 62,500 62,500
---------- ----------
Total senior debt................................... 372,500 128,400
---------- ----------
Subordinated debt:
7 3/4% Senior Subordinated Notes due April 1, 2006.... -- 248,400
8 3/4% Senior Subordinated Notes due April 1, 2003.... 258,000 258,000
---------- ----------
Total subordinated debt............................. 258,000 506,400
---------- ----------
Total long-term debt................................ 630,500 634,800
---------- ----------
Stockholders' equity:
Preferred Stock, $.01 par value:
10,000,000 shares authorized:
None issued........................................... -- --
Common Stock, $.01 par value:
100,000,000 shares authorized:
59,979,042 shares issued(2)........................... 600 600
Additional paid-in capital............................. 551,000 551,000
Retained earnings...................................... 157,100 157,100
Foreign currency translation adjustment................ (2,400) (2,400)
---------- ----------
Total stockholders' equity.......................... 706,300 706,300
---------- ----------
Total capitalization................................ $1,336,800 $1,341,100
========== ==========
</TABLE>
- --------
(1) See Note 7 to the Company's audited consolidated financial statements,
appearing elsewhere herein, for interest rates and other information
regarding the Company's outstanding indebtedness.
(2) Excludes 1,281,228 shares reserved for issuance upon exercise of
outstanding employee stock options.
20
<PAGE>
SELECTED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The following tables set forth selected consolidated financial information
of the Company for each of the five fiscal years in the period ended February
28, 1995 and for the nine month periods ended November 30, 1994 and 1995.
Information for the nine month periods ended November 30, 1994 and 1995 is
unaudited but, in the opinion of management, includes all adjustments,
consisting only of normal recurring accruals, necessary for a fair
presentation. The results of operations for the nine month period ended
November 30, 1995 are not necessarily indicative of the results to be expected
for the full year. These tables should be read in conjunction with the
Company's consolidated financial statements and pro forma financial
information appearing elsewhere herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED THE LAST DAY OF FEBRUARY, NOVEMBER 30,
------------------------------------------------------- ----------------------
1991 1992 1993 1994(1) 1995(2) 1994(2) 1995
-------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $789,700 $1,004,300 $1,085,700 $1,244,200 $1,603,300 $1,118,300 $1,553,500
-------- ---------- ---------- ---------- ---------- ---------- ----------
Operating costs:
Cost of products sold.. 492,800 641,900 698,800 803,500 1,060,000 730,200 1,049,200
Selling and
administration........ 164,800 200,600 215,100 236,300 292,700 205,000 257,000
Research and
development........... 20,600 24,900 26,100 30,900 34,800 24,500 35,000
Depreciation and
amortization.......... 23,500 28,300 32,100 41,700 51,500 38,000 49,300
-------- ---------- ---------- ---------- ---------- ---------- ----------
Total operating
costs............... 701,700 895,700 972,100 1,112,400 1,439,000 997,700 1,390,500
-------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income (3).... 88,000 108,600 113,600 131,800 164,300 120,600 163,000
Interest expense........ 60,600 64,700 51,600 50,100 53,900 39,000 45,500
-------- ---------- ---------- ---------- ---------- ---------- ----------
Income before securities
transactions and
provision for taxes.... 27,400 43,900 62,000 81,700 110,400 81,600 117,500
Gain (loss) on
securities
transactions........... 1,000 (2,400) -- -- -- -- --
-------- ---------- ---------- ---------- ---------- ---------- ----------
Income before provision
for taxes.............. 28,400 41,500 62,000 81,700 110,400 81,600 117,500
Provision for income
taxes.................. 10,800 14,700 22,900 30,600 42,500 31,300 45,800
-------- ---------- ---------- ---------- ---------- ---------- ----------
Income from continuing
operations............. 17,600 26,800 39,100 51,100 67,900 50,300 71,700
Discontinued operations,
net of taxes........... 4,700 2,000 3,600 -- -- -- --
-------- ---------- ---------- ---------- ---------- ---------- ----------
Income before
extraordinary items and
cumulative effect of
accounting change...... 22,300 28,800 42,700 51,100 67,900 50,300 71,700
Extraordinary gain
(loss) from early
extinguishment of debt,
net of taxes........... 700 (4,500) (3,700) (21,700) (1,100) (1,100) --
Cumulative effect of
accounting change...... -- -- -- (26,000) -- -- --
-------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.............. $ 23,000 $ 24,300 $ 39,000 $ 3,400 $ 66,800 $ 49,200 $ 71,700
======== ========== ========== ========== ========== ========== ==========
OTHER DATA:
Consolidated cash
flow/fixed charge
coverage ratio (4):
Actual................. 1.84x 2.13x 2.80x 3.46x 3.98x 4.05x 4.66x
As adjusted (5)........ -- -- -- -- -- -- 4.45x
Ratio of earnings to
fixed charges (6):
Actual................. 1.38x 1.63x 2.09x 2.50x 2.87x 2.92x 3.38x
As adjusted (5)........ -- -- -- -- -- -- 3.21x
Capital expenditures.... $ 22,900 $ 20,700 $ 35,500 $ 41,400 $ 50,800 $ 28,600 $ 68,900
</TABLE>
<TABLE>
<CAPTION>
LAST DAY OF FEBRUARY,
------------------------------------------------------ NOVEMBER 30,
1991 1992 1993 1994 1995 1995
---------- ---------- ---------- ---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $ 345,100 $ 285,500 $ 275,400 $ 312,800 $ 379,700 $ 433,000
Total assets............ 1,100,100 1,104,500 1,124,800 1,282,300 1,846,400 1,961,000
Long-term debt,
excluding current
maturities............. 717,600 525,400 497,100 567,200 610,700 630,500
Stockholders' equity.... 170,000 311,900 345,600 345,400 635,500 706,300
</TABLE>
- -------
(1) Includes the results of operations of the PTI business from its June 1993
acquisition date.
(2) Includes the results of operations of the Purolator business from its
November 1994 acquisition date.
(3) Represents income from continuing operations before interest expense,
securities transactions and taxes.
(4) The consolidated cash flow/fixed charge coverage ratio is defined in the
Indenture to be the ratio of consolidated cash flow to consolidated fixed
charges. See "Description of the Exchange Notes."
(5) As adjusted to reflect the interest expense on the Notes at an interest
rate of 7 3/4% per annum and the application of the net proceeds thereof
to reduce borrowings outstanding under the 1994 Credit Agreement.
(6) For the purpose of calculating the ratio of earnings to fixed charges, (i)
earnings consist of income from continuing operations before income taxes
plus fixed charges and (ii) fixed charges consist of interest expense
incurred, capitalized interest, amortization of debt expense and 15% of
rental payments under operating leases (an amount estimated by management
to be the interest component of such rentals).
21
<PAGE>
PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The pro forma unaudited consolidated financial information for the fiscal
year ended February 28, 1995 set forth below presents the results of
operations of the Company for such year as if the following transactions had
occurred on March 1, 1994, the beginning of fiscal 1995: (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 public offering of
shares of the Company's Common Stock in December 1994 and the application of
the net proceeds thereof of approximately $113,000,000. The pro forma
financial information combines, with appropriate adjustments, the Company's
audited consolidated results of operations for its fiscal year ended February
28, 1995 and the unaudited consolidated results of operations of Purolator for
its eight months ended October 31, 1994.
The pro forma financial information has been prepared on the basis of
preliminary assumptions and estimates. The pro forma financial information may
not be indicative of the results that would have been achieved if the
acquisition of Purolator and the borrowings under the 1994 Credit Agreement in
connection therewith and the application of the net proceeds from the sale of
Common Stock had been effected on the date indicated or which may be achieved
in the future. The pro forma financial information should be read in
conjunction with the financial statements of the Company and Purolator
appearing elsewhere herein.
<TABLE>
<CAPTION>
PRO FORMA
MARK IV(1) PUROLATOR(2) ADJUSTMENTS PRO FORMA
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.................. $1,603,300 $310,000 -- $1,913,300
---------- -------- ----------
Operating costs:
Cost of products sold.... 1,060,000 225,200 -- 1,285,200
Selling and administra-
tion.................... 292,700 50,100 $(4,600)(3) 338,200
Research and development. 34,800 4,100 -- 38,900
Depreciation and amorti-
zation.................. 51,500 8,500 600 (4) 60,600
---------- -------- ------- ----------
Total operating costs.. 1,439,000 287,900 (4,000) 1,722,900
---------- -------- ------- ----------
Operating income........... 164,300 22,100 4,000 190,400
Interest expense........... (53,900) (2,700) (6,800)(5) 63,400
---------- -------- ------- ----------
Income before provision for
taxes..................... 110,400 19,400 (2,800) 127,000
Provision for income taxes. (42,500) (900) (5,300)(6) (48,700)
---------- -------- ------- ----------
Income from continuing
operations................ $ 67,900 $ 18,500 $(8,100) $ 78,300
========== ======== ======= ==========
OTHER DATA:
Consolidated cash
flow/fixed charge coverage
ratio(7):
Actual................... 3.98x -- -- 3.89x
As adjusted (8).......... -- -- -- 3.76x
Ratio of earnings to fixed
charges (9):
Actual................... 2.87x -- -- 2.85x
As adjusted (8).......... -- -- -- 2.75x
</TABLE>
- -------
(1) Represents the Company's audited consolidated results of operations as
reported for its fiscal year ended February 28, 1995.
(2) Represents Purolator's unaudited consolidated results of operations for
the eight month period ended October 31, 1994.
(3) Represents the elimination of duplicate costs, primarily related to
Purolator's corporate headquarters function.
(4) Reflects increased depreciation and amortization expense based upon a
preliminary estimate of values and remaining lives of fixed and intangible
assets acquired.
(5) To adjust interest expense to reflect the amount that might have been paid
on borrowings incurred to finance the acquisition of Purolator had it
occurred on March 1, 1994.
(6) To adjust the tax provision to reflect the tax expense anticipated upon
consolidation.
(7) The consolidated cash flow/fixed charge coverage ratio is defined in the
Indenture to be the ratio of consolidated cash flow to consolidated fixed
charges. See "Description of the Exchange Notes."
(8) As adjusted to reflect the interest expense on the Notes at an interest
rate of 7 3/4% per annum and the application of the net proceeds thereof
to reduce borrowings outstanding under the 1994 Credit Agreement.
(9) For the purpose of calculating the ratio of earnings to fixed charges, (i)
earnings consist of income from continuing operations before income taxes
plus fixed charges and (ii) fixed charges consist of interest expense
incurred, capitalized interest, amortization of debt expense and 15% of
rental payments under operating leases (an amount estimated by management
to be the interest component of such rentals).
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company classifies its operations into two business segments: (i) Power
and Fluid Transfer and (ii) Professional Audio. The Company's current business
strategy is focused upon the enhancement of its Power and Fluid Transfer
business segment through internal growth, cost control and quality improvement
programs and selective, strategic acquisitions, with an emphasis on expanding
the Company's international presence in this segment. For a discussion of the
Company's plans relating to the possible sale of its Professional Audio
business segment and of the infrastructure business of its Power and Fluid
Transfer segment, see "Business--Recent Developments."
RESULTS OF OPERATIONS
Nine Months Ended November 30, 1995 Compared to Nine Months Ended November 30,
1994.
The results of operations for the nine month period ended November 30, 1995
include the results of operations of Purolator. The results of operations for
the nine month period ended November 30, 1994 include the results of operations
of Purolator from its November 4, 1994 acquisition date.
Net sales for the nine month period ended November 30, 1995 increased $435.2
million (39%) over the comparable period of the prior year. The increase was
primarily due to the inclusion of the results of operations of Purolator for
the full period and several smaller acquisitions. Excluding the acquisitions,
sales increased approximately $97.4 million (9%) in the nine month period ended
November 30, 1995, with approximately $85.0 million of the increase in the
Power and Fluid Transfer segment and approximately $12.4 million in the
Professional Audio segment. Foreign currency exchange rate movements had an
approximately $12.9 million positive effect on sales in the nine month period
ended November 30, 1995 in comparison to the comparable period of the prior
year.
Excluding acquisitions and the positive effect of foreign currency movements,
the internal sales growth was approximately $84.5 million (8%) in the nine
month period ended November 30, 1995 compared to the nine month period ended
November 30, 1994.
The cost of products sold as a percentage of consolidated net sales increased
to approximately 68% for the nine month period ended November 30, 1995, as
compared to approximately 65% for the nine month period ended November 30,
1994. This increase was primarily the result of the acquisition of Purolator,
which historically has had lower gross margins. To date, the Company has been
able to minimize the effects of negative pressures on its margins through its
cost control programs.
Selling and administration costs as a percentage of net sales were
approximately 16% for the nine month period ended November 30, 1995 as compared
to approximately 18% for the nine month period ended November 30, 1994. The
reduced level of these costs as a percentage of sales was primarily a result of
the inclusion of the Purolator operations for the full period, which reduced
the level of such costs after the elimination of duplicate corporate and other
costs. The reduction in the level of costs also reflects the Company's
continuing emphasis on cost control, which has been successful in substantially
offsetting the impact of inflation on such costs.
Research and development costs increased by $10.5 million (43%) for the nine
month period ended November 30, 1995 as compared to the nine month period ended
November 30, 1994. The increase was primarily attributable to the inclusion of
the results of operations of Purolator. As a percentage of 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.
23
<PAGE>
Depreciation and amortization expense increased by $11.3 million (30%) for
the nine month period ended November 30, 1995 as compared to the nine month
period ended November 30, 1994. The increase was primarily attributable to the
inclusion of the results of operations of Purolator for the full period and the
operations of several smaller acquisitions during the period, as well as
depreciation resulting from fixed asset additions made in fiscal 1996.
Interest expense for the nine month period ended November 30, 1995 increased
by $6.5 million (17%) as compared to the nine month period ended November 30,
1994. The increase was 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 $114.2 million principal
amount of the Company's 6 1/4% Convertible Subordinated Debentures into shares
of the Company's Common Stock, and the sale in a public offering of 6,500,000
shares of the Company's Common Stock which occurred in the latter part 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 income before
provision for taxes for the nine month period ended November 30, 1995 increased
to approximately 39% as compared to 38% for the nine month period ended
November 30, 1994. The slightly higher effective tax rate was primarily the
result of relatively increased income in foreign locations with higher
statutory tax rates than in the U.S.
As a result of the replacement of the Company's prior credit facility with
the 1994 Credit Agreement, the Company recognized a $1.1 million extraordinary
loss, net of related tax benefits, for the nine month period ended November 30,
1994, related to the write-off of the unamortized balance of deferred charges
associated with the prior credit facility.
As a result of all of the above, the Company's net income for the nine month
period ended November 30, 1995 increased $22.5 million (46%) over the
comparable period of the prior year.
Three Years Ended February 28, 1995.
In reviewing the Company's sales performance, the following results by
segment should be considered for each of the fiscal years presented:
<TABLE>
<CAPTION>
1993 1994 1995
---------- --------------------- ---------------------
% CHANGE % CHANGE
OVER OVER
AMOUNT AMOUNT PRIOR YEAR AMOUNT PRIOR YEAR
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NET SALES TO CUSTOMERS:
Power and Fluid
Transfer............. $ 908,900 $1,070,700 17.8% $1,418,000 32.4%
Professional Audio.... 176,800 173,500 (1.9) 185,300 6.8
---------- ---------- ---- ---------- ----
Total............... $1,085,700 $1,244,200 14.6% $1,603,300 28.9%
========== ========== ==== ========== ====
</TABLE>
The increase in the Power and Fluid Transfer sales in fiscal 1995 was
primarily the result of the Purolator acquisition and other smaller
acquisitions, as well as the inclusion of PTI (acquired in June 1993) for all
of fiscal 1995 and only nine months in fiscal 1994. Excluding the acquisitions,
sales increased approximately $201.1 million (21.1%) over fiscal 1994, with
$105.3 million of the increase in the U.S., and the $95.8 million balance of
the increase primarily in Europe. Foreign currency exchange rate movements did
not significantly effect fiscal 1995 sales in comparison to fiscal 1994. The
increase in fiscal 1994 in comparison to fiscal 1993 was the result of internal
sales growth of approximately $54.1 million (6.0%), and the inclusion of the
PTI operations. Excluding PTI and the negative effect of foreign currency
movements, the internal sales growth in fiscal 1994 was approximately $74.8
million (8.2%), with $45.7 million (5.0%) of such growth generated from the
segment's U.S. operations and the balance from its foreign based operations.
24
<PAGE>
The $11.8 million increase in Professional Audio sales in fiscal 1995 was
generated equally by the segment's U.S. and Pacific Rim operations. Sales in
the segment's European operations remained comparable to the prior year's, with
relative strengthening beginning in the latter part of fiscal 1995. Sales in
the Professional Audio segment in fiscal 1994 remained comparable to fiscal
1993, with a slight increase in U.S. sales being offset by a decline in the
segment's foreign operations, primarily in Europe.
Cost of products sold as a percentage of consolidated net sales were 66.1%,
64.6%, and 64.4% in fiscal 1995, 1994 and 1993, respectively. The increase in
the percentage in fiscal 1995 was primarily the result of the acquisition of
Purolator, which historically has had lower gross margins, with the last four
months of the fiscal year tending to be the lowest margin months. To date, the
Company has been able to minimize the effects of negative pressures on its
margins through its cost control programs.
Selling and administration costs as a percentage of consolidated net sales
were 18.3%, 19.0%, and 19.8% in fiscal 1995, 1994 and 1993, respectively. The
reductions in fiscal 1995 and 1994 were primarily the result of operating
synergies achieved from the combination of the PTI business with the previously
existing European operations of the Power and Fluid Transfer business segment.
The relatively consistent level of costs also reflects the Company's continued
emphasis on cost control, which has been successful in substantially offsetting
the impact of inflation on such costs.
Research and development costs increased by $3.9 million (12.6%) in fiscal
1995 over fiscal 1994, which in turn increased by $4.8 million (18.4%) over
fiscal 1993. The increases in fiscal 1995 and 1994 were primarily caused by the
Purolator and PTI acquisitions. As a percentage of consolidated net sales, such
costs were in the range of 2.2% to 2.5% in each of fiscal 1995, 1994 and 1993.
This consistent level of investment reflects the Company's continuing emphasis
on new product development.
Depreciation and amortization expense increased by $9.8 million (23.5%) in
fiscal 1995 over fiscal 1994, which in turn increased by $9.6 million (29.9%)
over fiscal 1993. The increases in fiscal 1995 and 1994 were primarily
attributable to the Purolator and PTI acquisitions. The fiscal 1995 amount also
includes $1.6 million related to restricted stock grants, compared to $800,000
in fiscal 1994. The remaining portion of the increases were primarily the
result of increased capital equipment expenditures.
The above mentioned items resulted in the following operating income for each
of the fiscal years presented:
<TABLE>
<CAPTION>
1993 1994 1995
-------------------- -------------------- --------------------
PERCENT PERCENT PERCENT
OF RELATED OF RELATED OF RELATED
AMOUNT SALES AMOUNT SALES AMOUNT SALES
-------- ---------- -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OPERATING INCOME:
Power and Fluid
Transfer............. $104,100 11.5% $124,800 11.7% $158,400 11.2%
Professional Audio.... 22,000 12.4 21,900 12.6 21,800 11.8
-------- ---- -------- ---- -------- ----
Total operating
income............... 126,100 11.6 146,700 11.8 180,200 11.2
Corporate expenses.... (12,500) (1.1) (14,900) (1.2) (15,900) (1.0)
-------- ---- -------- ---- -------- ----
Continuing
operations, before
interest and taxes. $113,600 10.5% $131,800 10.6% $164,300 10.2%
======== ==== ======== ==== ======== ====
</TABLE>
Notwithstanding the increased interest costs resulting from borrowings used
to fund the Purolator and PTI acquisitions, as well as the increase in the
overall interest rate environment, interest expense was up only $3.8 million
(7.6%) in fiscal 1995 in comparison to fiscal 1994. The relatively slight
increase in fiscal 1995 expense was achieved as a result of the financing
transactions referred to herein under the caption "--Liquidity and Capital
Resources," as well as the 1994 Credit Agreement entered into in November 1994
25
<PAGE>
which provided for lower interest rates as a result of the Company's improved
debt to total capitalization position. Fiscal 1994 interest expense was $1.5
million (2.9%) less than fiscal 1993 interest expense. The reduction in fiscal
1994 was primarily the result of the Company's repurchase and in-substance
defeasance of its 13 3/8% Subordinated Debentures at the beginning of fiscal
1994, which was refinanced with the proceeds from the issuance of the Company's
8 3/4% Senior Subordinated Notes due April 1, 2003 (the "8 3/4% Notes"). The
interest expense amounts reported for continuing operations also reflect the
allocation of $1.4 million, $2.2 million, and $5 million of such expense to
discontinued operations in fiscal 1995, 1994 and 1993, respectively.
The Company's provision for income taxes as a percentage of income before
provisions for taxes was 38.5%, 37.5%, and 36.9% in fiscal 1995, 1994 and 1993,
respectively. The higher rates in fiscal 1995 and 1994 were primarily the
result of increased income in foreign jurisdictions 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 in fiscal 1995 increased $16.8 million (32.9%) over fiscal 1994. In
turn, fiscal 1994 income from continuing operations increased $12 million
(30.7%) over fiscal 1993.
As a result of replacing the prior credit facility with the 1994 Credit
Agreement and the issuance of the 8 3/4% Notes referred to above, the Company
incurred extraordinary losses, net of related tax benefits, of $1.1 million,
$21.7 million and $3.7 million in fiscal 1995, 1994 and 1993, respectively.
Additionally, the Company's adoption of SFAS No. 106 in fiscal 1994 resulted in
the recognition of a net of tax charge of $26 million as the cumulative effect
of the accounting change in fiscal 1994. The above extraordinary items and
cumulative effect of the accounting change in fiscal 1994 resulted in
significantly reduced net income of $3.4 million in fiscal 1994 in comparison
to the $66.8 million earned in fiscal 1995 and the $39 million earned in fiscal
1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company's short-term capital needs are met by cash generated through
operations, supplemented by borrowings under its various credit facilities to
the extent required. During fiscal 1995, net cash provided by earnings was
$126.5 million, a 39% increase over the $91.2 million generated in fiscal 1994,
which in turn represented a 46% increase over fiscal 1993. At February 28,
1995, the Company's working capital investment was $379.7 million, a net
increase of $66.9 million in comparison to February 28, 1994. Excluding the
effects of the Purolator acquisition, net working capital was reduced by
approximately $5.6 million in fiscal 1995.
The Company's long-term capital needs are met by cash generated from
operations, bank financing, and a combination of public offerings of debt and
equity securities. Recent financing activities of a longer term nature include
the following:
. In October 1994, the Company entered into agreements with certain holders
of its 6 1/4% Convertible Debentures due February 15, 2011 to convert
approximately $76.7 million of the debentures into approximately
5,600,000 shares of the Company's Common Stock. In January 1995, the
Company called for redemption the $37.5 million remaining principal
amount of these debentures. As a result of the call for redemption,
substantially all of the remaining debentures were converted into
2,700,000 shares of the Company's Common Stock.
. In November 1994, the Company entered into the $650 million 1994 Credit
Agreement with a group of financial institutions which provided for (i) a
five-year term loan in the principal amount of approximately $300 million
used to finance the acquisition of Purolator and to repay certain
existing Purolator debt, and (ii) a five-year revolving credit facility
in an amount of up to $350 million used for refinancing the Company's
previously existing credit facility and certain existing Purolator debt,
and for working capital and other general corporate purposes.
26
<PAGE>
. In November 1994, the Company acquired all of the stock of Purolator for
a total cash purchase price, including expenses, of approximately $286.3
million. Funding for the acquisition was provided by borrowings under the
1994 Credit Agreement. Purolator is a significant addition to the
Company's Power and Fluid Transfer business segment. The Company also
completed a number of smaller acquisitions during fiscal 1995 for
aggregate total purchase prices of approximately $14.5 million.
. In December 1994, the Company completed an underwritten public offering
of 6,500,000 shares of its Common Stock, at a public offering price of
$18.10 per share (the "Stock Offering"). The net proceeds from the Stock
Offering of approximately $113 million were used to repay a portion of
the Company's outstanding indebtedness under the 1994 Credit Agreement.
As a result of all of the activities discussed above, long-term debt at
February 28, 1995 increased $43.5 million from the total amount outstanding at
February 28, 1994. Absent the effects of the Company's acquisitions and
divestitures, as well as the effects of the equity offerings and debt
conversion in fiscal 1995, long-term debt was actually reduced by approximately
$17.0 million from the levels at February 28, 1994. The Company's long-term
debt as a percentage of total capitalization at February 28, 1995 was 49%,
versus 62.2% at February 28, 1994.
Net cash provided by earnings was approximately $135 million for the nine
month period ended November 30, 1995, an increase of approximately $52.4
million (63%) over the nine month period ended November 30, 1994. At November
30, 1995, the Company's working capital investment was approximately $433
million, an increase of approximately $53.3 million (14%) from February 28,
1995. The increase in working capital is substantially attributable to the
support of higher business levels and temporary seasonal inventory and accounts
receivable increases in the Power and Fluid Transfer segment.
Capital expenditures in the nine month period ended November 30, 1995 were
approximately $68.9 million, in comparison to approximately $28.6 million in
the comparable period in fiscal 1994. Approximately $10.4 million of the
increase can be attributed to Purolator's operating units, which were included
for only one month of the nine month period ended November 30, 1994.
Approximately $20.3 million of the increase relates to a new manufacturing
facility and other increased capacity requirements in the European units of the
Power and Fluid Transfer segment, primarily in Italy. Certain of such capital
expenditures were accelerated into the first nine months of the 1996 fiscal
year to enable the Company to take advantage of certain statutory tax benefits
that were available for only a limited period of time. The balance of the
increase relates to the Power and Fluid Transfer segment's U.S. operations,
including a new centralized warehouse and distribution facility for the
Industrial Division of the segment. Cash generated from operating activities in
the period was sufficient to fund these capital expenditures.
The Company had borrowing availability under its primary credit agreements in
excess of $352.5 million and additional availability under its various domestic
and foreign demand lines of credit of approximately $124.8 million at November
30, 1995. Long-term debt at November 30, 1995 increased approximately $19.8
million (3%) from the total amount at February 28, 1995, primarily as a result
of increased borrowings required to support the temporarily increased working
capital requirements referred to above.
Although the Company's long-term debt increased in absolute terms, as a
percentage of total capitalization it decreased slightly to approximately 47%
at November 30, 1995, from 49% at February 28, 1995. 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.
In October 1995, the Company announced that it is exploring the possibility
of selling its infrastructure business (a non-core component of its Power and
Fluid Transfer business segment) to potential strategic buyers. This business,
known as the Transportation Products Group, currently has annual sales of
approximately $225 million. In January 1996, the Company announced that it is
also exploring the possibility of selling its Professional Audio business to
potential strategic buyers. This business, known as Mark IV Audio, currently
has annual sales of approximately $200 million.
27
<PAGE>
The sale of either or both of TPG and Mark IV Audio would allow the Company
to become more focused in the worldwide industrial, automotive aftermarket and
automotive OEM markets of its Power and Fluid Transfer business segment. The
potential sales of TPG and Mark IV Audio are in their preliminary stages and,
therefore, there can be no assurance that either such sale will occur. However,
if the Company were to consummate either or both such sales, the proceeds
thereof would be used to reduce Senior Indebtedness, to fund future
acquisitions in core business areas and/or, depending on market prices and
other relevant considerations, to repurchase the Company's Common Stock.
RECENT FINANCINGS
On March 8, 1996, the Company entered into the new Credit Agreement with
various financial institutions which provides for a five year non-amortizing
revolving credit facility with initial borrowing availability of $700 million,
of which $600 million was a domestic facility (the "Domestic Credit Facility")
and $100 million is a multi-currency facility (the "Multi-Currency Credit
Facility"). The Multi-Currency Credit Facility permits borrowings to be made in
dollars as well as specified foreign currencies. In accordance with the terms
of the Credit Agreement, the availability under the Domestic Credit Facility
was automatically reduced to $400 million on March 11, 1996 upon the
consummation of the sale of the Private Notes. The proceeds of the initial
borrowings under the Credit Agreement were used to repay in full amounts
outstanding under the Company's 1994 Credit Agreement and a previously existing
$100 million foreign currency credit agreement. Borrowings under the Domestic
Credit Facility bear interest at a rate per annum equal to, at the Company's
option, either (i) the greater of (a) at the reference rate of the agent acting
on behalf of the financial institutions or (b) the Federal Funds Rate plus one-
half of 1% or (ii) LIBOR plus a margin (the "Applicable Margin") ranging from
0.225% to 0.35%, depending upon the Company's Consolidated Leverage Ratio (as
defined in the Credit Agreement). Borrowings under the Multi-Currency Credit
Facility bear interest at the LIBOR rate for the currency of each loan plus the
Applicable Margin. The Company is also required to pay a commitment fee at a
rate per annum ranging from 0.125% to 0.20% of the total borrowing availability
under the Credit Agreement (the "Facility Fee Rate"), determined on the basis
of the Company's Consolidated Leverage Ratio. Based upon the Company's most
recently determined Consolidated Leverage Ratio, the Applicable Margin and
Facility Fee Rate are 0.225% and 0.15%, respectively. The Credit Agreement
contains customary affirmative and negative covenants, including financial
covenants requiring the maintenance of specified consolidated interest coverage
and leverage ratios and amounts of consolidated net worth. Borrowings under the
Credit Agreement are guaranteed by the Company's significant domestic
subsidiaries and are secured by a pledge of the capital stock of each of such
subsidiaries.
On March 11, 1996, the Company completed the sale of the Private Notes in the
Private Offering and applied the net proceeds thereof of approximately
$244,100,000 to reduce indebtedness under the new Credit Agreement.
FOREIGN CURRENCY
The Company does not hold or issue derivatives for trading purposes and is
not a party to leveraged derivatives transactions. The Company's sales from
foreign locations and exports are about $580 million and as a result, the
Company enters into foreign currency forward contracts as a hedge for certain
existing or anticipated business transactions denominated in various foreign
currencies. Foreign currency transactions included in income amounted to gains
(losses) of approximately ($400,000), $100,000, $300,000 and ($700,000) in the
nine month period ended November 30, 1995, and the fiscal years of 1995, 1994
and 1993, respectively. Unrealized gains and losses related to foreign currency
forward contracts were not significant at November 30, 1994. The maximum
notional amount of foreign currency forward contracts outstanding at any one
time through November 30, 1995 amounted to approximately $31.3 million and the
approximate notional amounts of such contracts outstanding were $10.9 million
at November 30, 1995.
From time to time, the Company enters into interest rate swap agreements to
balance the mix of its fixed and variable interest rate debt. At November 30,
1995, the Company had interest rate swap agreements
28
<PAGE>
in an aggregate notional amount of approximately $150 million, effectively
converting the variable rates of interest payable by the Company on such amount
of its indebtedness to fixed annual rates of interest. As a result of the
swaps, the Company is currently paying an effective fixed annual rate of
interest of approximately (i) 5.6% on approximately $117 million of
indebtedness and (ii) 12% on approximately $33 million of indebtedness
denominated in Italian Lire. The swap agreements are scheduled to expire at
various dates through July 2000.
IMPACT OF INFLATION
Although the Company has experienced delays in its ability to pass on certain
inflation related cost increases, the Company does not expect that such delays
or the overall impact of inflation will have a material impact on the Company's
operations.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 121-- Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of ("SFAS No. 121"). SFAS No. 121 requires
that long-lived assets and certain identifiable intangibles and goodwill
related to those assets be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. SFAS No. 121 is effective for the Company's fiscal year ending
February 28, 1997.
Management is in the process of assessing the impact of SFAS No. 121 on its
financial statements. While it is anticipated that SFAS No. 121 will require a
non-cash charge to reduce the carrying value of certain of the Company's fixed
assets and goodwill values, it is too early to estimate the amount thereof at
the present time. However, it is anticipated that the net effect of the
adoption of SFAS No. 121, combined with the possible costs associated with re-
focusing the Company's Power and Fluid Transfer business upon the sale of the
TPG and Professional Audio business units, will not exceed the net gain
expected to be realized upon the possible sale of such business units.
29
<PAGE>
BUSINESS
GENERAL
Mark IV is a diversified manufacturer of a broad range of proprietary and
other power and fluid transfer products and systems which serve four markets:
industrial; automotive aftermarket; automotive OEMs; and infrastructure. Power
and fluid transfer products accounted for 90% of Mark IV's net sales in fiscal
1995 after giving pro forma effect to the Company's November 1994 acquisition
of Purolator. Mark IV also manufactures professional audio products.
Many of Mark IV's products have a significant, and in certain instances the
leading, share of their respective markets. Products manufactured by Mark IV
principally serve specialized needs in markets in which relatively few
manufacturers compete. These products are primarily sold directly, and through
independent distributors, to other manufacturers and commercial users in the
United States and Europe and, to a lesser extent, in Canada, Latin America and
the Far East. Mark IV operates 75 manufacturing facilities and 52 distribution
and sales locations and employs approximately 17,000 people in 18 countries.
Mark IV's business strategy is focused on building the worldwide industrial,
automotive aftermarket and automotive OEM markets of its Power and Fluid
Transfer segment through internal growth, continuation of cost control and
quality improvement programs, and selective strategic domestic and foreign
acquisitions. The Company's operating strategy emphasizes management for
continuous improvement, establishing co-operative programs with customers to
engineer, design and develop higher value added systems in addition to
individual products, and the introduction of new, more cost effective and
durable products.
In furtherance of these strategies, over its last five fiscal years Mark IV
has: (i) emphasized continuous product development, with over 50.0% of its
current sales arising from the introduction of new products or products which
have been redesigned; (ii) considerably enhanced its ability to provide a
broader range of products to its existing customers through its November 1994
acquisition of Purolator, a leading manufacturer of automotive and industrial
filtration products; (iii) significantly expanded its presence in Western
Europe through its June 1993 acquisition of PTI, a leading Italian-based
manufacturer of power transmission products; (iv) substantially increased its
domestic production capacity and strengthened its market position in the power
steering and garden hose markets through the 1990 acquisition of Anchor Swan, a
leading manufacturer of these and other products; (v) established distribution
centers to serve markets in Central and South America and the Pacific Rim, and
acquired manufacturing and distribution facilities in Mexico; and (vi)
implemented cost savings and efficiency programs in its Power and Fluid
Transfer segment which have contributed to the improvement of the segment's
operating income margins from 7.0% in fiscal 1989 to 11.2% in fiscal 1995. Mark
IV believes that, having established an efficient global manufacturing and
distribution network, it is well positioned to benefit from its leading
domestic market position and its increased presence in European and other
foreign markets.
ACQUISITION OF PUROLATOR PRODUCTS COMPANY
As part of the Company's strategic emphasis on its Power and Fluid Transfer
segment, in November 1994 Mark IV acquired Purolator, which is a leading
manufacturer of filtration products, including automotive oil, air and fuel
filters; residential and commercial heating, ventilating and air-conditioning
("HVAC") filters; high-technology liquid filtration products; and specialized
industrial filters and filtration systems. The total cost of the acquisition
was $286.3 million. Purolator's filtration business complements the Company's
fluid transfer products since many of Purolator's products serve customers in
the same markets as the Company's other power and fluid transfer products, such
as certain industrial markets, the automotive aftermarket and, to a much lesser
extent, the automotive OEM market. In addition, filters are generally an
integral part of most power and fluid transfer systems produced by the Company.
In particular, the acquisition of Purolator strengthens Mark IV's presence in
the automotive aftermarket since more than 60% of Purolator's annual sales have
been made to customers in this market. Mark IV also believes that its extensive
sales and distribution network are providing opportunities for increased sales
of Purolator's products.
30
<PAGE>
RECENT DEVELOPMENTS
As part of the Company's strategy to become more focused in the worldwide
industrial, automotive aftermarket and automotive OEM markets of its Power and
Fluid Transfer segment, Mark IV is exploring the possibility of selling two of
its non-core businesses. In October 1995, the Company announced the possible
sale of TPG, which comprises the Company's infrastructure business, and which
currently has annual sales of approximately $225 million. In January 1996, the
Company announced that it is also exploring the possible sale of Mark IV Audio,
which comprises the Company's professional audio business segment and which
currently has annual sales of approximately $200 million. The potential sales
of TPG and Mark IV Audio are in their preliminary stages and, therefore, there
can be no assurance that either such sale will occur. If the Company were to
consummate either or both such sales, net proceeds thereof would be used to
reduce Senior Indebtedness, to fund future acquisitions in core business areas,
and/or, depending on market and other relevant considerations, to repurchase
the Company's Common Stock.
In furtherance of Mark IV's strategy of focusing on building the industrial
market of its Power and Fluid Transfer segment, on March 5, 1996 Mark IV
acquired Imperial Eastman for a purchase price of approximately $78 million.
Imperial Eastman manufactures industrial hose and couplings products
complementary to those currently produced by Mark IV, and has current annual
sales of approximately $135 million.
SEGMENT INFORMATION
The Company classifies its operations into the following two business
segments:
(i) Power and Fluid Transfer, which includes the design, manufacture and
distribution of products and systems primarily in the industrial market,
the automotive aftermarket, the automotive OEM market and the
infrastructure market. Such products and systems include those related to
rubber and plastic belts, hose, fittings and related assemblies; filters;
power transfer mechanisms for door control systems used in mass transit
vehicles; information displays; and advanced traffic control and management
systems; and
(ii) Professional Audio, which includes the design and manufacture of
products and systems used primarily in the high-performance professional
audio market, such as microphones, speakers, public address and musical
instrument loudspeaker systems, audio signal processors, and sound
enhancement and noise canceling equipment.
The results of operations of Purolator have been included in the Company's
results of operations for its 1995 fiscal year from Purolator's November 1994
acquisition date. The results of operations of PTI have been included in the
Company's results of operations for its 1994 fiscal year from PTI's June 1993
acquisition date. Selected summary information has been presented below to
facilitate the review of the Company's business segment discussion. The summary
information has been derived from the more detailed information regarding
industry segments in accordance with generally accepted accounting principles
as presented in Note 14 to the Company's audited consolidated financial
statements included elsewhere herein. Such summary information is as follows:
<TABLE>
<CAPTION>
1995
1994 1995 PRO FORMA(1)
---------- ---------- ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
NET SALES TO CUSTOMERS:
Power and Fluid Transfer..................... $1,070,700 $1,418,000 $1,728,000
Professional Audio........................... 173,500 185,300 185,300
---------- ---------- ----------
Total...................................... $1,244,200 $1,603,300 $1,913,300
========== ========== ==========
OPERATING INCOME(2):
Power and Fluid Transfer..................... $ 124,800 $ 158,400 $ 184,500
Professional Audio........................... 21,900 21,800 21,800
---------- ---------- ----------
Total...................................... $ 146,700 $ 180,200 $ 206,300
========== ========== ==========
</TABLE>
- --------
(1) To reflect the Purolator acquisition as if it had occurred at the beginning
of the fiscal year.
(2) Represents income before general corporate expenses, interest expense and
taxes.
31
<PAGE>
POWER AND FLUID TRANSFER
Dayco Products Inc. ("Dayco") and Purolator, each wholly-owned subsidiaries
of the Company, produce a variety of belts, hose, filters, and related
assemblies and systems, for industrial, automotive aftermarket and automotive
OEM customers, primarily in North America and Europe. The acquisition of
Purolator significantly increased the size and product base of the Power and
Fluid Transfer segment. The complementary nature of the Dayco and Purolator
product lines, particularly in the automotive aftermarket, Original Equipment
Service ("OES") market and industrial markets, is enabling the Company to
integrate the segment's systems and distribution approach to product offerings.
The acquisition of Purolator increased the pro forma revenue of these core
products to approximately $1.5 billion per annum. The balance of this segment
serves the infrastructure market.
Industrial
Approximately 30% of fiscal 1995 pro forma sales were to industrial
customers, making Industrial the largest market in this segment. Industrial
products include a variety of belts, hose, filters, tensioners, pulleys,
couplings, assemblies and systems for a number of markets, including
agricultural, oil field, mining, lawn and garden, food and beverage handling,
construction, environmental, chemical, lumber and specialty applications.
Many of the Industrial products are sold directly to industrial OEMs for use
in agricultural, manufacturing, office, mining, environmental, fuel dispensing
and fuel flow equipment, as well as in products such as snowmobiles, washing
machines, golf carts, vacuum cleaners, outboard motors and lawn mowers. The
balance of sales in this market are to distributors of industrial replacement
belts and hose, and lawn and garden product distributors and retailers, such as
hardware chains, home centers and mass merchandisers.
The segment's industrial product offerings were expanded in fiscal 1995 to
include the industrial filters and filtration systems which Purolator supplies
to the industrial, aviation and marine markets, broadening the Company's
product offerings and customer base in the industrial marketplace. Facet
International, Inc. ("Facet"), a Purolator subsidiary, has also expanded the
segment's Industrial product lines and markets. Facet is a manufacturer of high
performance filtration and separation products and systems for commercial and
military aviation applications. Facet's products, which have been approved by
numerous governmental and industry-related organizations around the world, are
sold to oil companies, airlines and defense ministries. Facet also produces
bilge separators for the commercial and military marine markets, as well as an
environmental protection product that removes oil pollution from water.
The May 1994 acquisition of the U.S. Rubber Hose Co. ("U.S. Rubber") in Vero
Beach, Florida enabled Dayco to enter new product lines in the industrial hose
market. U.S. Rubber provides the capability of manufacturing rigid mandrel hose
up to 200 feet in length in a variety of bore sizes. This new capability allows
Dayco to better serve customers in the paper, oil drilling and refining, water
pumping, natural gas production, manufacturing, cement/construction, chemical
and trucking industries.
Automotive Aftermarket
The Automotive Aftermarket accounted for roughly 28% of fiscal 1995 pro forma
sales. The products in this market include a vast array of automotive belts,
hose, filters and accessories sold to automotive warehouse distributors, oil
companies, original equipment service centers, retail and auto parts chains,
mass merchandisers, farm and fleet stores, and hardware distributors.
32
<PAGE>
Products include V-ribbed belts, V-belts, and timing belts; radiator,
automotive service, fuel line and heater hose and assemblies; as well as fan
clutches, transmission oil coolers, fan blades, electric fans, couplings and
pulleys. With the addition of Purolator, product offerings were expanded to
include a complete line of automotive oil, air and fuel filters for virtually
all automobiles and light duty trucks currently operated in North America,
including those manufactured by North American, Japanese and European OEMs. The
Company believes that the combined Dayco/Purolator distribution system and
complementary customer base provide opportunities for revenue growth, margin
improvement and increased market penetration.
Automotive OEM
The segment's Automotive OEM business accounted for 20% of fiscal 1995 pro
forma sales. Dayco designs, develops and manufactures automotive accessory
drive, camshaft drive, fuel, air conditioning, and power steering systems for
the global automotive OEM market, as well as radiator, heater, fuel, engine and
transmission oil cooler assemblies, consisting of various hose, belts, filters,
tensioners, brackets, pulleys, canisters and sprockets.
In response to the increased global nature of the automotive OEM industry,
Dayco's Automotive OEM business is now organized into a single global unit, to
better meet the needs of its worldwide customers, and to maximize the use of
its resources on a global basis.
In keeping with the Company's long-term growth strategy to expand its
geographic presence, several strategic acquisitions were made in fiscal 1995.
Citla, a manufacturer of industrial and automotive belts and hose products with
headquarters in Mexico City, Mexico, was acquired in June 1994. Citla provides
support to the Company's existing OEM customers in Mexico, as well as access to
the Mexican automotive aftermarket and industrial marketplace. Acquired in
September 1994, Dayco Hevas ("Hevas") of Varberg, Sweden, manufactures
automotive tubes and tube assemblies. Hevas' products complement Dayco's
existing power steering and air conditioning components for the European
automobile industry, further enhancing the Company's market position in Europe.
The acquisition of Purolator also provided increased market opportunities
with the Company's multi-national OEM customers. Purolator's products are being
incorporated into Dayco's systems, and the distribution of Purolator's products
are expected to be enhanced by Dayco's global OEM programs. Purolator's equity
interest in Purolator India Limited expands the Company's manufacturing
capabilities and OEM markets in Southeast Asia, while Purolator's 50% ownership
in Purodenso Corp., a joint venture with Nippondenso of Japan, provides access
to the OEM transplant market in the U.S.
Dayco also has development programs with respect to various automotive
systems with the Detroit "Big Three," U.S. foreign-based OEMs, and most of the
major European automotive manufacturers. The Company's penetration of the truck
OEM market improved in fiscal 1995 with new orders from Iveco, Mercedes and
Scania, and increased volume with Mack, Navistar, and Cummins. Dayco also
continues to benefit from the increasing demand in Europe for automobiles
equipped with power steering and air conditioning.
Emphasis on systems development as a hose and assembly producer has helped
Dayco gain market share in the power steering hose assembly market. The Company
believes that the increase in the number of motor vehicles in operation in Asia
and the high-temperature climate in populous portions of Asia should create a
strong demand for Dayco's air conditioning hose assemblies.
Infrastructure
Mark IV designs and manufactures products and systems serving two principal
components of the Infrastructure market. Mark IV produces information displays,
door systems, interior hardware and other systems for mass transit buses and
railcars. In addition, the Company produces electronic vehicle
33
<PAGE>
identification products for the electronic toll and traffic management markets,
as well as information signs and traffic signals and controllers. These
products, which are manufactured and sold in North America and throughout
Europe, accounted for 12% of fiscal 1995 pro forma sales.
The Company's customers include OEMs of mass transit bus and rail vehicles
and commercial aircraft, as well as state and local highway and transportation
agencies. Some of the Infrastructure products are also sold to the aftermarket.
The Infrastructure market is predominantly contract-driven, with many of the
contracts spanning one or more years. At times, there are delays in the
completion of contracts that may cause fluctuations in the timing of revenues,
allowing inventories to build.
Luminator Mass Transit, together with the Company's subsidiaries in Germany
and France, designs, markets and produces electronic vehicle information and
passenger information display systems and components for mass transit buses and
railcars throughout the world. While most of these products are sold directly
to vehicle manufacturers, there is also a large market for replacement parts
used to repair or upgrade mass transit vehicles. The marketing efforts for
these products are directed primarily at transit agencies, who can specify that
Mark IV products be included in their mass transit systems, as well as to OEMs.
The Company's F-P Electronics subsidiary is a producer of digital
electromagnetic display components, supplying product to all of the major
manufacturers of mass transit information display systems in North America and
Europe, including the Company's Luminator operations. These products are also
used in gasoline pump displays, variable message signs for highways, time and
temperature displays, and scoreboards. This market was enhanced by a new line
of high intensity fiber optic displays designed to dramatically improve
visibility.
The Company's Vapor business units in the U.S. and Canada supply complete bus
door systems, as well as basic components, to the transit industry. Vapor also
supplies the railroad industry with various electronic products. Vapor
introduced three new door systems during fiscal 1995. These systems, which
include microprocessor-based controls, were developed to meet the changing
needs of domestic customers, and to position Vapor for entry into the Asian
market.
Mark IV's Luminator Aircraft Products unit supplies interior lighting and
other passenger comfort systems for commercial aircraft, including the
McDonnell Douglas MD-11 and the new MD-90, and every other McDonnell Douglas
aircraft produced since the DC-3. In addition, Luminator provides components
for several Boeing aircraft models, as well as aircraft panel, navigation,
landing and emergency lighting for general aviation customers. Luminator also
makes a comprehensive line of night vision-compatible interior and exterior
lighting used in military applications. Luminator supplies its airline
customers with aftermarket replacement and spare parts through its Product
Support Center in Texas.
Mark IV's Automatic Signal/Eagle Signal and Interstate Highway Sign
operations manufacture products sold to state and local governments, as well as
transportation agencies, primarily in the U.S. and Canada. Automatic
Signal/Eagle Signal is a leading, full-line supplier of traffic control
equipment and systems in the U.S., including traffic and pedestrian signals,
signal control devices and complete traffic management systems. Some of these
products are also sold to the U.S. Government and to foreign municipalities.
Interstate Highway Sign is a leading manufacturer of reflective directional,
informational, regulatory and warning signs for the nation's highways and other
roadways. Interstate's products include a newer line of signs, using exterior
light, that provide better visibility and are easier to maintain.
Mark IV's Intelligent Vehicle Highway Systems ("IVHS") products and their
markets have been in development for a number of years. In March 1994, Mark
IV's IVHS equipment was selected by a group representing eight toll authorities
in New Jersey, New York, Pennsylvania and Delaware for use in the new E-ZPassSM
electronic toll collection system. Mark IV's IVHS provides the tag and reader
equipment for
34
<PAGE>
the E-ZPass system, which is designed to eliminate the need for motorists to
exchange cash, tokens, or tickets at toll booths. Tolls will be paid
electronically as vehicles pass through the booths, reducing congestion and
pollution, increasing accuracy in toll collection, and improving driver
convenience on toll roads, bridges and tunnels.
The Company announced in October 1995 that it is exploring the possibility of
selling the companies serving the Infrastructure market. The sale of the units,
which is at a preliminary stage, is being pursued in connection with the
Company's long-term strategy of focusing on its worldwide industrial,
automotive aftermarket and automotive OEM markets.
PROFESSIONAL AUDIO
The Professional Audio business segment accounted for approximately 10% of
total pro forma sales and 11% of pro forma operating income in fiscal 1995.
This group of companies, known in the marketplace as Mark IV Audio, provides a
comprehensive range of high quality, high performance audio products to the
professional audio market, including recording studio equipment, systems for
live performance, and permanently installed engineered sound systems. Products
include microphones, mixing consoles, signal processors, amplifiers and
loudspeakers, and accessory items for use in a wide variety of applications.
The Company views the Professional Audio business as consisting generally of
four markets: fixed installation; concert sound and commercial audio; retail
stores for professional musicians; and other professional audio applications.
Mark IV Audio's largest market is fixed installations, which encompasses
permanently installed engineered sound systems in cinemas, theaters, concert
halls, stadiums, sports arenas, airports, hotels, convention centers, amusement
parks, houses of worship and other facilities where music or speech is
amplified. The concert sound and commercial audio market includes sound systems
for touring concerts and live theater productions and radio and television
broadcast and production and sound recording applications. The retail market
for professional musicians consists of a large number of retail stores selling
high quality amplifiers, loud speaker systems, microphones (wired and
wireless), mixing consoles and signal processors to professional musicians. The
final Professional Audio market encompasses a variety of applications,
including microphones and earphones for field and aircraft communications, both
military and civilian, and equipment for high speed duplication of audio tapes.
In fiscal 1995, Mark IV Audio took significant steps forward in realizing the
objectives of an organizational restructuring, including a better focus on its
diversified technologies, brand recognition, and geographic distribution and
manufacturing. General administration, research and development, and
manufacturing responsibilities are now centralized for all Mark IV Audio
companies for more effective coordination and utilization of resources.
Marketing, sales and other business development activities are divided into
three regions--the Americas, Europe and the Pacific. Each region is structured
with a business development team whose mission is to identify and aggressively
pursue growth opportunities within its territory. This new strategy is intended
to enhance Mark IV Audio's ability to provide products, pricing and programs
tailored to the specific needs of the customers in each area, with an
understanding of the cultures, conditions and business practices of the
particular region.
Mark IV Audio has a full-line strategy for the production of all components
required in sound systems, which allows it to serve its customers as a single-
source audio supplier. The Mark IV Audio group is a leader in many segments of
the professional audio market and is diversified globally, with over 58% of the
group's fiscal 1995 revenue being derived from outside the U.S.
Mark IV Audio holds a large share of the worldwide market for fixed
installations of engineered sound systems under its Electro-Voice, Altec
Lansing and Dynacord product lines. The group also accounts for a leading share
of the wired dynamic and high-end wireless microphones employed in broadcast
and production
35
<PAGE>
applications with products under the Vega and Electro-Voice brand names, as
well as signal processing products under the Klark Teknik brand. Mark IV Audio
is also a leading supplier of high-speed tape cassette duplication equipment
under its Gauss and Electro Sound brands, and mixers under the DDA and Midas
labels. In addition, Mark IV Audio has developed numerous digital audio signal
processing ("DSP") applications under its Dynacord and Klark Teknik brand
names.
Under the Dynacord and University Sound brand names, Mark IV Audio provides
products for fixed installations with typically less demanding performance
requirements than those of engineered sound systems. The concert sound market,
which consists of audio equipment used in touring sound systems for live
performances, is served by Mark IV Audio's Electro-Voice, Klark Teknik, Midas
and Vega product lines.
The Company announced in January 1996 that it is exploring the possibility of
selling its business units comprising the Professional Audio segment. The
proposed sale of these units, which is at an earlier preliminary stage than the
proposed sale of TPG, is being pursued in connection with the Company's long-
term strategy of focusing on the worldwide industrial, automotive aftermarket
and automotive OEM markets of its Power and Fluid Transfer segment.
36
<PAGE>
MANAGEMENT
The following table sets forth certain information regarding the Directors
and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITIONS AND OFFICES WITH THE COMPANY
- ---- --- --------------------------------------
<S> <C> <C>
Sal H. Alfiero................. 58 Chairman of the Board and Chief Executive
Officer
William P. Montague............ 49 President and Director
Gerald S. Lippes............... 55 Secretary and Director
Bruce A. McNiel................ 47 Senior Vice President
Kurt J. Johansson.............. 54 Senior Vice President
Frederic L. Cook............... 49 Senior Vice President--Administration
John J. Byrne.................. 46 Vice President and Chief Financial Officer
Richard L. Grenolds............ 46 Vice President and Chief Accounting Officer
Douglas J. Fiegel.............. 48 Vice President, Financial Control and
Reporting
Patricia A. Richert............ 45 Vice President and Chief Information Officer
Clement R. Arrison............. 66 Director
Joseph G. Donohoo.............. 77 Director
Herbert Roth, Jr............... 67 Director
</TABLE>
SAL H. ALFIERO has been Chairman of the Board and Chief Executive Officer of
the Company since its incorporation. Mr. Alfiero serves as a Director of
Phoenix Home Life Mutual Insurance Company and is also a Director of Marine
Midland Bank. He holds a B.S. degree in Aeronautical Engineering from
Rensselaer Polytechnic Institute and holds an M.B.A. degree from the Harvard
Graduate School of Business Administration.
WILLIAM P. MONTAGUE has been employed by the Company since April 1972 and was
elected President and a Director effective March 1, 1996. He was previously a
Vice President of the Company since May 1974 and was elected Executive Vice
President and Chief Financial Officer in March 1986. He holds both a B.S.
degree in accounting and an M.B.A. degree from Wilkes University and is a
certified public accountant. He is a member of the Chase Manhattan Bank, N.A.
Regional Advisory Board and a Director of Gilbraltar Steel Corporation and
International Imaging Materials, Inc.
GERALD S. LIPPES has been general counsel, Secretary and a Director of the
Company since its incorporation. He has been engaged in the private practice of
law since 1965 and is a partner of the firm of Lippes, Silverstein, Mathias &
Wexler LLP, Buffalo, New York. Mr. Lippes is also a Director of Gibraltar Steel
Corporation.
BRUCE A. McNIEL was elected Senior Vice President of the Company in December
1994 and is President of the Company's Dayco Products, Inc. subsidiary,
headquartered in Miamisburg, Ohio. Mr. McNiel has worldwide responsibility for
the Company's Industrial Division. Mr. McNiel has been employed by Dayco since
1977, and prior to his appointment as President of Dayco in March 1993, served
in numerous executive positions, including Executive Vice President of Sales
and Marketing, and Senior Vice President of Finance and Administration. He
holds a B.S. degree in accounting from Wright State University and an M.B.A.
degree from the University of Dayton.
KURT J. JOHANSSON was elected Senior Vice President of the Company in
December 1994 and is President of the Company's Dayco Europe AB subsidiary,
headquartered in Solvesborg, Sweden, as well as Executive Vice President of
Dayco. Mr. Johansson has worldwide responsibility for the Company's Automotive
Division. Mr. Johansson has been with Dayco Europe since October 1990. Mr.
Johansson studied at the School of Economics and Business Administration in
Stockholm, Sweden, as well as the Technical University in Gothenburg, Sweden.
37
<PAGE>
FREDERIC L. COOK was elected Senior Vice President-Administration in March
1988, and prior thereto, had served as Vice President-Finance of the Company
since May 1986. Prior to joining the Company, Mr. Cook was a tax partner with
the accounting firm of Coopers & Lybrand L.L.P., where he was employed for 19
years. He holds a B.S. degree in accounting from the Rochester Institute of
Technology and is a certified public accountant.
JOHN J. BYRNE has been employed by the Company since September 1973 and was
elected Vice President and Chief Financial Officer effective March 1, 1996. He
has been a Vice President since March 1986 and was elected Vice President-
Finance of the Company in March 1988. He holds a B.S. degree in accounting from
Pennsylvania State University and an M.B.A. degree from Canisius College.
RICHARD L. GRENOLDS was elected Vice President and Chief Accounting Officer
in July 1989. Prior to joining the Company, Mr. Grenolds was a general practice
partner with the accounting firm of Coopers & Lybrand L.L.P., where he was
employed for 17 years. He holds a B.S. degree in accounting from the Rochester
Institute of Technology and is a certified public accountant.
DOUGLAS J. FIEGEL was elected Vice President, Financial Control and Reporting
in 1990. Prior to that he was the Company's Controller since joining the
Company in 1986. He holds a B.B.A. degree from Niagara University and is a
certified public accountant.
PATRICIA A. RICHERT has been employed by the Company since 1973, and has been
Vice President and Chief Information Officer since 1990. In August 1994 she was
also appointed Dayco's Vice President of Information Technology. She holds a
B.S. degree in accounting from the University of Buffalo.
CLEMENT R. ARRISON has been a Director of the Company since November 1976. He
was President of the Company from 1976 until his retirement effective March 1,
1996. Mr. Arrison continues to serve as a consultant to the Company. He holds a
B.S. degree in engineering from the University of Michigan and holds a
professional engineering license.
JOSEPH G. DONOHOO has been a Director of the Company since its incorporation.
He is Chairman of the Board of the Gibson Group, Inc. ("Gibson"), a marketer of
paper board, and Chairman of the Board of Clinch River Corporation ("Clinch
River"), a manufacturer of semi-chemical corrugating material. Clinch River is
a majority owned subsidiary of Gibson.
HERBERT ROTH, JR. has been a Director of the Company since September 1985,
having been Chairman of the Board and Chief Executive Officer of LFE
Corporation prior to its acquisition by Mark IV in July 1985. Mr. Roth also
serves as a Director of Boston Edison Company, Phoenix Home Life Mutual
Insurance Company, Landauer, Inc., Tech/Ops Sevcon, Inc., Key Energy Group and
Phoenix Total Return Fund, Inc., and is a trustee of Phoenix Series Fund,
Phoenix Multi-Portfolio Fund and The Big Edge Series Fund.
38
<PAGE>
PRINCIPAL SECURITYHOLDERS
The following table sets forth information as of January 31, 1996 (except as
otherwise noted) with respect to all stockholders known by the Company to be
the beneficial owners of more than 5% of its outstanding Common Stock, each
Director, the five most highly compensated executive officers, and all
executive officers and Directors as a group. Unless otherwise indicated, the
address of each person named below is 501 John James Audubon Parkway, P.O. Box
810, Amherst, New York 14226-0810.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME SHARES(1) OF CLASS
---- --------- --------
<S> <C> <C>
Sal H. Alfiero....................................... 4,350,926(2) 7.2%
FMR Corporation...................................... 6,510,928(3) 10.9%
Tiger Management Corporation......................... 4,966,501(4) 8.3%
Clement R. Arrison................................... 1,808,960(5) 3.0%
Gerald S. Lippes..................................... 1,687,396(6) 2.8%
William P. Montague.................................. 838,262(7) 1.4%
Joseph G. Donohoo.................................... 24,981(8) *
Herbert Roth, Jr..................................... 24,775 *
Frederic L. Cook..................................... 65,106(9) *
Bruce A. McNiel...................................... 52,514(10) *
Kurt J. Johansson.................................... 21,157(11) *
All Executive Officers and Directors as a Group (13
persons)............................................ 9,046,255(12) 15.0%
</TABLE>
- --------
* Less than 1%
(1) Except as otherwise indicated in the following footnotes, each person
listed in the table has both sole voting and sole investment power with
respect to the number of shares of Common Stock set forth opposite his
name. Messrs. Alfiero, Arrison, Lippes, Montague, and Cook, each of whom is
an executive officer of the Company, have the right to direct the Trustee
of the Company's defined benefit pension plan (the "Plan") with respect to
the voting of and investment in the shares of the Company's Common Stock
owned by such Plan. As of January 31, 1996, the Plan owned 1,513,129 shares
of the Company's Common Stock (2.5% of the total outstanding). Such
executive officers are not participants in the Plan and disclaim any
beneficial ownership in the shares, and the shares have not been included
in the amounts listed in this table.
(2) Includes 289,406 shares of Common Stock issued to Mr. Alfiero under the
Mark IV Industries, Inc. 1992 Restricted Stock Plan (the "Restricted
Plan"), as well as 26,906 shares of Common Stock issuable under currently
exercisable options granted under the Mark IV Industries, Inc. and
Subsidiaries 1992 Incentive Stock Option Plan (the "1992 Option Plan").
Also includes 14,383 shares of Common Stock allocated to Mr. Alfiero's
self-directed accounts in the Company's retirement and 401(k) savings plan.
Does not include 14,550 shares of Common Stock owned by the Alfiero Family
Charitable Foundation of which Mr. Alfiero is one of four directors and for
which he disclaims beneficial ownership.
(3) Based on information set forth in a statement on Schedule 13-G filed with
the SEC by FMR Corporation ("FMR") on February 14, 1996, FMR held on behalf
of itself and its subsidiaries, Fidelity Management and Research Company
("Fidelity"), and Fidelity Management Trust Company ("Fidelity Trust"), an
aggregate of 6,510,928 shares of Common Stock. The power to vote or direct
the voting of such shares resides with the respective Boards of Trustees of
the investment funds established and managed by FMR and its subsidiaries.
The stated business address of FMR, Fidelity and Fidelity Trust is 82
Devonshire Street, Boston, MA 02109.
(4) Based on information set forth in a statement on Schedule 13-G filed with
the SEC by Tiger Management Corporation ("Tiger") on February 12, 1996.
Tiger, a corporation controlled by majority shareholder Julian H.
Robertson, Jr., beneficially owns an aggregate of 4,966,501 shares of
Common Stock. Excluded from these shares are 266,699 shares held on behalf
of Panther Partners L.P., an investment corporation controlled by Mr.
Robertson. The stated business address of Tiger is 101 Park Avenue, New
York, NY 10178.
39
<PAGE>
(5) Includes 28,940 shares of Common Stock issued to Mr. Arrison under the
Restricted Plan, as well as 49,560 shares of Common Stock issuable under
currently exercisable options granted pursuant to the 1992 Option Plan.
Does not include 51,836 shares of Common Stock owned by the Arrison Family
Charitable Foundation of which Mr. Arrison is one of four directors and for
which he disclaims beneficial ownership.
(6) Includes 17,365 shares of Common Stock issued to Mr. Lippes under the
Restricted Plan, as well as 27,087 shares of Common Stock issuable under
currently exercisable options granted pursuant to the 1992 Option Plan.
Does not include 46,434 shares of Common Stock owned by the Lippes Family
Charitable Foundation of which Mr. Lippes is one of four directors and for
which he disclaims beneficial ownership.
(7) Includes 20,121 shares of Common Stock issued to Mr. Montague under the
Restricted Plan, as well as 31,025 shares of Common Stock issuable under
currently exercisable options granted pursuant to the 1992 Option Plan.
Also includes 5,618 shares of Common Stock allocated to Mr. Montague's
self-directed accounts in the Company's retirement and 401(k) savings plan.
Does not include 11,642 shares of Common Stock owned by the Montague Family
Charitable Foundation of which Mr. Montague is one of four directors and
for which he disclaims beneficial ownership.
(8) Includes 7,906 shares of Common Stock held by The Gibson Group, Inc.
Pension Fund, of which Mr. Donohoo is a trustee and has voting power.
(9) Includes 2,756 shares of Common Stock issued to Mr. Cook under the
Restricted Plan, as well as 8,561 shares of Common Stock issuable under
currently exercisable options granted pursuant to the 1992 Option Plan.
Also includes 1,260 shares of Common Stock allocated to Mr. Cook's self-
directed accounts in the Company's retirement and 401(k) savings plan.
(10) Includes 2,756 shares of Common Stock issued to Mr. McNiel under the
Restricted Plan, as well as 37,025 shares of Common Stock issuable under
currently exercisable options granted pursuant to the Company's 1988
Incentive Stock Option Plan (the "1988 Plan") and the 1992 Option Plan.
Also includes 2,623 shares of Common Stock allocated to Mr. McNiel's self-
directed accounts in the Company's retirement and 401(k) savings plan.
(11) Includes 2,756 shares of Common Stock issued to Mr. Johansson under the
Restricted Plan, as well as 18,400 shares of Common Stock issuable under
currently exercisable options granted pursuant to the 1988 and 1992 Option
Plans.
(12) Includes 369,614 shares of Common Stock issued to the group under the
Restricted Plan, as well as 254,523 shares of Common Stock issuable under
currently exercisable options granted pursuant to the 1988 and 1992 Option
Plans. Includes 31,509 shares of Common Stock allocated to the officers'
self-directed accounts in the Company's retirement and 401(k) savings
plan.
40
<PAGE>
DESCRIPTION OF THE EXCHANGE NOTES
GENERAL
The Exchange Notes will be issued pursuant to an indenture (the "Indenture")
dated as of March 11, 1996 between the Company and Fleet National Bank, as
trustee (the "Trustee"). The Exchange Notes will evidence the same indebtedness
as the Private Notes (which they replace) and will be entitled to the benefits
of the Indenture. The form and terms of the Exchange Notes are the same as the
form and terms of the Private Notes except that (i) the Exchange Notes will
have been registered under the Securities Act and, therefore, the Exchange
Notes will not bear legends restricting the transfer thereof and (ii) holders
of the Exchange Notes will not be entitled to certain rights of holders of the
Private Notes under the Registration Rights Agreement, which rights will
terminate upon consummation of the Exchange Offer. The terms of the Exchange
Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (the "Trust Indenture
Act") as in effect on the date of the Indenture. The Exchange Notes are subject
to all such terms and holders of the Exchange Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of certain provisions of the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act and the provisions of the Indenture (a copy of which has been
filed as an Exhibit to the Registration Statement of which this Prospectus
forms a part), including the definitions therein of certain terms used below.
The definitions of certain terms used in the following summary are set forth
below under "--Certain Definitions."
The Exchange Notes will be general unsecured obligations of the Company, will
be subordinated in right of payment to the prior payment in full of all
existing and future Senior Indebtedness of the Company, and will be effectively
subordinated to the indebtedness of the Company's Subsidiaries. See "--
Subordination".
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $250,000,000 and will
mature on April 1, 2006. Interest on the Notes will accrue at the rate of 7
3/4% per annum and will be payable semi-annually on each April 1 and October 1
commencing on October 1, 1996, to holders of record of the Notes ("Holders") on
the immediately preceding March 15 and September 15, whether or not a business
day. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from March 11, 1996,
the date of initial issuance of the Private Notes. Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months.
Principal of, premium and Liquidated Damages, if any, and interest on the
Notes will be payable at the office or agency of the Company maintained for
such purpose within or without the City and State of New York or, at the option
of the Company, payment of interest, principal and Liquidated Damages, if any,
may be made by check mailed to the Holders at their respective addresses set
forth in the register of the Holders; provided that all payments with respect
to Global Notes and Certificated Securities the holders of whom have given wire
transfer instructions to the Company will be required to be made by wire
transfer of same day funds to the accounts specified by the holders thereof.
Unless otherwise designated by the Company, the Company's office or agency in
New York will be the office of the Trustee maintained for such purpose. The
Notes will be issued only in registered form, without coupons, in denominations
of $1,000 and integral multiples thereof.
REDEMPTION
The Notes are not redeemable by the Company, in whole or in part, prior to
their stated maturity.
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CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined below), each Holder
will have the right to require the repurchase of all or any part of such
Holder's Notes pursuant to the offer described below (the "Change of Control
Offer") at a purchase price equal to 101% of the aggregate principal amount of
the Notes to be repurchased plus accrued and unpaid interest and Liquidated
Damages, if any, thereon through the date of purchase.
Immediately following any Change of Control, the Company is required to mail
a notice to the Trustee and to each Holder stating: (i) that the Change of
Control Offer is being made pursuant to the Repurchase Upon Change of Control
covenant of the Indenture and that all Notes tendered will be accepted for
payment; (ii) the purchase price and the purchase date (the "Change of Control
Payment Date"), which may not be earlier than 30 days or later than 60 days
from the date the notice is mailed; (iii) that any Note not tendered will
continue to accrue interest; (iv) that, unless the Company defaults in the
payment therefor, all Notes accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest and Liquidated Damages, if any, on
and after the Change of Control Payment Date; (v) that holders electing to have
any Notes purchased pursuant to a Change of Control Offer will be required to
surrender those Notes to the Paying Agent at the address specified in the
notice prior to the close of business on the third business day preceding the
Change of Control Payment Date; (vi) that Holders will be entitled to withdraw
Notes they have tendered on the terms and conditions set forth in such notice;
and (vii) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered; provided that the portion of each Note purchased and each
such new Note issued must be in a principal amount of $1,000 and integral
multiples thereof.
On the Change of Control Payment Date, the Company will (i) accept for
payment all Notes or portions thereof tendered pursuant to the Change of
Control Offer and not withdrawn, (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Notes or portions thereof so
tendered and not withdrawn, and (iii) deliver or cause to be delivered to the
Trustee all Notes so tendered and not withdrawn together with an officer's
certificate specifying the Notes or portions thereof tendered to the Company.
The Paying Agent will promptly mail to each Holder of Notes so tendered and not
withdrawn payment in an amount equal to the purchase price for such Notes, and
the Trustee will promptly authenticate and mail to such Holder a new Note equal
in principal amount to any unpurchased portion of the Notes surrendered. The
Company will publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Payment Date.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes triggered by a Change of Control.
A "Change of Control" will be deemed to have occurred at such time as either
of the following events occurs:
(i) there is consummated any consolidation or merger of the Company (A)
in which the Company is not the continuing or surviving corporation or (B)
pursuant to which the Common Stock of the Company would be converted into
cash, securities or other property, in each case other than a consolidation
or merger of the Company in which the holders of the Common Stock
outstanding immediately prior to the consolidation or merger hold, directly
or indirectly, at least a majority of the common stock of the continuing or
surviving corporation immediately after such consolidation or merger or the
majority of the members of the board of directors of the surviving entity
immediately after such consolidation or merger are Continuing Directors; or
(ii) there is filed a report on Schedule 13D or 14D-1 (or any successor
schedule, form or report) pursuant to the Exchange Act, disclosing that any
person (defined, solely for the purposes of the Change of Control
provision, as the term "person" is used in Section 13(d)(3) or Section
14(d)(2) of the Exchange
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Act or any successor provision to either of the foregoing) has become the
beneficial owner (as the term "beneficial owner" is defined under Rule 13d-
3 or any successor rule or regulation promulgated under the Exchange Act)
of 50% or more of the combined voting power of all the Company's then
outstanding securities entitled to vote generally for the election of
directors; provided, however, that a person shall not be deemed to be the
beneficial owner of, or to own beneficially, (A) any securities tendered
pursuant to a tender or exchange offer made by or on behalf of such person
or any of such person's Affiliates or associates until such tendered
securities are accepted for purchase or exchange thereunder, or (B) any
securities if such beneficial ownership (1) arises solely as a result of a
revocable proxy delivered in response to a proxy or consent solicitation
made pursuant to the applicable rules and regulations under the Exchange
Act, and (2) is not also then reportable on Schedule 13D (or any successor
schedule) under the Exchange Act.
Notwithstanding the foregoing, a Change of Control shall not be deemed to
have occurred under clause (ii) of the immediately preceding paragraph solely
by virtue of the Company, any such Subsidiary thereof, any employee stock
ownership plan or any other employee benefit plan of the Company or any such
Subsidiary or any other person holding securities of the Company for or
pursuant to the terms of any such employee benefit plan, filing or becoming
obligated to file a report under or in response to Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report) under the Exchange Act,
disclosing beneficial ownership by it of securities of the Company, whether in
excess of 50% of the combined voting power of all the Company's then
outstanding securities entitled to vote generally for the election of directors
or otherwise.
The Change of Control purchase feature of the Notes may in certain
circumstances make more difficult or discourage a takeover of the Company and,
thus, the removal of incumbent management. The Change of Control purchase
feature, however, is not the result of management's knowledge of any specific
effort to accumulate shares of Common Stock or to obtain control of the Company
by means of a merger, tender offer, solicitation or otherwise, or part of a
plan by management to adopt a series of anti-takeover provisions. Instead, the
Change of Control purchase feature is a standard term contained in other
similar debt offerings and the terms of such feature result from negotiations
between the Company and the Initial Purchaser.
If a Change of Control were to occur, there can be no assurance that the
Company would have sufficient funds to pay the Change of Control purchase price
for all Notes tendered by the holders thereof. In addition, the Company's
ability to make such payment may be limited by the terms of its then-existing
borrowing and other agreements. Certain of the agreements relating to the
Company's Senior Indebtedness, including the Credit Agreement, have similar
change of control provisions that may have the effect of further limiting the
Company's ability to pay the Change of Control purchase price for Notes
tendered by the holders thereof. The failure of the Company to make such
payment to holders of Notes, if continued for 45 days after receipt of written
notice of Default from the Trustee or the holders of at least 25% of the
aggregate principal amount of the Notes then outstanding, specifying such
Default and requiring that it be remedied, would constitute an Event of Default
under the terms of the Indenture. See "--Events of Default and Remedies."
SUBORDINATION
The Notes will be general unsecured obligations of the Company, will be
subordinated in right of payment to the prior payment in full of all existing
and future Senior Indebtedness of the Company, and will be effectively
subordinated to the indebtedness of the Company's Subsidiaries. At January 31,
1996, after giving pro forma effect to the issuance and sale of the Private
Notes and the application of the net proceeds thereof to reduce outstanding
Senior Indebtedness of the Company, Senior Indebtedness of the Company and its
subsidiaries was approximately $168,700,000 (of which approximately $52,800,000
was indebtedness of the Company's Subsidiaries) and subordinated indebtedness
of the Company (including the Private Notes) was approximately $508,000,000.
Subject to certain restrictions, the Indenture permits the Company to incur
additional indebtedness, but, until such time as the Notes are rated Investment
Grade, prohibits the incurrence by the Company of any indebtedness that is
senior to the Notes and subordinate to Senior Indebtedness.
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Upon any bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its properties, or any assignment for the
benefit of creditors or marshalling of the assets and liabilities or the
Company or any distribution to creditors or a liquidation or dissolution of the
Company, the holders of Senior Indebtedness will be entitled to receive payment
in full in cash or, at the option of such holders, cash equivalents of all
obligations with respect to Senior Indebtedness, before the Holders receive any
payment of principal, premium or Liquidated Damages, if any, or interest on the
Notes or receive any distributions to which the Holders would otherwise be
entitled.
Upon the maturity of any Senior Indebtedness by lapse of time, acceleration
(unless waived, rescinded or annulled) or otherwise, all principal thereof and
interest thereon shall first be paid in full in cash, or such payment duly
provided for in cash or in a manner satisfactory to the holders of such Senior
Indebtedness, before any payment is made on account of principal, premium or
Liquidated Damages, if any, interest, fees or expenses on the Notes.
The Company may not, directly or indirectly, pay principal, premium or
Liquidated Damages, if any, or interest on the Notes and may not acquire any
Notes for cash or property or make any other distribution with respect to the
Notes if (i) a default in the payment of principal or interest on any Senior
Indebtedness occurs and is continuing (a "Payment Default") unless and until
such default has been cured or waived; or (ii) a default, other than a Payment
Default, on any Senior Indebtedness occurs and is continuing that permits the
holders (or the agent) of such Senior Indebtedness to accelerate its maturity
(a "Non-Payment Default"), and such default is either the subject of judicial
proceedings or the Trustee or the Paying Agent receives a notice of the default
from a person who may give it pursuant to the terms of the Indenture at least
two business days prior to the relevant payment date; provided, however, that
only one such notice relating to the same event of default or any other default
existing at the time of such notice under the Senior Indebtedness may be given
during any 365-consecutive-day period.
The Company shall resume payments on the Notes and may acquire them upon the
earlier of when (a) the default is cured or waived, or (b) in the case of a
default referred to in clause (ii) in the immediately preceding paragraph, the
179th day after receipt of the notice referred to therein if the default is not
the subject of judicial proceedings.
A Payment Default or Non-Payment Default with respect to the Senior
Indebtedness does not suspend the rights of the Trustee or the Holders to take
any action to accelerate the maturity of the Notes; provided, however, that all
Senior Indebtedness then or thereafter due shall be paid first. In addition,
any acceleration of the maturity of the Notes as a result of the failure by the
Company to make any payment of principal, premium or Liquidated Damages, if
any, or interest on the Notes as a result of the foregoing subordination
provisions shall be automatically rescinded if (i) all defaults on Senior
Indebtedness are permanently cured or waived and (ii) the payment or payments,
the omission of which gave rise to the Event of Default, is or are made within
179 days after the Trustee received notice of the default or defaults on Senior
Indebtedness and at the time of such recision no other Default or Event of
Default shall have occurred and be continuing. See "Events of Default and
Remedies."
As a result of the subordination provisions described above, in the event of
insolvency of the Company, funds that would otherwise be payable to Holders
will be paid or turned over to the holders of Senior Indebtedness to the extent
necessary to pay the Senior Indebtedness in full, and the Company may be unable
to make all payments due under the Notes. Additionally, in such event, Holders
may recover less ratably than general creditors of the Company or the general
creditors of the Company's Subsidiaries to whom the Notes are structurally
subordinated.
CERTAIN COVENANTS
Limitation on Restricted Payments. Until such time as the Notes are rated
Investment Grade, the Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, (i) declare or pay any dividend on, or
make any distribution in respect of, the Company's or any of its Subsidiaries'
Capital Stock
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or other Equity Interests, except to the extent any such dividend or
distribution is actually received by the Company or a Subsidiary thereof; (ii)
purchase, redeem or otherwise acquire or retire for consideration any Capital
Stock or other Equity Interests of the Company or any of its Subsidiaries
(other than Equity Interests of the Company's Wholly-owned Subsidiaries); or
(iii) voluntarily purchase, redeem or otherwise acquire or retire for
consideration, prior to a scheduled mandatory sinking fund payment date or
maturity date (including, but not limited to, by substantive or legal
defeasance), any Indebtedness of the Company that is junior in right of payment
to the Notes other than in connection with the refinancing of such Indebtedness
to the extent permitted by the Indenture and certain intercompany Indebtedness
(each such declaration, distribution, purchase, redemption, acquisition or
retirement being referred to as a "Restricted Payment") if, at the time of such
action, or after giving effect to such Restricted Payment, (a) an Event of
Default or a Default shall have occurred and be continuing; (b) such Restricted
Payment, together with the aggregate amount of all other Restricted Payments
declared or made after March 15, 1993, exceeds the sum of: (A) 50% of the
cumulative Consolidated Net Income (including any gains or losses attributable
to Asset Sales, net of related tax costs or tax benefits, as the case may be,
during the applicable reference period, but excluding non-cash charges
resulting from the adoption by the Company of SFAS 121 and/or other new
accounting standards consistent with GAAP), for the period commencing on March
1, 1993 through the last day of the fiscal quarter immediately preceding such
proposed Restricted Payment (or if Consolidated Net Income shall be a deficit,
minus 100% of such deficit); (B) the aggregate net cash proceeds and the fair
market value (as determined in good faith by the Board of Directors) of
marketable securities and other property, if any, received by the Company
(other than from a Subsidiary of the Company) from the issuance and sale of
either Capital Stock (other than Redeemable Stock) or Indebtedness that is
convertible into Capital Stock, to the extent such Indebtedness is converted
into Capital Stock after March 15, 1993; (C) the fair market value (as
determined in good faith by the Board of Directors) of any shares of Capital
Stock (other than Redeemable Stock) of the Company issued after March 15, 1993,
pursuant to a plan or other arrangement approved by the Compensation Committee
of the Board of Directors, to or for the benefit of any employee of the Company
or any of its Subsidiaries or to or by any employee stock ownership plan or
similar trust for the benefit of any such employee, in each case to the extent
such value is includable as compensation expense in the computation of
Consolidated Net Income; and (D) $45,000,000; or (c) the Company could not
incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the Limitation on Additional Indebtedness covenant described below.
The foregoing will not prohibit, so long as no Default or Event of Default
shall have occurred and be continuing, (i) the payment of any dividend within
60 days after the date of the declaration, if at the date of declaration
thereof, such payment would comply with such provisions; (ii) the declaration
or payment of any dividend on shares of Capital Stock payable solely in shares
of Capital Stock of the Company (other than Redeemable Stock); or (iii) the
declaration or payment of a regular quarterly dividend in respect of the
Capital Stock of the Company at a rate not to exceed to $0.10 per share.
Repurchase upon Change of Control. See "Change of Control" above.
Limitation on Other Senior Subordinated Debt. The Indenture provides that
until such time as the Notes are rated Investment Grade, the Company will not
incur, create, assume, guarantee or otherwise become liable for any
Indebtedness that is contractually subordinated in right of payment to any
Senior Indebtedness and contractually senior in right of payment to the Notes.
Limitation on Additional Indebtedness. Until such time as the Notes are rated
Investment Grade, the Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable with respect to
(collectively, an "incurrence") any Indebtedness, including, without
limitation, Acquired Indebtedness, but excluding Permitted Indebtedness;
provided, however, that the Company or any Subsidiary thereof shall be
permitted to incur any Indebtedness if (i) no Default or Event of Default shall
have occurred and be continuing after giving effect to the incurrence of such
Indebtedness and (ii) after giving pro forma effect thereto, the Consolidated
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Cash Flow/Fixed Charge Coverage Ratio for the four full fiscal quarters ending
immediately prior to the date of the incurrence of such additional Indebtedness
is at least 2.0 to 1.0.
Limitation on Indebtedness of Subsidiaries. In addition to the limitations
described in the Limitation on Additional Indebtedness covenant, until such
time as the Notes are rated Investment Grade, the Company will not permit its
Subsidiaries to incur any Indebtedness (other than Acquired Indebtedness) that
is subordinated to Senior Indebtedness in an amount in excess of $25,000,000 in
the aggregate at any time outstanding, unless such Indebtedness is also
contractually subordinated to the Notes.
Limitation on Liens. Until such time as the Notes are rated Investment Grade,
the Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien on
any of their respective assets, now owned or hereafter acquired, or any
properties or any income therefrom securing any Indebtedness that is pari passu
with or contractually subordinated in right of payment to the Notes other than
(i) Liens outstanding immediately prior to the date of the Indenture, including
Liens securing or arising under or in connection with Existing Indebtedness,
(ii) Permitted Liens, (iii) any extension, renewal or replacement (or
successive extensions, renewals or replacements) of Liens permitted by this
covenant; provided that the terms and conditions of any such extension, renewal
or replacement (or successive extension, renewal or replacement) are not less
favorable to the holders of the Notes than those relating to the Liens so
extended, renewed or replaced and no additional property or assets are
encumbered as a result of such extension, renewal or replacement (or successive
extension, renewal or replacement), (iv) the Lien granted to the Trustee
pursuant to the Indenture, and (v) Liens securing Acquired Indebtedness;
provided that such Liens attach solely to the assets of the acquired entity and
do not extend to or cover any assets of the Company or its Subsidiaries.
Payments for Consent. Neither the Company nor any of its Subsidiaries will,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Notes unless such consideration is offered
to be paid or agreed to be paid to all holders of the Notes which so consent,
waive or agree to amend in the time frame set forth in solicitation documents
relating to such consent, waiver or agreement.
Provision of Reports and Other Information. The Indenture provides that at
all times while any Note is outstanding, the Company will file with the
Commission all such reports and other information as would be required by
Section 13 or 15(d) of the Exchange Act. Within 15 days after the same are
filed with the Commission, the Company will file with the Trustee and supply to
each holder of the Notes, without cost, copies of such reports or other
information.
MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY ALL OF THE ASSETS
The Company will not consolidate with or into any Person or permit any Person
to merge with or into it or directly or indirectly transfer (by lease,
assignment, sale, conveyance or otherwise) all or substantially all of its
properties and assets, in a single transaction or through a series of related
transactions, to another Person or group of affiliated Persons or permit a
Subsidiary of the Company to enter into any such transaction or transactions if
such transaction or transactions would result in a direct or indirect transfer
(by lease, assignment, sale, conveyance or otherwise) of all or substantially
all of the assets of the Company and its Subsidiaries on a consolidated basis,
unless: (i) the Company shall be the continuing Person, or the Person (if other
than the Company) formed by such consolidation or into which the Company is
merged or to which the properties and assets of the Company, substantially as
an entirety, are transferred shall be a corporation organized and existing
under the laws of the United States or any State thereof or the District of
Columbia and shall expressly assume, by a supplemental indenture, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all of the
obligations of the Company under the Notes and Indenture; (ii) immediately
before and immediately after giving effect to such transaction, no Event of
Default and no Default shall have occurred and be continuing; (iii) immediately
after giving effect to such transaction on a
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pro forma basis, the Consolidated Net Worth of the surviving entity is at least
equal to the Consolidated Net Worth of the Company immediately prior to such
transaction; and (iv) until such time as the Notes are rated Investment Grade,
the surviving entity, after giving pro forma effect to such transaction, could
incur $1.00 of additional Indebtedness pursuant to the Limitation on Additional
Indebtedness covenant.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in payment of interest on the Notes; (ii)
default in payment when due of principal of or premium or Liquidated Damages,
if any, on the Notes, whether at maturity, or upon acceleration, redemption or
otherwise; (iii) failure by the Company to comply in any respect with any of
its other agreements in the Indenture or the Notes and such Default continues
for 45 days after receipt of a written notice from the Trustee or holders of at
least 25% of the aggregate principal amount of the Notes then outstanding,
specifying such Default and requiring that it be remedied; (iv) default under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money borrowed by
the Company or any of its Subsidiaries (or the payment of which is guaranteed
by the Company or any of its Subsidiaries), whether such Indebtedness is
existing on the date of the Indenture or thereafter created (other than
Indebtedness of the Company or any of its Subsidiaries to the Company or
between such Subsidiaries), if as a result of such default the maturity of such
Indebtedness has been accelerated prior to its express maturity, the Trustee
has received notice of such acceleration from the Company or any holder of the
Notes or has otherwise obtained actual knowledge thereof and the principal
amount of such Indebtedness, together with the principal amount of any other
such Indebtedness the maturity of which has been accelerated, aggregates
$25,000,000 or more; (v) final judgments for the payment of money which in the
aggregate exceed $25,000,000 shall be rendered against the Company or any
Subsidiary thereof and shall remain unstayed or undischarged for a period of 60
days and the Trustee shall receive notice thereof from the Company or any
holder of the Notes or shall otherwise obtain actual knowledge thereof; and
(vi) certain events of bankruptcy or insolvency with respect to the Company.
If an Event of Default occurs and is continuing and if it is known to the
Trustee, the Trustee shall mail to each holder of the Notes notice of the Event
of Default within 90 days after it becomes known to the Trustee, unless such
Event of Default has been cured or waived. Except in the case of an Event of
Default in the payment of principal of, premium or Liquidated Damages, if any,
or interest on any Note, the Trustee may withhold the notice if and so long as
its Board of Directors, the executive committee of its Board of Directors or a
committee of Trust Officers in good faith determines that withholding the
notice is in the interest of the holders of the Notes.
If an Event of Default (other than an Event of Default resulting from
bankruptcy, insolvency or reorganization) occurs and is continuing, the Trustee
or the holders of at least 25% of the principal amount of the Notes then
outstanding may, by written notice to the Company (and to the Trustee if such
notice is given by such holders) (the "Acceleration Notice"), and the Trustee
at the request of such holders shall, declare all unpaid principal of, premium
and Liquidated Damages, if any, and accrued interest on such Notes to be due
and payable immediately. If an Event of Default resulting from certain events
of bankruptcy, insolvency or reorganization occurs, then all unpaid principal
of, premium and Liquidated Damages, if any, and accrued interest on the Notes
then outstanding shall ipso facto become and be immediately due and payable
without any declaration, notice or other act on the part of the Trustee or any
holder. Subject to the subordination provisions described above, the holders of
at least a majority in principal amount of the Notes by notice to the Trustee
may rescind an acceleration and its consequences, except an acceleration due to
default in payment of principal or interest on the Notes upon conditions
provided in the Indenture. Subject to certain restrictions set forth in the
Indenture, the holders of at least a majority in principal amount of the
outstanding Notes by notice to the Trustee may waive an existing Default or
Event of Default and its consequences, except a Default in the payment of
principal of, premium or Liquidated Damages, if any, or interest on, such Notes
or a Default under a provision which requires consent of all holders to amend.
When
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a Default or Event of Default is waived, it is cured and ceases. A holder of
Notes may not pursue any remedy with respect to the Indenture or the Notes
unless: (i) the holder gives to the Trustee written notice of a continuing
Event of Default; (ii) the holders of at least 25% in principal amount of such
Notes outstanding make a written request to the Trustee to pursue the remedy;
(iii) such holder or holders offer to the Trustee indemnity or security
satisfactory to the Trustee against any loss, liability or expense; (iv) the
Trustee does not comply with the request within 30 days after receipt of the
request and the offer of indemnity or security; and (v) during such 30-day
period the holders of a majority in principal amount of the outstanding Notes
do not give the Trustee a direction which is inconsistent with the request.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default to deliver a statement to the
Trustee specifying such Default or Event of Default.
DEFEASANCE AND DISCHARGE OF THE INDENTURE AND THE EXCHANGE NOTES
If the Company irrevocably deposits, or causes to be deposited with the
Trustee or the Paying Agent, at any time prior to the stated maturity of the
Notes, as trust funds in trust, money or direct noncallable obligations of or
guaranteed by the United States of America in amounts (including interest, but
without consideration of any reinvestment of such interest) and maturities
sufficient to pay timely and discharge the entire principal of the then
outstanding Notes and all interest then due in cash, the Indenture shall cease
to be of further effect as to all outstanding Notes (except, among other
things, as to (i) remaining rights of registration of transfer and substitution
and exchange of the Notes, (ii) rights of holders to receive payment of
principal of and interest on the Notes, and (iii) the rights, obligations and
immunities of the Trustee).
TRANSFER AND EXCHANGE
A holder may transfer or exchange Notes in accordance with the Indenture. The
Registrar may require a holder, among other things, to furnish appropriate
endorsements and transfer documents, and to pay any taxes and fees required by
law or permitted by the Indenture.
The registered holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Notes may be amended or
supplemented with the consent of the holders of at least a majority in
aggregate principal amount of the Notes then outstanding, and any existing
default or compliance with any provision may be waived (other than a continuing
Default or Event of Default in the payment of principal or interest on any
Note) with the consent of the holders of a majority in principal amount of the
then outstanding Notes.
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting holder of Notes) (i) reduce
the percentage of principal amount of the Notes whose holders must consent to
an amendment or waiver, (ii) change the fixed maturity of the principal of,
premium or Liquidated Damages, if any, or any interest on, any Note or alter
the redemption provisions with respect thereto, (iii) make any change in the
subordination provisions of the Indenture that adversely affects the rights of
any holders of the Notes or any change to any other section of the Indenture
that adversely affects the rights of any holder of the Notes under the
subordination provisions of the Indenture, (iv) waive a default in the payment
of the principal of, premium or Liquidated Damages, if any, or interest on, any
Note, (v) make any change to the Repurchase Upon Change of Control covenant of
the Indenture or (vi) make any change in the foregoing.
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Notwithstanding the foregoing, without the consent of any holder of the
Notes, the Company and the Trustee may amend or supplement the Indenture or the
Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to holders of the Notes
in the case of a merger or consolidation, to make any change that does not
adversely affect the rights of any holder of the Notes or to comply with any
requirement of the Commission in connection with the qualification of the
Trustee under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, or apply to the Commission for
permission to continue or resign.
The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any of the holders of the Notes, unless they shall have
offered to the Trustee security or indemnity satisfactory to it against any
loss, liability or expense.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the Notes will be represented by one or more
permanent global certificates in definitive, fully registered form (each a
"Global Note"). Each Global Note will be deposited with, or on behalf of, the
Depositary and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Note Holder").
See "The Exchange Offer--Book-Entry Transfer."
Notes that are issued as described below under "Certificated Securities" to a
holder of Notes (a "Non-Global Purchases"), will be issued in the form of
registered definitive certificates (the "Certificated Securities"). Upon the
transfer to a "qualified institutional buyer" (as defined in Rule 144A under
the Securities Act) of Certificated Securities initially issued to a Non-Global
Purchaser, such Certificated Securities may, unless the Global Note has
previously been exchanged for Certificated Securities, be exchanged for an
interest in the Global Note representing the principal amount of Notes being
transferred.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchaser), banks and trust companies, clearing
corporations and certain other organizations. Access to the Depositary's system
is also available to other entities such as banks, brokers, dealers and trust
companies (collectively, the "Indirect Participants" or the "Depositary's
Indirect Participants") that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly. Persons who are not
Participants may beneficially own securities held by or on behalf of the
Depositary only through the Depositary's Participants or the Depositary's
Indirect Participants.
The Company expects that pursuant to procedures established by the Depositary
(i) upon deposit of the Global Note, the Depositary will credit the accounts of
Participants designated by the Initial Purchaser with portions of the principal
amount of the Global Note and (ii) ownership of the Notes evidenced by the
Global
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Note will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by the Depositary (with respect to the
interests of the Depositary's Participants), the Depositary's Participants and
the Depositary's Indirect Participants. Prospective purchasers are advised that
the laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer Notes evidenced by the Global Note will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of
any Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by
the Global Note will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any
aspect of the records of the Depositary or for maintaining, supervising or
reviewing any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium and Liquidated Damages, if
any, and interest on any Notes registered in the name of the Global Note Holder
on the applicable record date will be payable by the Trustee to or at the
direction of the Global Note Holder in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee may treat the persons in whose names Notes, including the Global Note,
are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of Notes (including principal, premium and Liquidated Damages, if any,
and interest). The Company believes, however, that it is currently the policy
of the Depositary to immediately credit the accounts of the relevant
Participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant security as shown on the
records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in the
Global Note may, upon request to the Trustee, exchange such beneficial interest
for Notes in the form of Certificated Securities. Upon any such issuance, the
Trustee is required to register such Certificated Securities in the name of,
and cause the same to be delivered to, such person or persons (or the nominee
of any thereof). In addition, if (i) the Company notifies the Trustee in
writing that the Depositary is no longer willing or able to act as a depositary
and the Company is unable to locate a qualified successor within 90 days or
(ii) the Company, at its option, notifies the Trustee in writing that it elects
to cause the issuance of Notes in the form of Certificated Securities under the
Indenture, then, upon surrender by the Global Note Holder of its Global Note,
Notes in such form will be issued to each person that the Global Note Holder
and the Depositary identify as being the beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference is
made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person (i) assumed in
connection with an acquisition of assets or properties from such Person or (ii)
existing at the time such Person becomes a Subsidiary of any other Person (in
each case other than any Indebtedness incurred in connection with, or in
contemplation of, such acquisition or such Person becoming such a Subsidiary).
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. A Person shall be deemed to "control"
(including the correlative meanings, the terms "controlling," "controlled by,"
and "under common control with") another Person if the controlling Person (a)
possesses, directly or indirectly, the power to direct, or cause the direction
of, the management or policies of the controlled Person, whether through
ownership of voting securities, by agreement or otherwise, or (b) owns,
directly or indirectly, 10% or more of any class of the issued and outstanding
equity securities of the controlled Person.
"Asset Sale" means, with respect to any Person, the sale, lease, conveyance,
disposition or other transfer by such Person of any of its businesses
(including by way of a sale-and-leaseback and including the sale or other
transfer of any of the Capital Stock of any Subsidiary of such Person), in a
single transaction or through a series of related transactions, for aggregate
consideration received by such Person or a Subsidiary of such Person, net of
the out-of-pocket costs relating thereto (including, without limitation, legal,
accounting and investment banking fees and sales commissions), in excess of
$50,000,000. For purposes of this definition, consideration shall include,
without limitation, any indebtedness for borrowed money of such Person or such
Subsidiary that is assumed by the transferee of any assets or any such
indebtedness of any Subsidiary of the Company whose stock is purchased by the
transferee.
"Average Life" means, as of the date of determination, with respect to any
debt security, the quotient obtained by dividing (i) the sum of the products of
the numbers of years from the date of determination to the dates of each
successive scheduled principal payment (assuming the exercise by the obligor of
such debt security of all unconditional (other than as to the giving of notice)
extension options of each such scheduled payment date) of such debt security
multiplied by the amount of such principal payment by (ii) the sum of all such
principal payments.
"Capital Lease Obligation" means, at the time any determination thereof is to
be made, the amount of the liability in respect of a capital lease which would
at such time be so required to be capitalized on the balance sheet in
accordance with GAAP.
"Capital Stock" means any and all shares, interests, participation, rights or
other equivalents (however designated) of corporate stock (including common and
preferred stock) or partnership interests.
"Cash Equivalents" means (i) Marketable Equity Securities and (ii) Investment
Grade Securities.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the sum of, without duplication, (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) Consolidated Income Tax Expense and (iv) depreciation
and amortization expenses, all as determined on a consolidated basis in
accordance with GAAP consistently applied.
"Consolidated Cash Flow/Fixed Charge Coverage Ratio" means, with respect to
any Person for any period, the ratio of Consolidated Cash Flow to Consolidated
Fixed Charges.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum of (i) Consolidated Interest Expense and (ii) all cash
preferred dividends.
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"Consolidated Income Tax Expense" means, with respect to any Person for any
period, the provision for federal, state, local and foreign income taxes of
such Person and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP consistently applied.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication, the sum of (i) the interest expense of such Person
and its Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP consistently applied, including, without limitation, (a)
any amortization of debt discount, (b) the net cost of Interest Rate Protection
Obligations (including any amortization of discounts), (c) the interest portion
of any deferred payment obligation, (d) all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing and (e) all accrued interest, and (ii) the interest component of
Capital Lease Obligations paid, accrued and/or scheduled to be paid or accrued
by such Person and its Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate net income (or loss) of such Person and its Subsidiaries for such
period, before extraordinary items and the cumulative effect of a change in
accounting principles (as each such term is defined under GAAP) of such Person
and its Subsidiaries, on a consolidated basis, determined in accordance with
GAAP consistently applied, adjusted by excluding (i) any net gains or losses in
respect of disposition of assets other than in the ordinary course of business;
(ii) any gains or losses from currency exchange transactions; (iii) any gains
or losses realized upon the termination of any employee pension benefit plan;
(iv) any gains or losses realized upon the refinancing of any of such Person's
Indebtedness; (v) any settlements or judgments with respect to any litigation
not in the ordinary course of business; (vi) any gains or losses arising from
the destruction of property due to fire or other casualty; (vii) any gains or
losses arising from the revaluation of property or assets; (viii) the net
income (or loss) accounted for by the equity method of accounting, except for
dividends or other distributions actually received by such Person or its
Subsidiaries (provided that for purposes of any calculation of the Consolidated
Cash Flow/Fixed Charge Coverage Ratio, Consolidated Net Income for such Person
and its Subsidiaries shall exclude the net income (or loss) otherwise included
pursuant to clause (viii) hereof); and (ix) the net income of any Subsidiary of
such Person to the extent that such net income has any restrictions or
encumbrances on making distributions to such Person.
"Consolidated Net Worth" means, at any date of determination, the sum of the
Capital Stock and additional paid-in capital plus retained earnings (or minus
accumulated deficit) of any Person and its Subsidiaries on a consolidated
basis, excluding amounts attributable to Redeemable Stock and excluding charges
to net worth due to the prepayment of the Credit Agreement, each item to be
determined in accordance with GAAP consistently applied.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Credit Agreement" means the $650,000,000 Credit and Guarantee Agreement,
dated as of November 2, 1994, as amended from time to time, by and among the
Company, certain Subsidiaries of the Company, as Guarantors, Bank of America
National Trust and Savings Association, as administrative agent and bid agent,
and the banks and other financial institutions that are signatories thereto,
and any refinancings or replacements thereof providing for Indebtedness of up
to $700,000,000, less, in the case of any such refinancings or replacements,
the amount of all permanent reductions thereunder; provided, however, under no
circumstances will such permanent reductions reduce the amount of Indebtedness
permitted under clause (ii) of the definition of "Permitted Indebtedness" below
$500,000,000.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
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"Domestic Credit Facilities" means any U.S.-dollar denominated credit
facilities providing for extensions of credit to the Company or any domestic
Subsidiary thereof in an aggregate amount not exceeding the credit line
originally available under the Credit Agreement, less the amount of all
permanent commitment reductions under the Credit Agreement.
"8 3/4% Notes" means the Company's 8 3/4% Senior Subordinated Notes due April
1, 2003.
"8 3/4% Note Indenture" means the Indenture, dated as of March 15, 1993,
between the Company and Citibank, N.A., as trustee, pursuant to which the 8
3/4% Notes were issued.
"Equity Interest" means Capital Stock, warrants, options or other rights, to
acquire Capital Stock (but excluding any debt security which is convertible
into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence on the date of this Indenture.
"Foreign Credit Facilities" means any foreign-currency denominated credit
facilities providing for extensions of credit to the Company or any Subsidiary
thereof or U.S.-dollar denominated extensions of credit to any foreign
Subsidiary of the Company, in amounts not exceeding, in the aggregate, the
credit lines of such facilities existing on the date of this Indenture but in
no event greater than $100,000,000.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
from time to time.
"Indebtedness" of any person means any indebtedness, contingent or otherwise,
in respect of borrowed money (whether or not the recourse of the lender is to
the whole of the assets of such Person or only to a portion thereof), or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement obligations with respect thereto) or representing the
balance deferred and unpaid of the purchase price of any property (including
pursuant to Capital Lease Obligations), if and to the extent any of the
foregoing indebtedness would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP (except that any such balance that
constitutes a trade payable and/or an accrued liability arising in the ordinary
course of business shall not be considered Indebtedness), and shall also
include, to the extent not otherwise included, any Capital Lease Obligations,
the maximum fixed repurchase price of any Redeemable Stock, indebtedness
secured by a Lien to which the property or assets owned or held by such Person
is subject, whether or not the obligations secured thereby shall have been
assumed, guarantees of items that would be included within this definition to
the extent of such guarantees (exclusive of whether such items would appear
upon such balance sheet), and net liabilities in respect of Interest Rate
Protection Obligations. For purposes of the preceding sentence, the maximum
fixed repurchase price of any Redeemable Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Redeemable Stock as if such Redeemable Stock were repurchased on any date on
which Indebtedness shall be required to be determined pursuant to the
Indenture, provided that if such Redeemable Stock is not then permitted to be
repurchased, the repurchase price shall be the book value of such Redeemable
Stock. The amount of Indebtedness of any person at any date shall be, without
duplication, (i) the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability of any such contingent
obligations at such date and (ii) in the case of Indebtedness of others secured
by a Lien to which the property or assets owned or held by such Person is
subject, the lesser of the fair market value at such date of any asset subject
to a Lien securing the Indebtedness of others and the amount of the
Indebtedness secured.
"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest
on a stated notional
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amount in exchange for periodic payments made by such Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Investment Grade" means a rating by S&P of BBB- or higher or by Moody's of
Baa3 or the equivalent thereof by S&P or Moody's.
"Investment Grade Securities" means (i) any evidence of indebtedness,
maturing not more than 180 days after the date of acquisition, issued or fully
guaranteed or insured by the United States of America, or an instrumentality or
agency thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof), (ii) any certificate of deposit,
overnight bank deposit or bankers acceptance, maturing not more than 180 days
after the date of acquisition, issued by, or time deposit of, a commercial
banking institution which has capital and surplus in excess of $500,000,000
rated, at the time as of which any investment therein is made, A-1 or better by
S&P or P-1 or better by Moody's or the equivalent of such rating by a successor
rating agency, (iii) commercial paper, maturing not more than 90 days after the
date of acquisition, issued by a corporation (other than an Affiliate or
Subsidiary of the Company) organized and existing under the laws of the United
States of America or any State thereof or the District of Columbia which is
rated, at the time as of which any Investment therein is made, P-1 or better by
Moody's or A-1 or better by S&P or the equivalent of such rating by a successor
rating agency, (iv) money market funds issued or offered by any domestic
commercial bank which has capital and surplus in excess of $500,000,000 and (v)
any other debt instrument rated, at the time as of which any investment therein
is made, BBB- or better by S&P or Baa-3 or better by Moody's or the equivalent
of such rating by a successor rating agency.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give any security interest in and any filing or other agreement to give
any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"Permitted Indebtedness" means (i) prior to any refinancing or replacement of
the Credit Agreement as in effect on March 5, 1996, (a) Indebtedness under the
Domestic Credit Facilities or any refinancing or replacement thereof and (b)
Indebtedness under the Foreign Credit Facilities or any refinancing or
replacement thereof; (ii) subsequent to any refinancings or replacements of the
Credit Agreement as in effect on March 5, 1996, Indebtedness under such
refinancings or replacements; (iii) Existing Indebtedness; (iv) Indebtedness
represented by the Notes; (v) Interest Rate Protection Obligations covering
Indebtedness (which Indebtedness (A) bears interest at fluctuating interest
rates and (B) is otherwise permitted to be incurred under the Limitation on
Additional Indebtedness covenant) to the extent that the notional principal
amount of such Interest Rate Protection Obligations does not exceed the
principal amount of the Indebtedness to which such Interest Rate Protection
Obligations relate; (vi) Indebtedness of any Subsidiary of the Company to the
Company or any other Subsidiary of the Company and Indebtedness of the Company
to any Subsidiary of the Company of which, at the time such Indebtedness is
created or incurred, the Company owns or controls, directly or indirectly, at
least 66 2/3% of the combined voting power of all of such Subsidiary's then
outstanding Capital Stock; (vii) Indebtedness arising from guarantees of
Indebtedness incurred in the ordinary course of business to suppliers,
licensees, franchisees or customers; (viii) Indebtedness arising from
performance bonds provided by the Company in the ordinary course of business;
(ix) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except in
the case of daylight overdrafts) drawn against funds in the ordinary course of
business; provided, however, that such Indebtedness is extinguished within five
days of incurrence; (x) Indebtedness represented by letters of credit issued in
the ordinary course of business, and not issued pursuant to the Domestic Credit
Facilities or the Foreign Credit Facilities, or any refinancings thereof, or
subsequent to any refinancing or replacement of the Credit Agreement as in
effect on March 5, 1996, pursuant to such refinancings or replacements, in an
aggregate principal amount not to exceed $50,000,000 at any time; (xi) other
Indebtedness
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in an amount not to exceed $65,000,000 at any time; and (xii) Indebtedness, the
proceeds of which are used to redeem, refund, replace, reduce, extend,
discharge or otherwise retire for value or refinance any Indebtedness of the
Company or a Subsidiary thereof (such new Indebtedness being "Refinancing
Indebtedness") not to exceed the amount (or, if such Refinancing Indebtedness
is issued at a price less than the principal amount thereof, with an original
issue price) so refinanced (plus accrued interest, premium, if any, and
reasonable fees and expenses related thereto); provided, however, that (a) such
Refinancing Indebtedness shall rank in right of payment to the Notes at least
to the same extent as the Indebtedness to be refinanced, (b) such Refinancing
Indebtedness shall have an Average Life and stated maturity equal to, or
greater than, the Average Life and stated maturity of the Indebtedness to be
refinanced and (c) the proceeds of such Refinancing Indebtedness, if incurred
by a Subsidiary of the Company, shall not be used to refinance (x) Indebtedness
of the Company or (y) Indebtedness of another Subsidiary of the Company that is
subordinated to Senior Indebtedness.
"Permitted Liens" means, with respect to any Person, (i) pledges or deposits
by such Person under workmen's compensation laws, unemployment insurance laws
or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness) or leases to
which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States Government
bonds to secure surety or appeal bonds to which such Person is a party, or
deposits as security for contested taxes or for the payment of rent, (ii) Liens
(as defined) imposed by law, such as carriers', warehousemen's and mechanics'
liens, and bankers' liens, (iii) Liens for taxes not yet subject to penalties
for non-payment or which are being contested in good faith and by appropriate
proceedings, if adequate reserves, as may be required by GAAP, shall have been
made therefor, (iv) Liens upon specific items of inventory or other goods and
proceeds of any Person securing the Person's obligations in respect of banker's
acceptances issued or created for the account of such Person to facilitate the
shipping or storage of such inventory or other goods, (v) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods, (vi) Liens arising
out of consignment or similar arrangements for the sale of goods entered into
by the Company or any of its Subsidiaries in the ordinary course of business in
accordance with the past practices of the Company, and each of its
Subsidiaries, (vii) Liens arising from filing UCC financing statements
regarding leases (other than capital leases), (viii) Liens arising in
connection with or out of any commercial letters of credit, (ix) such other
nonconsensual Liens as may arise in the ordinary course of business of the
Company or any of its Subsidiaries and as do not materially impair the use of
the property subject thereto in the course of such business, (x) Liens in favor
of issuers of surety bonds (other than to satisfy or stay any judgment or
judgments in excess of $1,000,000 individually or $3,000,000 in the aggregate)
issued pursuant to the request of and for the account of such Person in the
course of its business, (xi) Liens in connection with any legal proceedings
(including legal proceedings instituted by the Company or any of its
Subsidiaries) which are being contested in good faith and by appropriate
proceedings, including appeals of judgments as to which a stay of execution
shall have been issued, provided that adequate reserves have been established
with respect thereto in accordance with GAAP and no property of the Company or
any of its Subsidiaries is in imminent danger of being lost or forfeited as a
result thereof, and (xii) survey exceptions, encumbrances, easements or
reservations of, or rights of others for, rights of way, sewers, electric
lines, telegraph and telephone lines and other similar purposes, or zoning or
other restrictions as to the use of real properties or Liens incidental to the
conduct of the business of such Person or to the ownership of its properties.
"Person" means any individual, corporation, partnership, joint venture,
incorporated or unincorporated association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.
"Redeemable Stock" means any Equity Interest which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable before the stated maturity of the Notes), or upon the happening of
any event, matures or is mandatorily redeemable, in whole or in part, prior to
the stated maturity of the Notes.
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"Senior Indebtedness" means the principal of, premium, if any, and interest
on any Indebtedness of the Company, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed, unless, in
the case of any particular Indebtedness, the instrument under which such
Indebtedness is created, incurred, assumed or guaranteed expressly provides
that such Indebtedness shall not be senior or superior in right of payment to
the Notes. Without limiting the generality of the foregoing, "Senior
Indebtedness" shall include the principal of, premium, if any, and interest on
all obligations of every nature of the Company from time to time owed to the
lenders under the Credit Agreement, including, without limitation, principal of
and interest on, and all fees and expenses payable under the Credit Agreement.
Notwithstanding anything to the contrary contained in this Indenture or the
Notes, "Senior Indebtedness" shall not include any Indebtedness represented by
the 8 3/4% Notes.
"SFAS 121" means Statement No. 121--Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of--issued in March 1995
by the Financial Accounting Standards Board.
"Subsidiary" means any corporation, association or other business entity of
which more than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"Wholly-owned Subsidiary" of any Person means any Subsidiary of such Person
to the extent the entire voting share capital of such Subsidiary is owned by
such Person (either directly or indirectly through Wholly-owned Subsidiaries).
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain federal income tax
considerations relevant to the exchange of Private Notes for Exchange Notes,
but does not purport to be a complete analysis of all potential tax effects.
The discussion is based upon the Internal Revenue Code of 1986, as amended,
Treasury regulations, Internal Revenue Service rulings and pronouncements and
judicial decisions now in effect, all of which are subject to change at any
time by legislative, judicial or administrative action. Any such changes may be
applied retroactively in a manner that could adversely affect a holder of the
Exchange Notes. The description does not consider the effect of any applicable
foreign, state, local or other tax laws or estate or gift tax considerations.
EACH HOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES TO IT OF EXCHANGING PRIVATE NOTES FOR EXCHANGE NOTES,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
The exchange of Private Notes for Exchange Notes should not be an exchange or
otherwise a taxable event to a holder for federal income tax purposes.
Accordingly, a holder should have the same adjusted issue price, adjusted basis
and holding period in the Exchange Notes as it had in the Private Notes
immediately before the exchange.
56
<PAGE>
PLAN OF DISTRIBUTION
Based on an interpretation by the staff of the Commission set forth in no-
action letters issued to third parties, the Company believes that the Exchange
Notes issued pursuant to the Exchange Offer in exchange for Private Notes may
be offered for resale, resold and otherwise transferred by a holder thereof
(other than (i) an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act, (ii) a broker-dealer who acquired Private Notes
directly from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act or (iii) a broker-dealer who
acquired Private Notes as a result of market making or other trading
activities), without compliance with the registration and prospectus delivery
requirements of the Securities Act; provided that the holder is acquiring
Exchange Notes in the ordinary course of its business and is not participating,
and has no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes. Holders of Private Notes wishing to accept
the Exchange Offer must represent to the Company, as required by the
Registration Rights Agreement, that such conditions have been met. The Company
believes that none of the registered holders of the Private Notes is an
affiliate (as such term is defined in Rule 405 under the Securities Act) of the
Company.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Private Notes must acknowledge that it will deliver a prospectus
in connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Private Notes, where such Private Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed to make this Prospectus (as it
may be amended or supplemented) available to any broker-dealer, upon request,
for use in connection with any such resale, for a period of one year after the
Registration Statement is declared effective by the Commission or until such
earlier date on which all the Exchange Notes are freely tradeable. However, any
broker-dealer who acquired the Notes directly from the Company may not fulfill
its prospectus delivery requirements with this Prospectus, but must comply with
the registration and prospectus delivery requirements of the Securities Act.
The Company will not receive any proceeds from any sale of the Exchange Notes
by broker-dealers or any other persons. Exchange Notes received by broker-
dealers for their own accounts pursuant to the Exchange Offer may be sold for
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes
or a combination of such methods of resale, at market prices prevailing at the
time of such resale, at prices related to such prevailing market prices or at
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or purchasers of any
such Exchange Notes. Any broker-dealer that resells Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in the distribution of such Exchange Notes
may be deemed to be an "underwriter" within the meaning of the Securities Act
and any profit on any such resale of Exchange Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
By acceptance of this Exchange Offer, each broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer agrees that, upon receipt of
notice from the Company of the happening of any event which makes any statement
in the Prospectus untrue in any material respect or which requires the making
of any changes in the Prospectus in order to make the statements therein not
misleading (which notice the Company agrees to deliver promptly to such broker-
dealer), such broker-dealer will suspend use of the Prospectus until the
Company has amended or supplemented the Prospectus to correct such misstatement
or omission and
57
<PAGE>
has furnished copies of the amended or supplemented Prospectus to such broker-
dealer. If the Company shall give any such notice to suspend the use of the
Prospectus, it shall extend the one-year period referred to above by the number
of days during the period from and including the date of the giving of such
notice to and including the date when the broker-dealers shall have received
copies of the supplemented or amended Prospectus necessary to permit resales of
the Exchange Notes.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders (including any broker-dealers) and certain parties
related to the holders against certain liabilities, including liabilities under
the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Exchange Notes will
be passed upon for the Company by Stroock & Stroock & Lavan, New York, New
York, special counsel to the Company.
EXPERTS
The consolidated balance sheets of Mark IV Industries, Inc. and its
subsidiaries as of February 28, 1995 and 1994 and the consolidated statements
of income, stockholders' equity and cash flows for each of the three years in
the period ended February 28, 1995, included in this Prospectus or incorporated
herein by reference to the Company's Annual Report on Form 10-K for the fiscal
year ended February 28, 1995, as amended, have been examined by Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
The consolidated balance sheets of Purolator Products Company and its
subsidiaries as of December 31, 1993 and 1992 and the consolidated statements
of income, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1993, included or incorporated by reference in
this Prospectus, to the extent and for the periods indicated in their report,
have been audited by Arthur Andersen LLP, independent public accountants, and
are included herein in reliance upon the authority of said firm as experts in
giving said report. Reference is made to said report, which includes an
explanatory paragraph with respect to the change in the method of accounting
for post-retirement benefit costs other than pensions, effective January 1,
1991, as discussed in Note 5 to Purolator's audited consolidated financial
statements included elsewhere herein.
58
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Audited Consolidated Financial Statements of Mark IV as of February
28, 1995:
Report of Independent Accountants.................................. F-2
Consolidated Balance Sheets........................................ F-3
Consolidated Statements of Income.................................. F-4
Consolidated Statements of Stockholders' Equity.................... F-5
Consolidated Statements of Cash Flows.............................. F-6
Notes to Consolidated Financial Statements......................... F-7
Unaudited Consolidated Financial Statements of Mark IV as of November
30, 1995:
Consolidated Condensed Balance Sheets.............................. F-22
Consolidated Statements of Income and Retained Earnings............ F-23
Consolidated Statements of Cash Flows.............................. F-25
Notes to Consolidated Financial Statements......................... F-26
Audited Consolidated Financial Statements of Purolator as of December
31, 1993:
Report of Independent Accountants.................................. F-29
Consolidated Balance Sheets........................................ F-30
Consolidated Statements of Operations.............................. F-31
Consolidated Statements of Stockholders' Equity.................... F-32
Consolidated Statements of Cash Flows.............................. F-33
Notes to Consolidated Financial Statements......................... F-34
Unaudited Consolidated Financial Statements of Purolator as of Sep-
tember 30, 1994:
Condensed Consolidated Statements of Operations.................... F-52
Condensed Consolidated Balance Sheet............................... F-53
Condensed Consolidated Statements of Cash Flows.................... F-54
Notes to Condensed Consolidated Financial Statements............... F-55
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Mark IV Industries, Inc.
We have audited the accompanying consolidated balance sheets of Mark IV
Industries, Inc. and Subsidiaries as of February 28, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended February 28, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Mark IV
Industries, Inc. and Subsidiaries as of February 28, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended February 28, 1995, in conformity with
generally accepted accounting principles.
As discussed in Note 11 to the consolidated financial statements, in 1994
the Company changed its method of accounting for postretirement benefits other
than pensions.
Coopers & Lybrand L.L.P.
Rochester, New York
March 30, 1995
F-2
<PAGE>
MARK IV INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash................................................. $ 800 $ 500
Accounts receivable.................................. 383,700 275,100
Inventories.......................................... 361,900 265,000
Other current assets................................. 58,600 42,100
---------- ----------
Total current assets............................... 805,000 582,700
Pension and other non-current assets................... 197,100 138,200
Property, plant and equipment, net..................... 487,900 365,300
Cost in excess of net assets acquired.................. 356,400 196,100
---------- ----------
TOTAL ASSETS....................................... $1,846,400 $1,282,300
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current maturities of debt......... $ 67,300 $ 45,000
Accounts payable..................................... 174,000 99,700
Compensation related liabilities..................... 70,400 43,100
Accrued interest..................................... 13,800 13,600
Other current liabilities............................ 99,800 68,500
---------- ----------
Total current liabilities.......................... 425,300 269,900
---------- ----------
Long-Term Debt:
Senior debt.......................................... 352,700 195,000
Subordinated debt.................................... 258,000 372,200
---------- ----------
Total long-term debt............................... 610,700 567,200
---------- ----------
Other non-current liabilities.......................... 174,900 99,800
---------- ----------
Stockholders' Equity:
Common stock--$.01 par value; Authorized 100,000,000
shares; Issued 59,900,000 shares in 1995 and
44,800,000 shares in 1994........................... 600 400
Additional paid-in capital........................... 550,200 261,500
Retained earnings.................................... 90,800 88,600
Foreign currency translation adjustment.............. (6,100) (5,100)
---------- ----------
Total stockholders' equity......................... 635,500 345,400
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY........... $1,846,400 $1,282,300
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED THE LAST DAY OF FEBRUARY 1995, 1994 AND 1993
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
1995* 1995 1994 1993
----------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales...................... $1,913,300 $1,603,300 $1,244,200 $1,085,700
---------- ---------- ---------- ----------
Operating costs:
Cost of products sold........ 1,285,200 1,060,000 803,500 698,800
Selling and administration... 338,200 292,700 236,300 215,100
Research and development..... 38,900 34,800 30,900 26,100
Depreciation and amortiza-
tion........................ 60,600 51,500 41,700 32,100
---------- ---------- ---------- ----------
Total operating costs.... 1,722,900 1,439,000 1,112,400 972,100
---------- ---------- ---------- ----------
Operating income............. 190,400 164,300 131,800 113,600
Interest expense............... 63,400 53,900 50,100 51,600
---------- ---------- ---------- ----------
Income from continuing
operations, before provision
for taxes................... 127,000 110,400 81,700 62,000
Provision for taxes............ 48,700 42,500 30,600 22,900
---------- ---------- ---------- ----------
Income from continuing opera-
tions....................... 78,300 67,900 51,100 39,100
Income from discontinued opera-
tions, net.................... -- -- -- 3,600
---------- ---------- ---------- ----------
Income before extraordinary
items and accounting
change...................... 78,300 67,900 51,100 42,700
Extraordinary loss from early
extinguishment of debt, net of
tax benefit of $700; $12,300;
and $2,000 ................... (1,100) (1,100) (21,700) (3,700)
Cumulative effect of a change
in accounting principle....... -- -- (26,000) --
---------- ---------- ---------- ----------
NET INCOME............... $ 77,200 $ 66,800 $ 3,400 $ 39,000
========== ========== ========== ==========
Net income per share of common
stock:
Primary:
Income from continuing op-
erations.................. $ 1.46 $ 1.40 $ 1.15 $ .89
Income from discontinued
operations................ -- -- -- .08
Extraordinary loss......... (.02) (.02) (.49) (.08)
Cumulative effect of a
change in accounting
principle................. -- -- (.58) --
---------- ---------- ---------- ----------
NET INCOME............... $ 1.44 $ 1.38 $ .08 $ .89
========== ========== ========== ==========
Fully-diluted:
Income from continuing op-
erations.................. $ 1.35 $ 1.29 $ 1.04 $ .83
Income from discontinued
operations................ -- -- -- .07
Extraordinary loss......... (.02) (.02) (.41) (.07)
Cumulative effect of a
change in accounting
principle................. -- -- (.48) --
---------- ---------- ---------- ----------
NET INCOME............... $ 1.33 $ 1.27 $ .15 $ .83
========== ========== ========== ==========
Weighted average shares out-
standing:
Primary...................... 53,700 48,600 44,600 44,100
========== ========== ========== ==========
Fully-diluted................ 60,100 55,000 53,300 52,800
========== ========== ========== ==========
</TABLE>
- --------
* To reflect acquisition and equity transactions occurring as of the beginning
of the year, as discussed further in Note 2.
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED THE LAST DAY OF FEBRUARY 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY
COMMON PAID-IN RETAINED TRANSLATION
STOCK CAPITAL EARNINGS ADJUSTMENT
------ ---------- -------- -----------
<S> <C> <C> <C> <C>
Balance at February 29, 1992........... $400 $154,800 $156,500 $ 200
Net income for fiscal 1993........... 39,000
Cash dividends of $.08 per share..... (3,600)
Stock dividend of 5% issued in July
1992................................ 27,900 (27,900)
Stock dividend of 5% issued in May
1993................................ 35,700 (35,700)
Exercise of stock options............ 900
Translation adjustments.............. (2,600)
---- -------- -------- -------
Balance at February 28, 1993........... 400 219,300 128,300 (2,400)
Net income for fiscal 1994........... 3,400
Cash dividends of $.093 per share.... (4,200)
Stock dividend of 5% issued in April
1994................................ 38,900 (38,900)
Conversion of 6 1/4% Convertible De-
bentures............................ 100
Restricted stock grants, net......... 800
Exercise of stock options, including
related tax benefits................ 2,400
Translation adjustments.............. (2,700)
---- -------- -------- -------
Balance at February 28, 1994........... 400 261,500 88,600 (5,100)
Net income for fiscal 1995........... 66,800
Cash dividends of $.107 per share.... (5,600)
Stock dividend of 5% issued in April
1995................................ 59,000 (59,000)
Public sale of common stock at $18.10
per share, net of expenses.......... 100 112,400
Sale of common stock to employee
benefits plans at $18.10 per share.. 2,000
Conversion of 6 1/4% Convertible
Debentures, net of expenses......... 100 111,100
Restricted stock grants, net......... 1,600
Stock options activity, including re-
lated tax benefits.................. 2,600
Translation adjustments.............. (1,000)
---- -------- -------- -------
Balance at February 28, 1995........... $600 $550,200 $ 90,800 $(6,100)
==== ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED THE LAST DAY OF FEBRUARY 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Income from continuing operations.............. $ 67,900 $ 51,100 $ 39,100
Items not affecting cash:
Depreciation and amortization................. 51,500 41,700 32,100
Deferred income taxes......................... 18,200 10,800 3,900
Pension income, net of other items............ (11,100) (12,400) (12,500)
--------- -------- --------
Net cash provided by earnings............... 126,500 91,200 62,600
Changes in assets and liabilities, net of
effects
of acquired and discontinued businesses:
Accounts receivable.......................... (20,900) (27,200) (12,000)
Inventories.................................. (23,100) (7,700) 1,300
Other assets................................. (3,000) (5,700) 6,000
Accounts payable............................. 33,700 (2,600) 3,800
Other liabilities............................ (16,100) (8,400) (21,400)
--------- -------- --------
Net cash provided by continuing operations.. 97,100 39,600 40,300
Discontinued operations, before non-cash
items......................................... -- 1,100 8,800
Extraordinary items, before deferred charges... -- (30,100) (4,900)
--------- -------- --------
Net cash provided by operating activities... 97,100 10,600 44,200
--------- -------- --------
Cash flows from investing activities:
Acquisitions................................... (300,900) (65,000) (4,000)
Divestitures and asset sales................... 12,100 35,000 13,500
Purchase of plant and equipment, net........... (49,600) (38,000) (32,900)
--------- -------- --------
Net cash used in investing activities....... (338,400) (68,000) (23,400)
--------- -------- --------
Cash flows from financing activities:
Credit agreement borrowings, net............... 121,400 (30,000) 65,000
Multi-currency credit agreement borrowings,
net........................................... (10,200) 48,400 --
Purchases of senior and subordinated debt...... -- (190,200) (62,800)
Issuance of subordinated debt.................. -- 258,000 --
Other changes in long-term debt, net........... 900 (18,900) (33,600)
Changes in short-term bank borrowings.......... 19,500 (8,300) 11,700
Common stock transactions...................... 114,800 800 900
Cash dividends paid............................ (5,100) (4,100) (3,300)
--------- -------- --------
Net cash provided by (used in) financing
activities................................. 241,300 55,700 (22,100)
--------- -------- --------
Effect of exchange rate fluctuations............ 300 (500) (600)
--------- -------- --------
Net increase (decrease) in cash............. 300 (2,200) (1,900)
Cash and cash equivalents:
Beginning of the year.......................... 500 2,700 4,600
--------- -------- --------
End of the year................................ $ 800 $ 500 $ 2,700
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
The Company
The company is a diversified manufacturer of proprietary and other products,
with operations in Power and Fluid Transfer and Professional Audio businesses.
Principles of Consolidation
The consolidated financial statements include the accounts of the company
and all of its subsidiaries. All significant intercompany transactions have
been eliminated.
Inventories
Inventories are stated at the lower of cost or market, with cost determined
primarily on the last-in, first-out (LIFO) method.
Property, Plant and Equipment
Property, plant and equipment are presented at cost, net of accumulated
depreciation. The cost of property, plant and equipment retired or otherwise
disposed of, and the accumulated depreciation thereon, are eliminated from the
asset and related accumulated depreciation accounts, and any resulting gain or
loss is reflected in income. The company provides for depreciation of plant
and equipment primarily on the straight-line method to amortize the cost of
such plant and equipment over its useful life.
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired ("goodwill") is presented net of
accumulated amortization. The company continually evaluates the existence of
goodwill impairment on the basis of whether the goodwill is fully recoverable
from projected, undiscounted net cash flows of the related business unit.
Goodwill is amortized on the straight-line method over 40 year periods from
the acquisition dates of the respective businesses acquired.
Income Taxes
The company adopted Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS No. 109), in fiscal 1994. The adoption of
this standard changed the company's method of accounting for income taxes from
the deferred method to the liability method. The company adopted SFAS No. 109
retroactively by restating prior years' financial statements for all years
back to and including fiscal 1986.
Postretirement Benefits
Through fiscal 1993, the company accounted for the cost of postretirement
benefits on the cash basis as they were paid. In fiscal 1994, the company
adopted Statement of Financial Accounting Standards No. 106, Employers
Accounting for Postretirement Benefits Other Than Pensions (SFAS No. 106).
SFAS No. 106 required the estimated present-value of the company's liability
for its commitments to provide health and life insurance benefits to its
retirees to be included in the balance sheet. The related expense is required
to be recognized on the accrual method over the remaining years of the
employees' active service, up to the dates of individual eligibility to retire
and begin receiving the benefit.
Foreign Currency
The assets and liabilities of the company's foreign subsidiaries are
translated at year-end exchange rates, and resulting gains and losses are
accumulated in a separate component of stockholders' equity. Foreign currency
transactions are included in income as realized. The company enters into
foreign currency forward contracts as a hedge for certain existing or
anticipated business transactions denominated in various foreign currencies.
Gains
F-7
<PAGE>
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
or losses on contracts related to existing business transactions are deferred
and recognized as the related transaction is completed. Gains or losses on
contracts related to anticipated transactions are recognized as of the balance
sheet date.
Net Income Per Share of Common Stock
Primary net income per share is calculated on the basis of the weighted
average number of shares outstanding during each year, adjusted for subsequent
stock distributions. Common stock equivalents which would arise from the
exercise of stock options, using the treasury stock method, were not
significant and have not been included in the calculation.
Fully-diluted net income per share, in addition to the weighted average
determined above, includes common stock equivalents which would arise from the
exercise of stock options using the treasury stock method, and assumes the
conversion of the company's 6 1/4% Convertible Debentures (for the periods
outstanding), as well as the elimination of related interest expense, net of
income tax effects.
Consolidated Statements of Cash Flows
For purposes of cash flows, the company considers overnight investments as
cash equivalents. The company paid interest of approximately $56,000,000;
$52,900,000; and $58,700,000 in fiscal 1995, 1994 and 1993, respectively. Such
amounts include $1,400,000; $2,200,000 and $5,000,000 allocated to the costs
of discontinued operations in fiscal 1995, 1994 and 1993, respectively. The
company paid income taxes of approximately $21,900,000; $13,700,000; and
$11,800,000 in fiscal 1995, 1994 and 1993, respectively.
2. ACQUISITIONS AND DIVESTITURES
In November 1994, the company acquired substantially all of the stock of
Purolator Products Company ("Purolator") for a total cash purchase price,
including expenses, of approximately $286,300,000. Funding for the acquisition
was provided by borrowings under the company's 1994 Credit Agreement.
Purolator is a manufacturer of a broad range of filters used principally in
the automotive aftermarket, and specialized separation systems for marine,
high-technology and industrial applications. 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
Purolator's results of operations have been consolidated with the company's
results of operations effective as of the acquisition date. The company has
made a preliminary determination and allocation of the purchase price as of
the acquisition date, consisting of the following (dollars in thousands):
<TABLE>
<S> <C>
Accounts receivable............................................... $ 83,300
Inventories....................................................... 69,900
Other current assets.............................................. 22,000
Accounts payable and other current liabilities.................... (102,700)
---------
Net working capital acquired.................................... 72,500
Fixed assets...................................................... 106,900
Cost in excess of net assets acquired............................. 154,200
Long-term bank indebtedness....................................... (38,600)
Other non-current items, net...................................... (8,700)
---------
Total purchase price, including expenses........................ $ 286,300
=========
</TABLE>
The financial position of Purolator has been included in the consolidated
balance sheet of the company as of February 28, 1995 based upon the above
preliminary determination and allocation. Such amounts will be
F-8
<PAGE>
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
finalized upon additional analysis and asset valuation determinations to be
made by the company with the assistance of various outside firms. The final
changes will be recorded in fiscal 1996, and are not expected to have a
significant impact on the company's results of operations as reported herein.
The pro forma 1995 information presented in the consolidated statements of
income is based upon the following information, which presents the pro forma
consolidated condensed results of operations as if the acquisition of
Purolator in November 1994 and the sale of the company's common stock in
December 1994 had occurred at the beginning of each of the years presented.
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 each of the years, nor are they
intended to be a projection of future results (dollars in thousands, except
per share amounts):
<TABLE>
<CAPTION>
1995 1994
---------- ----------
(UNAUDITED)
<S> <C> <C>
Net sales........................................ $1,913,300 $1,654,500
---------- ----------
Income before interest and taxes................. $ 190,400 $ 160,400
---------- ----------
Income before extraordinary items and accounting
changes......................................... $ 78,300 $ 60,800
========== ==========
Income per share, before extraordinary items and
accounting changes:
Primary........................................ $ 1.46 $ 1.19
========== ==========
Fully-diluted.................................. $ 1.35 $ 1.09
========== ==========
</TABLE>
The company made several other small acquisitions during fiscal 1995 for a
total purchase price of approximately $14,500,000. During fiscal 1994, the
company decided to sell its non-core business units, and accounted for them as
discontinued operations. The sale of certain of the company's assets held for
sale generated proceeds of $12,100,000 in fiscal 1995 and $35,000,000 in
fiscal 1994. At February 28, 1995, the company's net assets of its remaining
discontinued operations amounted to approximately $19,500,000. Such amounts
have been segregated in the balance sheet and offset by a corresponding amount
of long-term debt, on the assumption that the net sale proceeds will equal or
exceed the net asset amount, and all such proceeds will be utilized to offset
existing borrowings of the company.
3. ACCOUNTS RECEIVABLE
Accounts receivable are reflected net of allowances for doubtful accounts of
$18,600,000 and $12,000,000 at February 28, 1995 and 1994, respectively.
4. INVENTORIES
Inventories consist of the following at February 28, 1995 and 1994 (dollars
in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Raw materials, parts, and sub-assemblies.................. $103,500 $ 67,700
Work-in-process........................................... 60,200 43,500
Finished goods............................................ 198,200 153,800
-------- --------
Total................................................... $361,900 $265,000
======== ========
</TABLE>
As a result of the fair value determination of inventories required by the
purchase method of accounting for acquired companies as of their acquisition
date, LIFO costs exceed FIFO costs by approximately $39,300,000 and
$35,000,000 at February 28, 1995 and 1994, respectively.
F-9
<PAGE>
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and consist of the
following at February 28, 1995 and 1994 (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Land and land improvements................................ $ 41,500 $ 35,700
Buildings................................................. 145,300 115,700
Machinery and equipment................................... 451,600 324,700
-------- --------
Total property, plant and equipment..................... 638,400 476,100
Less accumulated depreciation............................. 150,500 110,800
-------- --------
Property, plant and equipment, net...................... $487,900 $365,300
======== ========
</TABLE>
Depreciation expense was approximately $40,900,000; $33,200,000; and
$29,800,000 in fiscal 1995, 1994 and 1993, respectively.
6. COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired is presented net of accumulated
amortization of approximately $29,700,000 and $22,700,000 at February 28, 1995
and 1994, respectively. Amortization expense was approximately $7,000,000;
$5,700,000 and $4,700,000 in fiscal 1995, 1994 and 1993, respectively.
7. LONG-TERM DEBT
Long-term debt consists of the following at February 28, 1995 and 1994
(dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
---------- --------
<S> <C> <C>
Senior debt:
Credit Agreement....................................... $ 300,000 $140,000
Multi-Currency Agreement............................... 38,300 48,400
Other items............................................ 42,500 40,500
---------- --------
Total................................................ 380,800 228,900
Less current maturities................................ (8,600) (5,800)
Less amounts allocated to discontinued operations...... (19,500) (28,100)
---------- --------
Net senior debt...................................... 352,700 195,000
---------- --------
Subordinated debt:
8 3/4% Senior Subordinated Notes....................... 258,000 258,000
6 1/4% Convertible Debentures.......................... -- 114,200
---------- --------
Total subordinated debt.............................. 258,000 372,200
---------- --------
Total long-term debt................................... 610,700 567,200
Total stockholders' equity............................. 635,500 345,400
---------- --------
Total capitalization................................. $1,246,200 $912,600
---------- --------
Long-term debt as a percentage of total capitaliza-
tion................................................ 49.0% 62.2%
========== ========
</TABLE>
In November 1994, the company entered into a new $650,000,000 credit
agreement (the "1994 Credit Agreement") with a group of financial institutions
which provides for (i) a five-year term loan in the principal amount of
approximately $300,000,000 used to finance the acquisition of Purolator and to
repay certain existing
F-10
<PAGE>
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Purolator debt, and (ii) a five-year revolving credit facility in an amount of
up to $350,000,000 used for refinancing the company's previously existing
credit facility (the "1993 Credit Facility") and certain existing Purolator
debt, and for working capital and other general corporate purposes.
The loans outstanding under the 1994 Credit Agreement bear interest, at the
company's option, at (i) the reference rate of the agent acting on behalf of
the financial institutions, or (ii) under a LIBOR option, with borrowing
spreads of LIBOR plus 0.55% to LIBOR plus 1.00% depending on the company's
consolidated leverage ratio (as defined in the 1994 Credit Agreement). The
company is currently paying interest on the loan at LIBOR plus 0.55% per
annum. The 1994 Credit Agreement contains certain affirmative and negative
covenants customary for this type of agreement and is guaranteed by all of the
company's significant domestic subsidiaries. All such guarantees are
collateralized by first priority pledges of all outstanding capital stock of
each guarantor subsidiary.
In October 1994, the company entered into agreements with certain holders of
its 6 1/4% Convertible Debentures due February 15, 2011 to convert
approximately $76,700,000 of the debentures into approximately 5,600,000
shares of the company's common stock. In January 1995, the company called for
redemption the $37,500,000 remaining principal amount of these debentures. As
a result of the call for redemption, substantially all of the debentures were
voluntarily converted into 2,700,000 shares of the company's common stock. The
principal amount of converted debt, as well as related unamortized deferred
charges, have been reclassified to common stock and additional paid-in
capital.
In May 1993, the company entered into a revolving credit agreement (as
amended in January 1995, the "Multi-Currency Agreement") providing for a five
year multi-currency revolving credit facility with a group of financial
institutions in the U.S. and Europe. The Multi-Currency Agreement provides for
a revolving loan commitment for the first two years of the equivalent of
$100,000,000. The commitment declines by $12,500,000 at each of six semi-
annual dates beginning in June 1995, with the remaining $25,000,000 of
commitment expiring in May 1998. Interest rates on borrowings under the Multi-
Currency Agreement are subject to change based on a specified pricing grid
which increases from LIBOR plus 0.55% to LIBOR plus 1.00% per annum based on
the company's senior debt rating (as defined in the Multi-Currency Agreement).
The company is currently paying interest at LIBOR plus .55% on borrowings
under the Multi-Currency Agreement. The Multi-Currency Agreement also contains
certain affirmative and negative covenants customary in an agreement of this
nature.
In March 1993, the company completed a public offering of $258,000,000
principal amount of its 8 3/4% Senior Subordinated Notes due April 2003. A
substantial portion of the net proceeds from the sale of the notes was used to
fund the retirement of the company's 13 3/8% Subordinated Debentures. There
are no sinking fund requirements on the Senior Subordinated Notes and they may
not be redeemed until April 1998. At such date they are redeemable at 104.375%
of principal amount, and thereafter at an annually declining premium over par
until April 2001 when they are redeemable at par. The Indenture limits the
payment of dividends and the repurchase of capital stock, and includes certain
other restrictions and limitations customary with subordinated indebtedness of
this type.
In March 1993, the company offered to purchase its 13 3/8% Subordinated
Debentures for a cash price of $1,137.50 per $1,000 principal amount, plus
accrued interest. As a result of the offer, and certain open-market purchases,
the company acquired approximately $138,000,000 principal amount of these
debentures. The company then completed an "in-substance defeasance" in which
approximately $60,400,000 was deposited in an irrevocable trust to cover both
the remaining outstanding principal amount ($52,000,000) and the related
interest expense requirements of these debentures. The company recognized an
extraordinary loss, net of tax, of
F-11
<PAGE>
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
approximately $21,700,000 as a result of the extinguishment of this debt in
fiscal 1994. The company also acquired or defeased approximately $63,000,000
of its indebtedness and recognized an extraordinary loss, net of tax, of
$3,700,000 in fiscal 1993.
The fair value of the 8 3/4% Senior Subordinated Notes is less than their
recorded value by approximately $9,000,000 as of February 28, 1995, based upon
the quoted market value of such notes as of that date. Since the rest of the
company's notes payable and senior debt are primarily floating rate debt,
their recorded amounts approximate their fair values as of February 28, 1995.
The recorded amounts for other financial instruments, such as cash and
accounts receivable, approximate their fair value.
Annual maturities of the company's long-term debt for the next five fiscal
years are approximately: 1996--$8,600,000; 1997--$4,200,000; 1998--
$17,100,000; 1999--$27,000,000; and 2000--$312,700,000. The amounts for fiscal
1996 through 1999 exclude maturities related to the term loan portion of the
1994 Credit Agreement as it is anticipated that such amounts will be offset
with availability under the revolving credit facility portion of such
agreement until maturity in 2000, by which date it is anticipated that the
agreement will have been extended, or replaced.
8. LEASES
The company has operating leases which expire at various dates through 2010
with, in some instances, renewal privileges. Certain leases provide for
escalation of the rentals primarily for increases in maintenance costs and
property taxes. Total rental expense under operating leases was approximately
$18,300,000; $15,900,000; and $15,900,000 in fiscal 1995, 1994 and 1993,
respectively. Minimum rental payments under operating leases having an initial
or remaining noncancellable term in excess of 12 months are approximately:
1996--$18,500,000; 1997--$15,300,000; 1998--$13,300,000; 1999--$11,400,000;
2000--$8,400,000; 2001 and thereafter $19,300,000.
9. INCOME TAXES
Income from continuing operations and the related provision for taxes for
fiscal 1995, 1994 and 1993 consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Income from continuing operations, before
provision for taxes:
United States................................. $ 69,500 $45,800 $41,400
Foreign....................................... 40,900 35,900 20,600
-------- ------- -------
Total..................................... $110,400 $81,700 $62,000
======== ======= =======
Provision for taxes on income from continuing
operations:
Currently payable:
United States............................... $ 12,500 $14,500 $10,900
Foreign..................................... 11,800 5,300 8,100
-------- ------- -------
Total currently payable................... 24,300 19,800 19,000
-------- ------- -------
Deferred:
United States............................... 7,600 3,600 4,200
Foreign..................................... 10,600 7,200 (300)
-------- ------- -------
Total deferred............................ 18,200 10,800 3,900
-------- ------- -------
Total provision for taxes................. $ 42,500 $30,600 $22,900
======== ======= =======
</TABLE>
F-12
<PAGE>
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The provision for taxes on income for fiscal 1995, 1994, and 1993 differs
from the amount computed using the United States statutory income tax rate as
follows (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Expected tax at United States statutory income
tax rate...................................... $38,600 $28,600 $21,100
Permanent differences.......................... 2,100 1,200 900
State and local income taxes................... 1,900 1,200 600
Tax credits.................................... (700) (500) (400)
Foreign tax rate differences................... 600 100 700
------- ------- -------
Total provision for taxes.................... $42,500 $30,600 $22,900
======= ======= =======
</TABLE>
The tax effects of temporary differences which give rise to a significant
portion of deferred tax assets (liabilities) consist of the following at
February 28, 1995 and 1994 (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Current:
Accounts receivable................................... $ 7,300 $ 3,900
Inventories........................................... (5,000) (9,500)
Compensation related.................................. 8,000 3,400
Tax credit and net operating loss carryforwards....... -- 9,000
Other items........................................... 7,000 7,500
-------- --------
Total current asset................................. 17,300 14,300
Valuation allowance................................... (5,600) (4,000)
-------- --------
Net current asset................................... $ 11,700 $ 10,300
======== ========
Non-current:
Fixed and intangible assets........................... $(52,100) $(39,500)
Pension and other benefit plans....................... (5,500) (21,400)
Tax credits........................................... 23,000 29,400
Capital loss carryforwards............................ 11,000 11,300
All other items....................................... 26,800 19,600
-------- --------
Total non-current liability......................... 3,200 (600)
Valuation allowance................................... (14,100) (16,800)
-------- --------
Net non-current liability........................... $(10,900) $(17,400)
======== ========
</TABLE>
The current valuation allowance primarily offsets foreign tax benefits
established in a previous acquisition which may not be realized. The non-
current valuation allowance is primarily attributable to the capital loss
carryforwards which are available to use substantially through fiscal 1996.
Based on the company's history of prior operating earnings and its
expectations for the future, management of the company has determined that it
is more likely than not that operating income will be sufficient to utilize
the tax credits in their carryforward periods, which run substantially through
fiscal 2007. The undistributed earnings of the company's foreign subsidiaries
have been reinvested in each country, and are not expected to be remitted back
to the parent company. The determination of the possible tax effect relating
to such reinvested income is not practicable.
F-13
<PAGE>
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. PENSION AND PROFIT SHARING PLANS
The company has a variety of defined benefit pension plans covering both
union and non-union employees. Under the union plans, employee benefits are
computed based on a dollar amount multiplied by the number of years of
service. Benefits under the non-union plans are computed in a similar manner
for certain plans, and based on the employees' earnings in other plans.
The following table sets forth the funded status of the company's defined
benefit plans and the net asset amount included in the consolidated balance
sheets at February 28, 1995 and 1994 (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested............................................. $(259,400) $(233,300)
========= =========
Accumulated........................................ $(264,500) $(236,100)
========= =========
Projected.......................................... $(273,700) $(241,900)
Plan assets at fair value............................ 335,400 314,300
--------- ---------
Plan assets in excess of projected benefit
obligation.......................................... 61,700 72,400
Unrecognized net loss and differences in
assumptions......................................... 49,100 36,400
Unrecognized prior service costs..................... 2,700 3,100
--------- ---------
Prepaid pension cost recognized in the consolidated
balance sheets...................................... $ 113,500 $ 111,900
========= =========
</TABLE>
The plans' assets consist of corporate and government bonds, guaranteed
investment contracts, listed common stocks and real estate investments.
Included in the plans' assets are common stock of the company with a market
value of approximately $28,800,000 and the company's 8 3/4% subordinated
debentures with a market value of $6,700,000 at February 28, 1995. The funded
status of Purolator's defined benefit plans as of the acquisition date
consisted of plan assets of approximately $42,500,000 and a projected benefit
obligation of approximately $53,500,000.
Net pension income for the defined benefit pension plans in fiscal 1995,
1994, and 1993 includes the following components (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Service cost-benefits earned during the
period..................................... $ (3,600) $ (2,900) $ (2,700)
Interest cost on projected benefit
obligation................................. (19,500) (18,200) (17,300)
Actual return on assets..................... 4,300 32,100 36,600
Net amortization and deferral............... 31,300 2,500 (4,100)
-------- -------- --------
Net pension income........................ $ 12,500 $ 13,500 $ 12,500
======== ======== ========
</TABLE>
The assumptions utilized to measure net pension income and the projected
benefit obligations are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ---- ----
<S> <C> <C> <C>
Discount rate......................................... 8.75% 7.75% 9.00%
Expected long-term rate of return..................... 11.50% 12.00% 12.00%
Average increase in compensation...................... 4.00% 5.00% 5.00%
</TABLE>
The changes in the expected long-term rate of return and the rate of
compensation increase did not have a significant effect on fiscal 1995's
income, nor are they expected to have a significant effect on fiscal 1996's
income.
F-14
<PAGE>
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The company also has defined contribution pension and profit sharing plans
for a significant number of its salaried and hourly employees. The company's
contributions to these plans are based on various percentages of compensation,
and in some instances are based upon the amount of the employees'
contributions to the plans. The annual cost of these plans, the substantial
part of which is funded currently, amounted to approximately $8,100,000;
$6,700,000; and $6,600,000 in fiscal 1995, 1994 and 1993, respectively.
11. POST-RETIREMENT BENEFITS
The company currently provides health and life insurance benefits to a
number of existing retirees from certain of its operations under the
provisions of a number of different plans. Contributions currently required to
be paid by the retirees towards the cost of such plans range from zero to
100%. The company also has a number of active employees who might receive such
benefits upon their retirement. A number of the plans which relate to retirees
and active non-union employees include provisions which allow the company to
increase the cost to participants, or otherwise modify or terminate them as
determined by management. The plans which relate to active union employees are
subject to modification in the same manner as are all other compensation and
benefits matters in the process of the company's negotiations of contracts
covering its union employees.
The company recognized a $40,000,000 liability for the cost of these plans,
referred to as the accumulated post-retirement benefit obligation (APBO),
entirely in fiscal 1994 in accordance with SFAS No. 106. Since the company
also adopted SFAS No. 109 at the same date, the company recognized a deferred
tax asset of $14,000,000 representing the future tax benefits to be received
related to the APBO. The resulting net charge of $26,000,000 ($.48 per fully
diluted share) was included as the cumulative effect of a change in accounting
principle in the consolidated statement of income for fiscal 1994. The company
continues to fund such costs on the cash-basis, which amounted to
approximately $4,700,000; $4,600,000; and $3,600,000 in fiscal 1995, 1994 and
1993, respectively.
The following table sets forth the amount included with other non-current
liabilities in the consolidated balance sheets at February 28, 1995 and 1994
(dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees and beneficiaries receiving benefits.......... $64,100 $34,700
Active employees, fully eligible for benefits.......... 6,100 4,600
Active employees, not fully eligible for benefits...... 10,300 6,500
------- -------
Total accumulated benefit obligation................. 80,500 45,800
Unrecognized net loss.................................... (2,900) (6,600)
------- -------
Post-retirement benefit liability recognized in the
consolidated balance sheets........................... $77,600 $39,200
======= =======
</TABLE>
The company's post-retirement benefit expense on the accrual method for
fiscal 1995 and 1994 includes the following components (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Service cost-benefits earned during the period.............. $ 500 $ 400
Interest cost on the APBO................................... 4,600 3,400
------ ------
Total expense............................................. $5,100 $3,800
====== ======
</TABLE>
F-15
<PAGE>
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The APBO for Purolator's various plans was approximately $38,200,000 as of
the acquisition date, and such amount is the primary cause of the increase in
the APBO from the end of fiscal 1994. The APBO was calculated using a discount
rate of 8.75% at February 28, 1995, and 7.75% at February 28, 1994. The change
in the discount rate did not have a significant effect on the expense
determination for fiscal 1995 and 1994, and is not expected to have a
significant effect for fiscal 1996. The APBO determinations assume an initial
health care cost trend rate of approximately 10%, trending down rateably to an
ultimate rate of 5%, which is expected to be reached in five years. The impact
of a one-percentage-point increase in such trend rate would be to increase the
APBO at February 28, 1995 by approximately $3,000,000 and increase annual
expense by approximately $500,000.
12. LEGAL PROCEEDINGS
The company is involved in various legal and environmental related issues.
In the opinion of the company's management, the ultimate cost to resolve these
matters will not have a material adverse effect on the company's financial
position, results of operations or cash flows.
13. STOCKHOLDERS' EQUITY AND STOCK OPTIONS
In December 1994, the company completed an underwritten public offering of
approximately 6,500,000 shares of its common stock, at a public offering price
of $18.10 per share (the "Offering"). The net proceeds from the Offering of
approximately $113,000,000 were used to repay a portion of the indebtedness
outstanding under the company's 1994 Credit Agreement. The company also sold
approximately 110,000 shares of its common stock to one of its pension plans
in December 1994 at a price of $18.10 per share, or a total cost of
approximately $2,000,000.
The company granted certain executives restricted stock awards with respect
to 22,000 shares in fiscal 1995 and 353,075 shares in fiscal 1994, at $.01 par
value per share. In certain situations the restrictions on the stock lapse
after a five year period. Therefore, the expense is being recognized as it is
earned over the restriction period, with $1,600,000 and $800,000 recognized as
an expense in fiscal 1995 and 1994, respectively. The unearned balance as of
February 28, 1995 is approximately $4,500,000. As of February 28, 1995,
approximately 250,500 shares remain available for issuance under the company's
Restricted Stock Plan.
The company's qualified Incentive Stock Option Plans provide for granting
officers and other key employees options to purchase the company's common
stock at an exercise price equal to 100% of the market price on the date of
grant. The options may be exercised in cumulative annual increments of 25%
commencing one year after the date of grant, and have a maximum duration of
seven to ten years. There were approximately 952,419 and 1,486,791 shares
reserved for the future granting of qualified incentive stock options at
February 28, 1995 and 1994.
As a result of the company's acquisition of Purolator, holders of Purolator
non-qualified stock options were entitled to receive an immediate cash payment
equal to their built-in gain in such options as of the acquisition date. In
lieu of the cash payment, holders of Purolator options were given the
opportunity to convert their options into options to acquire company stock at
an exercise price that would give them the same built-in gain as they had in
the Purolator options. As a result, certain of the Purolator options were
converted into non-qualified options to acquire approximately 334,600 shares
of the company's common stock at an average exercise price of $12.80 per
share. The company's common stock and additional paid in capital were
increased by approximately $2,000,000 to recognize the issuance of these "in-
the-money" company stock options. The holders of such options are 100% vested
in their exercise rights, and all such options have a duration of 10 years
from the date they were originally granted by Purolator.
F-16
<PAGE>
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes the status of all of the company's stock
option transactions for fiscal 1995, 1994 and 1993 (dollars in thousands,
except per share amounts):
<TABLE>
<CAPTION>
1995 1994 1993
------------------ ----------------- -----------------
AVERAGE AVERAGE AVERAGE
OPTION OPTION OPTION OPTION OPTION OPTION
SHARES PRICE SHARES PRICE SHARES PRICE
--------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of
year................... 596,650 $ 8.55 774,149 $ 7.29 885,252 $ 4.05
Activity during the
year:
Granted............... 870,946 $15.45 14,333 $18.37 245,069 $12.43
Exercised............. (100,583) $ 5.98 (175,680) $ 3.70 (352,525) $ 2.86
Canceled.............. (6,421) $11.49 (16,152) $ 9.18 (3,647) $ 5.90
--------- -------- --------
Balance at end of year:
Outstanding........... 1,360,592 $13.12 596,650 $ 8.55 774,149 $ 7.29
========= ======== ========
Exercisable........... 644,348 $10.50 267,803 $ 6.83 271,783 $ 3.92
========= ======== ========
</TABLE>
As a result of the exercise of certain employees' incentive stock options,
the company realized a tax benefit of $200,000 and $1,700,000 in fiscal 1995
and 1994, respectively, and such amounts have been recognized as a direct
increase in additional paid-in capital.
The company's Board of Directors declared five percent stock dividends which
were distributed in April 1995 (declared March 30, 1995), April 1994, and May
1993. All share amounts have been presented as if the stock distributions had
occurred on March 1, 1992, the beginning of fiscal 1993. The company continues
to be authorized by its Board of Directors to repurchase approximately
6,700,000 shares, or approximately 11%, of the company's outstanding common
stock as of February 28, 1995. The company is authorized to issue 10,000,000
shares of preferred stock, and there are no shares outstanding at the present
time.
14. INDUSTRY SEGMENTS, GEOGRAPHIC AREAS AND CURRENCY TRANSACTIONS
Prior to the acquisition of Purolator, the company classified its operations
into three business segments: Power and Fluid Transfer; Transportation; and
Professional Audio. Following the acquisition of Purolator, management
reviewed its existing businesses and determined that its Transportation
business segment should be combined with the Power and Fluid Transfer business
segment in view of the similarity in markets and customers served. Management
also believes that the revised classification will enable the company to
benefit from a global organizational structure and the coordination of
distribution activities.
The company now classifies its operations into the following two business
segments:
(i) Power and Fluid Transfer, which includes the design, manufacture and
distribution of products and systems primarily in the general industrial
market, the automotive aftermarket, the original equipment manufacturers
("OEM") market and the infrastructure market. Such products and systems
include those related to rubber and plastic belts, hose, fittings and
related assemblies; filters; power transfer mechanisms for door control
systems used in mass transit vehicles; information displays; and advanced
traffic control and management systems; and
(ii) Professional Audio, which includes the design and manufacture of
products and systems used primarily in the high-performance professional
audio market, such as microphones, speakers, public address and musical
instrument loudspeaker systems, audio signal processors, and sound
enhancement and noise canceling equipment.
F-17
<PAGE>
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Information concerning the company's business segments for fiscal 1995, 1994
and 1993 is as follows (dollars in thousands):
<TABLE>
<CAPTION>
PROFORMA
1995 * 1995 1994 1993
----------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET SALES TO CUSTOMERS
Power and Fluid Transfer.. $1,728,000 $1,418,000 $1,070,700 $ 908,900
Professional Audio........ 185,300 185,300 173,500 176,800
---------- ---------- ---------- ----------
Total net sales to cus-
tomers................. $1,913,300 $1,603,300 $1,244,200 $1,085,700
========== ========== ========== ==========
OPERATING INCOME
Power and Fluid Transfer.. $ 184,500 $ 158,400 $ 124,800 $ 104,100
Professional Audio........ 21,800 21,800 21,900 22,000
---------- ---------- ---------- ----------
Total operating income.. 206,300 180,200 146,700 126,100
General corporate......... (15,900) (15,900) (14,900) (12,500)
Interest expense.......... (63,400) (53,900) (50,100) (51,600)
---------- ---------- ---------- ----------
Income from continuing
operations, before
provision for taxes.... $ 127,000 $ 110,400 $ 81,700 $ 62,000
========== ========== ========== ==========
IDENTIFIABLE ASSETS
Power and Fluid Transfer.. $1,614,600 $1,614,600 $1,062,100 $ 843,100
Professional Audio........ 177,800 177,800 162,700 158,900
General corporate......... 54,000 54,000 57,500 122,800
---------- ---------- ---------- ----------
Total identifiable as-
sets................... $1,846,400 $1,846,400 $1,282,300 $1,124,800
========== ========== ========== ==========
DEPRECIATION AND
AMORTIZATION
Power and Fluid Transfer.. $ 52,400 $ 43,300 $ 34,600 $ 25,800
Professional Audio........ 4,500 4,500 4,500 4,400
General corporate......... 3,700 3,700 2,600 1,900
---------- ---------- ---------- ----------
Total depreciation and
amortization........... $ 60,600 $ 51,500 $ 41,700 $ 32,100
========== ========== ========== ==========
CAPITAL OUTLAYS
Power and Fluid Transfer.. $ 55,900 $ 46,900 $ 38,900 $ 32,600
Professional Audio........ 3,900 3,900 2,500 1,700
General corporate......... -- -- -- 1,200
---------- ---------- ---------- ----------
Total capital outlays... $ 59,800 $ 50,800 $ 41,400 $ 35,500
========== ========== ========== ==========
</TABLE>
- --------
* To reflect acquisition and equity transactions occurring as of the beginning
of the year, as discussed further in Note 2.
F-18
<PAGE>
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Operating income represents net sales less operating expenses, and excludes
general corporate expenses, interest expense and income taxes. Litigation
costs are considered to be corporate expenses. Identifiable assets are those
assets employed in each segment's operations, including an allocated value to
each segment of cost in excess of net assets acquired. Corporate assets
consist primarily of cash, investments and assets not employed in production.
The company's foreign operations are located primarily in Europe, and to a
lesser extent in Canada and the Far East. Information concerning the company's
operations by geographic area for fiscal 1995, 1994 and 1993 is as follows
(dollars in thousands):
<TABLE>
<CAPTION>
PRO FORMA 1995* 1995 1994 1993
--------------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET SALES TO CUSTOMERS
United States........... $1,385,200 $1,115,600 $ 884,500 $ 815,200
Foreign................. 528,100 487,700 359,700 270,500
---------- ---------- ---------- ----------
Total net sales to
customers............ $1,913,300 $1,603,300 $1,244,200 $1,085,700
========== ========== ========== ==========
OPERATING INCOME
United States........... $ 151,200 $ 126,400 $ 105,700 $ 102,100
Foreign................. 55,100 53,800 41,000 24,000
---------- ---------- ---------- ----------
Total operating in-
come................. $ 206,300 $ 180,200 $ 146,700 $ 126,100
========== ========== ========== ==========
IDENTIFIABLE ASSETS
United States........... $1,350,100 $1,350,100 $ 898,700 $ 916,800
Foreign................. 496,300 496,300 383,600 208,000
---------- ---------- ---------- ----------
Total identifiable as-
sets................. $1,846,400 $1,846,400 $1,282,300 $1,124,800
========== ========== ========== ==========
</TABLE>
- --------
* To reflect acquisition and equity transactions occurring as of the beginning
of the year, as discussed further in Note 2.
The net sales to customers reflect the sales of the operating units in each
geographic area to unaffiliated customers. Export sales from the United States
to unaffiliated customers were $92,900,000; $71,300,000; and $67,800,000 in
fiscal 1995, 1994, and 1993, respectively. Inter-segment sales are not
material. Sales between geographic areas are accounted for at prices which are
competitive with prices charged to unaffiliated customers.
Foreign currency transactions included in income amounted to gains (losses)
of approximately $100,000; $300,000 and ($700,000) in fiscal 1995, 1994 and
1993, respectively. Unrealized gains and losses related to foreign currency
forward contracts were not significant at February 28, 1995 or February 28,
1994. The maximum notional amount of foreign currency forward contracts
outstanding at any one time during fiscal 1995 amounted to approximately
$31,300,000 and the approximate notional amounts of such contracts outstanding
at the end of fiscal 1995 was approximately $12,700,000. At February 28, 1995,
the company also had an interest rate swap outstanding on debt of
approximately $17,000,000 which effectively converts variable rate debt to a
fixed rate of approximately 4.75% through September 1996. The company does not
hold or issue derivatives for trading purposes and is not a party to leveraged
derivatives transactions.
F-19
<PAGE>
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. QUARTERLY FINANCIAL DATA AND INFORMATION (UNAUDITED)
The following table sets forth the unaudited quarterly results of operations
for each of the fiscal quarters in the years ended February 28, 1995 and 1994
(dollars in thousands, except per share data):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
FISCAL 1995 QUARTER QUARTER QUARTER(A) QUARTER(A) YEAR
----------- --------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales............... $ 363,800 $357,200 $397,300 $485,000 $1,603,300
Gross profit (b)........ $ 127,700 $124,700 $135,600 $155,300 $ 543,300
Income from continuing
operations............. $ 17,100 $ 16,700 $ 16,500 $ 17,600 $ 67,900
Extraordinary items..... -- -- (1,100) -- (1,100)
--------- -------- -------- -------- ----------
Net income........... $ 17,100 $ 16,700 $ 15,400 $ 17,600 $ 66,800
========= ======== ======== ======== ==========
Income per share (d):
Primary:
Continuing opera-
tions................ $ .38 $ .37 $ .34 $ .31 $ 1.40
Extraordinary items... -- -- (.02) -- (.02)
--------- -------- -------- -------- ----------
Net income........... $ .38 $ .37 $ .32 $ .31 $ 1.38
========= ======== ======== ======== ==========
Fully-diluted:
Continuing opera-
tions................ $ .34 $ .33 $ .32 $ .30 $ 1.29
Extraordinary items... -- -- (.02) -- (.02)
--------- -------- -------- -------- ----------
Net income........... $ .34 $ .33 $ .30 $ .30 $ 1.27
========= ======== ======== ======== ==========
<CAPTION>
FISCAL 1994
-----------
<S> <C> <C> <C> <C> <C>
Net sales............... $ 287,800 $316,600 $320,000 $319,800 $1,244,200
Gross profit (b)........ $ 102,000 $110,800 $113,800 $114,100 $ 440,700
Income from continuing
operations............. $ 13,600 $ 13,100 $ 12,800 $ 11,600 $ 51,100
Extraordinary items..... (21,700) -- -- -- (21,700)
Cumulative effect of ac-
counting change........ (26,000) -- -- -- (26,000)
--------- -------- -------- -------- ----------
Net income........... $ (34,100) $ 13,100 $ 12,800 $ 11,600 $ 3,400
========= ======== ======== ======== ==========
Income per share (c)
(d):
Primary:
Continuing opera-
tions................ $ .31 $ .29 $ .29 $ .26 $ 1.15
Extraordinary items... (.49) -- -- -- (.49)
Cumulative effect of
accounting change.... (.59) -- -- -- (.58)
--------- -------- -------- -------- ----------
Net income........... $ (.77) $ .29 $ . 29 $ .26 $ .08
========= ======== ======== ======== ==========
Fully-diluted:
Continuing opera-
tions................ $ .28 $ .27 $ .26 $ .24 $ 1.04
Extraordinary items... (.41) -- -- -- (.41)
Cumulative effect of
accounting change.... (.49) -- -- -- (.48)
--------- -------- -------- -------- ----------
Net income........... $ (.62) $ .27 $ .26 $ .24 $ .15
========= ======== ======== ======== ==========
</TABLE>
F-20
<PAGE>
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------
(a) Includes the results of operations of Purolator from its acquisition date
of November 4, 1994.
(b) Excluding depreciation expense.
(c) The sum of the quarterly amounts do not equal the total as a result of
common stock transactions during the year. The impact of those
transactions on the determination of the weighted average number of shares
outstanding is different in each quarter, and for the year in total.
(d) Restated to reflect the five percent stock dividend issued in April 1995.
F-21
<PAGE>
MARK IV INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NOVEMBER 30, FEBRUARY 28,
1995 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash................................................ $ 900 $ 800
Accounts receivable................................. 405,700 383,700
Inventories......................................... 373,900 361,900
Other current assets................................ 79,500 58,600
---------- ----------
Total current assets.............................. 860,000 805,000
Pension related and other non-current assets.......... 229,700 197,100
Property, plant and equipment, net.................... 519,200 487,900
Cost in excess of net assets acquired................. 352,100 356,400
---------- ----------
TOTAL ASSETS...................................... $1,961,000 $1,846,400
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current maturities of debt........ $ 83,600 $ 67,300
Accounts payable.................................... 173,000 174,000
Compensation related liabilities.................... 71,600 70,400
Accrued interest.................................... 7,600 13,800
Other current liabilities........................... 91,200 99,800
---------- ----------
Total current liabilities......................... 427,000 425,300
---------- ----------
Long-Term Debt:
Senior debt......................................... 372,500 352,700
Subordinated debentures............................. 258,000 258,000
---------- ----------
Total long-term debt.............................. 630,500 610,700
---------- ----------
Other non-current liabilities......................... 197,200 174,900
---------- ----------
Stockholders' Equity:
Common stock........................................ 600 600
Additional paid-in capital.......................... 551,000 550,200
Retained earnings................................... 157,100 90,800
Foreign currency translation adjustment............. (2,400) (6,100)
---------- ----------
Total stockholders' equity........................ 706,300 635,500
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY.......... $1,961,000 $1,846,400
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE>
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED)
FOR THE THREE MONTH PERIODS ENDED NOVEMBER 30, 1995 AND 1994
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Net sales................................................... $525,500 $397,300
-------- --------
Operating costs:
Cost of products sold..................................... 358,800 261,700
Selling and administration................................ 83,500 71,700
Research and development.................................. 13,300 8,800
Depreciation and amortization............................. 16,900 14,800
-------- --------
Total operating costs................................... 472,500 357,000
-------- --------
Operating income.......................................... 53,000 40,300
Interest expense............................................ 15,300 13,700
-------- --------
Income before provision for taxes......................... 37,700 26,600
Provision for income taxes.................................. 14,700 10,100
-------- --------
Income before extraordinary items......................... 23,000 16,500
Extraordinary items, net of tax............................. -- (1,100)
-------- --------
Net Income................................................ 23,000 15,400
Retained earnings--beginning of the period.................. 135,900 120,000
Cash dividends of $.03 and $.026 per share.................. (1,800) (1,300)
-------- --------
Retained earnings--end of the period.................. $157,100 $134,100
======== ========
Net income per share of common stock:
Primary:
Income before extraordinary item........................ $ .38 $ .34
Extraordinary items..................................... -- (.02)
-------- --------
Net Income............................................ $ .38 $ .32
======== ========
Fully Diluted:
Income before extraordinary items....................... $ .38 $ .32
Extraordinary items......................................... -- (.02)
-------- --------
Net Income.............................................. $ .38 $ .30
======== ========
Weighted average number of shares outstanding:
Primary................................................... 60,000 48,300
======== ========
Fully-diluted............................................. 60,500 53,600
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
FOR THE NINE MONTH PERIODS ENDED NOVEMBER 30, 1995 AND 1994
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Net sales............................................... $1,553,500 $1,118,300
---------- ----------
Operating costs:
Cost of products sold................................. 1,049,200 730,200
Selling and administration............................ 257,000 205,000
Research and development.............................. 35,000 24,500
Depreciation and amortization......................... 49,300 38,000
---------- ----------
Total operating costs............................. 1,390,500 997,700
---------- ----------
Operating income...................................... 163,000 120,600
Interest expense........................................ 45,500 39,000
---------- ----------
Income before provision for income taxes.............. 117,500 81,600
Provision for income taxes.............................. 45,800 31,300
---------- ----------
Income before extraordinary items..................... 71,700 50,300
Extraordinary items, net of tax......................... -- (1,100)
---------- ----------
Net income............................................ 71,700 49,200
Retained earnings--beginning of the period.............. 90,800 88,600
Cash dividends of $.09 and $.079 per share.............. (5,400) (3,700)
---------- ----------
Retained earnings--end of the period.............. $ 157,100 $ 134,100
========== ==========
Net income per share of common stock:
Primary:
Income before extraordinary items................... $ 1.19 $ 1.09
Extraordinary items................................. -- (.02)
---------- ----------
Net income........................................ $ 1.19 $ 1.07
========== ==========
Fully-diluted:
Income before extraordinary items................... $ 1.19 $ .99
Extraordinary items................................. -- (.02)
---------- ----------
Net income........................................ $ 1.19 $ .97
========== ==========
Weighted average number of shares outstanding:
Primary............................................... 60,100 46,000
========== ==========
Fully-diluted......................................... 60,500 53,600
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTH PERIODS ENDED NOVEMBER 30, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Income before extraordinary items....................... $ 71,700 $ 50,300
Items not affecting cash:
Depreciation and amortization......................... 49,300 38,000
Pension and compensation related items................ (7,800) (10,600)
Deferred income taxes................................. 21,800 4,900
-------- ---------
Net cash provided by earnings....................... 135,000 82,600
Changes in assets and liabilities, net of effects of
businesses acquired and discontinued:
Accounts receivable................................... (13,500) (300)
Inventories........................................... (14,600) (13,800)
Other assets.......................................... (21,200) (10,400)
Accounts payable...................................... (4,400) 11,200
Other liabilities..................................... (18,300) 13,600
-------- ---------
Net cash provided from operating activities......... 63,000 82,900
-------- ---------
Cash flows from investing activities:
Acquisitions............................................ (26,100) (299,100)
Divestitures and asset sales............................ 1,400 5,300
Purchase of plant and equipment, net.................... (66,000) (28,000)
-------- ---------
Net cash used in investing activities............... (90,700) (321,800)
-------- ---------
Cash flows from financing activities:
Credit agreement borrowings, net........................ 11,700 241,200
Other changes in long-term debt, net.................... 5,200 600
Changes in short-term bank borrowings................... 16,400 700
Common stock transactions............................... (200) 300
Cash dividends paid..................................... (5,400) (3,500)
-------- ---------
Net cash provided by financing activities........... 27,700 239,300
-------- ---------
Effect of exchange rate fluctuations...................... 100 (100)
-------- ---------
Net increase in cash................................ 100 300
Cash and cash equivalents:
Beginning of the year................................... 800 500
-------- ---------
End of the period....................................... $ 900 $ 800
======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
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 November 30, 1995, and the results of its operations and its
cash flows for the three and nine month periods ended November 30, 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 and nine month periods ended November 30, 1995,
and in the consolidated balance sheets of the Company as of November 30,
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 the last quarter of
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 and nine month periods ended November
30, 1994 as if the following transactions had occurred at the beginning of
the periods: (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 therefrom.
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 the periods, nor are they intended
to be a projection of future results (dollars in thousands, except per
share amounts):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
NOVEMBER 30, 1994 NOVEMBER 30, 1994
----------------- -----------------
<S> <C> <C>
Net sales.............................. $477,000 $1,428,300
-------- ----------
Income before interest and taxes....... $ 47,500 $ 146,700
======== ==========
Income before extraordinary items...... $ 20,000 $ 60,500
======== ==========
Income per share before extraordinary
items:
Primary.............................. $ .37 $ 1.15
======== ==========
Fully-diluted........................ $ .34 $ 1.06
======== ==========
</TABLE>
3. Accounts receivable are presented net of allowances for doubtful accounts
of $18,900,000 and $18,600,000 at November 30, 1995 and February 28, 1995,
respectively.
4. Inventories consist of the following components (dollars in thousands):
<TABLE>
<CAPTION>
NOVEMBER 30, FEBRUARY 28,
1995 1995
------------ ------------
<S> <C> <C>
Raw materials, parts and sub-assemblies............ $104,300 $103,500
Work-in-process.................................... 65,900 60,200
Finished goods..................................... 203,700 198,200
-------- --------
Inventories...................................... $373,900 $361,900
======== ========
</TABLE>
F-26
<PAGE>
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
November 30, 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):
<TABLE>
<CAPTION>
NOVEMBER 30, FEBRUARY 28,
1995 1995
------------ ------------
<S> <C> <C>
Land and land improvements......................... $ 41,500 $ 41,500
Buildings.......................................... 153,400 145,300
Machinery and equipment............................ 513,400 451,600
-------- --------
Total property, plant and equipment.............. 708,300 638,400
Less accumulated depreciation...................... 189,100 150,500
-------- --------
Property, plant and equipment, net............... $519,200 $487,900
======== ========
</TABLE>
6. Long-term debt consists of the following at November 30, 1995 and February
28, 1995 (dollars in thousands):
<TABLE>
<CAPTION>
NOVEMBER 30, FEBRUARY 28,
1995 1995
------------ ------------
<S> <C> <C>
Senior Debt:
Credit Agreement............................... $ 310,000 $ 300,000
Multi-Currency Agreement....................... 40,000 38,300
Other items.................................... 49,600 42,500
---------- ----------
Total........................................ 399,600 380,800
Less Current maturities........................ (6,500) (8,600)
Less amounts allocated to discontinued opera-
tions......................................... (20,600) (19,500)
---------- ----------
Net senior debt.............................. 372,500 352,700
8 3/4% Senior Subordinated Notes................. 258,000 258,000
---------- ----------
Total long-term debt........................... 630,500 610,700
Total stockholders' equity..................... 706,300 635,500
---------- ----------
Total capitalization........................... $1,336,800 $1,246,200
========== ==========
Long-term debt as a percentage of total capi-
talization.................................... 47.2% 49.0%
========== ==========
</TABLE>
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 entitles 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. 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
F-27
<PAGE>
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. If either the acquiring person beneficially owns 20% or more
of the Company's Common Stock or the Company is a party to a business
combination which is not approved by the Company's Board of Directors, each
Right (other than those held by the acquiring person) will entitle the
holder to receive, upon exercise, shares of Common Stock of the Company or
of the surviving company with a value equal to two times the exercise price
of the Right.
8. For purposes of cash flows, the Company considers overnight investments as
cash equivalents. The Company made cash interest payments of approximately
$51,600,000 and $45,600,000 in the nine month periods ended November 30,
1995 and 1994, respectively. The Company also made cash income tax payments
of approximately $26,200,000 and $15,100,000 in the nine month periods
ended November 30, 1995 and 1994, respectively.
9. On December 5, 1995, the Company acquired the assets of FitzSimons
Manufacturing Company (FMC) for a cash purchase price of $23,700,000. FMC
is a manufacturer of fuel system components for the North American
automotive and truck industries, with annual sales of approximately
$60,000,000.
F-28
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Purolator Products Company:
We have audited the accompanying consolidated balance sheets of Purolator
Products Company (a Delaware corporation) and subsidiaries as of December 31,
1993 and 1992, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 31, 1993,
1992 and 1991. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Purolator
Products Company and subsidiaries as of December 31, 1993 and 1992, and the
results of their operations and their cash flows for the years ended December
31, 1993, 1992, and 1991 in conformity with generally accepted accounting
principles.
As explained in Note 5 to the consolidated financial statements, effective
January 1, 1991, the Company changed its method of accounting for
postretirement benefit costs other than pensions.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
February 11, 1994
F-29
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1993 1992
------------ ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 5,707 $ 3,411
Trade accounts receivable, net..................... 63,766 63,834
Inventories, net................................... 73,473 87,130
Other current assets............................... 8,610 9,222
------------ ------------
Total Current Assets........................... 151,556 163,597
Land, buildings and equipment, net................. 75,551 72,239
Investments........................................ 11,905 7,767
Intangible assets, net............................. 110,800 116,128
Other assets....................................... 9,255 4,735
------------ ------------
Total Assets................................... $ 359,067 $ 364,466
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt............... $ 4,243 $ 3,936
Accounts payable................................... 32,387 31,465
Accrued liabilities................................ 36,109 27,224
------------ ------------
Total Current Liabilities...................... 72,739 62,625
Long-term debt, less current maturities............ 38,971 69,039
Other noncurrent liabilities....................... 73,745 74,548
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1.00 par value per share,
10,000,000 shares authorized, no shares issued
or outstanding.................................. -- --
Common stock, $.01 par value per share,
30,000,000 shares authorized, 11,212,500 and
10,112,500 shares issued and outstanding........ 112 101
Additional paid-in capital......................... 326,944 311,437
Accumulated deficit................................ (140,573) (151,230)
Additional minimum pension liability............... (10,424) (1,002)
Cumulative translation adjustment.................. (2,447) (1,052)
------------ ------------
Total Stockholders' Equity..................... 173,612 158,254
------------ ------------
Total Liabilities and Stockholders' Equity..... $ 359,067 $ 364,466
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-30
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1992 1991
-------- -------- --------
(EXPRESSED IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales........................................ $435,821 $417,888 $401,690
Cost of sales.................................... 333,488 318,507 310,265
-------- -------- --------
Gross Profit..................................... 102,333 99,381 91,425
Selling, general and administrative expenses..... 84,577 83,349 82,157
Nonrecurring charges............................. -- 2,888 39,980
-------- -------- --------
Operating Income (Loss).......................... 17,756 13,144 (30,712)
Interest expense................................. 4,119 8,475 9,059
Other income..................................... 2,182 3,661 2,191
-------- -------- --------
Income (Loss) Before Income Taxes and Equity in
Income (Loss) of Affiliates..................... 15,819 8,330 (37,580)
Income tax provision (benefit)................... 461 (1,966) (1,015)
Equity in income (loss) of affiliates............ 2,475 795 (1,445)
-------- -------- --------
Income (Loss) Before Cumulative Effect of Change
in Accounting
Principle....................................... 17,833 11,091 (38,010)
======== ======== ========
Cumulative Effect of Change in Accounting
Principle....................................... -- -- (17,317)
-------- -------- --------
Net income (loss)................................ $ 17,833 $ 11,091 $(55,327)
Earnings (loss) per share:
Income (Loss) Before Cumulative Effect of Change
in Accounting Principle......................... $ 1.59 $ 1.29 $ (4.47)
Cumulative Effect of Change in Accounting
Principle....................................... -- -- (2.04)
-------- -------- --------
Net Income (Loss)................................ $ 1.59 $ 1.29 $ (6.51)
======== ======== ========
Weighted Average Shares Outstanding.............. 11,182 8,550 8,500
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-31
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
ADDITIONAL MINIMUM CUMULATIVE
PAID-IN ACCUMULATED PENSION TRANSLATION
SHARES AMOUNT CAPITAL DEFICIT LIABILITY ADJUSTMENT TOTAL
---------- ------ ---------- ----------- ---------- ----------- --------
(EXPRESSED IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1991................... 8,500,000 $ 85 $263,831 $(106,994) $ (1,423) $ 1,318 $156,817
Changes in Additional
Minimum Pension Liabil-
ity.................... -- -- -- -- 92 -- 92
Translation Adjustment.. -- -- -- -- -- 462 462
Net Loss................ -- -- -- (55,327) -- -- (55,327)
---------- ---- -------- --------- -------- ------- --------
Balance, December 31,
1991................... 8,500,000 85 263,831 (162,321) (1,331) 1,780 102,044
Translation Adjustment.. -- -- -- -- -- (2,832) (2,832)
Changes in Additional
Minimum Pension Liabil-
ity.................... -- -- -- -- 329 -- 329
Issuance of Stock, net.. 1,612,500 16 22,645 -- -- -- 22,661
Environmental Indemnifi-
cation by Former Par-
ent.................... -- -- 17,700 -- -- -- 17,700
Capital Contribution by
Former
Parent................. -- -- 7,261 -- -- -- 7,261
Net Income.............. -- -- -- 11,091 -- -- 11,091
---------- ---- -------- --------- -------- ------- --------
Balance, December 31,
1992................... 10,112,500 101 311,437 (151,230) (1,002) (1,052) 158,254
Translation Adjustment.. -- -- -- -- -- (1,395) (1,395)
Changes in Additional
Minimum Pension Liabil-
ity.................... -- -- -- -- (9,422) -- (9,422)
Issuance of Stock, net.. 1,100,000 11 15,507 -- -- -- 15,518
Dividends Paid ($0.64
per share of Common
Stock)................. -- -- -- (7,176) -- -- (7,176)
Net Income.............. -- -- -- 17,833 -- -- 17,833
---------- ---- -------- --------- -------- ------- --------
Balance, December 31,
1993................... 11,212,500 $112 $326,944 $(140,573) $(10,424) $(2,447) $173,612
========== ==== ======== ========= ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-32
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1993 1992 1991
--------- --------- --------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................... $ 17,833 $ 11,091 $(55,327)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating ac-
tivities:
Depreciation and amortization................. 13,567 14,651 14,732
Equity in (income) loss of affiliates......... (2,475) (795) 1,445
Provision for losses on receivables........... 1,142 1,604 1,537
Provision for inventory reserves.............. 2,949 3,474 7,811
Interest accretion on postretirement employee
benefits obligations......................... 3,348 4,513 5,927
Amortization of debt origination costs........ 611 -- --
Nonrecurring charges.......................... -- 2,888 39,980
Write-downs of buildings and equipment........ -- 426 4,085
Change in operating assets and liabilities,
net of effects from acquisitions and disposi-
tions:
(Increase) decrease in receivables........... (1,217) (3,888) 12,980
(Increase) decrease in inventories........... 10,708 (16,149) 2,638
(Increase) decrease in other current assets.. 3,483 (2,407) (360)
(Increase) decrease in other noncurrent as-
sets........................................ (4,465) 1,012 1,675
Increase (decrease) in accounts payable...... 922 (4,464) 4,731
Decrease in other current liabilities........ (1,689) (7,166) (25,009)
Decrease in other noncurrent liabilities..... (489) (1,773) (1,211)
Increase (decrease) in postretirement em-
ployee benefits obligations................. (3,520) (3,472) 14,155
Other, net................................... (1,363) (2,539) 1,437
--------- --------- --------
Total adjustments............................ 21,512 (14,085) 86,553
--------- --------- --------
Net cash provided by (used in) operating ac-
tivities.................................... 39,345 (2,994) 31,226
--------- --------- --------
Cash flows from investing activities:
Capital expenditures......................... (13,552) (10,835) (7,905)
Other, net................................... 177 830 122
Investment in Purodenso...................... (2,000) (2,500) (2,500)
--------- --------- --------
Net cash used in investing activities......... (15,375) (12,505) (10,283)
--------- --------- --------
Cash flows from financing activities:
Proceeds from note payable to Former Par-
ent........................................ -- 67,000 46,000
Payments on note payable to Former Parent... -- (142,044) (63,665)
Debt origination costs...................... (272) (2,085) --
Proceeds from stock issuance................ 15,518 21,150 --
Proceeds from long-term debt................ 117,829 71,972 1,842
Payments on long-term debt.................. (147,573) (3,878) (2,911)
Dividends paid.............................. (7,176) -- --
--------- --------- --------
Net cash provided by (used in) financing ac-
tivities................................... (21,674) 12,115 (18,734)
--------- --------- --------
Increase (decrease) in cash and cash equiva-
lents...................................... 2,296 (3,384) 2,209
Cash and cash equivalents, beginning of pe-
riod....................................... 3,411 6,795 4,586
--------- --------- --------
Cash and cash equivalents, end of period.... $ 5,707 $ 3,411 $ 6,795
========= ========= ========
Supplemental disclosures of cash flow informa-
tion:
Interest payments........................... $ 3,125 $ 9,112 $ 8,760
Tax payments................................ 4,818 907 369
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-33
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
Effective December 21, 1992, Pennzoil Company ("Pennzoil" or the "Former
Parent") together with Purolator Products Company, a Delaware corporation
("Purolator" or the "Company"), sold 10,000,000 shares of common stock of
Purolator in concurrent domestic and international public offerings. Purolator
did not receive any of the proceeds from the sales of shares held by the
Former Parent (8,500,000). As a result of the completion of the offerings, the
Former Parent does not own any shares of capital stock of the Company. On
January 11, 1993, the Company sold 1,100,000 shares of common stock pursuant
to the partial exercise of the over-allotment options granted to the
underwriters in connection with the public offerings.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Purolator and its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
Foreign Currency Translation
Foreign currency transactions and financial statements are translated in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 52,
Foreign Currency Translation. Assets and liabilities are translated to U.S.
dollars at the current exchange rate at the end of the period. Income and
expense accounts are translated using the weighted average exchange rate for
the period. Adjustments arising from translation of foreign financial
statements are reflected in the cumulative translation adjustment in the
equity section of the consolidated balance sheet. Transaction gains and losses
are included in net income (loss).
The Company enters into forward foreign exchange contracts to hedge the
effect of fluctuating currency rates on certain liabilities, such as accounts
payable, that are denominated in foreign currencies. The contracts typically
provide for the exchange of different currencies at specified future dates and
rates. The gain or loss due to the difference between the forward exchange
rates of the contracts and current rates offsets in whole or in part the loss
or gain on the liabilities being hedged.
Inventories
Substantially all inventories are reported at cost, using the first-in,
first-out (FIFO) method, which is lower than market.
Land, Buildings and Equipment
Land, buildings and equipment are stated at cost. Depreciation is provided
generally on a straight-line basis over the estimated service lives of the
respective classes of property. Estimated service lives are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Land improvements................................................... 10-35
Leasehold improvements.............................................. 3-30
Buildings and improvements.......................................... 3-66
Machinery and equipment............................................. 3-18
</TABLE>
Amortization of leasehold improvements is based upon the terms of the
respective leases. Maintenance, repairs and betterments, including replacement
of minor items of physical properties, are charged to expense; major additions
to physical properties are capitalized. The cost of the assets retired or sold
is credited to the
F-34
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
asset accounts and the related accumulated depreciation is charged to the
accumulated depreciation accounts. The gain or loss from sale or retirement of
property, if any, is included in net income (loss).
Investments
Common stock investments in entities in which the Company owns equity
interests ranging from 20 percent to 50 percent are accounted for under the
equity method, pursuant to which the Company's share of the affiliate's
operating results is included in net income (loss).
Intangible Assets
Intangible assets include goodwill which represents the excess of cost over
the amount ascribed to the net assets of ongoing businesses purchased and is
being amortized on a straight-line basis over a 40-year period.
The cost of internally developed patents is charged to expense as incurred.
Purchased patents are amortized over their estimated economic lives.
Interest Rate Swap Agreement
During 1993, the Company entered into an interest rate swap agreement which
involved the exchange of fixed and floating rate interest payments
periodically over the life of the agreement without the exchange of the
underlying principal amounts. The differential to be paid or received is
recorded as an adjustment to interest expense over the life of the agreement.
Federal, State and Foreign Income Taxes
Effective January 1, 1993, the Company adopted SFAS No. 109, Accounting for
Income Taxes, which uses the liability method of accounting for income taxes.
Under the liability method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
The Company and its United States subsidiaries are included in the Former
Parent's consolidated United States federal income tax returns for the year
ended December 31, 1991 and the period from January 1, 1992 through December
21, 1992. The Company and the Former Parent previously entered into a tax
sharing agreement ("Tax Sharing Agreement") which was intended to put the
Company in the same position with regard to the amount of federal income taxes
that it would pay if it filed a separate tax return. The agreement also
provided that the Company would be reimbursed by the Former Parent for any tax
losses or credits of the Company utilized by the Former Parent consolidated
return group. The Tax Sharing Agreement was terminated effective September 30,
1992. The Company received no benefit for federal income tax losses which were
generated during the period October 1, 1992 through December 21, 1992. The
Company filed a separate federal income tax return for the period from
December 22, 1992 through December 31, 1992.
Capitalized Leases
Assets and related obligations under certain long-term leases are
capitalized. The related depreciation and the imputed interest expense are
charged against income in lieu of lease rental expense.
Earnings (Loss) Per Share
Earnings (loss) per share are calculated by dividing net income (loss) by
the weighted average number of shares of common stock outstanding. Stock
options have been excluded from the calculations as their dilutive effect is
not significant.
F-35
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Cash Flows Information
For purposes of the consolidated statements of cash flows, all highly liquid
investments purchased with a maturity of three months or less are considered
to be cash equivalents. The effect of changes in foreign exchange rates on
cash balances is immaterial.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash and Short-term Investments:
The carrying amount approximates fair value because of the short maturity of
those instruments.
Notes Receivable:
The carrying amount approximates fair value because interest rates are at or
close to a reasonable market rate.
Long-term Debt:
The carrying amount approximates fair value because of the frequent
repricing on revolving facilities.
Forward Foreign Exchange Contracts:
The fair value of forward foreign exchange contracts is estimated by
obtaining a quote from a commercial bank. The carrying amount approximates
fair value.
Interest Rate Swap Agreement:
The fair value of the Company's interest rate swap agreement is the
estimated amount that the Company would receive or pay to terminate the
agreement. Based on a quote from a commercial bank, the carrying amount of the
swap agreement approximates the fair value.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year presentations. These reclassifications have no impact on net
income (loss).
F-36
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. DETAILS TO CONSOLIDATED BALANCE SHEETS:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1993 1992
------------ ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C>
Trade accounts receivable:
Trade receivables................................ $ 72,304 $ 72,124
Less allowances.................................. 8,538 8,290
------------ ------------
Total, net..................................... $ 63,766 $ 63,834
============ ============
Inventories:
Finished goods................................... $ 41,271 $ 51,442
Work in progress................................. 7,039 7,375
Raw materials and supplies....................... 27,850 33,124
------------ ------------
Total.......................................... 76,160 91,941
Less reserves.................................... 2,687 4,811
------------ ------------
Total, net..................................... $ 73,473 $ 87,130
============ ============
Land, buildings and equipment:
Land and improvements............................ $ 6,278 $ 6,292
Leasehold improvements........................... 5,806 5,644
Buildings and improvements....................... 23,752 23,265
Machinery and equipment.......................... 69,120 64,817
Construction in progress......................... 14,878 9,230
------------ ------------
Total.......................................... 119,834 109,248
Less accumulated depreciation and amortization... 44,283 37,009
------------ ------------
Total, net..................................... $ 75,551 $ 72,239
============ ============
Intangible assets:
Goodwill (Note 4)................................ $ 127,078 $ 130,308
Other............................................ 5,628 4,436
------------ ------------
Total.......................................... 132,706 134,744
Less accumulated amortization.................... 21,906 18,616
------------ ------------
Total, net..................................... $ 110,800 $ 116,128
============ ============
Accrued liabilities:
Salaries and wages............................... $ 4,856 $ 4,828
Employee pensions................................ 12,885 5,469
Advertising...................................... 3,100 4,189
Other............................................ 15,268 12,738
------------ ------------
Total.......................................... $ 36,109 $ 27,224
============ ============
Other noncurrent liabilities:
<CAPTION>
Postretirement employee benefits obligations..... $ 64,280 $ 64,452
<S> <C> <C>
Other............................................ 9,465 10,096
------------ ------------
Total.......................................... $ 73,745 $ 74,548
============ ============
</TABLE>
F-37
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1992 1991
-------- -------- --------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Allowance for accounts receivable:
Balance, beginning of period............... $ 8,290 $ 10,347 $ 13,032
Provision for losses on receivables........ 1,142 1,604 1,537
Receivables written off, net of
recoveries................................ (894) (3,661) (4,222)
-------- -------- --------
Balance, end of period..................... $ 8,538 $ 8,290 $ 10,347
======== ======== ========
Allowance for inventories:
Balance, beginning of period............... $ 4,811 $ 9,148 $ 7,744
Provision.................................. 2,949 3,474 7,811
Inventories written off and other
adjustments............................... (5,073) (7,811) (6,407)
-------- -------- --------
Balance, end of period..................... $ 2,687 $ 4,811 $ 9,148
======== ======== ========
Accumulated amortization of intangible
assets:
Balance, beginning of period............... $ 18,616 $ 13,853 $ 10,388
Provision.................................. 3,259 3,519 3,599
Retirements and other...................... 31 1,244 (134)
-------- -------- --------
Balance, end of period..................... $ 21,906 $ 18,616 $ 13,853
======== ======== ========
</TABLE>
3. DEBT:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1993 1992
------------ ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C>
Revolving credit facility with a group of banks,
interest at 6.1%................................. $ 10,000 $ 30,000
Term credit agreement with a group of banks,
interest at 5.6%................................. 31,000 40,000
Capital building lease obligation, payable in
quarterly installments ranging from $14,600 to
$56,750, including interest, through March 2036.. 2,047 2,129
Other debt and capital lease obligations.......... 167 846
------------ ------------
43,214 72,975
Less--current maturities.......................... 4,243 3,936
------------ ------------
Total long-term amount............................ $ 38,971 $ 69,039
============ ============
</TABLE>
The Company amended its credit facility with a group of banks and Texas
Commerce Bank National Association ("TCB"), as agent, (the "Credit Facility")
during the fourth quarter of 1993. The amended agreement expands the total
funds available under the revolving credit agreement by $20.0 million. The
Credit Facility provides the Company with the ability to make individual
acquisitions up to $20.0 million without the consent of the lenders under the
Credit Facility and up to $45.0 million in the aggregate ("permitted
acquisitions"). At December 31, 1993, the Credit Facility provided for a $65.0
million revolving credit facility (the "Revolving Credit Facility") and a
$31.0 million term loan (the "Term Loan"). Up to $7.0 million of the Revolving
Credit Facility is available for the issuance of letters of credit. The
aggregate amount available for borrowing under the Revolving Credit Facility
is limited to an amount equal to a specified borrowing base (generally
consisting of 80 percent of certain accounts receivable balances and 45
percent of certain inventory balances of the Company and certain subsidiaries,
with the inventory portion of the borrowing base not to exceed 50 percent of
the borrowing base). At December 31, 1993, the Credit Facility provided for
quarterly principal
F-38
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
payments on the Term Loan of $1.0 million beginning on March 31, 1994,
escalating to $1.44 million on March 31, 1996. The final maturities of the
Revolving Credit Facility and the Term Loan are four years and seven years,
respectively, from the establishment of the original credit facility ("TCB
Credit Facility") on December 14, 1992. Interest on the Revolving Credit
Facility is at a variable rate equal to, at the option of the Company, LIBOR
plus 1.75 percent, or the agent bank's "base rate" plus one percent. Interest
on the Term Loan is at a variable rate equal to, at the option of the Company,
LIBOR plus two percent, or the agent bank's "base rate" plus one percent. The
interest rates for both the Revolving Credit Facility and the Term Loan are
subject to reduction based upon the ratio of the total committed debt under
the Credit Facility to the Company's earnings before interest, taxes,
depreciation, obsolescence and amortization ("EBITDA").
Borrowings under the Credit Facility are collateralized by liens on
substantially all accounts receivable and inventory and certain patents and
trademarks of the Company and certain subsidiaries, together with a pledge of
all the capital stock of such subsidiaries, and are guaranteed by certain of
those subsidiaries. The terms of the Credit Facility require the Company to
meet certain financial covenants. The primary financial covenants require that
the company maintain (i) net worth; as defined, $175.1 million at December 31,
1993; (ii) a current ratio greater than 1.5-to-1.0; and (iii) a fixed charge
coverage ratio greater than 1.25-to-1.0 (1.0-to-1.0 inclusive of dividends).
Additionally, certain covenants contained in the Credit Facility, among
other things, generally (i) restrict the Company's incurrence of additional
indebtedness or contractual contingent obligations to an aggregate of $7.5
million; (ii) prohibit the encumbrance of the Company's assets and the
creation of negative pledges; (iii) restrict the transfer of the Company's
assets (including dispositions of capital stock of certain of the Company's
subsidiaries); (iv) prohibit the Company from engaging in any merger,
consolidation or asset disposition transaction (except for disposition of
previously scheduled non-producing assets); and (v) limit the Company's
investments, other than permitted acquisitions, and extensions of credit in
excess of $3.0 million.
The Company leases certain of its plant facilities and equipment under
capital leases. Lease payments are scheduled to coincide with the liquidation
of the related debt obligations of the lessors.
Future maturities of long-term debt and the minimum future annual
obligations on all capitalized leases in effect as of December 31, 1993 are
presented in the table below (expressed in thousands):
<TABLE>
<CAPTION>
AGGREGATE
MATURITIES
----------
<S> <C>
1994.............................................................. $ 4,358
1995.............................................................. 4,249
1996.............................................................. 15,987
1997.............................................................. 5,987
1998.............................................................. 5,985
Thereafter........................................................ 8,820
-------
Total future maturities and minimum payments...................... 45,386
Less--amount representing interest on capital leases.............. 2,172
-------
Future maturities and present value of net minimum payments....... 43,214
Less--current portion............................................. 4,243
-------
$38,971
=======
</TABLE>
At December 31, 1993, the Company had available revolving credit facilities
aggregating $67.3 million with $10.1 million drawn under these facilities.
F-39
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As required by the Credit Facility, the Company entered into an interest
rate agreement during 1993 to effectively fix or place a limit upon the
interest payable with respect to at least 50% of the principal amount of the
Term Loan. At December 31, 1993, the Company had outstanding an interest rate
swap agreement with a commercial bank. Under the interest rate swap agreement,
the Company pays an effective fixed interest rate of approximately 6.7% on a
notional principal amount of $17.0 million. The agreement expires in 1996.
4. INCOME TAXES:
Income (loss) before income taxes and equity in income (loss) of affiliates
consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1992 1991
------- ------- --------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Domestic......................................... $15,988 $ 9,352 $(37,005)
Foreign.......................................... (169) (1,022) (575)
------- ------- --------
Total........................................ $15,819 $ 8,330 $(37,580)
======= ======= ========
</TABLE>
Federal, state and foreign income tax provision (benefit) consists of the
following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1992 1991
-------- -------- --------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Current:
U.S. federal and state...................... $ 7,516 $ (2,555) $ (1,610)
Foreign..................................... 461 589 595
-------- -------- --------
Total current provision (benefit)......... $ 7,977 $ (1,966) $ (1,015)
======== ======== ========
Deferred:
U.S. federal and state...................... $(7,516) -- --
Foreign..................................... -- -- --
-------- -------- --------
Total deferred benefit.................... $ (7,516) -- --
======== ======== ========
Total provision (benefit)..................... $ 461 $ (1,966) $ (1,015)
======== ======== ========
</TABLE>
A reconciliation of federal statutory and effective income tax rates is
shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
STATUTORY RATE................................ 35.0% 34.0 % (34.0)%
INCREASES (REDUCTIONS) RESULTING FROM:
Nonrecognition of deferred tax assets....... -- (58.7) 25.5
Recognition of previously reserved tax as-
sets....................................... (41.2) -- --
Reimbursed tax losses from Former Parent.... -- (31.0) 3.1
Amortization of goodwill.................... 6.1 12.9 2.1
State income taxes.......................... -- 1.9 0.1
Foreign income and losses................... 0.8 3.9 2.5
Foreign income taxes........................ 2.5 6.5 1.1
Other, net.................................. (0.7) 8.9 (2.2)
------- ------- -------
EFFECTIVE RATE................................ 2.5% (21.6)% (1.8)%
======= ======= =======
</TABLE>
F-40
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company adopted SFAS No. 109, Accounting for Income Taxes, effective
January 1, 1993. There was no cumulative effect of adopting SFAS No. 109 on
net income for the year ended December 31, 1993. Deferred income taxes reflect
the net tax effects of (i) temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes, and (ii) operating loss and tax credit
carryforwards. The effects of significant items comprising the Company's net
deferred tax asset are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 1,
1993 1993
------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Fixed asset basis differences............. $ (6,235) $ (6,156)
Other..................................... (8,265) (8,260)
------------ ------------
Total deferred tax liabilities.......... (14,500) (14,416)
------------ ------------
Deferred tax assets:
Postretirement employee benefits obliga-
tions.................................... $ 25,985 $ 26,004
Environmental reserve not currently de-
ductible................................. 3,431 3,644
Inventory capitalization under Section
263A of the Internal Revenue Code........ 3,108 3,506
Reserves not currently deductible......... 9,119 9,887
Additional minimum pension liability...... 4,158 --
Other..................................... 13,362 11,609
------------ ------------
Total deferred tax assets............... 59,163 54,650
Valuation allowance for deferred tax as-
sets....................................... (37,147) (40,234)
------------ ------------
22,016 14,416
------------ ------------
Net deferred tax asset.................. $ 7,516 $ --
============ ============
</TABLE>
Due to its recent history of losses, the Company applied valuation
allowances against all of its net deferred tax assets as of January 1, 1993.
The net change of $3.1 million in the valuation allowance was attributable to
(i) current year temporary differences, (ii) federal and state current income
taxes paid or payable, and (iii) utilization of pre-acquisition net operating
loss carryforwards to reduce goodwill.
At December 31, 1993, the Company had net operating loss carryforwards of
$3.4 million available to offset future federal taxable income. The net
operating loss carryforwards expire as follows: $1.1 million in 2003 and $2.3
million in 2004. The future utilization of these net operating loss
carryforwards will result in a reduction of goodwill. The Company has net
state operating loss carryforwards of $14.5 million available to offset future
state taxable income. The state net loss carryforwards begin to expire in
1999.
5. BENEFIT PLANS:
Stock Option Plans
In November 1992, the Company established the 1992 Stock Option Plan ("1992
Plan"). Awards under the 1992 Plan are to be made to those persons who hold
positions of responsibility and whose performance can have a significant
effect on the success of the Company and its subsidiaries. An award consists
of an option to purchase a specified number of shares of common stock at a
specified price that is not less than the fair market value of the common
stock on the date of grant of the option. All options granted under the 1992
Plan are ten-year non-qualified options and become exercisable in 33 1/3%
increments on each of the first, second and third
F-41
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
anniversaries of the date of grant. The Company has reserved 387,500 shares of
common stock for awards made under the 1992 plan.
In May 1993, the stockholders approved the 1993 Nonemployee Director Stock
Option Plan ("1993 Plan"). The 1993 Plan is intended as an incentive to
attract and retain, as independent directors of the Company, persons of
training, experience and ability, to encourage the sense of proprietorship of
such persons and to stimulate their active interest in the development and
financial success of the Company. Under the 1993 Plan, nonemployee members of
the Company's board of directors receive nondiscretionary automatic grants of
non-qualified options to purchase 500 shares of common stock upon becoming a
director of the Company (persons who were serving as nonemployee directors as
of May 20, 1993, the date of implementation of the plan, were granted their
500 share options as of that date). In addition, beginning in 1994, each
person serving as a nonemployee director on January 1 of each calendar year
will automatically be granted options to purchase an additional 1,000 shares
of common stock, subject to the availability for issuance of such shares under
the 1993 Plan. All options granted under the 1993 Plan have an exercise price
equal to the fair market value of the underlying common stock on the date of
the grant and become exercisable in increments of 50% on the first anniversary
of the date of grant and 25% on each of the second and third anniversaries of
the date of grant. The Company has reserved 50,000 shares of common stock for
awards made under the 1993 Plan.
Long-Term Incentive Plan
In February 1994, the Company adopted the 1994 Long-Term Incentive Plan
("1994 Plan"). The 1994 Plan is intended to provide an incentive that will
allow the Company to retain key executives and other selected employees and
reward them for making major contributions to the success of the Company and
its subsidiaries. Awards that can be made under the 1994 Plan include (i)
stock options (both non-qualified stock options and incentive stock options);
(ii) stock appreciation rights; (iii) stock; and (iv) cash. The exercise price
of stock options granted under the 1994 Plan may not be less than the par
value of the underlying common stock on the date of grant of the option. The
Company has reserved 500,000 shares of common stock for awards granted under
the 1994 Plan. All awards made under the 1994 Plan for the year ended December
31, 1993 were in the form of non-qualified stock options with exercise prices
equal to the fair market value of the underlying stock on the date of grant.
The number and option price of options granted under the Company's stock
option plans and long-term incentive plan were as follows:
<TABLE>
<CAPTION>
NUMBER OF PRICE PER
SHARES SHARE
--------- ---------
<S> <C> <C>
Outstanding at January 1, 1992..................... -- --
Granted.......................................... 287,000 $15.00
Exercised........................................ -- --
Cancelled........................................ -- --
------- --------------
Outstanding at December 31, 1992................... 287,000 $15.00
Granted.......................................... 132,430 $17.75--$19.75
Exercised........................................ -- --
Cancelled........................................ (4,910) $15.00
------- --------------
Outstanding at December 31, 1993................... 414,520 $15.00--$19.75
======= ==============
Exercisable at December 31, 1993................... 94,030 $15.00
======= ==============
</TABLE>
F-42
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Shares of common stock reserved for future grants at December 31, 1993 and
1992 were 522,980 and 100,500, respectively.
Deferred Compensation Plan
In November 1993, the Company adopted the Deferred Compensation Plan (the
"Plan") as an incentive for certain employee directors, officers and other key
employees of the Company or its subsidiaries to encourage them to remain in
the employ of the Company or of its subsidiaries. The Plan, which is treated
as an unfunded non-qualified deferred compensation plan, enables eligible
employees to defer the receipt of a portion of their compensation for a fixed
period of years, until their employment terminates. Participants' account
balances are valued at the greater of the share value or the dollar value, as
defined in the Plan. The share value of a participant's account balance is the
market value of the number of shares of common stock that could have been
purchased by the participant with the deferral amounts, including dividend
reinvestment. The dollar value represents the value of the deferral amounts
adjusted for compound interest that would have been earned on the deferral
amounts assuming allocation of interest at the Applicable Interest Rate
established quarterly by the Internal Revenue Service. The Company accrued no
additional compensation expense related to the Plan for the year ended
December 31, 1993.
Retirement Plans
The Company and certain of its subsidiaries maintain three noncontributory
defined benefit pension plans (the Employees' Pension Plan, the Hourly
Employees' Pension Plan, and the Retirement Plan for Employees of UAW Local
604, Elmira, NY, the ("Elmira Plan") covering certain salaried and hourly
employees, former employees and retirees. Under these plans, the Company
contributes an amount equal to or greater than the minimum funding
requirements of the Employee Retirement Income Security Act of 1974 as
amended, ("ERISA"), where applicable, but not in excess of the maximum amount
that can be deducted for federal income tax purposes. Benefits under the
Employees' Pension Plan are generally based on the employees' years of service
and compensation during years of service. Benefits under the Hourly Employees'
Pension Plan are generally based on years of service multiplied by a specified
dollar amount. The Company previously maintained a defined contribution plan,
the Hourly Employees' Target Benefit Plan (the "Target Plan"), and a defined
benefit plan, the Hourly Employees' Supplemental Retirement Plan (the
"Supplemental Plan"). The Target Plan covered the current hourly employees of
the Motor Components Division of the Automotive Products Segment and the
former hourly employees of the Motor Components, Filter Products and Fuel
Devices Divisions who previously were covered by a collective bargaining
agreement with the United Automotive Workers Union. The Supplemental Plan
covered employees and former employees who were participants of a defined
benefit pension plan (the "Terminated Hourly Plan") that was terminated by the
Company in 1980 under the provisions of ERISA. The Target Plan and
Supplemental Plan were adopted in connection with the termination of the
Terminated Hourly Plan. Under the Target Plan, the Company was obligated to
make periodic contributions to a trust fund based on each covered employee's
credited hours of service to the Company. The Supplemental Plan provided that
the Company make periodic contributions sufficient to fund benefits equal to
the benefits that retirees (or their spouses) would have received had the
Terminated Hourly Plan not been terminated, less the sum of the amounts paid
to such persons (i) by the Pension Benefit Guaranty Corporation with respect
to the Terminated Hourly Plan and (ii) all amounts paid under the Target Plan.
Effective April 15, 1992, the Supplemental and Target Plans were combined into
a single defined benefit plan which is the Elmira Plan.
F-43
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net periodic pension cost includes the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1992 1991
------- ------- --------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Service cost--benefits earned during the
period....................................... $ 1,793 $ 1,531 $ 1,364
Interest cost of projected benefit
obligations.................................. 4,317 4,079 3,874
Actual return on plan assets.................. (4,744) (4,417) (12,044)
Net amortization and deferral................. 264 167 8,295
------- ------- --------
Net periodic pension cost................. $ 1,630 $ 1,360 $ 1,489
======= ======= ========
</TABLE>
The funded status of the defined benefit plans as of December 31, 1993 and
1992 is reconciled to prepaid pension cost (pension liability) as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1992
--------------------------- ---------------------------
PLANS WHERE PLANS WHERE PLANS WHERE PLANS WHERE
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
------------- ------------- ------------- -------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
ACTUARIAL PRESENT VALUE
OF BENEFIT OBLIGATIONS:
Vested benefit obliga-
tion................. $-- $ 53,394 $41,914 $ 5,170
======== ======= =======
Accumulated benefit
obligation........... -- $ 55,570 $43,538 $ 6,957
======== ======= =======
Projected benefit
obligation........... -- $ 60,299 $48,904 $ 7,145
Plan assets at fair
value................ -- 42,932 45,947 1,488
-------- ------- -------
Projected benefit
obligation (in excess
of) less than plan
assets............... -- (17,367) (2,957) (5,657)
Unrecognized prior
service cost......... -- 1,008 (688) 1,843
Unrecognized net
loss................. -- 16,851 7,079 1,075
Minimum liability
adjustment........... -- (13,377) -- (2,730)
---- -------- ------- -------
Prepaid pension cost
(pension liability)
recognized in the
consolidated balance
sheet................ $-- $(12,885) $ 3,434 $(5,469)
==== ======== ======= =======
</TABLE>
Assumptions used were:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1993 1992 1991
------------------------
<S> <C> <C> <C>
Discount rate..................................... 7.5% 8.5% 8.5%
Expected long-term rate of return on plan assets.. 10.0% 10.0% 10.0%
Weighted average rates of increase in compensation
levels........................................... 4.5% 6.0% 4.5%-6.0%
</TABLE>
Savings Plan
The Company has a voluntary savings and investment plan available to
substantially all non-union employees. Employee contributions of not less than
one percent of the employee's salary to not more than eight percent are
matched 75 percent by the Company. The cost of the Company's contributions was
$1.9 million, $1.8 million and $1.4 million for the years ended December 31,
1993, 1992 and 1991, respectively.
F-44
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Postretirement Health Care and Life Insurance Benefits
The Company provides health care and life insurance benefits to certain
retirees. Health care coverage includes medical costs as well as prescription
drugs.
During 1991, the Company changed its method of accounting for postretirement
benefit costs other than pensions by adopting the requirements of SFAS No.
106, Employers' Accounting for Postretirement Benefits Other Than Pensions,
effective as of January 1, 1991. As a result, the Company recorded a charge of
$17.3 million to reflect the cumulative effect of the change in accounting
principle for periods prior to 1991.
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1992 1991
-------- -------- --------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Service cost--benefits attributed to service
during the period........................... $ 473 $ 548 $ 469
Interest cost on accumulated postretirement
benefit obligation.......................... 3,548 4,773 5,458
Amortization of accumulated gains............ (673) (808) --
-------- -------- --------
Net periodic postretirement benefit cost..... $ 3,348 $ 4,513 $ 5,927
======== ======== ========
</TABLE>
The following table sets forth the plans' combined status reconciled with
the amounts included in the consolidated balance sheets:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1993 1992
------------ ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees....................................... $ 47,110 $ 45,077
Fully eligible active plan participants........ 5,511 1,161
Other active plan participants................. 6,571 6,144
------------ ------------
Total accumulated postretirement benefit obli-
gation........................................ 59,192 52,382
Unrecognized net gain from past experience dif-
ferences...................................... 5,088 12,070
------------ ------------
Accrued postretirement benefit cost............ $ 64,280 $ 64,452
============ ============
</TABLE>
None of the future annual benefits of plan participants is covered by
insurance contracts issued by the Company or a related party.
For measurement purposes, an 11 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1994; the rate was
assumed to decrease gradually to six percent through the year 1999 and to
remain at that level thereafter. The health care cost trend rate assumption
has a significant effect on the amount of the obligation and the periodic cost
reported. An increase in the assumed health care cost trend rates by one
percent in each year would increase the accumulated postretirement benefit
obligation as of December 31, 1993 by $6.0 million and the aggregate of the
service and interest cost components of net periodic postretirement benefit
cost for the year then ended by $0.5 million.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation as of December 31, 1993, 1992 and 1991 was
7.5 percent, 8.0 percent and 8.5 percent, respectively.
F-45
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Postemployment Benefits
In November 1992, the Financial Accounting Standards Board issued SFAS No.
112, Employers' Accounting for Postemployment Benefits, which requires accrual
accounting for postemployment benefits, such as disability benefits, instead
of recognizing an expense for those benefits when paid. The Company currently
is accumulating the data necessary to comply with the new rules. Adoption of
SFAS No. 112 using the cumulative effect method is required in the first
quarter of 1994. Based on preliminary estimates, the cumulative effect of the
accounting change at January 1, 1994 is expected to range from approximately
$5.4 million to approximately $7.4 million. The Company does not expect 1994
postemployment expense under the new rules to differ significantly from
postemployment expense that would have been recognized under the pay-as-you-go
basis of accounting.
6. OPERATING LEASES:
Certain properties and equipment are leased for varying periods under long-
term, noncancellable agreements which are renewable in many instances. The
total rent expense amounted to $8.17 million, $8.04 million and $8.17 million
for the years ended December 31, 1993, 1992 and 1991, respectively. The
approximate annual minimum rentals under all noncancellable operating leases
as of December 31, 1993 are as follows (expressed in thousands):
<TABLE>
<S> <C>
1994.............................................................. $ 6,918
1995.............................................................. 5,325
1996.............................................................. 4,756
1997.............................................................. 2,495
1998.............................................................. 723
Thereafter........................................................ 752
-------
$20,969
=======
</TABLE>
7. NONRECURRING CHARGES:
During the third quarter of 1991, the Company recorded provisions against
income to reflect losses due to certain identified liabilities and asset
impairments. In the fourth quarter of 1992, the Company recorded a charge
related to compensation of a key executive under the terms of an employment
contract. The following is a summary of the charges provided for (expressed in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1993 1992 1991
--------------- ---------
<S> <C> <C> <C>
Executive compensation............................ $-- $ 2,888 $ --
Reserve for environmental costs (see Note 8)...... -- -- 26,480
Other write-downs and charges..................... -- -- 13,500
------ -------- ---------
$-- $ 2,888 $ 39,980
====== ======== =========
</TABLE>
8. COMMITMENTS AND CONTINGENCIES:
The Company had a remaining reserve of approximately $8.5 million at
December 31, 1993 for estimated cleanup and compliance costs at certain waste
disposal areas, including those in which it has been alleged that the Company
is a potentially responsible party under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended, or
similar state legislation. Included in these sites is a plant operated by the
Company in Elmira, New York (the "Elmira Facility") that is the subject
F-46
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
of an Environmental Protection Agency ("EPA") Record of Decision dated
September 4, 1992 (the "Elmira ROD") which delineates the actions to be taken
to remediate the contamination specified in the Elmira ROD.
The Company and the Former Parent have entered into an indemnification
agreement, which became effective December 14, 1992, with respect to the
Elmira Facility. Under the agreement, the Former Parent has agreed to
reimburse the Company for costs and expenses of certain remediation required
by the Elmira ROD and indemnify the Company against necessary costs and
expenses of certain remediation activities at one other site located near the
Elmira Facility and at a landfill site in Metamora, Michigan. The
indemnification provided by the Former Parent with respect to the Elmira
Facility will apply to all remediation required by the Company under CERCLA
that had been identified as of the date of the indemnification agreement at
the Elmira Facility, but will not extend to certain additional environmental
expenditures relating to the Elmira Facility or other sites for which the
Company is or may be held responsible. In connection with the indemnification,
the Company reduced its accrual for environmental costs and credited
additional paid-in capital for $17.7 million. Management believes the accrual
for environmental costs at December 31, 1993 is adequate.
The Company is a defendant in certain other litigation arising out of
operations in the normal course of business and is aware of certain litigation
threatened against the Company from time to time. In the opinion of
management, none of the other pending or threatened lawsuits and proceedings
should have a material adverse effect on the consolidated financial position
or results of operations of the Company.
9. INVESTMENT IN PURODENSO:
In 1989, the Automotive Products Segment formed the Purodenso manufacturing
joint venture with a unit of Nippondenso of Japan (with each joint venturer
owning a 50% interest) to exploit the combined engineering and technological
abilities of the two companies. Purodenso supplies highly specialized
automotive filters and injection molded filter housings to the Company for
distribution to domestic Original Equipment Manufacturers ("OEMs"), U.S.
manufacturing plants of Japanese OEM companies and the aftermarket. The
selected financial data presented below as of the dates and for the periods
indicated are derived from the audited financial statements of Purodenso.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1992 1991
-------- -------- --------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Income Statement Data:
Net sales..................................... $ 57,408 $ 41,019 $ 23,554
Cost of sales................................. 51,972 38,143 24,771
-------- -------- --------
Gross profit.................................. $ 5,436 $ 2,876 $ (1,217)
======== ======== ========
Net income.................................... $ 3,672 $ 1,041 $ (2,806)
======== ======== ========
Balance Sheet Data (at end of period):
Current assets................................ $ 10,671 $ 7,037 $ 5,704
Noncurrent assets............................. 22,904 21,117 21,159
Current liabilities........................... 12,602 14,853 19,603
Partners' equity.............................. 20,973 13,301 7,260
</TABLE>
F-47
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. DETAILS TO CONSOLIDATED STATEMENTS OF OPERATIONS:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1992 1991
-------- -------- --------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Expenses Included in Other Categories:
Maintenance and repairs....................... $ 8,521 $ 7,217 $ 7,518
Depreciation and amortization of land
improvements, buildings and equipment........ 10,308 11,132 11,133
Amortization of goodwill and other
intangibles.................................. 3,259 3,519 3,599
Taxes, other than payroll and federal, state
and foreign income taxes:
Real and personal property.................. 1,156 1,031 1,103
Miscellaneous............................... 664 468 553
Rents......................................... 8,173 8,040 8,168
Advertising costs............................. 12,404 13,408 11,956
Research and development costs................ 745 341 429
</TABLE>
11. SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
<TABLE>
<CAPTION>
1992
--------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
--------- --------- --------- --------- ---------
(EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1992
Net sales................... $ 102,302 $ 105,284 $ 108,495 $ 101,807 $ 417,888
Cost of sales............... 79,183 79,340 82,693 77,291 318,507
--------- --------- --------- --------- ---------
Gross profit................ $ 23,119 $ 25,944 $ 25,802 $ 24,516 $ 99,381
========= ========= ========= ========= =========
Net income (loss)........... $ 1,725 $ 4,717 $ 4,738 $ (89) $ 11,091
========= ========= ========= ========= =========
Earnings (loss) per share... $ 0.20 $ 0.55 $ 0.56 $ (0.01) $ 1.29
========= ========= ========= ========= =========
<CAPTION>
1993
--------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
--------- --------- --------- --------- ---------
(EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1993
Net sales................... $ 107,812 $ 109,287 $ 112,993 $ 105,729 $ 435,821
Cost of sales............... 83,065 82,381 87,016 81,026 333,488
--------- --------- --------- --------- ---------
Gross profit................ $ 24,747 $ 26,906 $ 25,977 $ 24,703 $ 102,333
========= ========= ========= ========= =========
Net income.................. $ 2,651 $ 5,119 $ 5,348 $ 4,715 $ 17,833
========= ========= ========= ========= =========
Earnings per share.......... $ 0.24 $ 0.46 $ 0.48 $ 0.42 $ 1.59
========= ========= ========= ========= =========
</TABLE>
F-48
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. BUSINESS SEGMENT INFORMATION:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1992 1991
-------- -------- --------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Net Sales:
Automotive Products............................ $321,271 $301,077 $286,364
Air Filtration Products........................ 57,082 55,055 52,898
Separation Systems............................. 41,416 44,237 43,501
Filter Products................................ 16,052 17,519 18,927
-------- -------- --------
$435,821 $417,888 $401,690
======== ======== ========
Operating Income (Loss):
Automotive Products............................ $ 20,964 $ 18,189 $(21,354)
Air Filtration Products........................ 4,795 4,316 2,989
Separation Systems............................. 2,691 1,448 1,801
Filter Products................................ 906 2,367 3,130
Corporate...................................... (11,600) (13,176) (17,278)
-------- -------- --------
$ 17,756 $ 13,144 $(30,712)
======== ======== ========
Identifiable Assets:
Automotive Products............................ $254,510 $257,784 $244,427
Air Filtration Products........................ 34,503 32,973 32,831
Separation Systems............................. 26,348 28,828 33,295
Filter Products................................ 16,494 17,198 16,586
Corporate...................................... 27,212 27,683 24,211
-------- -------- --------
$359,067 $364,466 $351,350
======== ======== ========
Capital Expenditures:
Automotive Products............................ $ 12,058 $ 8,847 $ 6,158
Air Filtration Products........................ 485 450 343
Separation Systems............................. 587 1,040 964
Filter Products................................ 350 483 397
Corporate...................................... 72 15 43
-------- -------- --------
$ 13,552 $ 10,835 $ 7,905
======== ======== ========
Depreciation and Amortization:
Automotive Products............................ $ 9,942 $ 11,056 $ 11,048
Air Filtration Products........................ 1,370 1,280 1,273
Separation Systems............................. 949 994 1,083
Filter Products................................ 536 506 459
Corporate...................................... 770 815 869
-------- -------- --------
$ 13,567 $ 14,651 $ 14,732
======== ======== ========
Equity in Income (Loss) of Affiliates:
Automotive Products............................ $ 1,893 $ 489 $ (1,428)
Air Filtration Products........................ -- -- --
Separation Systems............................. 19 62 (17)
Filter Products................................ -- -- --
Corporate...................................... 563 244 --
-------- -------- --------
$ 2,475 $ 795 $ (1,445)
======== ======== ========
</TABLE>
F-49
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOREIGN AND DOMESTIC OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1992 1991
-------- -------- --------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Net Sales:
Domestic........................................ $400,482 $383,058 $359,703
Foreign......................................... 35,339 34,830 41,987
-------- -------- --------
$435,821 $417,888 $401,690
======== ======== ========
Operating Income (Loss):
Domestic........................................ $ 17,530 $ 14,422 $(31,264)
Foreign......................................... 226 (1,278) 552
-------- -------- --------
$ 17,756 $ 13,144 $(30,712)
======== ======== ========
Identifiable Assets:
Domestic........................................ $334,491 $339,857 $315,956
Foreign......................................... 24,576 24,609 35,394
-------- -------- --------
$359,067 $364,466 $351,350
======== ======== ========
Capital Expenditures:
Domestic........................................ $ 13,235 $ 10,612 $ 7,263
Foreign......................................... 317 223 642
-------- -------- --------
$ 13,552 $ 10,835 $ 7,905
======== ======== ========
Depreciation and Amortization:
Domestic........................................ $ 13,168 $ 14,135 $ 13,838
Foreign......................................... 399 516 894
-------- -------- --------
$ 13,567 $ 14,651 $ 14,732
======== ======== ========
Equity in Income (Loss) of Affiliates:
Domestic........................................ $ 2,475 $ 795 $ (1,445)
Foreign......................................... -- -- --
-------- -------- --------
$ 2,475 $ 795 $ (1,445)
======== ======== ========
</TABLE>
One customer accounted for 14 percent of the Company's net sales in the
years ended December 31, 1993, 1992 and 1991. These sales were made from the
Automotive Products Segment.
13. CONCENTRATIONS OF CREDIT RISK:
The Company extends credit to various companies in the retail,
wholesale/distributor, original equipment and export markets in the normal
course of business. Within these markets, certain concentrations of credit
risk exist. These concentrations of credit risk may be similarly affected by
changes in economic or other conditions and may, accordingly, impact the
Company's overall credit risk. However, management believes that consolidated
receivables are well diversified, thereby reducing potential credit risk to
the Company, and that allowances for doubtful accounts are adequate to absorb
estimated losses at December 31, 1993.
F-50
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
At December 31, 1993 and 1992, trade receivables related to these group
concentrations were:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1993 1992
------------ ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C>
Retail......................................... $28,796 $28,326
Wholesalers/Distributors....................... 26,349 23,365
Original Equipment............................. 8,994 10,962
Export......................................... 5,865 5,687
Other.......................................... 2,300 3,784
------------ ------------
Total.......................................... $72,304 $72,124
============ ============
</TABLE>
14. SUBSEQUENT EVENT:
In January 1994, the Company made the decision to shut down the fiberglass
manufacturing process of the Air Filtration Products Segment's Henderson,
North Carolina plant, effective on or about April 15, 1994, in favor of
purchasing fiberglass from outside sources. The Company will reserve
approximately $950,000 in the first quarter of 1994 for the costs associated
with shutting down the process. There are no plans at the present time that
would adversely impact the remaining operations at the Henderson, North
Carolina plant.
F-51
<PAGE>
PUROLATOR PRODUCTS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(EXPRESSED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1994 1993
-------- --------
<S> <C> <C>
Net sales................................................... $354,624 $330,092
Cost of sales............................................... 270,543 252,462
-------- --------
Gross profit.............................................. 84,081 77,630
Selling, general and administrative expenses................ 66,289 64,366
Process shutdown charge..................................... 718 --
-------- --------
Operating income.......................................... 17,074 13,264
Interest expense............................................ 3,026 3,167
Other income................................................ 1,148 1,654
-------- --------
Income before income taxes and equity in income of
affiliates............................................... 15,196 11,751
Income tax provision........................................ 948 380
Equity in income of affiliates.............................. 2,443 1,747
-------- --------
Income before cumulative effect of change in accounting
principle................................................ 16,691 13,118
Cumulative effect of change in accounting principle......... (6,535) --
-------- --------
Net income.................................................. $ 10,156 $ 13,118
======== ========
Earnings per share:
Income before cumulative effect of change in accounting
principle................................................ $ 1.50 $ 1.17
Cumulative effect of change in accounting principle....... (0.59) --
-------- --------
Net income.............................................. $ 0.91 $ 1.17
======== ========
Dividends per common share.................................. $ 0.48 $ 0.48
======== ========
Weighted average shares outstanding......................... 11,125 11,172
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
F-52
<PAGE>
PUROLATOR PRODUCTS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(EXPRESSED IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1994
-------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 9,557
Trade accounts receivable, net................................. 78,760
Inventories, net............................................... 73,145
Other current assets........................................... 14,733
--------
Total current assets......................................... 176,195
Land, buildings and equipment, net............................... 78,765
Investments...................................................... 14,048
Intangible assets, net........................................... 108,265
Other assets..................................................... 11,533
--------
Total assets................................................. $388,806
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt........................... $ 4,388
Accounts payable............................................... 41,542
Accrued liabilities............................................ 42,618
--------
Total current liabilities.................................... 88,548
Long-term debt, less current maturities.......................... 43,647
Other noncurrent liabilities..................................... 78,929
Stockholders' equity:
Common stock, $0.01 par value per share, 30,000,000 shares au-
thorized, 11,095,674 and 11,212,500 shares issued and out-
standing...................................................... 111
Other stockholders' equity..................................... 177,571
--------
Total stockholders' equity................................... 177,682
--------
Total liabilities and stockholders' equity................... $388,806
========
</TABLE>
See notes to condensed consolidated financial statements.
F-53
<PAGE>
PUROLATOR PRODUCTS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(EXPRESSED IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1994 1993
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 10,156 $ 13,118
Adjustments to reconcile net income to net cash pro-
vided by operating
activities:
Depreciation and amortization......................... 10,315 10,128
Cumulative effect of change in accounting principle... 6,535 --
Process shutdown charge............................... 718 --
Other noncash charges................................. 4,440 4,507
Change in operating assets and liabilities:
Increase in receivables.............................. (16,045) (10,464)
(Increase) decrease in inventories................... (1,965) 8,879
Increase in accounts payable......................... 9,155 1,749
Other, net............................................ (3,903) (2,839)
--------- ---------
Total adjustments.................................... 9,249 11,960
--------- ---------
Net cash provided by operating activities........... 19,405 25,078
--------- ---------
Cash flows from investing activities:
Capital expenditures................................... (11,368) (9,434)
Investment in Purodenso................................ 250 (2,000)
Other, net............................................. (809) 383
--------- ---------
Net cash used in investing activities............... (11,927) (11,051)
--------- ---------
Cash flows from financing activities:
Proceeds from stock issuance........................... 63 15,475
Proceeds from long-term debt........................... 121,236 89,789
Payments on long-term debt............................. (117,506) (111,438)
Dividends paid......................................... (5,345) (5,382)
Other, net............................................. (2,076) (250)
--------- ---------
Net cash used in financing activities............... (3,628) (11,806)
--------- ---------
Increase in cash and cash equivalents.................. 3,850 2,221
Cash and cash equivalents, beginning of period......... 5,707 3,411
--------- ---------
Cash and cash equivalents, end of period............... $ 9,557 $ 5,632
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
F-54
<PAGE>
PUROLATOR PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) GENERAL--
The condensed consolidated financial statements included herein have been
prepared by Purolator Products Company (the "Company") without audit and
should be read in conjunction with the financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993. The foregoing financial statements include only
normal recurring accruals and all adjustments which the Company considers
necessary for a fair presentation.
(2) DETAIL TO CONDENSED CONSOLIDATED BALANCE SHEETS--(EXPRESSED IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1994
-------------
<S> <C>
Inventories:
Finished goods............................................ $41,306
Work in progress.......................................... 7,506
Raw materials and supplies................................ 28,659
-------
Total................................................... 77,471
Less reserves............................................. 4,326
-------
Total, net.............................................. $73,145
=======
</TABLE>
(3) REPURCHASE OF COMMON STOCK--
On February 25, 1994, the Company was authorized to repurchase as many as
approximately 560,000 common shares, or five percent of its common stock
outstanding as of that date. During the nine months ended September 30, 1994,
the Company repurchased 121,000 common shares.
(4) POSTEMPLOYMENT BENEFITS--
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
112, Employers' Accounting for Postemployment Benefits, effective January 1,
1994. SFAS No. 112 requires accrual accounting for postemployment benefits,
such as disability benefits, instead of recognizing an expense for those items
when paid. The Company recorded a charge of $6.5 million in the first quarter
of 1994 to reflect the cumulative effect of the change in accounting principle
for periods prior to 1994. The Company does not expect 1994 postemployment
expense under the new rules to differ significantly from postemployment
expense that would have been recognized under the pay-as-you-go basis of
accounting.
(5) PRO FORMA EARNINGS PER SHARE--
As a result of adopting SFAS No. 109, Accounting for Income Taxes, effective
January 1, 1993, the Company expects to report only foreign income tax expense
through December 31, 1994. Therefore, the effective income tax rates for the
nine months ended September 30, 1994 and 1993 were substantially below the 35%
statutory U.S. income tax rate. Previously unrecognized tax benefits have been
recognized in the balance sheet to the extent of U.S. federal and state income
taxes paid or payable and the utilization of net operating loss carryforwards.
The table below sets forth a pro forma representation of earnings per share
based on the following assumptions and adjustments: (a) a 45 percent combined
federal, state and foreign tax rate; (b) a constant level of shares
outstanding (11,095,674 shares issued and outstanding as of September 30,
1994); (c) exclusion of the cumulative effect of a change in accounting
principle; and (d) exclusion of the process shutdown charge recorded
F-55
<PAGE>
PUROLATOR PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
(UNAUDITED)
in the first quarter of 1994 as the result of the Company's decision to shut
down the fiberglass manufacturing process of the Air Filtration Products
Segment's Henderson, North Carolina plant in favor of purchasing fiberglass
from outside sources.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
-------------
1994 1993
------ ------
<S> <C> <C>
Pro forma earnings per share............................... $ 0.91 $ 0.67
====== ======
</TABLE>
(6) SUBSEQUENT EVENTS--
On October 3, 1994, Mark IV Industries, Inc. ("Mark IV"), and its wholly
owned subsidiary, Mark IV Acquisition Corp. (the "Purchaser"), entered into an
Agreement and Plan of Merger (the "Merger Agreement") with the Company.
Pursuant to the Merger Agreement, which was unanimously approved by the
Company's Board of Directors, the Purchaser commenced a tender offer (the
"Offer") for all outstanding shares of the Company's common stock (and
associated preferred stock purchase rights), at a price of $25.00 net per
share in cash to the seller. Prior to the commencement of the Offer, Mark IV
beneficially owned 520,500 shares of the Company's common stock (4.69% of the
Company's outstanding common stock), which shares were acquired by Mark IV in
open market transactions. Upon the expiration of the Offer on November 4,
1994, the Purchaser had accepted for payment 10,236,000 shares of the
Company's common stock, which, when combined with the shares already owned by
Mark IV, resulted in the Purchaser's ownership of approximately 96.9% of the
Company's outstanding common stock.
As a result of the Purchaser acquiring in excess of 90% of the Company's
outstanding common stock, and as provided for in the Merger Agreement, it is
anticipated that the Purchaser will be merged with the Company by November 30,
1994 (the "Merger"). In the Merger, each share of the Company's common stock
(other than shares held by Mark IV and its subsidiaries and those shares held
by stockholders who properly exercise appraisal rights under Delaware law)
will be converted into the right to receive $25.00 per share in cash.
Upon the consummation of the Merger, the holders of outstanding options to
acquire common stock of the Company, which options were granted by the Company
under its non-qualified stock option plans, will be offered the opportunity to
elect either: to have the outstanding Purolator options assumed by Mark IV and
amended to become options to purchase common stock of Mark IV; or to receive a
cash payment in settlement of each Purolator option in an amount equal to
$25.00 minus the exercise price per share of the Purolator option, multiplied
by the number of shares of Purolator common stock subject to such Purolator
option.
As a result of the tender of a majority of the Company's stock to the
Purchaser, effective November 7, 1994, the Company's credit facility with a
group of banks and Texas Commerce Bank National Association ("TCB"), as agent,
was terminated and the outstanding amounts owed thereunder were paid from the
proceeds of a replacement credit facility provided by TCB under a $44,000,000
note due on demand or within 30 days ("Bridge Note"). All collateral securing
the previous credit agreement has been assigned as security for the Bridge
Note.
On November 8, 1994, as a result of the completion of the Offer, the Company
announced that five of its seven directors resigned and were replaced by four
nominees of Mark IV.
F-56
<PAGE>
MARK IV INDUSTRIES
THE EXCHANGE AGENT
FOR THE EXCHANGE OFFER IS
FLEET NATIONAL BANK
All tendered Private Notes, executed Letters of Transmittal and other related
documents should be directed to the Exchange Agent at any of the following
addresses:
BY FACSIMILE:
(401) 621-8088
(For Eligible Institutions Only)
CONFIRM BY TELEPHONE:
(401) 865-7132
BY INSURED OVERNIGHT CARRIER
Fleet National Bank
Corporate Trust Department
125 Dupont Drive-RI/OP/317
Providence, RI 02907
BY REGISTERED MAIL:
Fleet National Bank
Corporate Trust Department
P.O. Box 366-RI/OP/317
Providence, RI 02901-0366
NEW YORK DROP:
Fleet National Bank
c/o First Chicago Trust Company
14 Wall Street
6th Floor, Window 2
New York, NY 10005
Requests for assistance and for additional copies of the Prospectus, the
Letter of Transmittal and other related documents should be directed to the
Exchange Agent at the following address:
Fleet National Bank
Corporate Trust Department
Mail Stop: RI/MO/199
111 Westminster Street
Providence, RI 02903
Attention: Stephen Maceroni
Telephone: (401) 278-3768
Facsimile: (401) 751-9706
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Ninth of the Company's Certificate of Incorporation entitles
officers, directors and controlling persons of the Company to indemnification
to the full extent permitted by Section 145 of the Delaware General Corporation
Law (the "DGCL") as the same may be supplemented or amended from time to time.
Section 145 of the DGCL provides in relevant part that a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that such person is or was
a director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection
with such action, suit or proceeding if such person acted in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful.
In addition, Section 145 provides that a corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection with the defense or settlement of such
action or suit if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnify for such expenses which the Delaware Court of Chancery or
such other court shall deem proper. Delaware law further provides that nothing
in the above-described provisions shall be deemed exclusive of any other rights
to indemnification or advancement of expenses to which any person may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
Article Ninth of the Company's Certificate of Incorporation was amended in
August 1986 to provide that no director shall have any personal liability to
the Company or its stockholders for any monetary damages for breach of
fiduciary duty as a director, provided that such provision does not limit or
eliminate the liability of any director (i) for breach of such director's duty
or loyalty to the Company or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL (involving certain unlawful dividends
or stock repurchases) or (iv) for any transaction from which such director
derived an improper personal benefit. The provisions of such article do not
limit or eliminate the liability of any director for any act or omission
occurring prior to the effective time of such amendment.
Reference is made to Section 8 of the Registration Rights Agreement included
in Exhibit 4.3 hereto which provides certain indemnification rights to the
directors and officers of the Company.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<C> <S>
4.1 --Indenture dated as of March 15, 1993 between the Company and Citibank,
N.A., as Trustee (including the form of 8 3/4% Senior Subordinated Notes
due April 1, 2003) (incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K dated March 29, 1993).
4.2 --Indenture dated as of March 11, 1996 between the Company and Fleet
National Bank, as Trustee (including the forms of the 7 3/4% Senior
Subordinated Notes due April 1, 2006) (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K dated March 21,
1996, as amended by the Company's Current Report on Form 8-K/A dated
March 27, 1996).
4.3 --Registration Rights Agreement dated as of March 11, 1996 between the
Company and Bear,
Stearns & Co. Inc.
5 --Opinion of Stroock & Stroock & Lavan as to the legality of the Exchange
Notes.
10.1 --Amended and Restated Credit Agreement dated as of March 8, 1996 among
the Company, as Borrower, Dayco PTI S.p.A., as Subsidiary Borrower,
certain other subsidiaries of the Company named therein, as Guarantors,
various banks and other financial institutions named therein, Chemical
Bank, as Administrative and Bid Agent, Bank of America National Trust and
Savings Association, as Documentation Agent, and BA Securities, Inc. and
Chemical Securities Inc., as Arrangers (incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form
8-K dated March 21, 1996).
12.1 --Statement Regarding Computation of Ratios of Earnings to Fixed Charges.
12.2 --Statement Regarding Computation of Pro Forma Ratios of Earnings to Fixed
Charges.
23.1 --Consent of Stroock & Stroock & Lavan (included in Exhibit 5).
23.2 --Consent of Coopers & Lybrand L.L.P.
23.3 --Consent of Arthur Andersen LLP.
24 --Powers of attorney (included on p. II-5 of the Registration Statement).
25 --Statement on Form T-1 of Eligibility of Trustee.
99.1 --Form of Letter of Transmittal.
99.2 --Form of Notice of Guaranteed Delivery.
99.3 --Form of Letter to Nominees.
99.4 --Form of Letter to Clients.
99.5 --Form of Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
</TABLE>
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
(c) The undersigned registrant hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Amherst, State of New
York, on April 2, 1996.
MARK IV INDUSTRIES, INC.
/s/ William P. Montague
By___________________________________
William P. Montague
President
II-4
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears below
constitutes and appoints Sal H. Alfiero, Clement R. Arrison, William P.
Montague, Gerald S. Lippes, John J. Byrne and Richard L. Grenolds, and each of
them, his true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-
effective amendments) of and supplements to this Registration Statement and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto such
attorneys-in-fact and agents and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, to all intents and purposes and as fully as they might
or could do in person, hereby ratifying and confirming all that such attorneys-
in-fact and agents, or their substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Sal H. Alfiero Chairman of the Board and April 2, 1996
____________________________________ Chief Executive Officer
Sal H. Alfiero
/s/ William P. Montague President and Chief April 2, 1996
____________________________________ Operating Officer and
William P. Montague Director
/s/ Gerald S. Lippes Secretary and Director April 2, 1996
____________________________________
Gerald S. Lippes
/s/ John J. Byrne Vice President and Chief April 2, 1996
____________________________________ Financial Officer
John J. Byrne
/s/ Richard L. Grenolds Vice President and Chief April 2, 1996
____________________________________ Accounting Officer
Richard L. Grenolds
/s/ Clement R. Arrison Director April 2, 1996
____________________________________
Clement R. Arrison
Director April , 1996
____________________________________
Joseph G. Donohoo
Director April , 1996
____________________________________
Herbert Roth, Jr.
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
4.1 --Indenture dated as of March 15, 1993 between the Company and
Citibank, N.A., as Trustee (including the form of 8 3/4%
Senior Subordinated Notes due April 1, 2003) (incorporated by
reference to Exhibit 4.1 to the Company's Current Report on
Form 8-K dated March 29, 1993)................................
4.2 --Indenture dated as of March 11, 1996 between the Company and
Fleet National Bank, as Trustee (including the forms of the 7
3/4% Senior Subordinated Notes due April 1, 2006)
(incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K dated March 21, 1996, as amended by
the Company's Current Report on Form 8-K/A dated March 27,
1996). .......................................................
4.3 --Registration Rights Agreement dated as of March 11, 1996
between the Company and Bear,
Stearns & Co. Inc. ...........................................
5 --Opinion of Stroock & Stroock & Lavan as to the legality of
the Exchange Notes............................................
10.1 --Amended and Restated Credit Agreement dated as of March 8,
1996 among the Company, as Borrower, Dayco PTI S.p.A., as
Subsidiary Borrower, certain other subsidiaries of the Company
named therein, as Guarantors, various banks and other
financial institutions named therein, Chemical Bank, as
Administrative and Bid Agent, Bank of America National Trust
and Savings Association, as Documentation Agent, and BA
Securities, Inc. and Chemical Securities Inc., as Arrangers
(incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K dated March 21, 1996)..............
12.1 --Statement Regarding Computation of Ratios of Earnings to
Fixed Charges.................................................
12.2 --Statement Regarding Computation of Pro Forma Ratios of
Earnings to Fixed Charges.....................................
23.1 --Consent of Stroock & Stroock & Lavan (included in Exhibit 5).
23.2 --Consent of Coopers & Lybrand L.L.P. .........................
23.3 --Consent of Arthur Andersen LLP...............................
24 --Powers of attorney (included on p. II-5 of the Registration
Statement). ..................................................
25 --Statement on Form T-1 of Eligibility of Trustee. ............
99.1 --Form of Letter of Transmittal. ..............................
99.2 --Form of Notice of Guaranteed Delivery. ......................
99.3 --Form of Letter to Nominees. .................................
99.4 --Form of Letter to Clients. ..................................
99.5 --Form of Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9. ................
</TABLE>
II-6
<PAGE>
EXHIBIT 5
April 2, 1996
Mark IV Industries, Inc.
501 John James Audubon Parkway
Amherst, New York 14266-0810
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as special counsel to Mark IV Industries, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"), of a Registration Statement on Form S-4
(the "Registration Statement") relating to the offer (the "Exchange Offer") by
the Company to exchange $1,000 principal amount of its 7 3/4% Senior
Subordinated Notes due April 1, 2006 (the "Exchange Notes") for each $1,000
principal amount of its outstanding 7 3/4% Senior Subordinated Notes due April
1, 2006 (the "Private Notes"), of which $250,000,000 aggregate principal amount
was issued and sold on March 11, 1996 in a transaction exempt from registration
under the Act and is outstanding on the date hereof. The Private Notes were
issued under, and the Exchange Notes are to be issued under, the Indenture
dated as of March 11, 1996 between the Company and Fleet National Bank, as
trustee (the "Trustee").
As such counsel, we have examined originals or copies of the Certificate of
Incorporation and By-Laws of the Company, each as amended to date, the
Indenture and the Registration Statement. We have also examined original,
reproduced or certified copies of all such records of the Company, such other
agreements and such certificates of officers and representatives of the Company
and others, and such statutes and authorities, as we have deemed relevant and
necessary to form the basis of the opinions hereinafter expressed. In such
examinations, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity
to original documents of the copies of documents supplied to us as copies
thereof. As to various questions of fact material to the opinions hereinafter
expressed, we have relied on representations, statements and certificates of
officers and representatives of the Company and others.
Attorneys involved in the preparation of this opinion are admitted to practice
law in the State of New York and we do not purport to be experts on, or to
express any opinion herein concerning, any laws other than the laws of the
State of New York, the federal laws of the United States of America and the
Delaware General Corporation Law.
Based upon and subject to the foregoing, we are of the opinion that the
Exchange Notes have been duly and validly authorized and, when duly executed by
the proper officers of the Company, duly authenticated by the Trustee and
issued by the Company in accordance with the terms of the Indenture and the
Exchange Offer, will constitute the legal, valid and binding obligations of the
Company in accordance with their terms and the terms of the Indenture, subject
to the effect of applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally and
court decisions with respect thereto and we express no opinion with respect to
the application of equitable principles or remedies in any proceeding, whether
at law or in equity.
We consent to being named in the Registration Statement and related prospectus
as counsel who are passing upon the legality of the Exchange Notes for the
Company and to the reference to our name under the caption "Legal Matters" in
such prospectus. We also consent to the filing of this opinion as an exhibit to
the Registration Statement or any amendment thereto. In giving such consents,
we do not admit hereby that we come within the category of persons whose
consent is required under Section 7 of the Act or the rules and regulations of
the Commission thereunder.
No one other than the addressee indicated first above shall be entitled to rely
on this opinion.
Very truly yours,
STROOCK & STROOCK & LAVAN
<PAGE>
EXHIBIT 12.1
MARK IV INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES (1)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED LAST DAY OF FEBRUARY
-----------------------------------------------------
PRO FORMA NINE MONTHS
1991 1992 1993 1994 1995 1995 (2) ENDED NOVEMBER 30,
------- -------- -------- -------- -------- --------- -------------------
1994 1995
--------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings
Income before
provision for income
taxes................. $27,400 $ 43,900 $ 62,000 $ 81,700 $110,400 $127,000 $ 81,600 $ 117,500
Fixed charges, before
capitalized interest.. 66,965 69,254 55,668 54,309 58,588 68,295 42,157 49,154
Amortization of
capitalized interest.. 100 191 133 210 247 247 185 210
------- -------- -------- -------- -------- -------- --------- ---------
Earnings as adjusted. $94,465 $113,345 $117,801 $136,219 $169,235 $195,542 $ 123,942 $ 166,864
======= ======== ======== ======== ======== ======== ========= =========
Fixed Charges
Interest expense, net.. $60,600 $ 64,700 $ 51,600 $ 50,100 $ 53,900 $ 63,400 $ 39,000 $ 45,500
Investment income (3).. 2,100 700 300 400 284 284 146 320
Interest expense
included in
securities
transactions.......... 587 -- -- -- -- -- -- --
------- -------- -------- -------- -------- -------- --------- ---------
Total interest....... 63,287 65,400 51,900 50,500 54,184 63,684 39,146 45,820
Amortization of debt
expense............... 1,548 1,544 1,383 1,424 1,659 1,866 1,222 1,275
Interest portion of
rent expense.......... 2,130 2,310 2,385 2,385 2,745 2,844 1,789 2,059
------- -------- -------- -------- -------- -------- --------- ---------
Fixed Charges, before
capitalized
interest............ 66,965 69,254 55,668 54,309 58,588 68,394 42,157 49,154
Capitalized interest... 1,424 450 632 195 335 335 251 251
------- -------- -------- -------- -------- -------- --------- ---------
Fixed Charges........ $68,389 $ 69,704 $56,300 $ 54,504 $ 58,923 $ 68,729 $ 42,408 $ 49,405
======= ======== ======== ======== ======== ======== ========= =========
Ratio of Earnings to
Fixed Charges....... 1.38x 1.63x 2.09x 2.50x 2.87x 2.85x 2.92x 3.38x
</TABLE>
- --------
(1) For the purpose of calculating the ratio of earnings to fixed charges, (i)
earnings consist of income from continuing operations before income taxes
plus fixed charges, exclusive of capitalized interest; and (ii) fixed
charges consist of interest expense incurred, amortization of debt
expense, 15% of rental payments under operating leases (an amount
estimated by management to be the interest component of such rentals) and
capitalized interest.
(2) Presents pro forma data as if the acquisition of Purolator and the related
borrowings under the 1994 Credit Agreement in November 1994, and the
public offering of shares of the Company's Common Stock in December 1994
had all occurred as of March 1, 1994, the beginning of fiscal 1995. See
"Pro Forma Financial Information" in the Prospectus for information
relating to pro forma assumptions.
(3) Represents investment income netted against interest expense; such
investment income is eliminated for purposes of calculating the ratios.
<PAGE>
EXHIBIT 12.2
MARK IV INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF PRO FORMA RATIOS OF EARNINGS TO FIXED
CHARGES(1)
(DOLLARS IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
FEBRUARY 28, 1995 NOVEMBER 30, 1995
PRO FORMA ACTUAL
----------------- -----------------
<S> <C> <C>
Earnings as adjusted (per Exhibit 12.1).... $195,542(2) $166,864
======== ========
Fixed charges before Pro Forma Adjustments
(per Exhibit 12.1)........................ $ 68,729(2) $ 49,405
Pro Forma Adjustments:
Interest expense of the 7 3/4% Private
Notes (including amortization of debt
expense)................................ 19,965 14,974
Interest expense reduction attributable
to the assumed reduction of indebtedness
under the Credit Agreement.............. (17,478) (12,449)
-------- --------
Pro Forma Fixed Charges................ $ 71,216 $ 51,930
======== ========
Pro Forma Ratio........................ 2.75x 3.21x
======== ========
</TABLE>
- --------
(1) The pro forma ratios of earnings to fixed charges reflect an increase in
fixed charges related to incremental interest expense that would have been
incurred on the 7 3/4% Private Notes, the net proceeds of which were used
to reduce outstanding indebtedness under the Company's 1994 Credit
Agreement. See "Use of Proceeds" and "Pro Forma Financial Information" in
the Prospectus.
(2) Presents pro forma data as if the acquisition of Purolator and the related
borrowings under the 1994 Credit Agreement in November 1994, and the
public offering of shares of the Company's Common Stock in December 1994
had all occurred as of March 1, 1994, the beginning of fiscal 1995. See
"Pro Forma Financial Information" in the Prospectus.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of our
report dated March 30, 1995, on our audits of the consolidated financial
statements of Mark IV Industries, Inc. and the incorporation by reference of
our report on the financial statement schedule, which report dated March 30,
1995 is included in the Company's Annual Report on Form 10-K, as amended by
Amendment No. 1 on Form 10-K/A. We also consent to the reference to our firm
under the caption "Experts."
Coopers & Lybrand L.L.P.
Rochester, New York
April 2, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in this
Mark IV Industries, Inc. Registration Statement on Form S-4 dated April 2, 1996
of our report dated February 11, 1994 on the consolidated financial statements
of Purolator Products Company as of December 31, 1993 and 1992 and for the
years ended December 31, 1993, 1992 and 1991 and to all references to our Firm
included in or made a part of this Registration Statement.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
April 2, 1996
<PAGE>
EXHIBIT 25
----------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM T-1
-------------------------
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
[_] CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
FLEET NATIONAL BANK
------------------------------------------------------------
(Exact name of trustee as specified in its charter)
Not applicable 04-0317415
-------------------------- --------------------------
(State of incorporation if (I.R.S. Employer
not a national bank) Identification No.)
111 Westminster Street, Providence, Rhode Island 02903
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Not applicable
------------------------------------------------------------
(Name, address and telephone number of agent for service)
Mark IV Industries, Inc., as Issuer
------------------------------------------------------------
(Exact name of obligor as specified in its charter)
Delaware 23-1733979
-------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 John James Audubon Parkway, Amherst, NY 14226-0810
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
7-3/4% Senior Subordinated Notes Due 2006
------------------------------------------------------------
(Title of the indenture securities)
<PAGE>
Item 1. General Information.
-------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject:
The Comptroller of the Currency,
Washington, D.C.
Board of Governors of the Federal Reserve System,
Washington, D.C.
Federal Deposit Insurance Corporation,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor. If the obligor is an affiliate of the
-------------------------
trustee, describe each such affiliation.
None with respect to the trustee; none with respect to Fleet Financial
Group, Inc. and its affiliates (the "affiliates").
Item 16. List of exhibits. List below all exhibits filed as a part of this
----------------
statement of eligibility and qualification.
1. * A copy of the articles of association of the trustee as now in
effect. (See Exhibit 25 of Registration Statement No.333-01843).
2. * A copy of the certificate of authority of the trustee to do
business. (See Exhibit 25, Registration Statement No. 333-01843).
3. The authorization of the trustee to exercise corporate trust powers
is referenced in Exhibit 2 of this Item 16.
4. * A copy of the by-laws of the trustee as now in effect. (See Exhibit
25, Registration Statement No. 333-01843).
2
<PAGE>
5. Consent of the trustee required by Section 321(b) of the Act.
6.* A copy of the latest report of condition dated December 31, 1995
of the trustee published pursuant to law or the requirements of its supervising
or examining authority as now in effect. (See Exhibit 25 of Registration
Statement No. 333-01843).
*The Exhibits thus designated are incorporated herein by reference. Following
the description of such Exhibits is a reference to the copy of the Exhibit
heretofore filed with the Securities and Exchange Commission, to which there
have been no amendments or changes.
3
<PAGE>
NOTES
1. Inasmuch as this Form T-l is filed prior to the ascertainment by the
trustee of all facts on which to base its answer to Item 2, the answer to said
Item is based upon incomplete information.
2. Item 2 may, however, be considered correct unless amended by an
amendment to this Form T-l.
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, Fleet National Bank, a national banking association incorporated and
existing under the laws of the United States of America, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Providence, and State of Rhode
Island, and Providence Plantation on the 2nd day of April 1996.
FLEET NATIONAL BANK,
Trustee
By /s/ Stephen M. Maceroni
-------------------------
Name: Stephen M. Maceroni
Title: Trust Officer
5
<PAGE>
EXHIBIT 5
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
----------------------------------
The undersigned, as Trustee under an Indenture between Mark IV and Fleet
National Bank, Trustee, does hereby consent that, pursuant to Section 321(b) of
the Trust Indenture Act of 1939, reports of examinations with respect to the
undersigned by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
FLEET NATIONAL BANK,
Trustee
By /s/ Stephen M. Maceroni
-------------------------
Name: Stephen M. Maceroni
Title: Trust Officer
Dated: April 2, 1996
6
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
7 3/4% SENIOR SUBORDINATED NOTES DUE 2006
OF
MARK IV INDUSTRIES, INC.
PURSUANT TO THE PROSPECTUS DATED , 1996
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON , 1996 (THE "EXPIRATION DATE"), UNLESS THE
EXCHANGE OFFER IS EXTENDED, IN WHICH CASE THE TERM "EXPIRATION DATE" SHALL
MEAN THE LATEST DATE AND TIME TO WHICH THE EXCHANGE OFFER IS EXTENDED.
TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY
TIME, ON THE EXPIRATION DATE.
The Exchange Agent is:
Fleet National Bank
By Insured Overnight By Registered Mail: New York Drop:
Carrier:
Fleet National Bank Fleet National Bank
Fleet National Bank Corporate Trust Department c/o First Chicago Trust
Corporate Trust P.O. Box 366-RI/OP/317 Company 14 Wall Street
Department Providence, RI 02901-0366 6th Floor, Window 2
125 Dupont Drive- New York, New York 10005
RI/OP/317
Providence, RI 02907
By Facsimile:
(401) 621-8088
(For Eligible Institutions Only)
Confirm by telephone:
(401) 865-7132
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
<PAGE>
The undersigned acknowledges receipt of the Prospectus dated , 1996
(the "Prospectus"), of Mark IV Industries, Inc., a Delaware corporation (the
"Company"), and this Letter of Transmittal (the "Letter of Transmittal"),
which together with the Prospectus constitutes the Company's offer (the
"Exchange Offer") to exchange $1,000 principal amount of its 7 3/4% Senior
Subordinated Notes due 2006 (the "Exchange Notes") for each $1,000 principal
amount of its 7 3/4% Senior Subordinated Notes due 2006 (the "Private Notes").
Recipients of the Prospectus should read the requirements described in such
Prospectus with respect to eligibility to participate in the Exchange Offer.
Capitalized terms used but not defined herein have the meaning given to them
in the Prospectus.
The undersigned hereby tenders the Private Notes described in the box
entitled "Description of Private Notes" below pursuant to the terms and
conditions described in the Prospectus and this Letter of Transmittal. The
undersigned is the registered owner of all the Private Notes and the
undersigned represents that it has received from each beneficial owner of
Private Notes ("Beneficial Owners") a duly completed and executed form of
"Instruction to Registered Holder from Beneficial Owner" accompanying this
Letter of Transmittal, instructing the undersigned to take the action
described in this Letter of Transmittal.
This Letter of Transmittal is to be used only by a holder of Private Notes
(i) if certificates representing Private Notes are to be forwarded herewith or
(ii) if delivery of Private Notes is to be made by book-entry transfer to the
Exchange Agent's account at The Depository Trust Company (the "Depository"),
pursuant to the procedures set forth in the section of the Prospectus entitled
"The Exchange Offer--Procedures for Tendering." If delivery of the Private
Notes is to be made by book-entry transfer to the account maintained by the
Exchange Agent at the Depository, this Letter of Transmittal need not be
manually executed; provided, however, that tenders of the Private Notes must
be effected in accordance with the procedures mandated by the Depository's
Automated Tender Offer Program and the procedures set forth in the Prospectus
under the caption "The Exchange Offer--Book-Entry Transfer."
Any beneficial owner whose Private Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder of Private Notes promptly and
instruct such registered holder of Private Notes to tender on behalf of the
beneficial owner. If such beneficial owner wishes to tender on its own behalf,
such beneficial owner must, prior to completing and executing this Letter of
Transmittal and delivering its Private Notes, either make appropriate
arrangements to register ownership of the Private Notes in such beneficial
owner's name or obtain a properly completed bond power from the registered
holder of Private Notes. The transfer of record ownership may take
considerable time.
In order to properly complete this Letter of Transmittal, a holder of
Private Notes must (i) complete the box entitled "Description of Private
Notes," (ii) if appropriate, check and complete the boxes relating to book-
entry transfer, guaranteed delivery, Special Issuance Instructions and Special
Delivery Instructions, (iii) sign the Letter of Transmittal by completing the
box entitled "Sign Here" and (iv) complete the Substitute Form W-9. Each
holder of Private Notes should carefully read the detailed instructions below
prior to completing the Letter of Transmittal.
Holders of Private Notes who desire to tender their Private Notes for
exchange and (i) whose Private Notes are not immediately available, (ii) who
cannot deliver their Private Notes and all other documents required hereby to
the Exchange Agent on or prior to the Expiration Date or (iii) who are unable
to complete the procedure for book-entry transfer on a timely basis, must
tender the Private Notes pursuant to the guaranteed delivery procedures set
forth in the section of the Prospectus entitled "The Exchange Offer--
Guaranteed Delivery Procedures." See Instruction 2 of the Instructions
beginning on page 8 hereof.
Holders of Private Notes who wish to tender their Private Notes for exchange
must, at a minimum, complete columns (1), (2), if applicable (see footnote 1
below), and (3) in the box below entitled "Description of Private Notes" and
sign the box on page 7 under the words "Sign Here." If only those columns are
completed, such holder of Private Notes will have tendered for exchange all
Private Notes listed in column (3) below. If the holder of Private Notes
wishes to tender for exchange less than all of such Private Notes, column (4)
must be completed in full. In such case, such holder of Private Notes should
refer to Instruction 5 on page 9.
2
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION OF PRIVATE NOTES
- -------------------------------------------------------------------------------
(1) (2) (3) (4)
PRINCIPAL
AMOUNT
TENDERED FOR
EXCHANGE
NAME(S) AND ADDRESS(ES) OF (ONLY IF
REGISTERED HOLDER(S) OF PRIVATE PRIVATE NOTE DIFFERENT AMOUNT
NOTE(S), EXACTLY AS NAME(S) NUMBER(S)/1/ FROM COLUMN (3))
APPEAR(S) ON PRIVATE NOTE (ATTACH AGGREGATE (MUST BE IN
CERTIFICATE(S) SIGNED LIST PRINCIPAL INTEGRAL MULTIPLES
(PLEASE FILL IN, IF BLANK) IF NECESSARY) AMOUNT OF $1,000)/2/
- ---------------------------------------------------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
- ---------------------------------------------------------------------------
/1/Column (2) need not be completed by holders of Private Notes tendering
Private Notes for exchange by book-entry transfer. Please check the
appropriate box below and provide the requested information.
/2/Column (4) need not be completed by holders of Private Notes who wish to
tender for exchange the principal amount of Private Notes listed in Column
(3). Completion of column (4) will indicate that the holder of Private
Notes wishes to tender for exchange only the principal amount of Private
Notes indicated in column (4).
- --------------------------------------------------------------------------------
[_] CHECK HERE IF TENDERED PRIVATE NOTES ARE ENCLOSED HEREWITH.
[_] CHECKHERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
DEPOSITORY AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS
HEREINAFTER DEFINED) ONLY):
Name of Tendering Institution: ___________________________________________
Account Number: __________________________________________________________
Transaction Code Number: _________________________________________________
[_] CHECKHERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name of Registered Holder of Private Note(s): _____________________________
Date of Execution of Notice of Guaranteed Delivery: _______________________
Window Ticket Number (if available): ______________________________________
Name of Institution with Guaranteed Delivery: _____________________________
Account Number (if delivered by book-entry transfer): _____________________
3
<PAGE>
[_] CHECKHERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: _______________________________________________________________________
Address: ____________________________________________________________________
_____________________________________________________________________________
- -------------------------------------- ----------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8) (SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY (i) if the To be completed ONLY (i) if the
Exchange Notes issued in Exchange Notes issued in
exchange for Private Notes, exchange for Private Notes,
certificates for Private Notes certificates for Private Notes
in a principal amount not in a principal amount not
exchanged for Exchange Notes or exchanged for Exchange Notes or
Private Notes (if any) not Private Notes (if any) not
tendered for exchange, are to be tendered for exchange, are to be
issued in the name of someone mailed or delivered to someone
other than the undersigned or other than the undersigned, or
(ii) if Private Notes tendered (ii) to the undersigned at an
by book-entry transfer which are address other than the address
not exchanged are to be returned shown below the undersigned's
by credit to an account signature.
maintained at the Depository.
Issue to: Mail or deliver to:
Name ____________________________ Name ____________________________
(Please Print) (Please Print)
Address _________________________ Address _________________________
_________________________________ _________________________________
_________________________________ _________________________________
(Include Zip Code) (Include Zip Code)
_________________________________ _________________________________
(Tax Identification or Social (Tax Identification or Social
Security No.) Security No.)
Credit Private Notes not
exchanged and delivered by book-
entry transfer to the Depository
account set forth below:
_________________________________
(Account Number)
- -------------------------------------- ----------------------------------------
If delivery of Private Notes is to be made by book-entry transfer to the
account maintained by the Exchange Agent at the Depositary, then tenders of
Private Notes must be effected in accordance with the procedures mandated by
the Depository's Automated Tender Offer Program and the procedures set forth
in the Prospectus under the caption "The Exchange Offer--Book-Entry Transfer."
4
<PAGE>
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Pursuant to the offer by Mark IV Industries, Inc., a Delaware corporation
(the "Company"), upon the terms and subject to the conditions set forth in the
Prospectus dated , 1996 (the "Prospectus") and this Letter of Transmittal
(the "Letter of Transmittal"), which together with the Prospectus constitutes
the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount
of its 7 3/4% Senior Subordinated Notes due 2006 (the "Exchange Notes") for
each $1,000 principal amount of its outstanding 7 3/4% Senior Subordinated
Notes due 2006 (the "Private Notes"), the undersigned hereby tenders to the
Company for exchange the Private Notes.
By executing this Letter of Transmittal and subject to and effective upon
acceptance for exchange of the Private Notes tendered for exchange herewith,
the undersigned (A) acknowledges and agrees that, except as set forth in the
Prospectus under the caption "The Exchange Offer--Termination of Certain
Rights," all of the rights of such undersigned pursuant to that certain
Registration Rights Agreement, dated as of March 11, 1996, between the Company
and the Initial Purchaser (as defined in the Prospectus), will have been
satisfied and extinguished in all respects and (B) will have irrevocably sold,
assigned, transferred and exchanged, to the Company, all right, title and
interest in, to and under all of the Private Notes tendered for exchange
hereby, and hereby appoints the Exchange Agent as the true and lawful agent
and attorney-in-fact (with full knowledge that the Exchange Agent also acts as
agent of the Company) of such holder of Private Notes with respect to such
Private Notes, with full power of substitution to (i) deliver certificates
representing such Private Notes, or transfer ownership of such Private Notes
on the account books maintained by the Depositary (together, in any such case,
with all accompanying evidences of transfer and authenticity), to the Company,
(ii) present and deliver such Private Notes for transfer on the books of the
Company and (iii) receive all benefits and otherwise exercise all rights and
incidents of beneficial ownership with respect to such Private Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed to be irrevocable and coupled with an
interest.
The undersigned hereby represents and warrants that (i) the undersigned is
the owner; (ii) has a net long position within the meaning of Rule 14e-4 under
the Securities Exchange Act of 1934, as amended ("Rule 14e-4"), equal to or
greater than the principal amount of Private Notes tendered hereby; (iii) the
tender of such Private Notes complies with Rule 14e-4 (to the extent that Rule
14e-4 is applicable to such exchange); (iv) the undersigned has full power and
authority to tender, exchange, assign and transfer the Private Notes; and (v)
that when such Private Notes are accepted for exchange by the Company, the
Company will acquire good and marketable title thereto, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claims. The undersigned will, upon receipt, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Private
Notes tendered for exchange hereby.
The undersigned hereby further represents to the Company that (i) the
Exchange Notes to be acquired by the undersigned in exchange for the Private
Notes tendered hereby and any beneficial owner(s) of such Private Notes in
connection with the Exchange Offer will be acquired by the undersigned and
such beneficial owner(s) in the ordinary course of business of the
undersigned, (ii) the undersigned (if not a broker-dealer referred to in the
last sentence of this paragraph) are not engaging and do not intend to engage
in the distribution of the Exchange Notes, (iii) the undersigned have no
arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) the undersigned and each beneficial
owner acknowledge and agree that any person participating in the Exchange
Offer for the purpose of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction of the Exchange Notes acquired
by such person and cannot rely on the position of the staff of the Commission
set forth in certain no-action letters, (v) the undersigned and each
beneficial owner understand that a secondary resale transaction described in
clause (iv) above and any resales of Exchange Notes
5
<PAGE>
obtained by the undersigned and such beneficial owner(s) in exchange for
Private Notes acquired by the undersigned directly from the Company should be
covered by an effective registration statement containing the selling security
holder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission and (vi) neither the undersigned nor any
beneficial owner is an "affiliate" of the Company, as defined under Rule 405
under the Securities Act. If the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Private Notes that
were acquired as a result of market making activities or other trading
activities, it acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes received in respect of such Private Notes pursuant to the
Exchange Offer; however, by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
For purposes of the Exchange Offer, the Company will be deemed to have
accepted for exchange, and to have exchanged, validly tendered Private Notes,
if, as and when the Company gives oral or written notice thereof to the
Exchange Agent. Tenders of Private Notes for exchange may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. See "The
Exchange Offer--Withdrawal of Tenders" in the Prospectus. Any Private Notes
tendered by the undersigned and not accepted for exchange will be returned to
the undersigned at the address set forth above unless otherwise indicated in
the box above entitled "Special Delivery Instructions."
The undersigned acknowledges that the Company's acceptance of Private Notes
validly tendered for exchange pursuant to any one of the procedures described
in the section of the Prospectus entitled "The Exchange Offer" and in the
instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of
the Exchange Offer.
Unless otherwise indicated in the box entitled "Special Issuance
Instructions," please return any Private Notes not tendered for exchange in
the name(s) of the undersigned. Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions," please mail any certificates for
Private Notes not tendered or exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the Exchange Notes issued in exchange for the Private Notes
accepted for exchange in the name(s) of, and return any Private Notes not
tendered for exchange or not exchanged to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to
transfer any Private Notes from the name of the holder of Private Note(s)
thereof if the Company does not accept for exchange any of the Private Notes
so tendered for exchange or if such transfer would not be in compliance with
any transfer restrictions applicable to such Private Note(s).
IN ORDER TO VALIDLY TENDER PRIVATE NOTES FOR EXCHANGE, HOLDERS OF PRIVATE
NOTES MUST COMPLETE, EXECUTE, AND DELIVER THIS LETTER OR TRANSMITTAL.
Except as stated in the Prospectus, all authority herein conferred or agreed
to be conferred shall survive the death or incapacity of the undersigned, and
any obligation of the undesigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned. Except as
otherwise stated in the Prospectus, this tender for exchange of Private Notes
is irrevocable.
6
<PAGE>
SIGN HERE
___________________________________________________________________________
(Signature(s) of Owner(s))
Date: , 1996
Must be signed by the registered holder(s) of Private Notes exactly as
name(s) appear(s) on certificate(s) representing the Private Notes or on a
security position listing or by person(s) authorized to become registered
Private Note holder(s) by certificates and documents transmitted herewith.
If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the following
information. (See Instruction 6).
Name(s): __________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
(Please Print)
Capacity (full title): ____________________________________________________
___________________________________________________________________________
___________________________________________________________________________
Address: __________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
(Include Zip Code)
Area Code and Telephone No. ( ) _________________________________________
Tax Identification or Social Security Nos.: _______________________________
Please complete Substitute Form W-9
GUARANTEE OF SIGNATURE(S)
(SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 1)
Authorized Signature: _____________________________________________________
Dated: ____________________________________________________________________
Name and Title: ___________________________________________________________
(Please Print)
Name of Firm: _____________________________________________________________
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by an institution
which is an "eligible guarantor institution" within the meaning of Rule 17Ad-
15 under the Securities Exchange Act of 1934, as amended, which is a member of
one of the following recognized Signature Guarantee Programs (an "Eligible
Institution"):
a. The Securities Transfer Agents Medallion Program (STAMP)
b. The New York Stock Exchange Medallion Signature Program (MSP)
c. The Stock Exchange Medallion Program (SEMP)
Signatures on this Letter of Transmittal need not be guaranteed (i) if this
Letter of Transmittal is signed by the registered holder(s) of the Private
Notes tendered herewith and such registered holder(s) have not completed the
box entitled "Special Issuance Instructions" or the box entitled "Special
Delivery Instructions" on this Letter of Transmittal or (ii) if such Private
Notes are tendered for the account of an Eligible Institution. IN ALL OTHER
CASES, ALL SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION.
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND PRIVATE NOTES; GUARANTEED
DELIVERY PROCEDURE. This Letter of Transmittal is to be completed by holders
of Private Notes (i) if certificates are to be forwarded herewith or (ii) if
tenders are to be made pursuant to the procedures for tender by book-entry
transfer or guaranteed delivery set forth in the section of the Prospectus
entitled "the Exchange Offer." Certificates for all physically tendered
Private Notes or any confirmation of a book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth on the cover of this Letter of Transmittal prior to 5:00
p.m., New York City time, on the Expiration Date. Holders of Private Notes who
elect to tender Private Notes and (i) whose Private Notes are not immediately
available, (ii) who cannot deliver the Private Notes or other required
documents to the Exchange Agent prior to 5:00 p.m., New York City time on the
Expiration Date or (iii) who are unable to complete the procedure for book-
entry transfer on a timely basis, may have such tender effected if: (a) such
tender is made by or through an Eligible Institution; (b) prior to 5:00 p.m.,
New York time, on the Expiration Date, the Exchange Agent has received from
such Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile hereof) and Notice of Guaranteed Delivery (by
telegram, telex, facsimile transmission, mail or hand delivery) setting forth
the name and address of the holder of such Private Notes, the certificate
number(s) of such Private Notes and the principal amount of Private Notes
tendered for exchange, stating that tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after the
Expiration Date, the certificates representing such Private Notes (or a Book-
Entry Confirmation), in proper form for transfer, and any other documents
required by this Letter of Transmittal, will be deposited by such Eligible
Institution with the Exchange Agent; and (c) certificates for all tendered
Private Notes, or a Book-Entry Confirmation, together with a copy of the
previously executed Letter of Transmittal (or facsimile thereof) and any other
documents required by this Letter of Transmittal are received by the Exchange
Agent within five New York Stock Exchange trading days after the Expiration
Date.
THE METHOD OF DELIVERY OF PRIVATE NOTES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDER
OF PRIVATE NOTES. EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. NEITHER THIS LETTER OF TRANSMITTAL NOR ANY PRIVATE
NOTES SHOULD BE SENT TO THE COMPANY.
8
<PAGE>
No alternative, conditional or contingent tenders will be accepted. All
tendering holders of Private Notes, by execution of this Letter of Transmittal
(or facsimile hereof, if applicable), waive any right to receive notice of the
acceptance of their Private Notes for exchange.
3. INADEQUATE SPACE. If the space provided in the box entitled "Description
of Private Notes" above is inadequate, the certificate numbers and principal
amounts of the Private Notes being tendered should be listed on a separate
signed schedule affixed hereto.
4. WITHDRAWALS. A tender of Private Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration Date by delivery of
written notice of withdrawal to the Exchange Agent at the address set forth on
the cover of this Letter of Transmittal. To be effective, a notice of
withdrawal of Private Notes must (i) specify the name of the person who
tendered the Private Notes to be withdrawn (the "Depositor"), (ii) identify
the Private Notes to be withdrawn (including the certificate number or numbers
and aggregate principal amount of such Private Notes), (iii) be signed by the
holder of Private Notes in the same manner as the original signature on the
Letter of Transmittal by which such Private Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the applicable transfer agent register the transfer of such
Private Notes into the name of the person withdrawing the tender. Withdrawals
of tenders of Private Notes may not be rescinded, and any Private Notes
withdrawn will thereafter be deemed not validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto
unless the Private Notes so withdrawn are validly retendered. Properly
withdrawn Private Notes may be retendered by following one of the procedures
described in the section of the Prospectus entitled "The Exchange Offer--
Procedures for Tendering" at any time prior to 5:00 p.m., New York City time,
on the Expiration Date.
5. PARTIAL TENDERS. (Not applicable to holders of Private Notes who tender
Private Notes by book-entry transfer). Tenders of Private Notes will be
accepted only in integral multiples of $1,000 principal amount. If a tender
for exchange is to be made with respect to less than the entire principal
amount of any Private Notes, fill in the principal amount of Private Notes
which are tendered for exchange in column (4) of the box entitled "Description
of Private Notes" on page 3, as more fully described in the footnotes thereto.
In case of a partial tender for exchange, a new certificate, in fully
registered form, for the remainder of the principal amount of the Private
Notes, will be sent to the holders of Private Notes unless otherwise indicated
in the appropriate box on this Letter of Transmittal as promptly as
practicable after the expiration or termination of the Exchange Offer.
6. SIGNATURES ON THIS LETTER OF TRANSMITTAL, POWERS OF ATTORNEY AND
ENDORSEMENTS.
(a) The signature(s) of the holder of Private Notes on this Letter of
Transmittal must correspond with the name(s) as written on the face of the
Private Notes without alternation, enlargement or any change whatsoever.
(b) If tendered Private Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
(c) If any tendered Private Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate copies of this Letter of Transmittal and any necessary or
required documents as there are different registrations or certificates.
(d) When this Letter of Transmittal is signed by the holder of the Private
Notes listed and transmitted hereby, no endorsements of Private Notes or
separate powers of attorney are required. If, however, Private Notes not
tendered or not accepted, are to be issued or returned in the name of a person
other than the holder of Private Notes, then the Private Notes transmitted
hereby must be endorsed or accompanied by appropriate powers of attorney in a
form satisfactory to the Company, in either case signed exactly as the name(s)
of the holder of Private Notes appear(s) on the Private Notes. Signatures on
such Private Notes or powers of attorney must be guaranteed by an Eligible
Institution (unless signed by an Eligible Institution).
9
<PAGE>
(e) If this Letter of Transmittal or Private Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Company of their authority so to act must be submitted.
(f) If this Letter of Transmittal is signed by a person other than the
registered holder of Private Notes listed, the Private Notes must be endorsed
or accompanied by appropriate powers of attorney, in either case signed
exactly as the name(s) of the registered holder of Private Notes appear(s) on
the certificates. Signatures on such Private Notes or powers of attorney must
be guaranteed by an Eligible Institution (unless signed by an Eligible
Institution).
7. TRANSFER TAXES. Except as set forth in this Instruction 7, the Company
will pay all transfer taxes, if any, applicable to the transfer and exchange
of Private Notes pursuant to the Exchange Offer. If, however, issuance of
Exchange Notes is to be made to, or Private Notes not tendered for exchange
are to be issued or returned in the name of, any person other than the holder
of Private Notes, and satisfactory evidence of payment of such taxes or
exemptions from taxes therefrom is not submitted with this Letter of
Transmittal, the amount of any transfer taxes payable on account of the
transfer to such person will be imposed on and payable by the holder of
Private Notes tendering Private Notes for exchange prior to the issuance of
the Exchange Notes.
8. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If the Exchange Notes are to
be issued, or if any Private Notes not tendered for exchange are to be issued
or sent to someone other than the holder of Private Notes or to an address
other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. Holders of Private Notes tendering Private
Notes by book-entry transfer may request that Private Notes not accepted be
credited to such account maintained at the Depository as such holder of
Private Notes may designate.
9. IRREGULARITIES. All questions as to the form of documents and the
validity, eligibility (including time of receipt), acceptance and withdrawal
of Private Notes will be determined by the Company, in its sole discretion,
whose determination shall be final and binding. The Company reserves the
absolute right to reject any or all tenders for exchange of any particular
Private Notes that are not in proper form, or the acceptance of which would,
in the opinion of the Company or its counsel, be unlawful. The Company
reserves the absolute right to waive any defect, irregularity or condition of
tender for exchange with regard to any particular Private Notes. The Company's
interpretation of the term of, and conditions to, the Exchange Offer
(including the instructions herein) will be final and binding. Unless waived,
any defects or irregularities in connection with the Exchange Offer must be
cured within such time as the Company shall determine. Neither the Company,
the Exchange Agent nor any other person shall be under any duty to give notice
of any defects or irregularities in Private Notes tendered for exchange, nor
shall any of them incur any liability for failure to give such notice. A
tender of Private Notes will not be deemed to have been made until all defects
and irregularities with respect to such tender have been cured or waived. Any
Private Notes received by the Exchange Agent that are not properly tendered
and as to which the defects or irregularities have not been cured or waived
will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in this Letter of Transmittal, as soon as practicable
following the Expiration Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive,
amend or modify certain of the specified conditions as described under "The
Exchange Offer--Conditions of the Exchange Offer" in the Prospectus in the
case of any Private Notes tendered (except as otherwise provided in the
Prospectus).
11. MUTILATED, LOST, STOLEN OR DESTROYED PRIVATE NOTES. If a holder of
Private Notes desires to tender Private Notes pursuant to the Exchange Offer,
but any of such Private Notes has been mutilated, lost, stolen or destroyed,
such holder of Private Notes should write to or telephone the Trustee at the
address listed below,
10
<PAGE>
concerning the procedures for obtaining replacement certificates for such
Private Notes, arranging for indemnification or any other matter that requires
handling by the Trustee:
Fleet National Bank
Mail Stop RI/MO/199
111 Westminster Street
Providence, Rhode Island 02903
Attention: Corporate Trust Administration
(Mark IV Industries, Inc.)
12. REQUESTS FOR INFORMATION OR ADDITIONAL COPIES. Requests for information
or for additional copies of the Prospectus and this Letter of Transmittal may
be directed to the Exchange Agent at the address set forth for Fleet National
Bank in Instruction 11, directing your inquiries to Stephen Maceroni, or by
calling Mr. Maceroni at (401) 278-3768 or by faxing to his attention at (401)
751-9706.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF, IF
APPLICABLE) TOGETHER WITH CERTIFICATES, OR CONFIRMATION OF BOOK-ENTRY OR THE
NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS MUST BE
RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under certain federal income tax laws, a holder of Private Notes whose
tendered Private Notes are accepted for exchange may be subject to backup
withholding unless the holder provides the Company (as payor), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Private
Notes is awaiting a TIN) and that (A) the holder of Private Notes has not been
notified by the Internal Revenue Service that he or she is subject to backup
withholding as a result of a failure to report all interest or dividends or
(B) the Internal Revenue Service has notified the holder of Private Notes that
he or she is no longer subject to backup withholding; or (ii) an adequate
basis for exemption from backup withholding. If such holder of Private Notes
is an individual, the TIN is such holder's social security number. If the
Exchange Agent is not provided with the correct taxpayer identification
number, the holder of Private Notes may be subject to certain penalties
imposed by the Internal Revenue Service.
Certain holders of Private Notes (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding
and reporting requirements. Exempt holders of Private Notes should indicate
their exempt status on Substitute Form W-9. A foreign individual may qualify
as an exempt recipient by submitting to the Exchange Agent a properly
completed Internal Revenue Service Form W-8 (the terms of which the Exchange
Agent will provide upon request) signed under penalty of perjury, attesting to
the holder's exempt status. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 (the "Guidelines") for
additional instructions.
If backup withholding applies, the Company is required to withhold 31% of
any payment made to the holder of Private Notes or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal
income tax liability of persons subject to backup withholding will be reduced
by the amount of tax withheld. If withholding results in an overpayment of
taxes, a refund may be obtained from the Internal Revenue Service.
The holder of Private Notes is required to give the Exchange Agent the TIN
(e.g., social security number or employer identification number) of the record
owner of the Private Notes. If the Private Notes are held in more than one
name or are not held in the name of the actual owner, consult the enclosed
Guidelines for additional guidance regarding which number to report.
11
<PAGE>
- --------------------------------------------------------------------------------
PAYER'S NAME:
- -------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR ____________________
TIN IN THE BOX AT RIGHT AND Social Security
CERTIFY BY SIGNING AND DATING Number
BELOW
SUBSTITUTE OR
____________________
FORM W-9 Employer
Identification
DEPARTMENT OF Number
THE TREASURY
INTERNAL ---------------------------------------------------------
REVENUE SERVICE PART 2--Certification Under PART 3--
Penalties of Perjury, I
certify that:
(1) The number shown on this
form is my current Awaiting TIN [_]
taxpayer identification
number (or I am waiting
for a number to be issued
PAYER'S REQUEST FOR to me) and
TAXPAYER IDENTIFIC-
ATION NUMBER (TIN) (2) I am not subject to
backup withholding either
because I have not been
notified by the Internal
Revenue Service (the
"IRS") that I am subject
to backup withholding as
a result of a failure to
report all interest or
dividends, or the IRS has
notified me that I am no
longer subject to backup
withholding.
---------------------------------------------------------
CERTIFICATE INSTRUCTIONS--You must cross out item
(2) in Part 2 above if you have been notified by
the IRS that you are subject to backup withholding
because of underreporting interest or dividends on
your tax return. However, if after being notified
by the IRS that you are subject to backup
withholding you receive another notification from
the IRS stating that you are no longer subject to
backup withholding, do not cross out item (2).
SIGNATURE _________________________ DATE __________
NAME _______________________________________________
ADDRESS ____________________________________________
CITY _________________ STATE ZIP CODE _________
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECK THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
PAYOR'S NAME:
- -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or
delivered an application to receive a taxpayer identification number to
the appropriate Internal Revenue Service Center or Social Security
Administration Office or (b) I intend to mail or deliver such an
application in the near future. I understand that if I do not provide a
taxpayer identification number with sixty (60) days, 31% of all reportable
payments made to me thereafter will be withheld until I provide such a
number.
__________________________________________ _______________________________
Signature Date
- --------------------------------------------------------------------------------
12
<PAGE>
EXHIBIT 99.2
MARK IV INDUSTRIES, INC.
EXCHANGE OFFER
TO HOLDERS OF ITS
7 3/4% SENIOR SUBORDINATED NOTES DUE 2006
NOTICE OF GUARANTEED DELIVERY
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Mark IV Industries, Inc. (the "Company") made pursuant to
the Prospectus dated , 1996 (the "Prospectus") and the accompanying
Letter of Transmittal if certificates for the above-referenced Notes (the
"Private Notes") are not immediately available or time will not permit all
required documents to reach the Exchange Agent (as defined below) prior to the
Expiration Date (as defined in the Prospectus) of the Exchange Offer (as
defined below) or if the procedures for book-entry transfer cannot be
completed on a timely basis. Such form may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Exchange Agent.
TO: FLEET NATIONAL BANK (THE "EXCHANGE AGENT")
By Insured Overnight By Registered Mail: New York Drop:
Carrier:
Fleet National Bank Fleet National Bank
Fleet National Bank Corporate Trust Department c/o First Chicago Trust
Corporate Trust P.O. Box 366-RI/OP/317 Company 14 Wall Street
Department Providence, RI 02901-0366 6th Floor, Window 2
125 Dupont Drive- New York, New York 10005
RI/OP/317
Providence, RI 02907
By Facsimile:
(401) 621-8088
(For Eligible Institutions Only)
Confirm by telephone:
(401) 865-7132
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Ladies and Gentlemen:
The undersigned hereby tenders to the Company upon the terms and conditions
set forth in the Prospectus and the Letter of Transmittal (which together
constitute the "Exchange Offer"), receipt of which is hereby acknowledged, the
principal amount of Private Notes set forth below, pursuant to the guaranteed
delivery procedure described in the Prospectus and the Letter of Transmittal.
Signature(s) ________________________ Address _____________________________
_____________________________________ _____________________________________
Name(s) _____________________________ Area Code and Tel. No.(s) ___________
_____________________________________ If Private Notes will be delivered
Please Type or Print by book-entry transfer, check box
and provide account number.
Certificate Nos. (if available) _____
[_] The Depository Trust Company
Account Number: _____________________
Principal Amount of Private Notes
Represented by Certificate(s) _______
<PAGE>
GUARANTEE
The undersigned, member of a recognized signature guarantee medallion
program within the meaning of Rule 17A(d)-15 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), hereby guarantees (a) that the
above-named person(s) own(s) the above-described securities tendered hereby
within the meaning of Rule 10b-4 under the Exchange Act, (b) that such tender
of the above-described securities complies with Rule 10b-4 and (c) that
delivery to the Exchange Agent of certificates representing the principal
amount of Private Notes tendered hereby, in proper form for transfer, or
timely confirmation of the book-entry transfer of such Private Notes into the
Exchange Agent's account at the Depository Trust Company, in either case with
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees and any other required
documents, will be received by the Exchange Agent at one of its addresses set
forth above, no later than five New York Stock Exchange trading days after the
date of execution of this Notice of Guaranteed Delivery.
_____________________________________ _____________________________________
Name of Firm Authorized Signature
_____________________________________ _____________________________________
Address Title
_____________________________________ _____________________________________
Zip Code Please Type or Print
Area Code and Tel. No. ______________ Dated _______________________________
2
<PAGE>
EXHIBIT 99.3
MARK IV INDUSTRIES, INC.
OFFER TO EXCHANGE
7 3/4% SENIOR SUBORDINATED NOTES DUE 2006
FOR ANY AND ALL OUTSTANDING
7 3/4% SENIOR SUBORDINATED NOTES DUE 2006
, 1996
TO SECURITIES DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES AND OTHER NOMINEES:
Mark IV Industries, Inc. (the "Company") is offering (the "Exchange Offer"),
upon the terms and subject to the conditions of the enclosed Prospectus, dated
, 1996 (as the same may be amended or supplemented from time to time, the
"Prospectus"), and the enclosed Letter of Transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount of its 7 3/4% Senior
Subordinated Notes due April 1, 2006 (the "Exchange Notes"), which exchange
has been registered under the Securities Act of 1933, as amended (the
"Securities Act"), for each $1,000 principal amount of its outstanding 7 3/4%
Senior Subordinated Notes due April 1, 2006 (the "Private Notes"), of which
$250,000,000 aggregate principal amount was issued and sold on March 11, 1996
in a transaction exempt from registration under the Securities Act and is
outstanding on the date hereof. The Company will accept for exchange any and
all Private Notes properly tendered according to the terms of the Prospectus
and the Letter of Transmittal. Consummation of the Exchange Offer is subject
to certain conditions described in the Prospectus.
WE ARE ASKING YOU TO CONTACT YOUR CLIENTS FOR WHOM YOU HOLD PRIVATE NOTES
REGISTERED IN YOUR NAME OR IN THE NAME OF YOUR NOMINEE OR WHO HOLD PRIVATE
NOTES REGISTERED IN THEIR OWN NAMES.
The Company will not pay any fees or commissions to any broker or dealer or
other person for soliciting tenders of Private Notes pursuant to the Exchange
Offer. You will, however, be reimbursed by the Company for customary mailing
and handling expenses incurred by you in forwarding any of the enclosed
materials to your clients. The Company will pay all transfer taxes, if any,
applicable to the tender of Private Notes to it or its order, except as
otherwise provided in the Prospectus and the Letter of Transmittal.
Enclosed are copies of the following documents:
1. A form of letter which you may send, as a cover letter to accompany
the Prospectus and related materials, to your clients for whose accounts
you hold Private Notes registered in your name or the name of your nominee,
with space provided for obtaining the clients' instructions with regard to
the Exchange Offer.
2. The Prospectus.
3. The Letter of Transmittal for your use in connection with the tender
of Private Notes and for the information of your clients.
4. A form of Notice of Guaranteed Delivery.
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
Your prompt action is requested. The Exchange Offer will expire at 5:00
P.M., New York City time, on [DAY], [DATE], 1996, unless the Exchange Offer is
extended by the Company. The time at which the Exchange Offer expires is
referred to as the "Expiration Date." Tendered Private Notes may be withdrawn,
subject to the procedures described in the Prospectus, at any time prior to
5:00 P.M. on the Expiration Date.
To participate in the Exchange Offer, certificates for Private Notes, or a
timely confirmation of a book-entry transfer of such Private Notes into the
Exchange Agent's account at the Depository Trust Company, together with a duly
executed and properly completed Letter of Transmittal or facsimile thereof,
with any required
<PAGE>
signature guarantees, and any other required documents, must be received by
the Exchange Agent by the Expiration Date as indicated in the Letter of
Transmittal and the Prospectus.
If holders of the Private Notes wish to tender, but it is impracticable for
them to forward their Private Notes prior to the Expiration Date or to comply
with the book-entry transfer procedures on a timely basis, a tender may be
effected by following the guaranteed delivery procedures described in the
Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures" and the
Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the Exchange
Agent, Fleet National Bank, by calling (401) 278-3768, directing your
inquiries to Stephen Maceroni.
Very truly yours,
Mark IV Industries, Inc.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON
AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT
TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS
AND THE LETTER OF TRANSMITTAL.
2
<PAGE>
EXHIBIT 99.4
MARK IV INDUSTRIES, INC.
OFFER TO EXCHANGE
7 3/4% SENIOR SUBORDINATED NOTES DUE 2006
FOR ANY AND ALL OUTSTANDING
7 3/4% SENIOR SUBORDINATED NOTES DUE 2006
, 1996
To Our Clients:
Enclosed for your consideration is a Prospectus, dated , 1996 (as the
same may be amended or supplemented from time to time, the "Prospectus"), and
a Letter of Transmittal (the "Letter of Transmittal"), relating to the offer
(the "Exchange Offer") by Mark IV Industries, Inc. (the "Company") to exchange
$1,000 principal amount of its 7 3/4% Senior Subordinated Notes due April 1,
2006 (the "Exchange Notes"), which exchange has been registered under the
Securities Act of 1933, as amended (the "Securities Act"), for each $1,000
principal amount of its outstanding 7 3/4% Senior Subordinated Notes due April
1, 2006 (the "Private Notes"), of which $250,000,000 aggregate principal
amount was issued and sold on March 11, 1996 in a transaction exempt from
registration under the Securities Act and is outstanding on the date hereof.
The Company will accept for exchange any and all Private Notes properly
tendered according to the terms of the Prospectus and the Letter of
Transmittal. Consummation of the Exchange Offer is subject to certain
conditions described in the Prospectus.
This material is being forwarded to you as the beneficial owner of Private
Notes carried by us for your account or benefit but not registered in your
name. A tender of such Private Notes may only be made by us as the registered
holder and pursuant to your instructions. Therefore, the Company urges
beneficial owners of Private Notes registered in the name of a broker, dealer,
commercial bank, trust company or other nominee to contact such registered
holder promptly if such beneficial owners wish to tender Private Notes in the
Exchange Offer.
Accordingly, we request instructions as to whether you wish us to tender any
or all such Private Notes held by us for your account, pursuant to the terms
and conditions set forth in the enclosed Prospectus and Letter of Transmittal.
However, we urge you to read the Prospectus carefully before instructing us as
to whether or not to tender your Private Notes.
Your instructions to us should be forwarded as promptly as possible in order
to permit us to tender Private Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 P.M.,
New York City Time, on [DAY], [DATE], 1996, unless the Exchange Offer is
extended by the Company. The time the Exchange Offer expires is referred to as
the "Expiration Date." Tenders of Private Notes may be withdrawn at any time
prior to the Expiration Date.
IF YOU WISH TO HAVE US TENDER ANY OR ALL OF YOUR PRIVATE NOTES, PLEASE SO
INSTRUCT US BY COMPLETING, EXECUTING AND RETURNING TO US THE INSTRUCTION FORM
ON THE REVERSE HEREOF. The accompanying Letter of Transmittal is furnished to
you for your information only and may not be used by you to tender Private
Notes held by us and registered in our name for your account or benefit.
If we do not receive written instructions in accordance with the procedures
presented in the Prospectus and the Letter of Transmittal, we will not tender
any of the Private Notes on your account.
Please carefully review the enclosed material as you consider the Exchange
Offer.
<PAGE>
INSTRUCTIONS
INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER
OF
7 3/4% SENIOR SUBORDINATED NOTES DUE 2006
OF
MARK IV INDUSTRIES, INC.
The undersigned hereby acknowledges receipt of the Prospectus dated ,
1996 (the "Prospectus") of Mark IV Industries, Inc., a Delaware corporation
(the "Company") and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer"). Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus.
This will instruct you, the registered holder, as to the action to be taken
by you relating to the Exchange Offer with respect to the 7 3/4% Senior
Subordinated Notes due 2006 (the "Private Notes") held by you for the account
of the undersigned.
The aggregate face amount of the Private Notes held by you for the account
of the undersigned is (fill in amount):
$ of the Private Notes.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[_] To TENDER the following Private Notes held by you for the account of the
undersigned (insert principal amount of Private Notes to be tendered, if
any):
$ of the Private Notes.
[_] NOT to TENDER any Private Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Private Notes held by you for
the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner of the Private Notes, including but not limited to the
representations that (i) the undersigned is acquiring the Exchange Notes in
the ordinary course of business of the undersigned, (ii) the undersigned is
not participating, does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of Exchange
Notes, (iii) the undersigned acknowledges that any person participating in the
Exchange Offer for the purpose of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities
Act of 1933, as amended, in connection with any resale transaction of the
Exchange Notes acquired by such person and cannot rely on the position of the
Staff of the Securities and Exchange Commission set forth in certain no-action
letters (See the section of the Prospectus entitled "The Exchange Offer--
Resale of the Exchange Notes"), (iv) the undersigned understands that a
secondary resale transaction described in clause (iii) above should be covered
by an effective registration statement containing the selling securityholder
information required by Item 507 or Item 508, if applicable, of Regulation S-K
of the Commission, (v) the undersigned is not an "affiliate," as defined in
Rule 405 under the Securities Act, of the Company, (vi) if the undersigned is
not a broker-dealer, that it is not participating in, does not intend to
participate in, and has no arrangement or understanding with any person to
participate in, the distribution of Exchange Notes and (vii) if the
undersigned is a broker-dealer that will receive Exchange Notes for its own
account in exchange for Private Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes received in respect of such
Private Notes pursuant to the Exchange Offer; however, by so acknowledging and
by delivering a prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act; (b) to agree,
on behalf of the undersigned, as set forth in the Letter of Transmittal; and
(c) to take such other action as necessary under the Prospectus or the Letter
of Transmittal to effect the valid tender of Private Notes.
SIGN HERE
Name of Beneficial Owner(s): __________________________________________________
Signature(s): _________________________________________________________________
Name(s) (please print): _______________________________________________________
Address: ______________________________________________________________________
Telephone Number: _____________________________________________________________
Taxpayer Identification or Social Security Number: ____________________________
Date: _________________________________________________________________________
2
<PAGE>
EXHIBIT 99.5
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.-- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
- --------------------------------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, the first
individual on
the account(1)
3. Custodian account of The minor(2)
a minor (Uniform Gift
to Minors Act)
4. a. The usual revocable The grantor-trustee(1)
savings trust
account (grantor is
also trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust under
State law
5. Sole proprietorship account The owner(3)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------------------------------------------
6. A valid trust, estate, or pension The legal entity(4)
trust
7. Corporate account The corporation
8. Partnership account held in the name The partnership
of the business
9. Association, club, religious, The organization
charitable, educational or other
tax-exempt organization
10. A broker or registered nominee The broker or nominee
11. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
- --------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business
or "doing business as" name. You may use either your social security
number or employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension
trust. Do not furnish the taxpayer identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL
BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number
(for businesses and all other entities), at the local office of the Social
Security Administration or the Internal Revenue Service.
To complete Substitute Form W-9 if you do not have a taxpayer identification
number, write "Applied For" in the space for the taxpayer identification
number in Part 1, sign and date the Form, and give it to the requester.
Generally, you will then have 60 days to obtain a taxpayer identification
number and furnish it to the requester. If the requester does not receive your
taxpayer identification number within 60 days, backup withholding, if
applicable, will begin and continue until you furnish your taxpayer
identification number to the requester.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in
items (1) through (13) and a person registered under the Investment Advisers
Act of 1940 who regularly acts as a broker are exempt. Payments subject to
reporting under sections 6041 and 6041A are generally exempt from backup
withholding only if made to payees described in items (1) through (7), except
a corporation that provides medical and health care services or bills and
collects payments for such services is not exempt from backup withholding or
information reporting. Only payees described in items (2) through (6) are
exempt from backup withholding for barter exchange transactions, patronage
dividends, and payments by certain fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an IRA, or a
custodial account under section 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States,
or any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivision, agencies, or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the
United States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Mortgage interest paid to you.
Exempt payees described above should file a Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6042, 6044, 6045, 6049 and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
Payers must be given the numbers whether or not recipients are required to
file tax returns. Payers must generally withhold 31% of taxable interest,
dividends, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
