UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended February 29, 1996
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________________ to ____________________
Commission File No. 1-8862
MARK IV INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 23-1733979
(State or other jurisdiction of (IRS employer Identification number)
incorporation or organization)
501 John James Audubon Pkwy., P.O. Box 810, Amherst, NY 14226-0810
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716) 689-4972
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of Class which registered
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
The aggregate market value of the voting stock of the Registrant held by
non-affiliates of the Registrant based on the closing price of the Common
Stock on May 14, 1996 on the New York Stock Exchange was $1,136,595,840.
As of May 14, 1996, the number of outstanding shares of Registrant's
Common Stock, $.01 par value, was 63,043,877 shares.
Documents Incorporated By Reference
Portions of the Registrant's definitive proxy statement to be filed
pursuant to Regulation 14A not later than 120 days after the end of the fiscal
year are incorporated by reference into Part III.
<PAGE>2
MARK IV INDUSTRIES, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-K
PART I Page
----
Item 1: Business 3
Item 2: Properties 11
Item 3: Legal Proceedings 12
Item 4: Submission of Matters to a Vote
of Security Holders 12
PART II
Item 5: Market for the Company's Common Stock and
Related Security Holder Matters 12
Item 6: Selected Financial Data 13
Item 7: Management's Discussion and Analysis
of Financial Condition and Results
of Operations 14
Item 8: Financial Statements and Supplementary
Data 20
Item 9: Disagreement on Accounting and Financial
Disclosure 41
PART III
Item 10: Directors and Executive Officers of the
Registrant 41
Item 11: Executive Compensation 41
Item 12: Security Ownership of Certain Beneficial
Owners and Management 41
Item 13: Certain Relationships and Related
Transactions 41
PART IV
Item 14: Exhibits, Financial Statement Schedules and
Reports on Form 8-K 42
Signatures 49
Exhibit Index 50
<PAGE>3
PART I
ITEM 1. BUSINESS
General
Mark IV Industries, Inc. ("Mark IV" or "the company") is a diversified
manufacturer of a broad range of proprietary and other power and fluid
transfer products and systems which serve primarily automotive and industrial
markets. 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 primarily
directly, but also through independent distributors, to other manufacturers
and commercial users int he United States and Europe and, to a lesser extent,
in Canada, Latin America and the Far East. Mark IV operates 79 manufacturing
facilities and 56 distribution and sales locations and employs approximately
18,200 people in 19 countries.
During fiscal 1996, the Company reorganized what had been classified as
its primary business segment, Power and Fluid Transfer, into separately
managed and market-focused businesses. As a result, in connection with the
preparation of its financial statements for its fiscal year ended February 29,
1996, the Company determined to reclassify the operations included in that
segment into two segments--Mark IV Automotive and Mark IV Industrial, with its
former Professional Audio Segment being included in the Industrial segment.
Mark IV's business strategy is focused on building, its worldwide, automotive
and industrial business segments 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 cooperative 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 a significant
amount of its current sales arising from the introduction of new products or
products which have been redesigned; (ii) substantially increased its
industrial hose and couplings production capacity and strengthened its
position in the hose and couplings products market through its recent
acquisition of Imperial Eastman; (iii) 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 and systems; (iv) significantly expanded
its presence in Western Europe through its June 1993 acquisition of PTI, a
leading Italian-based manufacturer of power transmission products; and (v)
established distribution centers to serve markets in Central and South America
and the Pacific Rim, and acquired manufacturing and distribution facilities in
Mexico. 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.
<PAGE>4
Recent Acquisitions
As part of the Company's strategic growth plans, 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 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.
In furtherance of Mark IV's strategy of focusing on building its
Industrial 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 existing Mark IV
products, and has annual sales of approximately $135 million.
Recent Developments
As part of the Company's strategy to become more focused within its
Industrial segment, Mark IV is exploring the possibility of selling its non-
core businesses. In October 1995, the Company announced the possible sale of
its Transportation Products businesses which have aggregate 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 which has
annual sales of approximately $200 million. The potential sales remain in
their preliminary stages and, therefore, there can be no assurance that any
such sales will occur. It the Company were to consummate all or a portion of
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.
Segment Information
As discussed above, in connection with the preparation of its financial
statements for its fiscal year ended February 29, 1996, the Company has
reclassified the operations included in its former Power and Fluid Transfer
segment and its former Professional Audio segment into the following two
business segments:
(i) Automotive, which includes the design, manufacture and
distribution of fuel, power transmission, and fluid handling
systems and components, and filters and filtration systems for the
global automotive aftermarket and OEM market; and
<PAGE>5
(ii) Industrial, which includes the design, manufacture and
distribution of power transmission, fluid handling, and filtration
components and systems for industrial OEM and industrial
distribution markets worldwide. The Industrial segment also
includes the Company's Transportation Products and Professional
Audio business units.
A more detailed discussion concerning the Company's two reclassified
business segments follows. Financial information regarding such business
segments is presented in Note 14 to the Company's audited consolidated
financial statements included elsewhere herein.
MARK IV AUTOMOTIVE
Overview
During the latter part of fiscal 1996, the Company's worldwide
automotive OEM and aftermarket operations were combined to form Mark IV
Automotive as a global manufacturer of automotive systems and components
primarily operating under the trade names of Dayco and Purolator. Mark IV
Automotive's sales accounted for about 48%, or $1.0 billion, of the Company's
total consolidated net sales in fiscal 1996, with approximately 38% of such
sales to customers outside of the U.S.
Mark IV Automotive develops, manufactures and markets systems and
components primarily in the fuel, power transmission, fluid handling and
filtration technology areas. In the design, manufacture and distribution of
its products, Mark IV Automotive places particular emphasis on the use of
complete systems or subsystems to meet the needs of its global customers. In
addition, products are designed to improve or enhance automotive safety,
passenger comfort and/or the environment.
Mark IV Automotive's fuel products include all systems and components
required for the safe transport of fuel from the gas tank inlet into a
vehicle's gas tank, and then from the tank into the engine. Products vary
from complete fuel systems to individual components, including tubes, hose,
couplings, fuel filler and other assemblies, fittings, valves, canisters and
filters. Power transmission products, of which Mark IV Automotive is a
leading manufacturer, include accessory drive and camshaft drive systems,
consisting of components such as belts, pulleys, idlers and tensioners, for
the global automotive market. Fluid handling products consist of hose and
hose assemblies for power steering, air conditioning, oil cooler, and other
high-pressure applications; as well as radiator hose, heater hose and other
related hose, couplings and assemblies. Automotive filtration products, of
which Mark IV Automotive is a leading manufacturer, include a complete line of
filters and filter housing for automotive, light truck and heavy duty
applications.
<PAGE>6
AUTOMOTIVE OEM
Mark IV Automotive designs and manufactures systems and components for
most vehicle producers in the world, including OEMs in North America, Europe
and Asia. The segment's Automotive OEM business accounted for approximately
21% of the Company's consolidated net sales in fiscal 1996.
The Company's wholly-owned subsidiary, Dayco Products, Inc. ("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. These systems and assemblies consist of various hose,
belts, filters, tensioners, brackets, pulleys, canisters and sprockets. Dayco
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. An emphasis on systems development as a hose and
assembly producer has helped Dayco gain market share in the power steering
hose assembly market. In addition, Dayco continues to benefit from the
increasing demand in Europe for automobiles equipped with power steering and
air conditioning. Almost 50% of vehicles produced in Europe today include
both air conditioning and power steering, while in the U.S., over 95% of all
new vehicles are comparably equipped. The Company believes that the number of
cars manufactured in Europe which feature these products is growing at a
faster rate than the overall market, representing a continuing growth
opportunity for Mark IV Automotive. Moreover, 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.
The acquisition of Purolator has 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. During
fiscal 1995 and 1996, the Company continued to expand its international
manufacturing base through acquisitions in Mexico and Sweden and the
establishment of manufacturing operations in Argentina where the construction
of a new manufacturing facility is planned for fiscal 1998.
AUTOMOTIVE AFTERMARKET
Mark IV Automotive products in the automotive aftermarket include a vast
array of automotive belts, hose, filters and accessories sold to automotive
warehouse distributors, oil companies, quick lubes, original equipment service
centers, retail and auto parts chains, mass merchandisers, farm and fleet
stores, and hardware distributors. The automotive aftermarket accounted for
approximately 27% of the Company's consolidated net sales in fiscal 1996.
The Company's automotive aftermarket business is divided between the
"traditional" and "maintenance" markets. The traditional market, which
accounts for about one third of the aftermarket business, includes standard
"wear-and-tear" replacement and repair products, such as belts and hose. The
balance of aftermarket sales are to the maintenance market, which includes
regularly scheduled maintenance or upkeep products, such as filters.
<PAGE>7
Automotive aftermarket 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.
MARK IV INDUSTRIAL
Overview
Mark IV Industrial combines the industrial operations of Dayco,
Purolator and Imperial Eastman and offers to specifically targeted industrial
markets around the world engineered systems and components primarily in the
fluid power, power transmission, fluid transfer and filtration technology
areas. Mark IV Industrial also encompasses the Company's Transportation
Products and Professional Audio business units. Mark IV Industrial accounted
for approximately 52%, or $1.1 billion, of the Company's total consolidated
net sales in fiscal 1996, with approximately 33% of such sales to customers
outside of the U.S.
Industrial Systems and Components
Many of Mark IV's Industrial products are sold directly to industrial
OEMs for use in agricultural, marine, manufacturing, office, mining,
environmental, fuel dispensing and fuel flow equipment applications, as well
as in products such as snowmobiles, washing machines, golf carts, vacuum
cleaners, outboard motors, lawn mowers. The balance of sales of these
products are to distributors of industrial replacement belts and filters,
industrial and hydraulic hose and couplings, and lawn and garden product
distributors and retailers, such as hardware chains, home centers and mass
merchandisers, in addition to government agencies and contractors. Net sales
in these markets accounted for approximately 33% of the Company's consolidated
net sales in fiscal 1996.
Mark IV Industrial's fluid power products include high-pressure
hydraulic and pneumatic hose, couplings and assemblies to a variety of
industrial customers, primarily through its Dayco and Imperial Eastman
operations. Recent products include a series of agricultural hose operational
at up to 3,000 pounds per square inch, designed for use on agricultural
equipment; a high-pressure, spiral wire hose for use on large, off-road
construction and agricultural equipment, such as earth movers and combines; a
line of flexible, general purpose wire braid hose and hose assemblies for use
in chemical refineries and in other high pressure applications; and a wire
braid hose capable of handling a multitude of fluids for a variety of
applications.
<PAGE>8
Mark IV Industrial, through its Dayco operation, also designs and
manufactures belts and drive systems for industrial power transmission
applications. The Company's belts and drive systems can be found in a diverse
range of industrial applications, including for use in heavy-duty farm
equipment, rock crushers, lathes, snowmobiles, cooling towers, air handling
and petroleum pumping units, underground mines, lawn mowers and other grounds
care equipment, and, recently, in products ranging from exercise treadmills to
industrial dough mixers and large appliances, such as washers and dryers.
Mark IV Industrial's fluid transfer products provide customers with hose
and couplings for transferring liquids, ranging from corrosive chemicals to
water, air and other gaseous materials, and solid matter as diverse as flour
and concrete. These products can be found in agricultural applications,
refineries and service stations, underground mines, sandblasting jobs, welding
processes, chemical transference applications, transportation equipment,
vacuum cleaners, steel mills and in garden and air hose applications.
Through Purolator, Mark IV Industrial offers specialized industrial
fluid filters for the aeropower, fluid processing and general industrial
markets, as well as for government and military applications. Purolator's
other products include heating and air-conditioning filters for residential,
commercial and industrial uses and, through the operations of Purolator's
subsidiary, Facet International, Inc. ("Facet"), high performance filtration
and separation products and systems for commercial and military aviation
applications. Facet's products are sold to oil companies, airlines and
defense ministries. Facet also produces bilge separators for the commercial
and military marine markets, as well as environmental protection filters that
separate oil from water.
Other
Transportation Products. Mark IV designs and manufactures products and
systems serving two principal components of the Transportation Products
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 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 approximately
10% of the Company's total consolidated net sales in fiscal 1996.
The Company announced in October 1995 that it is exploring the
possibility of selling the Transportation Products business unit. The sale of
the unit, which is at a preliminary stage, is being pursued in connection with
the Company's long-term strategy of focusing on the worldwide industrial and
automotive aftermarket and OEM markets.
<PAGE>9
Professional Audio. The Professional Audio business units accounted for
approximately 9% of the Company's consolidated net sales in fiscal 1996. 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 announced in January 1996 that it is exploring the
possibility of selling its Professional Audio businesses. The proposed sale
of these businesses, which is also at a preliminary stage, is being pursued in
connection with the Company's long-term strategy of focusing on the worldwide
industrial and automotive aftermarket and OEM markets.
Marketing and Competition
Mark IV's products are marketed primarily in the United States and
Europe, and to a lesser extent in Canada and the Far East. The company uses
its own sales engineers and other sales personnel, independent distributors
and sales representatives to market its products.
A majority of the company's products have a significant and in many
instances the leading market share in their respective markets. Most of the
markets for the company's products are characterized by a limited number of
competitors. However, competition in certain of those markets is intense.
Some of the company's competitors are substantially larger than Mark IV and
have greater financial resources. The company competes on the basis of price,
quality, technical innovation and its ability to fill orders promptly, with
the relative importance of each factor depending on the market for the
particular product.
Backlog
The company does not believe that the backlog of orders for any of its
products is material to the company as a whole. However, backlogs are a
significant factor in the Transportation Products market of the Industrial
segment.
Patents and Trademarks
Although a number of patents and trademarks have been issued to the
company and its subsidiaries, the company believes its competitive position is
more dependent on its technical knowledge and processes than on patent or
trademark protection. The company believes, however, that its trademarks and
tradenames used in connection with certain products may be significant to its
business.
<PAGE>10
Research and Development
The company is engaged in ongoing research and development in connection
with new and existing products. Research and development expenditures are
expensed as incurred, and amounted to $48,400,000; $34,800,000; and
$30,700,000 in the company's operations in fiscal 1996, 1995 and 1994,
respectively.
Raw Materials and Supplies
The materials and supplies used to produce the company's products are
generally obtained from a wide variety of suppliers, and the company has not
experienced any shortages. Although certain materials used in the manufacture
of flip-dots, electrostatic control equipment, self-illuminating lights and
smoke-detector ionization elements are readily available from only a few
suppliers, the company does not anticipate any significant difficulties in
obtaining any of these raw materials in the foreseeable future.
Government Regulation
Certain of the company's process control systems, electrostatic control
devices, smoke-detector ionization elements and self-illuminating lights have
radioactive components, the production, storage and transportation of which
are subject to federal, state and local laws and regulations. Federal and
state regulations also limit the amount of exposure the company's employees
may have to such radioactive materials. The company has obtained the
necessary licenses and approvals required for its businesses and believes it
is in material compliance with all applicable regulations concerning
radioactive materials and employee safety.
A portion of the company's business is conducted pursuant to U.S.
Government contracts or sub-contracts. Generally, government contracts and
sub-contracts contain provisions permitting termination at any time at the
convenience of the Government upon payment to the company of costs incurred
plus a profit related to the work performed to the date of termination.
Substantially all of the company's government contracts and sub-contracts
contain these provisions. The company, as a government contractor, is subject
to various statutes and regulations governing defense contracts.
Other than as described above with respect to radioactive components,
the company is not subject to any particular environmental laws or regulations
which are not generally applicable to all manufacturing companies. The
company believes that it is in material compliance with all applicable
environmental laws and regulations. Mark IV does not anticipate having to
incur material capital expenditures for environmental compliance in fiscal
1997 or fiscal 1998.
Employees
The company currently employs approximately 18,200 persons, of whom
approximately 12,900 are production employees, with the remainder serving in
executive, administrative, engineering or sales capacities. Approximately
3,600 production employees are covered by 19 collective bargaining agreements
which expire at various times through the year 2001. The company believes its
relationship with its employees is good.
<PAGE>11
Other
Mark IV was incorporated in Delaware in 1970 and its executive offices
are at 501 John James Audubon Parkway, Amherst, New York 14226-0810. Its
telephone number is (716) 689-4972.
ITEM 2. PROPERTIES
The table below summarizes the approximate floor space of the company's
corporate office and principal manufacturing facilities by business segment.
Approximate Floor Space
(In Thousands of Square Feet)
Owned Leased Total
Corporate Office - 23,000 23,000
Automotive (1) (3) 3,920,000 1,073,000 4,993,000
Industrial (2) (3) 4,183,000 2,009,000 6,192,000
(1) Consisting of the following twenty-three facilities:
North American facilities (approximately 3,980,000 square feet):
Waynesville, NC; Walterboro, SC; Williston, SC; Ocala, FL; Ft. Worth,
TX; Fayeteville, AR; Weston, Ontario, Canada; Easley, SC; Lexington, TN;
Red Wing, MI; Dexter, MO; Fayetteville, NC; Salt Lake City, UT;
Mississauga, Ontario, Canada; Detroit, MI; Big Rapids, MI.
European facilities (approximately 1,013,000 square feet): Torino,
Italy; Baudour, Belgium; Chieti, Italy; Manopello, Italy; Varberg,
Sweden; Ulricehamn, Sweden; Blidsberg, Sweden.
(2) Consisting of the following fifty-six facilities:
North American facilities (approximately 5,558,000 square feet):
Springfield, MO; Fort Scott, KS; Alliance, NE; Eldora, IA; McCook, NE;
Walnut, CA; Rock Island, IL; Bucyrus, OH; Buffalo, NY; Vero Beach, FL;
Stillwell, OK; Tulsa, OK; Henderson, NC; Kenly, NC; Davenport, IA;
Sacramento, CA; Newark, NJ; Greensboro, NC; Mexico City, Mexico; Plano,
TX; Montreal, Quebec, Canada; Niles, IL (2); Mississauga, Ontario,
Canada (2); Cobourg, Ontario, Canada; Little Rock, AR; Austin, TX; Grand
Island, NY; Clinton, MA; Hudsonville, MI; Albuquerque, NM; Costa Messa,
CA; Manitowoc, WI (2); Barrie, Ontario, Canada; Buchanan, MI; Newport,
TN; Sevierville, TN; Mishawaka, IN; Oklahoma City, OK (2); Sun Valley,
CA; El Monte, CA; Gananoque, Ontario, Canada.
European Facilities (approximately 634,000 square feet): Halesowen,
U.K.; Torino, Italy; Barcelona, Spain; Treforest, Wales, UK; Lacoruna,
Spain; Rastatt, Germany; Straubing, West Germany; Hohenwarth, West
Germany; Kidderminster, Worchester, U.K.; Hounslow, Middlesec, U.K. and
Nice, France.
(3) The automotive amounts include approximately 350,000 square feet from
facilities listed in footnote 2 above. This amount represents a portion
of industrial manufacturing facilities which manufactures products the
Company classifies in its Automotive segment.
<PAGE>12
The company also owns or leases various small production facilities,
sales offices, distribution and research centers which are not included in the
above list of properties.
The company believes that its existing facilities have sufficient
capacity to meet its anticipated needs in each of its industry segments for
the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The company is involved in various legal and environmental related
claims or disputes in the ordinary course of business. In the opinion of
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
<PAGE>13
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The company's Common Stock is listed on the New York Stock Exchange
(Symbol: IV). The following table sets forth, for the fiscal periods
indicated, the high and low closing sale prices per share of the company's
Common Stock as reported by the New York Stock Exchange. All amounts have
been adjusted for the 5% stock dividend issued in April 1995.
Fiscal 1996 Fiscal 1995
Low High Low High
1st Quarter $16.125 $19.125 $14.250 $17.250
2nd Quarter $19.125 $22.500 $16.250 $18.875
3rd Quarter $17.625 $22.500 $18.375 $20.875
4th Quarter $17.125 $21.000 $16.750 $18.500
As of February 29, 1996, the approximate number of holders of record of
the company's Common Stock was 2,400.
The company declared total cash dividends of $.119 and $.102 per share
during fiscal 1996 and 1995, respectively.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FIVE YEAR SUMMARY OF OPERATIONS
(Amounts in thousands, except per share data)
Fiscal Year Ended the Last Day of February,
1996 1995 (1) 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $2,088,500 $1,603,300 $1,244,200 $1,085,700 $1,004,300
Operating income (2) $ 212,600 $ 164,300 $ 131,800 $ 113,600 $ 106,200
Interest expense 61,200 53,900 50,100 51,600 64,700
Operating income,
net of interest
expense $ 151,400 $ 110,400 $ 81,700 $ 62,000 $ 41,500
Income from continuing
operations $ 92,400 $ 67,900 $ 51,100 $ 39,100 $ 26,800
Income from
discontinued
operations - - - 3,600 2,000
Extraordinary items - (1,100) (21,700) (3,700) (4,500)
Cumulative effect of
accounting change - - (26,000) - -
NET INCOME $ 92,400 $ 66,800 $ 3,400 $ 39,000 $ 24,300
<PAGE>14
Fiscal Year Ended the Last Day of February,
1996 1995 (1) 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Primary income
per share (3):
Continuing operations $ 1.46 $ 1.33 $ 1.09 $ .84 $ .73
Discontinued operations - - - .08 .06
Extraordinary items - (.02) (.46) (.08) (.12)
Cumulative effect of
accounting change - - (.56) - -
NET INCOME $ 1.46 $ 1.31 $ .07 $ .84 $ .67
Fully-diluted income
per share (3):
Continuing operations $ 1.46 $ 1.23 $ .99 $ .79 $ .67
Discontinued operations - - - .07 .05
Extraordinary items - (.02) (.39) (.07) (.11)
Cumulative effect of
accounting change - - (.46) - -
NET INCOME $ 1.46 $ 1.21 $ .14 $ .79 $ .61
Cash dividends paid $ .12 $ .10 $ .09 $ .08 $ .06
Weighted average
number of shares
outstanding (3):
Primary 63,000 51,000 46,800 46,300 36,500
Fully-diluted 63,400 57,800 55,900 55,400 42,300
Balance Sheet Data:
Working capital $ 404,900 $ 379,700 $ 312,800 $ 275,400 $ 285,500
Total assets $2,013,100 $1,846,400 $1,282,300 $1,124,800 $1,104,500
Long-term debt $ 642,500 $ 610,700 $ 567,200 $ 497,100 $ 525,400
Stockholders' equity $ 725,500 $ 635,500 $ 345,400 $ 345,600 $ 311,900
<FN>
____________________________
(1) Includes the results of operations of Purolator from its November
1994 acquisition date.
(2) Represents income from continuing operations before interest expense
and taxes.
(3) Adjusted to reflect the 5% stock dividend issued in April 1996.
</TABLE>
<PAGE>15
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company's short-term capital needs are met by cash generated through
operations, and supplemented by its borrowing under various credit facilities
to the extent required. During fiscal 1996, net cash provided by earnings was
$183.0 million, a 45% increase over the $126.5 million generated in fiscal
1995, which in turn represented a 39% increase over fiscal 1994. At February
29, 1996, the Company's working capital investment was $404.9 million, a net
increase of $25.2 million (7%) in comparison to February 28, 1995. As a
percentage of sales, working capital at February 29, 1996 represented 19% of
fiscal 1996's net sales as compared to a 20% relationship at fiscal 1995,
computed as on a pro forma basis as if the results of operations of Purolator
had been included for all of fiscal 1995. Management anticipates that its
working capital investment will be reduced further during fiscal 1997
relative to its relationship to net sales.
Capital expenditures in fiscal 1996 were $95.5 million, which exceeds
depreciation and amortization expense of $66.8 million in fiscal 1996 and
capital expenditures of $50.8 million in fiscal 1995. Approximately $11.0
million of the increase in capital expenditures resulted from the capital
requirements of Purolator for all of fiscal 1996, and only four months of
fiscal 1995. Additionally, approximately $21.0 million of the increase
related to a new manufacturing facility and other increased capacity
requirements in the European units of the Company's Automotive business
segment, primarily in Italy. The balance of the increase related to the U.S.
units of the Company's Industrial business segment, including a new
centralized warehouse and distribution facility. Management anticipates that
the Company's capital expenditure requirements will continue to exceed its
annual depreciation and amortization charges over the next few years.
Cash generated from earnings in fiscal 1996 was sufficient to fund the
Company's capital expenditure investments as well as its increased working
capital requirements. Management believes that cash generated from earnings
will continue to be sufficient to fund such needs for the foreseeable future.
The Company's long-term capital needs are met by cash generated from earnings,
bank financing, and public debt and equity offerings. 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 5.9 million shares of the Company's Common Stock. In
January 1995, the Company called for redemption the $37.5 million
remaining principal amount of the debentures. As a result of the call
for redemption, substantially all of the remaining debentures were
converted into 2.8 million shares of the Company's Common Stock.
- - In November 1994, the Company acquired all of the stock of Purolator
Products Company ("Purolator") for a total cash purchase price,
including expenses, of approximately $286.3 million. Funding for the
acquisition was provided by borrowings under the Company's credit
agreement.
<PAGE>16
- - In December 1994, the Company completed an underwritten public offering
of 6.8 million shares of its Common Stock at a public offering price of
$17.23 per share. The net proceeds of approximately $113 million were
used to repay a portion of the Company's outstanding indebtedness under
its credit agreement.
- - In March 1996, the Company entered into an Amended and Restated Credit
and Guarantee Agreement (the "Credit Agreement") with various financial
institutions. The Credit Agreement currently provides for a five-year
non-amortizing revolving credit facility with borrowing availability of
$400 million under a domestic facility (the "Domestic Credit Facility")
and $100 million under 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. The proceeds of the initial borrowings under the Credit
Agreement were used to repay all amounts outstanding under the
Company's previously existing credit agreements. See Note 7 to the
Company's audited financial statements for information as to applicable
interest rates and covenants.
- - In March 1996, the Company completed the private placement of $250
million principal amount of its 7-3/4% Senior Subordinated Notes due
2006 (the "7-3/4% Notes") at a purchase price of 99.36% of their face
amount. The net proceeds from the sale of the 7-3/4% Notes were used
to reduce outstanding indebtedness under the Credit Agreement. The 7-
3/4% Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all existing and future senior
indebtedness, and rank the same in right of payment as the Company's
Senior Subordinated Notes due 2003 (the "8-3/4% Notes"). The related
Indenture limits the payment of dividends and the repurchase of the
Company's Common Stock, and includes certain other restrictions and
limitations customary with subordinated indebtedness of this type. The
Company is in the process of exchanging the 7-3/4% Notes for a new
issue of debt securities to be registered under the Securities Act of
1933 (as amended), with substantially identical terms.
The March 1996 transactions referenced above have been presented in the
Company's audited consolidated balance sheet as of February 29, 1996 as if
they had occurred as of that date.
As of March 31, 1996, the Company had borrowing availability under its Credit
Agreement of approximately $285 million and additional availability under its
various other domestic and foreign demand lines of credit of approximately
$125 million.
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 significant; therefore, the Company does
enter into foreign currency forward contracts as a hedge for certain existing
or anticipated business transactions denominated in various foreign
currencies. The maximum notional amount of foreign currency forward contracts
outstanding at any one time during fiscal 1996 amounted to approximately $23.9
million and the approximate notional amount of such contracts outstanding was
$7.8 million at February 29, 1996.
<PAGE>17
Results of Operations
During fiscal 1996, the Company reorganized what had been identified as its
primary business segment, Power and Fluid Transfer, into separately managed
and market-focused businesses. As a result, in connection with the
preparation of its fiscal 1996 consolidated financial statements, the Company
determined to reclassify the operations of that segment and its former
Professional Audio segment into the following two business segments:
(i) Automotive, which includes the design, manufacture and
distribution of fuel, power transmission, and fluid handling
systems and components, and filters and filtration systems for
the global automotive aftermarket and Original Equipment
Manufacturers ("OEM") market.
(ii) Industrial, which includes the design, manufacture and
distribution of power transmission, fluid handling, and
filtration components and systems for industrial OEM and
industrial distribution markets worldwide. The Industrial
segment also includes the Company's Transportation Products and
Professional Audio business units.
The results of operations of Purolator have been included in the Company's
results of operations for fiscal 1995 from its November 1994 acquisition date.
In reviewing the Company's sales performance, the following results by segment
should be considered for each of the fiscal years presented (dollars in
thousands):
1996 1995 1994
---------------- ---------------- --------------
% Increase % Increase
Over Prior Over Prior
Amount Year Amount Year Amount
Net Sales
to Customers:
Automotive $1,004,300 39.7% $ 718,900 35.0% $ 532,600
Industrial $1,084,200 22.6% $ 884,400 24.3% $ 711,600
Total $2,088,500 30.3% $1,603,300 28.9% $1,244,200
The most significant reason for the increase in net sales in fiscal 1996 is
the fact that the results of operations of Purolator were included for all of
fiscal 1996, and for only four months following Purolator's November 1994
acquisition date in fiscal 1995. On a pro forma basis, including Purolator
for all of fiscal 1995, net sales increased by $175 million (9.2%) in fiscal
1996 on a consolidated basis, and by $57.1 million (6.0%) for the Automotive
business segment.
The $199.8 million increase in net sales for the Industrial segment for fiscal
1996 was generated primarily by the segment's domestic power transmission and
fluid handling business product lines. The Automotive segments increase in
net sales, excluding the effects of Purolator, was primarily the result of
increased OEM sales in Europe, offset somewhat by reduced sales in the
segment's domestic after-market product lines.
<PAGE>18
The increase in net sales in fiscal 1995 was also primarily the result of the
Purolator acquisition. Excluding the results of Purolator, sales increased
approximately $200 million (21.1%) over fiscal 1994, with $105 million of the
increase coming from domestic sales, and the balance being generated primarily
in Europe.
Cost of products sold as a percentage of consolidated net sales were 67.7%,
66.1%, and 64.6% in fiscal 1996, 1995 and 1994, respectively. The increase in
the percentage of costs in fiscal 1996 is primarily the result of the
Purolator acquisition, due to its historically lower gross margin. On a pro
forma basis including Purolator for the entire fiscal year, such costs were
67.2% for fiscal 1995. This level of costs also reflects the positive effects
of the Company's cost control programs, which have helped to substantially
offset the negative pressures on the margins experienced by both of the
Company's business segments.
Selling and administration costs as a percentage of consolidated net sales
were 16.6%, 18.3% and 19.0% in fiscal 1996, 1995 and 1994, respectively. The
reductions in fiscal 1996 and 1995 are primarily the result of the Purolator
acquisition, which had a lower level of such costs. On a pro forma basis,
including Purolator for the entire fiscal year, such costs were 17.7% for
fiscal 1995. The reductions also reflect operating efficiencies achieved in
fiscal 1996 from the integration of the Purolator business and the
reorganization of the Company's business segments. The lower level of costs
also indicates that the Company's continued emphasis on cost control and cycle
time reduction has been successful in offsetting the impact of inflation on
such costs.
Research and development costs increased by $13.6 million (39.1%) in fiscal
1996 over fiscal 1995, which in turn increased by $3.9 million (12.6%) over
fiscal 1994. The increases in fiscal 1996 and 1995 are primarily due to the
Purolator acquisition. As a percentage of consolidated net sales, such costs
were in the range of 2.2% to 2.5% in each of fiscal 1996, 1995 and 1994. This
consistent level of investment reflects the Company's continuing emphasis on
new product development.
Depreciation and amortization expense increased by $15.3 million (29.7%) in
fiscal 1996 over fiscal 1995, which in turn increased by $9.8 million (23.5%)
over fiscal 1994. The increases in fiscal 1996 and 1995 are primarily
attributable to the Purolator acquisition, and the increased level of capital
equipment expenditures.
<PAGE>19
The above mentioned items resulted in the following operating income for each
of the fiscal years presented (dollars in thousands):
1996 1995 1994
% of % of % of
Related Related Related
Amount Sales Amount Sales Amount Sales
OPERATING INCOME
Automotive $110,600 11.0% $ 79,300 11.0% $ 66,300 12.5%
Industrial 119,400 11.0% 100,900 11.4% 80,400 11.3%
Total operating
income before
corporate expenses 230,000 11.0% 180,200 11.2% 146,700 11.8%
Corporate expenses (17,400) ( .8)% (15,900) (1.0)% (14,900) (1.2)%
Operating Income (a) $212,600 10.2% $164,300 10.2% $131,800 10.6%
(a) Including Purolator's results of operations on a pro-forma basis for
all of fiscal 1995 and 1994, operating income as a percentage of
consolidated net sales would have been 10.2%, 10.0% and 9.7% for fiscal
1996, 1995 and 1994, respectively. The increase is primarily
attributable to the Company's emphasis on cost control as discussed
above.
In spite of the increased interest costs resulting from borrowings to fund the
Purolator acquisition, interest expense increased only $7.3 million (13.5%) in
fiscal 1996 in comparison to fiscal 1995. The relatively slight increase in
fiscal 1996's expense was achieved as a result of the financing transactions
referred to previously under Liquidity and Capital Resources, as well as lower
interest rates resulting from the Company's improved debt to total
capitalization position. Fiscal 1995's interest expense increased $3.8
million (7.6%) over fiscal 1994's interest expense. This slight increase was
achieved for the same reasons notwithstanding the higher interest rates
prevailing during fiscal 1995.
The Company's provision for income taxes as a percentage of income before
provision for taxes was 39.0%, 38.5% and 37.5% in fiscal 1996, 1995 and 1994,
respectively. The higher rates in fiscal 1996 and 1995 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 before extraordinary
items in fiscal 1996 increased $24.5 million (36.1%) over fiscal 1995. In
turn, fiscal 1995's income before extraordinary items increased $16.8 million
(32.9%) over fiscal 1994 (before the effect of an accounting change in 1994).
As a result of replacing prior credit facilities and the issuance of the
Company's 8-3/4% Notes, the Company incurred extraordinary losses, net of
related tax benefits, of $1.1 million and $21.7 million in fiscal 1995 and
1994, 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.
<PAGE>20
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, and management is in the process of assessing its impact 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, the Company has not completed its
estimate at the present time.
In October 1995, the FASB also issued Statement No. 123 - Accounting for
Stock-Based Compensation ("SFAS No. 123"), which is also effective for the
Company's fiscal year ending February 28, 1997. SFAS No. 123 encourages, but
does not require, recognition of compensation expense based on the fair value
of equity instruments (such as stock options) granted to employees. The
Company does not plan to record compensation for its stock option grants to
employees; therefore, the adoption of SFAS No. 123 will have no impact on its
financial position or results of operations. The Company will provide pro
forma disclosures of the effects of applying the fair value method in the
Notes to the Company's future financial statements.
<PAGE>21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Page
Report of Independent Accountants for
each of the three fiscal years in the
period ended February 29, 1996 21
Financial Statements:
Consolidated Balance Sheets at February 29, 1996 and February 28, 1995 22
Consolidated Statements of Income for each of
the three fiscal years in the period ended
February 29, 1996 23
Consolidated Statements of Stockholders' Equity for
each of the three fiscal years in the period
ended February 29, 1996 24
Consolidated Statements of Cash Flows
for each of the three fiscal years in
the period ended February 29, 1996 25
Notes to Consolidated Financial Statements 26
<PAGE>22
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 29, 1996 and February 28,
1995, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended February 29,
1996. 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 29, 1996 and February 28,
1995, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended February 29, 1996, in
conformity with generally accepted accounting principles.
As discussed in Note 11 to the consolidated financial statements, the Company
changed its method of accounting for postretirement benefits other than
pensions.
COOPERS & LYBRAND L.L.P.
Rochester, New York
March 29, 1996
<PAGE>23
MARK IV INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
Last Day of February 1996 and 1995
(Dollars in Thousands)
ASSETS 1996 1995
Current Assets:
Cash $ 900 $ 800
Accounts receivable 399,600 383,700
Inventories 405,000 361,900
Other current assets 68,300 58,600
Total current assets 873,800 805,000
Pension and other non-current assets 216,500 197,100
Property, plant and equipment, net 553,700 487,900
Cost in excess of net assets acquired 369,100 356,400
TOTAL ASSETS $2,013,100 $1,846,400
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current maturities of debt $ 95,100 $ 67,300
Accounts payable 191,300 174,000
Compensation related liabilities 71,300 70,400
Accrued interest 12,700 13,800
Other current liabilities 98,500 99,800
Total current liabilities 468,900 425,300
Long-Term Debt:
Senior debt 136,100 352,700
Subordinated debt 506,400 258,000
Total long-term debt 642,500 610,700
Other non-current liabilities 176,200 174,900
Stockholders' Equity:
Common stock - $.01 par value;
Authorized 100,000,000 shares;
Issued 63,000,000 shares in 1996 and
62,900,000 shares in 1995 600 600
Additional paid-in capital 617,600 550,200
Retained earnings 109,700 90,800
Foreign currency translation adjustment (2,400) (6,100)
Total stockholders' equity 725,500 635,500
TOTAL LIABILITIES
& STOCKHOLDERS' EQUITY $2,013,100 $1,846,400
The accompanying notes are an integral part of these financial statements.
<PAGE>24
<TABLE>
<CAPTION>
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED THE LAST DAY OF FEBRUARY 1996, 1995 and 1994
(Amounts in Thousands, Except Per Share Data)
1996 1995 1994
<S> <C> <C> <C>
Net sales $2,088,500 $1,603,300 $1,244,200
Operating costs:
Cost of products sold 1,413,500 1,060,000 803,500
Selling and administration 347,200 292,700 236,300
Research and development 48,400 34,800 30,900
Depreciation and amortization 66,800 51,500 41,700
Total operating costs 1,875,900 1,439,000 1,112,400
Operating income 212,600 164,300 131,800
Interest expense 61,200 53,900 50,100
Income before provision for taxes 151,400 110,400 81,700
Provision for taxes 59,000 42,500 30,600
Income before extraordinary items
and accounting change 92,400 67,900 51,100
Extraordinary loss from early
extinguishment of debt, net of tax
benefit of $700 and $12,300 - (1,100) (21,700)
Cumulative effect of a change in
accounting principle - - (26,000)
NET INCOME $ 92,400 $ 66,800 $ 3,400
Net income per share of common stock:
Primary:
Income before extraordinary items $ 1.46 $ 1.33 $ 1.09
Extraordinary loss - (.02) (.46)
Cumulative effect of accounting change - - (.56)
NET INCOME $ 1.46 $ 1.31 $ .07
Fully-diluted:
Income before extraordinary items $ 1.46 $ 1.23 $ .99
Extraordinary loss - (.02) (.39)
Cumulative effect of accounting change - - (.46)
NET INCOME $ 1.46 $ 1.21 $ .14
Weighted average shares outstanding:
Primary 63,000 51,000 46,800
Fully-diluted 63,400 57,800 55,900
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>25
<TABLE>
<CAPTION>
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED THE LAST DAY OF FEBRUARY 1996, 1995 AND 1994
(Dollars in Thousands, Except Per Share Data)
Foreign
Additional Currency
Common Paid-in Retained Translation
Stock Capital Earnings Adjustment
<S> <C> <C> <C> <C>
Balance at February 28, 1993 $ 400 $219,300 $ 128,300 $ (2,400)
Net income for fiscal 1994 3,400
Cash dividends of $.088 per share (4,200)
Stock dividend of 5% 38,900 (38,900)
Conversion of 6-1/4% Debentures 100
Restricted stock grants, net 800
Stock options activity,
including related tax benefits 2,400
Translation adjustment (2,700)
Balance at February 28, 1994 400 261,500 88,600 (5,100)
Net income for fiscal 1995 66,800
Cash dividends of $.102 per share (5,600)
Stock dividend of 5% 59,000 (59,000)
Sale of Common Stock at
$17.23 per share,net of expenses 100 114,400
Conversion of 6-1/4% Debentures,
net of expenses 100 111,100
Restricted stock grants, net 1,600
Stock options activity,
including related tax benefits 2,600
Translation adjustment (1,000)
Balance at February 28, 1995 600 550,200 90,800 (6,100)
Net income for fiscal 1996 92,400
Cash dividends of $.119 per share (7,500)
Stock dividend of 5% 66,000 (66,000)
Restricted stock amortization 1,300
Stock options activity,
including related tax benefits 100
Translation adjustment 3,700
Balance at February 29, 1996 $ 600 $617,600 $109,700 $ (2,400)
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>26
<TABLE>
<CAPTION>
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED THE LAST DAY OF FEBRUARY 1996, 1995 AND 1994
(Dollars in Thousands)
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Income before extraordinary items $ 92,400 $ 67,900 $ 51,100
Items not affecting cash:
Depreciation and amortization 66,800 51,500 41,700
Deferred income taxes 28,700 18,200 10,800
Pension income, net of other items (4,900) (11,100) (12,400)
Net cash provided by earnings 183,000 126,500 91,200
Changes in assets and liabilities, net
of effects of acquired businesses:
Accounts receivable (1,700) (20,900) (27,200)
Inventories (38,400) (23,100) (7,700)
Other assets (25,500) (3,000) (5,700)
Accounts payable 8,500 33,700 (2,600)
Other liabilities (36,200) (16,100) (7,300)
Net cash provided by operations 89,700 97,100 40,700
Extraordinary items, before
deferred charges - - (30,100)
Net cash provided
by operating activities 89,700 97,100 10,600
Cash flows from investing activities:
Acquisitions (28,200) (300,900) (65,000)
Divestitures and asset sales 1,600 12,100 35,000
Purchase of plant and equipment, net (92,100) (49,600) (38,000)
Net cash used in investing activities (118,700) (338,400) (68,000)
Cash flows from financing activities:
Credit agreement borrowings, net (242,700) 111,200 18,400
Purchases of subordinated debt - - (190,200)
Issuance of subordinated debt 248,400 - 258,000
Other changes in long-term debt, net 3,400 900 (18,900)
Changes in short-term bank borrowings 27,500 19,500 (8,300)
Common stock transactions 100 114,800 800
Cash dividends paid (7,500) (5,100) (4,100)
Net cash provided by
financing activities 29,200 241,300 55,700
Effect of exchange rate fluctuations (100) 300 (500)
Net increase (decrease) in cash 100 300 (2,200)
Cash and cash equivalents:
Beginning of the year 800 500 2,700
End of the year $ 900 $ 800 $ 500
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>27
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 primarily in industrial and automotive power and fluid
transfer 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. The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities as of the date of such financial statements, and the
reported amounts of revenues and expenses during the reporting periods. It
should be recognized that the actual results could differ from those
estimates.
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
The Company provides for depreciation of plant and equipment primarily on the
straight-line method over its useful life. 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.
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired ("goodwill") is amortized on the
straight-line method over 40 years. 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.
<PAGE>28
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 foreign currencies. Gains or
losses on contracts related to existing business transactions are deferred and
recognized as the related transaction is completed, while those related to
anticipated transactions are recognized as of the balance sheet date. The
Company does not hold or issue derivatives for trading purposes and is not a
party to leveraged derivatives transactions.
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, 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% Debentures for the periods outstanding.
Consolidated Statements of Cash Flows
For purposes of cash flows, the Company considers overnight investments as
cash equivalents. The Company paid interest of approximately $64,000,000;
$56,000,000; and $52,900,000 in fiscal 1996, 1995 and 1994, respectively. The
Company paid income taxes of approximately $26,600,000; $21,900,000 and
$13,700,000 in fiscal 1996, 1995 and 1994, respectively.
New Accounting Pronouncement
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, and management is in the process of assessing its impact
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, the Company has not completed its
estimate at the present time.
<PAGE>29
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 credit agreement.
Purolator is a manufacturer of a broad range of filtration products used
principally in the automotive aftermarket, and specialized industrial
applications.
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 as of the acquisition date. During fiscal 1996, the
Company made a final determination and allocation of the purchase price as of
the acquisition date, consisting of the following (dollars in thousands):
Accounts receivable $ 83,300
Inventories 71,000
Other current assets 10,000
Accounts payable and
other current liabilities (104,200)
--------
Net working capital acquired 60,100
Fixed assets 99,900
Cost in excess of net assets acquired 158,200
Long-term bank indebtedness (38,600)
Other non-current items, net 6,700
--------
Total purchase price,
including expenses $286,300
========
The final changes to the preliminary purchase price determination and
allocation did not have a significant effect on the Company's results of
operations as previously reported.
During fiscal 1994, the Company decided to sell certain of its non-core
business units, and accounted for them as discontinued operations. The sale
of certain of these operations generated proceeds of $12,100,000 and
$35,000,000 in fiscal 1995 and 1994, respectively. At February 28, 1995, the
Company's net assets of its remaining discontinued operations amounted to
approximately $19,500,000. The Company did not sell such operations in fiscal
1996, and determined it appropriate to reclassify them as continuing.
3. Accounts Receivable
Accounts receivable are reflected net of allowances for doubtful accounts of
$16,700,000 and $18,600,000 at February 29, 1996 and February 28, 1995,
respectively.
<PAGE>30
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Inventories
Inventories consist of the following at February 29, 1996 and February 28,
1995 (dollars in thousands):
1996 1995
Raw materials $ 112,900 $103,500
Work-in-process 57,500 60,200
Finished goods 234,600 198,200
Total $405,000 $361,900
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 $40,000,000 and
$39,300,000 at February 29, 1996 and February 28, 1995, respectively.
5. Property, Plant and Equipment
Property, plant and equipment are stated at cost and consist of the following
at February 29, 1996 and February 28, 1995 (dollars in thousands):
1996 1995
Land and land improvements $ 43,400 $ 41,500
Buildings 155,300 145,300
Machinery and equipment 547,700 451,600
Total property, plant and equipment 746,400 638,400
Less accumulated depreciation 192,700 150,500
Property, plant and equipment, net $553,700 $487,900
Depreciation expense was approximately $53,300,000; $40,900,000; and
$33,200,000 in fiscal 1996, 1995 and 1994, respectively.
6. Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired is presented net of accumulated
amortization of approximately $39,300,000 and $29,700,000 at February 29, 1996
and February 28, 1995, respectively. Amortization expense was approximately
$9,600,000, $7,000,000 and $5,700,000 in fiscal 1996, 1995 and 1994,
respectively.
<PAGE>31
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Long-Term Debt
Long-term debt consists of the following at February 29, 1996 and February 28,
1995 (dollars in thousands):
1996 1995
Senior debt:
Credit agreement $ 97,300 $ -
Prior credit agreements - 338,300
Other items 46,700 23,000
Total senior debt 144,000 361,300
Less current maturities (7,900) (8,600)
Net senior debt 136,100 352,700
Subordinated debt:
7-3/4% Senior Subordinated Notes 248,400 -
8-3/4% Senior Subordinated Notes 258,000 258,000
Total subordinated debt 506,400 258,000
Total long-term debt 642,500 610,700
Stockholders' equity 725,500 635,500
Total capitalization $1,368,000 $1,246,200
Long-term debt as a percentage
of total capitalization 47.0% 49.0%
On March 8, 1996, the Company entered into an Amended and Restated Credit and
Guarantee Agreement (the "Credit Agreement") with various financial
institutions. The Credit Agreement provides for a five year non-amortizing
revolving credit facility with borrowing availability of $400,000,000 under a
domestic facility (the "Domestic Credit Facility") and $100,000,000 under 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. The proceeds of the initial borrowings under
the Credit Agreement were used to repay all amounts outstanding under the
Company's previously existing credit agreements. Borrowings outstanding under
the previous credit agreements as of February 29, 1996 are assumed to have
been replaced as of the balance sheet date with borrowings under the Credit
Agreement, as well as the proceeds from the sale of the 7-3/4% Notes, as
discussed below.
Borrowings under the Domestic Credit Facility bear interest at an annual rate
equal to, at the Company's option, either (i) the greater of (a) the reference
rate of the agent acting on behalf of the various banks or (b) the Federal
Funds Rate plus 0.50% 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 determined on a quarterly basis. 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 an annual rate 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 same consolidated
leverage ratio. Based upon the Company's consolidated leverage ratio as of
February 29, 1996, the Applicable Margin and Facility Fee Rate are 0.225% and
0.15% respectively. The Credit Agreement contains customary covenants,
including those 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 collateralized by a pledge of the
capital stock of each of such subsidiaries.
<PAGE>32
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On March 11, 1996, the Company completed the private placement of $250,000,000
principal amount of its 7-3/4% Senior Subordinated Notes due 2006 (the "7-3/4%
Notes") at a purchase price of 99.36% of their face amount. The net proceeds
from the sale of the 7-3/4% Notes were used to reduce outstanding indebtedness
under the Credit Agreement. The 7-3/4% Notes are general unsecured
obligations of the Company and are subordinated in right of payment to all
existing and future senior indebtedness, and rank the same in right of payment
as the Company's 8-3/4% Notes. The related Indenture limits the payment of
dividends and the repurchase of the Company's Common Stock, and includes
certain other restrictions and limitations customary with subordinated
indebtedness of this type. The Company has agreed to make an offer to
exchange the 7-3/4% Notes (the "Exchange Offer") for a new issue of debt
securities registered under the Securities Act of 1933 (as amended), with
substantially identical terms. The Company is in the process of registering
the Exchange Offer.
In fiscal 1994, the Company completed a public offering of $258,000,000
principal amount of its 8-3/4% Senior Subordinated Notes due April 2003 (the
"8-3/4% Notes"). The 8-3/4% Notes are not redeemable until April 1998, when
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. In fiscal 1994, the Company also recognized an extraordinary loss,
net of tax, of approximately $21,700,000 as a result of the extinguishment of
$190,000,000 of its 13-3/8% Subordinated Debentures.
At February 29, 1996, the Company had interest rate swap agreements in an
aggregate notional amount of approximately $133,000,000. Such agreements
effectively convert 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 such agreements, the Company is currently paying an effective fixed
annual rate of interest of approximately 5.70% on $100,000,000 of
indebtedness, and 12% on $33,000,000 of indebtedness denominated in Italian
Lira. The agreements are scheduled to expire at various dates through 2000.
Based on market quotes and interest rates currently available to the Company
for debt with similar terms and remaining maturities, the aggregate fair value
of total long-term debt at February 29, 1996 and February 28, 1995 was
approximately $652,200,000 and $601,700,000, respectively.
After giving consideration to the Company's new Credit Agreement in March
1996, annual maturities of long-term debt for the next five fiscal years are
approximately: 1997-$7,900,000; 1998-$3,000,000; 1999-$2,700,000; 2000-
$2,200,000; and 2001-$99,400,000.
<PAGE>33
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Leases
The Company has operating leases which expire at various dates through 2010
with, in some instances, cost escalation and renewal privileges. Total rental
expense under operating leases was approximately $19,100,000; $18,300,000; and
$15,900,000 in fiscal 1996, 1995 and 1994, respectively. Minimum rental
payments under operating leases are approximately: 1997-$18,800,000;
1998-$16,500,000; 1999-$14,500,000; 2000-$10,400,000; 2001-$8,400,000; 2002
and thereafter $24,500,000.
9. Income Taxes
Income before provision for taxes and the related provision for taxes for
fiscal 1996, 1995 and 1994 consists of the following (dollars in thousands):
1996 1995 1994
Income before provision for taxes:
United States $ 95,100 $ 69,500 $45,800
Foreign 56,300 40,900 35,900
Total $151,400 $110,400 $81,700
Provision for taxes:
Currently payable:
United States $ 15,300 $ 12,500 $14,500
Foreign 15,000 11,800 5,300
Total currently payable 30,300 24,300 19,800
Deferred:
United States 16,500 7,600 3,600
Foreign 12,200 10,600 7,200
Total deferred 28,700 18,200 10,800
Total provision for taxes $ 59,000 $ 42,500 $30,600
The provision for taxes for fiscal 1996, 1995, and 1994 differs from the
amount computed using the United States statutory income tax rate as follows
(dollars in thousands):
1996 1995 1994
Expected tax at United States
statutory income tax rate $53,000 $ 38,600 $28,600
Permanent differences 1,600 2,100 1,200
State and local income taxes 2,600 1,900 1,200
Tax credits, net (250) (700) (500)
Foreign tax rate differences 2,050 600 100
Total provision for taxes $59,000 $ 42,500 $30,600
<PAGE>34
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of temporary differences which give rise to a significant
portion of deferred tax assets (liabilities) consist of the following at
February 29, 1996 and February 28, 1995 (dollars in thousands):
1996 1995
Current:
Accounts receivable $ 6,500 $ 7,300
Inventories (5,100) (5,000)
Compensation related 7,800 8,000
Tax credit carryforwards 4,000 2,000
Other items (8,000) (600)
Net current asset $ 5,200 $ 11,700
Non-current:
Fixed and intangible assets $(41,000) $(52,100)
Tax credits 17,000 21,000
Capital loss carryforwards - 11,000
All other items (9,100) 23,300
Total non-current asset (liability) (33,100) 3,200
Valuation allowance - (14,100)
Net non-current liability $(33,100) $(10,900)
The non-current valuation allowance in fiscal 1995 related primarily to
capital loss carryforwards which were 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.
10. Pension and Profit Sharing Plans
The Company has 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.
<PAGE>35
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The funded status of the Company's defined benefit plans consists of the
following at February 29, 1996 and February 28, 1995 (dollars in thousands):
1996 1995
Actuarial present value of benefit obligations:
Vested $(283,500) $(259,400)
Accumulated $(289,600) $(264,500)
Projected $(303,100) $(273,700)
Plan assets at fair value 366,400 335,400
Plan assets in excess of projected
benefit obligations 63,300 61,700
Unrecognized net loss and
differences in assumptions 48,800 49,100
Unrecognized prior service costs 7,500 2,700
Prepaid pension cost recognized in the
consolidated balance sheets $ 119,600 $ 113,500
The plans' assets consist of corporate and government bonds, listed common
stocks, guaranteed investment contracts, and real estate investments.
Included in the plans' assets are $37,700,000 of the Company's securities at
February 29, 1996.
Net pension income for the defined benefit pension plans in fiscal 1996, 1995,
and 1994 includes the following components (dollars in thousands):
1996 1995 1994
Service cost-benefits
earned during the period $ (3,700) $ (3,600) $ (2,900)
Interest cost on projected
benefit obligation (22,400) (19,500) (18,200)
Actual return on assets 68,600 4,300 32,100
Net amortization and deferral (36,000) 31,300 2,500
Net pension income $ 6,500 $ 12,500 $ 13,500
The assumptions utilized to measure net pension income and the projected
benefit obligations are as follows:
1996 1995 1994
Discount rate 7.50% 8.75% 7.75%
Expected long-term rate of return 11.50% 11.50% 12.00%
Average increase in compensation 4.00% 4.00% 5.00%
The Company also has defined contribution pension plans for a significant
number of its 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 $10,600,000; $8,100,000; and $6,700,000 in fiscal 1996, 1995 and
1994, respectively.
<PAGE>36
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. 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 Statement of
Financial Accounting Standards No. 106. The resulting net of tax charge of
$26,000,000 ($.46 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 following table sets forth the amount included with other non-current
liabilities in the consolidated balance sheets at February 29, 1996 and
February 28, 1995 (dollars in thousands):
1996 1995
Accumulated post-retirement benefit obligation:
Retirees and beneficiaries receiving benefits $68,300 $56,200
Active employees, fully eligible for benefits 6,500 5,700
Active employees, not fully eligible for benefits 9,300 7,800
Total accumulated benefit obligation 84,100 69,700
Unrecognized net loss (13,500) (1,800)
Post-retirement benefit liability recognized
in the consolidated balance sheets $70,600 $67,900
The Company's post-retirement benefit expense for fiscal 1996, 1995 and 1994
includes the following components (dollars in thousands):
1996 1995 1994
Service cost-benefits earned
during the period $ 600 $ 500 $ 400
Interest cost on the APBO 6,000 4,600 3,400
Amortization expense 100 - -
Total expense $6,700 $5,100 $3,800
The APBO was calculated using a discount rate of 7.50% at February 29, 1996,
and 8.75% at February 28, 1995. The APBO determinations assume an initial
health care cost trend rate of approximately 8.0%, trending down rateably to
an ultimate rate of 4.5% in 2002. The impact of a one-percentage-point
increase in such trend rate would be to increase the APBO at February 29, 1996
by approximately $1,400,000 and increase annual expense by approximately
$100,000.
<PAGE>37
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 fiscal 1996, the Company's Board of Directors adopted a Shareholders'
Rights Plan under which Rights were distributed as a dividend at a rate of one
Right for each share of Common Stock held. Each Right entitles the holder to
buy one one-hundredth of a newly-issued share of the Company's Series A Junior
Participating Preferred Stock at an exercise price of $80.00 per share. If an
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.
The Company's Board of Directors declared five percent stock dividends which
were distributed in April 1996, 1995 and 1994. All share amounts have been
presented as if the stock distributions had occurred at the beginning of
fiscal 1994. As of February 29, 1996, the Company continues to be authorized
to repurchase approximately 7,000,000 shares, of its outstanding Common Stock.
The Company is also authorized to issue 10,000,000 shares of Preferred Stock,
and there are no shares outstanding at the present time.
The Company's qualified Incentive Stock Option Plan provides for granting 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 ten years. There were
approximately 350,000 and 1,000,000 shares reserved for the future granting of
options at February 29, 1996 and February 28, 1995, respectively.
As a result of the Company's acquisition of Purolator, certain holders of
Purolator non-qualified stock options converted their options into options to
acquire the Company's Common Stock at an exercise price that would give them
the same built-in gain as they had in the Purolator options. As a result,
Purolator options were converted into non-qualified options to acquire
approximately 351,300 shares of the Company's Common Stock at an average
exercise price of $12.19 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" stock options.
<PAGE>38
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the status of all of the Company's stock option
transactions for fiscal 1996, 1995 and 1994 (share amounts in thousands):
1996 1995 1994
Average Average Average
Option Option Option Option Option Option
Shares Price Shares Price Shares Price
Balance at
beginning
of year 1,429 $12.50 627 $ 8.14 813 $ 6.94
Activity during
the year:
Granted 678 $17.87 914 $14.71 15 $17.50
Exercised (322) $11.22 (105) $ 5.70 (184) $ 3.52
Canceled (32) $14.02 (7) $10.94 (17) $ 8.74
Balance at
end of year:
Outstanding 1,753 $14.78 1,429 $12.50 627 $ 8.14
Exercisable 618 $10.64 677 $10.00 281 $ 6.50
The Company granted restricted stock awards with respect to 23,100 shares in
fiscal 1995 and 370,700 shares in fiscal 1994, at $.01 par value per share.
The fair market value of the awards as of the date of grant is being
recognized as it is earned over the restriction period, with $1,300,000;
$1,600,000 and $800,000 recognized as an expense in fiscal 1996, 1995,
and 1994, respectively. As of February 29, 1996, approximately 263,000
shares remain available for issuance under the Company's Restricted Stock
Plan.
14. Industry Segments and Geographic Areas
During fiscal 1996, the Company reorganized what had been identified as its
primary business segment, Power and Fluid Transfer, into separately managed
and market-focused businesses. As a result, the Company has reclassified the
operations of that segment and its former Professional Audio Segment into the
following two business segments (and information for the prior years has been
restated accordingly):
(i) Automotive, which includes the design, manufacture and distribution
of fuel, power transmission, and fluid handling systems and
components, and filters and filtration systems for the global
automotive aftermarket and OEM market.
(ii) Industrial, which includes the design, manufacture and distribution
of power transmission, fluid handling, and filtration components
and systems for industrial OEM (original equipment manufacturers)
and industrial distribution markets worldwide. The Industrial
segment also includes the Company's Transportation Products and
Professional Audio business units.
<PAGE>39
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information concerning the Company's business segments for fiscal 1996, 1995
and 1994 is as follows (dollars in thousands):
1996 1995 1994
NET SALES TO CUSTOMERS
Automotive $1,004,300 $ 718,900 $ 532,600
Industrial 1,084,200 884,400 711,600
Total net sales
to customers $2,088,500 $1,603,300 $1,244,200
OPERATING INCOME
Automotive $ 110,600 $ 79,300 $ 66,300
Industrial 119,400 100,900 80,400
Total operating income 230,000 180,200 146,700
General corporate expense (17,400) (15,900) (14,900)
Interest expense (61,200) (53,900) (50,100)
Income before
provision for taxes $ 151,400 $ 110,400 $ 81,700
IDENTIFIABLE ASSETS
Automotive $1,030,000 $ 922,700 $ 481,500
Industrial 929,200 869,700 743,300
General corporate 53,900 54,000 57,500
Total identifiable assets $2,013,100 $1,846,400 $1,282,300
DEPRECIATION AND AMORTIZATION
Automotive $ 33,100 $ 23,100 $ 15,400
Industrial 30,100 24,700 23,700
General corporate 3,600 3,700 2,600
Total depreciation
and amortization $ 66,800 $ 51,500 $ 41,700
CAPITAL OUTLAYS
Automotive $ 57,600 $ 29,100 $ 25,200
Industrial 37,900 21,700 16,200
Total capital outlays $ 95,500 $ 50,800 $ 41,400
<PAGE>40
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 1996, 1995 and 1994 is as
follows (dollars in thousands):
1996 1995 1994
NET SALES TO CUSTOMERS
United States $1,460,300 $1,115,600 $ 884,500
Foreign 628,200 487,700 359,700
Total net sales
to customers $2,088,500 $1,603,300 $1,244,200
OPERATING INCOME
United States $ 161,500 $ 126,400 $ 105,700
Foreign 68,500 53,800 41,000
Total operating
income $ 230,000 $ 180,200 $ 146,700
IDENTIFIABLE ASSETS
United States $1,421,400 $1,350,100 $ 898,700
Foreign 591,700 496,300 383,600
Total identifiable
assets $2,013,100 $1,846,400 $1,282,300
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 $115,900,000, $92,900,000, and
$71,300,000 in fiscal 1996, 1995, and 1994, 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.
<PAGE>41
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 29, 1996 and
February 28, 1995 (dollars in thousands, except per share data):
First Second Third Fourth Total
Fiscal 1996 Quarter Quarter Quarter Quarter Year
Net sales $518,500 $509,500 $525,500 $535,000 $2,088,500
Gross profit (a) $172,700 $164,900 $166,700 $170,700 $ 675,000
Net income $ 24,600 $ 24,100 $ 23,000 $ 20,700 $ 92,400
Income per share (b):
Primary:
Income before
extraordinary items $ .39 $ .38 $ .36 $ .33 $ 1.46
Extraordinary items - - - - -
Net income $ .39 $ .38 $ .36 $ .33 $ 1.46
Fully-diluted:
Continuing operations $ .39 $ .38 $ .36 $ .33 $ 1.46
Extraordinary items - - - - -
Net income $ .39 $ .38 $ .36 $ .33 $ 1.46
Fiscal 1995
Net sales $363,800 $357,200 $397,300 $485,000 $1,603,300
Gross profit (a) $127,700 $124,700 $135,600 $155,300 $ 543,300
Income before
extraordinary items $ 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 (b)(c):
Primary:
Income before
extraordinary items $ .36 $ .35 $ .33 $ .30 $ 1.33
Extraordinary items - - (.02) - (.02)
Net income $ .36 $ .35 $ .31 $ .30 $ 1.31
Fully-diluted:
Income before
extraordinary items $ .32 $ .32 $ .31 $ .29 $ 1.23
Extraordinary items - - (.02) - (.02)
Net income $ .32 $ .32 $ .29 $ .29 $ 1.21
___________________________________
(a) Excluding depreciation expense.
(b) Restated to reflect the 5% stock dividend issued in April 1996.
(c) The sum of the quarterly amounts do not equal the total as a result of
Common Stock transactions during the year, as well as rounding
differences.
<PAGE>42
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Items 10-13
The information required for Items 10, 11, 12 and 13 is incorporated
herein by reference to the information set forth in the definitive Proxy
Statement for the Company's 1996 Annual Meeting of Stockholders which will be
filed with the Securities and Exchange Commission not later than 120 days
after February 29, 1996.
<PAGE>43
PART IV
ITEM 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Page
(a) (1) Financial Statements
Report of Independent Accountants for
each of the three fiscal years in the
period ended February 29, 1996 21
Consolidated Balance Sheets at February 29, 1996
and February 28, 1995 22
Consolidated Statements of Income for each of
the three fiscal years in the period ended
February 29, 1996 23
Consolidated Statements of Stockholders' Equity for
each of the three fiscal years in the period
ended February 29, 1996 24
Consolidated Statements of Cash Flows
for each of the three fiscal years in
the period ended February 29, 1996 25
Notes to Consolidated Financial Statements 26
(2) Financial Statement Schedule
Report of Independent Accountants
for each of the three fiscal years in the
period ended February 29, 1996 44
II. Valuation and qualifying accounts 48
All other schedules and statements have been omitted as the
required information is inapplicable or is presented in the
financial statements or notes thereto.
(b) Reports on Form 8-K
None
(c) Exhibits
2.1 Agreement and Plan of Merger dated as of October 3, 1994 by and
among Mark IV Industries, Inc., Mark IV Acquisition Corp., and
Purolator Products Company, incorporated by reference to exhibit
(c)(1) to Schedule 14D-1 (Tender Offer) dated October 7, 1994,
as filed with the SEC on such date (incorporated by reference to
the exhibit (c)(1) to Schedule 14D - (Tender Offer) dated
October 7, 1994, as filed with the SEC on such date).
<PAGE>44
2.2 Offer to Purchase, as revised, incorporated by reference to
exhibit (a)(1) to Amendment No. 1 to Schedule 14D-1 Tender
Offer) dated October 11, 1994, as filed with the SEC on such
date.
2.3 Share Purchase Agreement dated April 29, 1993 among Mark IV
Industries, Inc., a Delaware Corporation, and its indirect
wholly-owned subsidiary, Dayco Italy, S.p.A., an Italian
Corporation, and Pirelli S.p.A., an Italian Corporation
(incorporated by reference to exhibit 2.1 to the Company's
Current Report on Form 8-K dated May 27, 1993, as filed on June
17, 1993). All schedules and other attachments to this exhibit,
as identified on the last page of the exhibit, have been
omitted.
3.1 Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 28.1 to the Company's Registration
Statement No. 33-45215 on Form S-3, as filed with the SEC on
January 24, 1993).
4.1 Specimen Common Stock Certificate (incorporated by reference to
Exhibit 4.11 to Amendment No. 1 to the Registrant's Registration
Statement No. 33-41553 on Form S-3 dated August 6, 1991).
4.2 By-Laws of the Registrant (incorporated by reference to Exhibit
4.12 To Amendment No. 1 to the Registrant's Registration
Statement No. 33-41553 on Form S-3, dated August 6, 1991).
4.3 Conformed copy of the Indenture, dated as of March 15, 1993,
between Mark IV Industries, Inc. and Citibank, N.A.; including
the form of 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).
4.4 Conformed copy of the Indenture, dated as of March 11, 1996,
between Mark IV Industries, Inc. and Fleet National Bank as
Trustee; including the form of 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 6, 1996).
<PAGE>45
Executive Compensation Plans and Arrangements (10.1 -10.20)
10.1 Employment Agreement dated March 1, 1995 between the Company and
Sal Alfiero (incorporated by reference to Exhibit 10.1 to the
Company's Annual Report or Form 10-K for the fiscal year ended
February 28, 1995).
10.2 Employment Agreement dated March 1, 1995 between the Company and
Clement R. Arrison (incorporated by reference to Exhibit 10.2 to
the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.3 Employment Agreement dated March 1, 1995 between the Company and
Gerald S. Lippes (incorporated by reference to Exhibit 10.3 to
the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.4 Employment Agreement dated March 1, 1995 between the Company and
William P. Montague (incorporated by reference to Exhibit 10.4
to the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.5 Employment Agreement dated March 1, 1995 between the Company and
Frederic L. Cook (incorporated by reference to Exhibit 10.5 to
the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.6 Employment Agreement dated March 1, 1995 between the Company and
John J. Byrne (incorporated by reference to Exhibit 10.6 to the
Company's Annual Report or Form 10-K for the fiscal year ended
February 28, 1995).
10.7 Employment Agreement dated March 1, 1995 between the Company and
Richard L. Grenolds (incorporated by reference to Exhibit 10.7
to the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.8 Employment Agreement dated March 1, 1995 between the Company and
Douglas J. Fiegel (incorporated by reference to Exhibit 10.8 to
the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.9 Employment Agreement dated January 1, 1995 between the Company,
Dayco Products, Inc. ("Dayco") and Bruce A. McNiel (incorporated
by reference to Exhibit 10.9 to the Company's Annual Report or
Form 10-K for the fiscal year ended February 28, 1995).
10.10 Employment Agreement dated January 1, 1995 between the Company,
Dayco, Dayco Europe, A.B. and Kurt J. Johansson (incorporated by
reference to Exhibit 10.10 to the Company's Annual Report or
Form 10-K for the fiscal year ended February 28, 1995).
10.11 Employment Agreement dated January 1, 1995 between the Company,
Dayco and Patricia Richert (incorporated by reference to Exhibit
10.11 to the Company's Annual Report or Form 10-K for the fiscal
year ended February 28, 1995).
<PAGE>46
10.12 Amendment and Restatement of Mark IV Industries, Inc. and
Subsidiaries Incentive Stock Option Plan, as of February 8, 1988
(incorporated by reference to Exhibit 10.13.1 to the Company's
Registration Statement No. 33-42307 on Form S-8 dated August 19,
1991).
10.13 Amendment and Restatement of the Mark IV Industries, Inc. and
Subsidiaries 1992 Incentive Stock Option Plan Effective March
30, 1994 (incorporated by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1994).
10.14 Amendment and Restatement of the Mark IV Industries, Inc. 1992
Restricted Stock Plan Effective March 1, 1995 (incorporated by
reference to Exhibit 10.1 to the Company's Annual Report or Form
10-K for the fiscal year ended February 28, 1995).
10.15 Mark IV Industries, Inc. Executive Bonus Plan (incorporated by
reference to Exhibit 10.8 to the Company's Annual Report on Form
10-K for the fiscal year ended February 28, 1991).
10.16 First Amendment and Restatement of the Mark IV Industries, Inc.
Enhanced Executive Incentive Plan (incorporated by reference to
Exhibit 10.16 to the Company's Annual Report on Form 10-K dated
February 29, 1992).
10.17 Third Amendment and Restatement of the Non-Qualified Plan of
Deferred Compensation of Mark IV Industries, Inc. Effective
September 1, 1993 (incorporated by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended February
28, 1994).
10.18 First Amendment and Restatement of the Non-Qualified Plan of
Deferred Compensation for Non-Employee Directors of Mark IV
Industries, Inc. Effective December 1, 1993 (incorporated by
reference to the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1994).
10.19 First Amendment and Restatement of the Non-qualified Plan of
Deferred Incentive Compensation for Executives of Certain
Operating Divisions and Subsidiaries of Mark IV Industries, Inc.
Effective November 30, 1993 (incorporated by reference to
Exhibit 10.19 to the Company's Annual Report or Form 10-K for
the fiscal year ended February 28, 1995).
10.20* Short Term Incentive Bonus Plan of Dayco Products, Inc. dated
March 30, 1994 (incorporated by reference to Exhibit 10.20 to
the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
<PAGE>47
Other Material Contract Exhibits
10.21 Credit and Guarantee Agreement dated as of November 2, 1994,
among Mark IV Industries, Inc., as Borrower, Mark IV
Transportation Products Corp., Gulton Industries, Inc., Dayco
Products, Inc. Electro-Voice Incorporated, Anchor Swan, Inc. and
Mark IV Acquisition Corp., as Guarantors, the banks and other
financial institutions which are parties thereto, Bank of
American National Trust and Savings Association, as
Administrative Agent and BID Agent, and BA Securities, Inc. as
Arranger (incorporated by reference to exhibit (b)(2) to
Amendment No. 3 to Schedule 14D-1 (Tender Offer) dated November
2, 1994, as filed on that date).
10.22 Revolving Credit Facility Agreement dated May 27, 1993, among
Mark IV Industries, Inc., a Delaware Corporation, Dayco Italy
S.p.A., an Italian Corporation, Bank of America National Trust
and Savings Association, Chemical Investment Bank Limited, and
Citibank, N.A. and Chase Manhattan Bank N.A., as co-agents for
various financial institutions that are signatories thereto
(incorporated by reference to the Company's Current Report on
Form 8-K dated May 27, 1993 as filed on June 17, 1993). All
schedules and other attachments to this exhibit, as identified
on page v of the exhibit, have been omitted.
10.23 Conformed copy of the Credit Agreement, dated as of March 8,
1996, among the Registrant and Dayco PTI S.p.A., as Borrowers,
certain other subsidiaries of the Registrant, as Guarantors,
various banks and financial institutions, Chemical Bank, as
Administrator 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 Registrant's Current Report on
Form 8-K dated March 6, 1996).
11* Statement regarding computation of per share earnings.
21* Subsidiaries of the Registrant.
23* Consent of Independent Accountants.
27* Financial Data Schedule.
______________________
* Filed herewith by direct transmission pursuant to the EDGAR program.
<PAGE>48
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Mark IV Industries, Inc.
Our report on the consolidated financial statements of Mark IV Industries,
Inc. is included in Item 8 of this Form 10-K. In connection with our audits
of such financial statements, we have also audited the related financial
statement schedule listed in Item 14 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Rochester, New York
March 29, 1996
<PAGE>49
<TABLE>
<CAPTION>
MARK IV INDUSTRIES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions
Charged Deductions
Beginning (Credited) Accounts Ending
Classifications Balance to Expense Charged Off Other(a) Balance
<S> <C> <C> <C> <C> <C>
Year ended February 29, 1996
Allowance for doubtful
accounts $ 18,600,000 $ 2,700,000 $ (5,400,000) $ 800,000 $ 16,700,000
Year ended February 28, 1995
Allowance for doubtful
accounts $ 12,000,000 $ 3,300,000 $ (3,100,000) $ 6,400,000 $ 18,600,000
Year ended February 29, 1994
Allowance for doubtful
accounts $ 10,300,000 $ 2,400,000 $ (3,100,000) $ 2,400,000 $ 12,000,000
(a) Represents the following
February February February
29, 1996 28, 1995 28, 1994
Reserve at date of acquisition of subsidiary $ 100,000 $5,500,000 $3,700,000
Reclassification from other reserves 200,000 400,000 100,000
Reserves of discontinued operations
at February 28, 1993 - - (900,000)
Foreign currency translation adjustment 500,000 500,000 (500,000)
$ 800,000 $6,400,000 $2,400,000
</TABLE>
<PAGE>50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MARK IV INDUSTRIES, INC.
By: /s/ Sal H. Alfiero
Sal H. Alfiero, Chairman of the
Board and Chief Executive Officer
Dated: May 16, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
/s/ Sal H. Alfiero Chairman of the Board May 16, 1996
Sal H. Alfiero and Chief Executive Officer
/s/ William P. Montague President, Director May 16, 1996
William P. Montague
/s/ John J. Byrne Vice President and May 16, 1996
John J. Byrne Chief Financial Officer
/s/ Richard L. Grenolds Vice President - May 16, 1996
Richard L. Grenolds Chief Accounting Officer
/s/ Gerald S. Lippes Secretary and Director May 16, 1996
Gerald S. Lippes
/s/ Clement R. Arrison Director May 16, 1996
Clement R. Arrison
<PAGE>51
Exhibit Index
2.1 Agreement and Plan of Merger dated as of October 3, 1994 by and
among Mark IV Industries, Inc., Mark IV Acquisition Corp., and
Purolator Products Company, incorporated by reference to exhibit
(c)(1) to Schedule 14D-1 (Tender Offer) dated October 7, 1994,
as filed with the SEC on such date (incorporated by reference to
the exhibit (c)(1) to Schedule 14D - (Tender Offer) dated
October 7, 1994, as filed with the SEC on such date).
2.2 Offer to Purchase, as revised, incorporated by reference to
exhibit (a)(1) to Amendment No. 1 to Schedule 14D-1 Tender
Offer) dated October 11, 1994, as filed with the SEC on such
date.
2.3 Share Purchase Agreement dated April 29, 1993 among Mark IV
Industries, Inc., a Delaware Corporation, and its indirect
wholly-owned subsidiary, Dayco Italy, S.p.A., an Italian
Corporation, and Pirelli S.p.A., an Italian Corporation
(incorporated by reference to exhibit 2.1 to the Company's
Current Report on Form 8-K dated May 27, 1993, as filed on June
17, 1993). All schedules and other attachments to this exhibit,
as identified on the last page of the exhibit, have been
omitted.
3.1 Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 28.1 to the Company's Registration
Statement No. 33-45215 on Form S-3, as filed with the SEC on
January 24, 1993).
4.1 Specimen Common Stock Certificate (incorporated by reference to
Exhibit 4.11 to Amendment No. 1 to the Registrant's Registration
Statement No. 33-41553 on Form S-3 dated August 6, 1991).
4.2 By-Laws of the Registrant (incorporated by reference to Exhibit
4.12 To Amendment No. 1 to the Registrant's Registration
Statement No. 33-41553 on Form S-3, dated August 6, 1991).
4.3 Conformed copy of the Indenture, dated as of March 15, 1993,
between Mark IV Industries, Inc. and Citibank, N.A.; including
the form of 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).
4.4 Conformed copy of the Indenture, dated as of March 11, 1996,
between Mark IV Industries, Inc. and Fleet National Bank as
Trustee; including the form of 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 6, 1996).
Executive Compensation Plans and Arrangements (10.1 -10.20)
10.1 Employment Agreement dated March 1, 1995 between the Company and
Sal Alfiero (incorporated by reference to Exhibit 10.1 to the
Company's Annual Report or Form 10-K for the fiscal year ended
February 28, 1995).
<PAGE>52
10.2 Employment Agreement dated March 1, 1995 between the Company and
Clement R. Arrison (incorporated by reference to Exhibit 10.2 to
the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.3 Employment Agreement dated March 1, 1995 between the Company and
Gerald S. Lippes (incorporated by reference to Exhibit 10.3 to
the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.4 Employment Agreement dated March 1, 1995 between the Company and
William P. Montague (incorporated by reference to Exhibit 10.4
to the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.5 Employment Agreement dated March 1, 1995 between the Company and
Frederic L. Cook (incorporated by reference to Exhibit 10.5 to
the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.6 Employment Agreement dated March 1, 1995 between the Company and
John J. Byrne (incorporated by reference to Exhibit 10.6 to the
Company's Annual Report or Form 10-K for the fiscal year ended
February 28, 1995).
10.7 Employment Agreement dated March 1, 1995 between the Company and
Richard L. Grenolds (incorporated by reference to Exhibit 10.7
to the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.8 Employment Agreement dated March 1, 1995 between the Company and
Douglas J. Fiegel (incorporated by reference to Exhibit 10.8 to
the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
10.9 Employment Agreement dated January 1, 1995 between the Company,
Dayco Products, Inc. ("Dayco") and Bruce A. McNiel (incorporated
by reference to Exhibit 10.9 to the Company's Annual Report or
Form 10-K for the fiscal year ended February 28, 1995).
10.10 Employment Agreement dated January 1, 1995 between the Company,
Dayco, Dayco Europe, A.B. and Kurt J. Johansson (incorporated by
reference to Exhibit 10.10 to the Company's Annual Report or
Form 10-K for the fiscal year ended February 28, 1995).
10.11 Employment Agreement dated January 1, 1995 between the Company,
Dayco and Patricia Richert (incorporated by reference to Exhibit
10.11 to the Company's Annual Report or Form 10-K for the fiscal
year ended February 28, 1995).
10.12 Amendment and Restatement of Mark IV Industries, Inc. and
Subsidiaries Incentive Stock Option Plan, as of February 8, 1988
(incorporated by reference to Exhibit 10.13.1 to the Company's
Registration Statement No. 33-42307 on Form S-8 dated August 19,
1991).
<PAGE>53
10.13 Amendment and Restatement of the Mark IV Industries, Inc. and
Subsidiaries 1992 Incentive Stock Option Plan Effective March
30, 1994 (incorporated by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1994).
10.14 Amendment and Restatement of the Mark IV Industries, Inc. 1992
Restricted Stock Plan Effective March 1, 1995 (incorporated by
reference to Exhibit 10.1 to the Company's Annual Report or Form
10-K for the fiscal year ended February 28, 1995).
10.15 Mark IV Industries, Inc. Executive Bonus Plan (incorporated by
reference to Exhibit 10.8 to the Company's Annual Report on Form
10-K for the fiscal year ended February 28, 1991).
10.16 First Amendment and Restatement of the Mark IV Industries, Inc.
Enhanced Executive Incentive Plan (incorporated by reference to
Exhibit 10.16 to the Company's Annual Report on Form 10-K dated
February 29, 1992).
10.17 Third Amendment and Restatement of the Non-Qualified Plan of
Deferred Compensation of Mark IV Industries, Inc. Effective
September 1, 1993 (incorporated by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended February
28, 1994).
10.18 First Amendment and Restatement of the Non-Qualified Plan of
Deferred Compensation for Non-Employee Directors of Mark IV
Industries, Inc. Effective December 1, 1993 (incorporated by
reference to the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1994).
10.19 First Amendment and Restatement of the Non-qualified Plan of
Deferred Incentive Compensation for Executives of Certain
Operating Divisions and Subsidiaries of Mark IV Industries, Inc.
Effective November 30, 1993 (incorporated by reference to
Exhibit 10.19 to the Company's Annual Report or Form 10-K for
the fiscal year ended February 28, 1995).
10.20 Short Term Incentive Bonus Plan of Dayco Products, Inc. dated
March 30, 1994 (incorporated by reference to Exhibit 10.20 to
the Company's Annual Report or Form 10-K for the fiscal year
ended February 28, 1995).
Other Material Contract Exhibits
10.21 Credit and Guarantee Agreement dated as of November 2, 1994,
among Mark IV Industries, Inc., as Borrower, Mark IV
Transportation Products Corp., Gulton Industries, Inc., Dayco
Products, Inc. Electro-Voice Incorporated, Anchor Swan, Inc. and
Mark IV Acquisition Corp., as Guarantors, the banks and other
financial institutions which are parties thereto, Bank of
American National Trust and Savings Association, as
Administrative Agent and BID Agent, and BA Securities, Inc. as
Arranger (incorporated by reference to exhibit (b)(2) to
Amendment No. 3 to Schedule 14D-1 (Tender Offer) dated November
2, 1994, as filed on that date).
<PAGE>54
10.22 Revolving Credit Facility Agreement dated May 27, 1993, among
Mark IV Industries, Inc., a Delaware Corporation, Dayco Italy
S.p.A., an Italian Corporation, Bank of America National Trust
and Savings Association, Chemical Investment Bank Limited, and
Citibank, N.A. and Chase Manhattan Bank N.A., as co-agents for
various financial institutions that are signatories thereto
(incorporated by reference to the Company's Current Report on
Form 8-K dated May 27, 1993 as filed on June 17, 1993). All
schedules and other attachments to this exhibit, as identified
on page v of the exhibit, have been omitted.
10.23 Conformed copy of the Credit Agreement, dated as of March 8,
1996, among the Registrant and Dayco PTI S.p.A., as Borrowers,
certain other subsidiaries of the Registrant, as Guarantors,
various banks and financial institutions, Chemical Bank, as
Administrator 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 Registrant's Current Report on
Form 8-K dated March 6, 1996).
11* Statement regarding computation of per share earnings.
21* Subsidiaries of the Registrant.
23* Consent of Independent Accountants.
27* Financial Data Schedule.
______________________
* Filed herewith by direct transmission pursuant to the EDGAR program.
<TABLE> EXHIBIT 11
<CAPTION>
MARK IV INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(Amounts in Thousands, Except Per Share Data)
For the Fiscal Year Ended
the Last Day of February
<S> <C> <C> <C>
Primary Earnings Per Share 1996 1995 1994
- -------------------------- ------ ------ -----
Primary Shares Outstanding:
Weighted average number of shares outstanding 62,961 51,015 46,835
Net effect of dilutive stock options (1) 432 425 348
Total 63,393 51,440 47,183
Income from continuing operations $ 92,400 $ 67,900 $ 51,100
Income per share from continuing operations (2) $ 1.46 $ 1.32 $ 1.08
Income from discontinued operations $ - $ - $ -
Income per share from discontinued
operations (2) $ - $ - $ -
Loss from extraordinary items $ - $ (1,100) $(21,700)
Loss per share from extraordinary items (2) $ - $ (.02) $ (.46)
Loss from cumulative accounting change $ - $ - $(26,000)
Loss per share from cumulative
accounting change (2) $ - $ - $ (.55)
Fully-diluted Earnings Per Share
- --------------------------------
Fully-diluted Shares Outstanding:
Weighted average number of shares
outstanding 62,961 51,015 46,835
Shares issuable upon conversion of the
Company's 6-1/4% Convertible Subordinated
Debentures - 6,302 8,765
Net effect of dilutive stock options (1) 432 449 348
Total 63,393 57,766 55,948
Income from continuing operations $ 92,400 $ 67,900 $ 51,100
Interest, net of tax effect, for 6-1/4%
Convertible Subordinated Debentures - 3,200 4,400
Income applicable to fully diluted shares $ 92,400 $ 71,100 $ 55,500
Income per share from continuing operations $ 1.46 $ 1.23 $ .99
Income from discontinued operations $ - $ - $ -
Income per share from discontinued operations $ - $ - $ -
Loss from extraordinary items $ - $ (1,100) $(21,700)
Loss per share from extraordinary items $ - $ (.02) $ (.39)
Loss from cumulative accounting change $ $ - $(26,000)
Loss per share from cumulative accounting
change $ $ - $ (.46)
<FN>
_________________
(1) The net effects for fiscal 1996, 1995 and 1994 are based upon the treasury
stock method using average market prices during the periods for the primary
amounts, and the higher of the average market prices or the market price at
year-end for the fully-diluted amounts.
(2) Primary earnings per share for fiscal 1996, 1995 and 1994 have been reported
on the Company's financial statements based only upon the shares of common
stock outstanding, since the dilutive effect of the stock options is not
considered to be material.
</TABLE>
EXHIBIT 21
SUBSIDIARIES
The following is a list of the subsidiaries of Mark IV Industries, Inc.
at May 15, 1996. Except as otherwise indicated, the names of indirectly-
owned subsidiaries are indented under the names of their immediate parent.
Automatic Signal/Eagle Signal Corporation (Delaware)
F-P Technologies Holding Corporation (Delaware) (a subsidiary of the Company
owned 100% by the Company and Mark IV Industries Limited)
Gulton-Statham Transducers, Inc. (Delaware)
Gulton Industries, Inc. (Delaware)
F-P Displays, Inc. (Massachusetts)
Electro-Voice, Incorporated (Delaware)
Mark IV Audio Canada Inc. (Canada) (an indirect
subsidiary of the Company 100% owned, in the aggregate,
by Electro-Voice, Incorporated, Gulton Industries, Inc.
and Altec Lansing Corporation)
Altec Lansing International Limited (United Kingdom)
Mark IV Hong Kong Limited (Hong Kong)
Audio Consultants Co., Limited (Hong Kong)
Mark IV Audio (Aust) Pty. Limited (Australia) (an indirect subsidiary
of the Company owned 100% by Gulton Industries, Inc. and
Electro-Voice, Inc.)
Mark IV Holding AG (Switzerland)
Mark IV Audio AG (Switzerland)
F-P Displays AG (Switzerland)
LFE Industrial Systems Corporation (Connecticut)
Mark IV Audio Japan Ltd. (Japan) (88% owned)
Mark IV France S.A. (France) (an indirect subsidiary of the
Company 100% owned, in the aggregate, by Gulton Industries,
Inc. and Dayco Products, Inc.)
Mark IV Audio France S.A. (France)
Dayco Products - Europe S.A.R.L. (France)
Gulton S.A. (France)
SLE S.A.R.L. (France)
Interstate Highway Sign Corp. (Delaware)
Kirkhof/Goodrich Corp. (Delaware)
Mark IV Transportation Products Corp. (Delaware)
Mark IV Audio, Inc. (Delaware)
Armtek International Holding Company, Inc. (Delaware)
Dayco Pacific Pty. Limited (Australia) (an indirect subsidiary of the
Company 100% owned in the aggregate by Armtek Int'l Holding Company,
Inc. and Dayco Products, Inc.)
Dayco Products Singapore PTE Limited (Singapore)
Dayco TSA Singapore PTE Limited (Singapore) (66% owned by Dayco
Products Singapore PTE Limited)
Dayco Products-United Kingdom, Inc. (Delaware)
Eagle Funding Corporation (Delaware)
Mark IV Industries GmbH (Germany)
Mark IV Vertriebs GmbH (Germany)
Dayco Europe GmbH (Germany)
Dynacord Electronic-und Geratebau GmbH (Germany)
Dynacord Electronic-und Geratebau GmbH & Co. KG (Germany)
Dynacord France S.A. (France) (100% owned, in the aggregate, by
Dynacord GmbH and Dynacord KG)
Clarke Container Company, Inc. (New York)
Glar-Ban Incorporated (New York)
Mark IV Holdings Inc. (Delaware)
Mark IV Industries Overseas, Ltd. (Barbados)
Aerospace Sub, Inc. (Delaware)
Mark IV Industries Ireland (Ireland) (100% owned by the Company and
Mark IV Holdings, Inc.)
Mark IV IVHS, Inc. (Delaware)
Madison Industrial Properties, Inc. (Delaware)
NRD, Inc. (New York)
LFE Corporation (Delaware)
Dayco De Brasil (Brazil) (100% owned, in the aggregate, by Mark IV and
Dayco PTI S.p.A.)
Dayco Argentina, S.A. (Argentina)
Dayco Products, Inc. (Delaware)
Controladora Dayco SA de C.V. (Mexico)
Dayco Products S.A. de C.V. (Mexico)
Bandas Y Mangueras Industriales, S.A. (Mexico)
Industrial de Plasticos Y Elastmeros, S.A. (Mexico)
Dayco Canada Holdings, Inc. (Canada)
Dayco Products Canada Inc. (Canada)
Mark IV Industries Limited (Canada)
Vapor Canada Inc. (Canada)
Dayco PTI S.p.A. (Italy)
Dayco SACIC S.A. (Belgium)
Prelasti Joint Venture (Belgium) (50% ownership)
Dayco PTI S.A. (Spain)
Dayco PTI GmbH (Germany)
Dayco Europe S.p.A. (Italy)
Tubi Speciali Auto S.p.A. (Italy)
Lunkoflex Iberica, S.A. (Spain)
Dayco Europe AB (Sweden)
Dayco Hevas AB (Sweden)
Dayco Bjorkmans AB (Sweden)
Anchor Swan, Inc. (Delaware)
Dayco Distributing, Inc. (Kentucky)
U.S. Rubber Acquisition Corp. (Delaware)
Imperial Eastman Acquisition Corp. (Delaware)
Mark IV Holdings, S.A. (Belgium)
Mark IV Audio Magnetic, Inc. (Delaware)
Mark IV PLC (United Kingdom)
Dayco Europe Ltd. (United Kingdom)
Cetec International Limited (United Kingdom)
Klark Teknik Plc (United Kingdom)
Nivenfield (1992) Limited (United Kingdom)
Rebis (United Kingdom)
Dearden-Davies Associates Limited (United Kingdom)
Klark-Teknik Electronics, Inc. (New York)
Vapor U.K. Ltd. (United Kingdom)
Caplugs Ltd. (United Kingdom)
Mark IV Netherlands B.V. (Netherlands)
LE Holdings U.K. (United Kingdom)
Vapor Corporation (Illinois)
Pietranera S.r.L. (Italy) (a subsidiary of the Company owned 100% by the
Company and Armtek International Holding Company, Inc.)
Purolator Products Co. (Delaware)
Cal-Facet, Inc. (Delaware)
Facet Advanced Technology Company (Delaware)
Purodenso (Partnership owned 50% by Facet Advanced Technology Company)
Facet Enterprises, Inc. (Delaware)
Facet Export Corporation (Delaware)
Facet Fuel Systems, Inc. (Delaware)
Facet Aerospace Products Company (Delaware)
Facet Industrial U.K. Limited (United Kingdom)
Facet Iberica, S.A. (Spain) (Owned 65.5% by Purolator Products Co.;
11.34% by Facet Italiana SpA; 5.91% Facet Industrial U.K.)
Facet Industrial B.V. (Netherlands)
Purolator Filter GmbH (Germany) (100% owned, in the aggregate, by Facet
Industrial B.V. and Purolator Products Company)
Facet International, Inc. (Delaware)
Facet Italiana S.p.A (Italy)
Facet FCE S.A.R.L. (France) (100% owned, in the aggregate, by Facet
Italiana SpA and Facet Industrial U.K. Limited)
George W. Dahl Company, Inc. (Delaware)
Purolator Products Air Filtration Company (Delaware)
Purolator Products Limited (Canada)
Purolator Products NA, Inc. (Delaware)
Purolator India Limited (39.27% Joint Venture-India)
Woods Liquidating Corporation (Delaware)
Tecalon Brasil (Brasil) (100% owned, in the aggregate, by Mark IV Industries,
Inc. and Dayco PTI SpA)
Lum-Eag Holdings (Ireland) (100% owned, in the aggregate by Mark IV
Industries, Inc. and Dayco Products, Inc.)
Luminator Holding, LLC (New York) (100% owned, in the aggregate, by Dayco
Products, Inc. and Lum-Eag Holdings)
Luminator Service, Inc. (New York)
Automatic/Eagle Holding, LLC (New York) (100% owned, in the aggregate, by
Dayco Products, Inc. and Lum-Eag Holdings)
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Mark IV Industries, Inc. on Form S-4 (File No. 333-02183) and Form S-8
(File Nos. 33-423007 and 33-55367) of our report dated March 29, 1996, on
our audits of the consolidated financial statements and financial statement
schedule of Mark IV Industries, Inc. as of February 29, 1996 and February 28,
1995, and for each of the three years in the period ended February 29, 1996,
which reports are included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Rochester, New York
May 16, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Mark IV Industries, Inc. and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> FEB-29-1996
<CASH> 900
<SECURITIES> 0
<RECEIVABLES> 416,300
<ALLOWANCES> 16,700
<INVENTORY> 405,000
<CURRENT-ASSETS> 873,800
<PP&E> 746,400
<DEPRECIATION> 192,700
<TOTAL-ASSETS> 2,013,100
<CURRENT-LIABILITIES> 468,900
<BONDS> 642,500
0
0
<COMMON> 600
<OTHER-SE> 724,900
<TOTAL-LIABILITY-AND-EQUITY> 2,013,100
<SALES> 2,088,500
<TOTAL-REVENUES> 2,088,500
<CGS> 1,413,500
<TOTAL-COSTS> 1,875,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,200
<INCOME-PRETAX> 151,400
<INCOME-TAX> 59,000
<INCOME-CONTINUING> 92,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 92,400
<EPS-PRIMARY> 1.46
<EPS-DILUTED> 1.46
</TABLE>
