UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Quarterly Period Ended May 31, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period From _______ to ________.
Commission File Number 1-8862
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MARK IV INDUSTRIES, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 23-1733979
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 John James Audubon Parkway, P.O. Box 810, Amherst, New York 14226-0810
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(Address of principal executive offices) (Zip Code)
(716) 689-4972
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
---
Number of shares outstanding of each class of the Registrant's common stock,
as of the latest practicable date:
Class Outstanding at June 27, 1996
----- ----------------------------
Common stock $.01 par value 63,119,351
<PAGE>2
MARK IV INDUSTRIES, INC.
INDEX
Part I. Financial Information Page No.
- ------------------------------ -------
Consolidated Condensed Balance Sheets as of
May 31, 1996 and February 29, 1996 3
Consolidated Statements of Income and Retained Earnings
For the Three Month Periods Ended May 31, 1996 and 1995 4
Consolidated Statements of Cash Flows
For the Three Month Periods Ended May 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information 11
- --------------------------
Signature Page 12
Exhibit Index 13
<PAGE>3
MARK IV INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
May 31, February 29,
1996 1996
ASSETS (Unaudited)
Current Assets:
Cash $ 1,100 $ 900
Accounts receivable 451,600 399,600
Inventories 425,300 405,000
Other current assets 81,500 68,300
Total current assets 959,500 873,800
Pension related and other
non-current assets 228,100 216,500
Property, plant and equipment, net 599,100 553,700
Cost in excess of net assets acquired 414,200 369,100
TOTAL ASSETS $2,200,900 $2,013,100
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current
maturities of debt $ 119,000 $ 95,100
Accounts payable 174,800 191,300
Compensation related liabilities 59,300 71,300
Accrued interest 13,500 12,700
Other current liabilities 119,500 98,500
Total current liabilities 486,100 468,900
Long-Term Debt:
Senior debt 247,200 136,100
Subordinated debentures 506,400 506,400
Total long-term debt 753,600 642,500
Other non-current liabilities 211,000 176,200
Stockholders' Equity:
Common stock 600 600
Additional paid-in capital 617,900 617,600
Retained earnings 136,000 109,700
Foreign currency translation adjustment (4,300) (2,400)
Total stockholders' equity 750,200 725,500
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $2,200,900 $2,013,100
The accompanying notes are an integral part of these financial statements.
<PAGE>4
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED)
For the Three Month Periods Ended May 31, 1996 and 1995
(Amounts in thousands, except per share data)
1996 1995
Net sales $616,900 $518,500
Operating costs:
Cost of products sold 420,900 345,800
Selling and administration 99,500 90,400
Research and development 13,100 10,800
Depreciation and amortization 18,800 16,200
Total operating costs 552,300 463,200
Operating income 64,600 55,300
Interest expense 17,800 15,000
Income before provision for taxes 46,800 40,300
Provision for income taxes 18,300 15,700
NET INCOME 28,500 24,600
Retained earnings - beginning of the period 109,700 90,800
Cash dividends of $.035 and $.029 per share (2,200) (1,800)
Retained earnings - end of the period $136,000 $113,600
Net income per share of common stock:
Primary $ .45 $ .39
Fully-diluted $ .45 $ .39
Weighted average number of shares outstanding:
Primary 63,100 63,000
Fully-diluted 63,500 63,400
The accompanying notes are an integral part of these financial statements.
<PAGE>5
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Month Periods Ended May 31, 1996 and 1995
(Dollars in thousands)
1996 1995
Cash flows from operating activities:
Net income $ 28,500 $ 24,600
Items not affecting cash:
Depreciation and amortization 18,800 16,200
Pension and compensation related items (3,400) (2,600)
Deferred income taxes 7,400 7,200
Net cash provided by earnings 51,300 45,400
Changes in assets and liabilities, net
of effects of businesses acquired and
discontinued:
Accounts receivable (36,000) (32,700)
Inventories 4,600 (12,000)
Accounts payable (23,300) 6,000
Other items, net (31,400) (13,100)
Net cash used in
operating activities (34,800) (6,400)
Cash flows from investing activities:
Acquisitions (78,000) (4,300)
Divestitures and asset sales - 600
Purchase of plant and equipment, net (18,900) (16,900)
Net cash used in investing activities (96,900) (20,600)
Cash flows from financing activities:
Credit agreement borrowings, net 121,800 30,400
Other changes in long-term debt, net (11,700) (14,900)
Changes in short-term bank borrowings 23,900 13,900
Common stock transactions - (400)
Cash dividends paid (2,200) (1,800)
Net cash provided by
financing activities 131,800 27,200
Effect of exchange rate fluctuations 100 (100)
Net increase in cash 200 100
Cash and cash equivalents:
Beginning of the year 900 800
End of the period $ 1,100 $ 900
The accompanying notes are an integral part of these financial statements.
<PAGE>6
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. In the opinion of the Company's management, the accompanying unaudited
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position
of the Company at May 31, 1996, and the results of its operations and
its cash flows for the three month periods ended May 31, 1996 and 1995.
Such results are not necessarily indicative of the results to be
expected for the full year.
2. On March 5, 1996, the Company acquired the net assets of the Imperial
Eastman division of the Pullman Company for a cash purchase price of
approximately $78.0 million. Imperial Eastman is a leading manufacturer
and marketer of a broad range of thermoplastic hydraulic and pneumatic
hose assemblies, and steel and brass couplings, adapters and fittings
for both high and low pressure applications, with annual sales of
approximately $120.0 million. Imperial Eastman is included in the
Company's Industrial business segment.
3. Accounts receivable are presented net of allowances for doubtful
accounts of $16.9 million and $16.7 million at May 31, 1996 and February
29, 1996, respectively.
4. Inventories consist of the following components (dollars in thousands):
May 31, February 29,
1996 1996
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Raw materials, parts and sub-assemblies $121,100 $112,900
Work-in-process 64,500 57,500
Finished goods 239,700 234,600
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Inventories $425,300 $405,000
======== ========
Since physical inventories taken during the year do not necessarily
coincide with the end of a quarter, management has estimated the
composition of inventories with respect to raw materials, work-in-
process and finished goods. It is management's opinion that this
estimate represents a reasonable approximation of the inventory
breakdown as of May 31, 1996. The amounts at February 29, 1996 are
based upon the audited balance sheet at that date.
5. Property, plant and equipment is stated at cost and consists of the
following components (dollars in thousands):
May 31, February 29,
1996 1996
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Land and land improvements $ 43,400 $ 43,400
Buildings 166,400 155,300
Machinery and equipment 595,500 547,700
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Total property, plant and equipment 805,300 746,400
Less accumulated depreciation 206,200 192,700
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Property, plant and equipment, net $599,100 $553,700
======== ========
<PAGE>7
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. Long-term debt consists of the following (dollars in thousands):
May 31, February 29,
1996 1996
Senior Debt:
Credit Agreement $ 218,400 $ 97,300
Other items 36,600 46,700
Total 255,000 144,000
Less Current maturities (7,800) (7,900)
Net senior debt 247,200 136,100
Subordinated Debt:
7-3/4% Senior Subordinated Notes 248,400 248,400
8-3/4% Senior Subordinated Notes 258,000 258,000
Total subordinated debt 506,400 506,400
Total long-term debt 753,600 642,500
Total stockholders equity 750,200 725,500
Total capitalization $1,503,800 $1,368,000
Long-term debt as a percentage
of total capitalization 50.1% 47.0%
7. For purposes of cash flows, the Company considers overnight investments
as cash equivalents. The Company made cash interest payments of
approximately $17.2 million and $21.8 million in the three month periods
ended May 31, 1996 and 1995, respectively. The Company also made cash
income tax payments of approximately $3.0 million and $5.4 million in
the three month periods ended May 31, 1996 and 1995, respectively.
8. In March 1996, the Company adopted Financial Accounting Standards Board
("FASB") 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.
The adoption of SFAS No. 121 did not require a charge in the Company's
first quarter ended May 31, 1996.
<PAGE>8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
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Net cash provided by earnings was approximately $51.3 million for the three
month period ended May 31, 1996, an increase of $5.9 million (13%) over the
three month period ended May 31, 1995. As of May 31, 1996, the Company had
working capital of $473.4 million, an increase of $68.5 million (17%) from
February 29, 1996. The increase in working capital is substantially
attributable to the acquisition of Imperial Eastman and to support the
Company's higher overall revenue base, as well as temporary seasonal inventory
and accounts receivable increases in the Company's Industrial business
segment.
On March 5, 1996, the Company acquired the net assets of the Imperial Eastman
division of The Pullman Company for a cash purchase price of approximately
$78.0 million. Imperial Eastman is a leading manufacturer and marketer of a
broad range of thermoplastic hydraulic and pneumatic hose assemblies, and
steel and brass couplings, adapters and fittings for both high and low
pressure applications, with annual sales of approximately $120.0 million.
Imperial Eastman is included in the Company's Industrial business segment.
The Company has borrowing availability under its primary credit agreements in
excess of $285.0 million and additional availability under its various
domestic and foreign demand lines of credit of approximately $140.0 million as
of May 31, 1996. Long-term debt at May 31, 1996 increased $111.1 million
(17%) from the total amount as of February 29, 1996, with approximately $78.0
million of the increase related to the acquisition of Imperial Eastman. The
remainder of the increase, as well as the $23.9 million increase in short-term
debt, are primarily the result of increased borrowings to support temporary
increases in working capital requirements. Such temporary working capital
increases are expected to be reduced by the end of the Company's second
quarter. Debt reduction in the balance of the fiscal year will be pursued
through the use of cash generated from operations and further reductions in
working capital requirements.
Management believes that cash generated from operations, as temporarily
supplemented with existing credit availability, should be sufficient to
support the Company's working capital requirements and anticipated capital
expenditures for the foreseeable future.
Results of Operations
- ---------------------
The Company classifies its operations in two business segments: Automotive
and Industrial. The Company's current business strategy is focused upon the
enhancement of its business segments through internal growth, cost control and
quality improvement programs and selective, strategic acquisitions with an
emphasis on expanding each segment's international presence.
Net Sales for the three month period ended May 31, 1996 increased by $98.4
million (19%) over the comparable period last year. The increase was
attributable to internal sales growth, as well as the inclusion of the results
of operations of Imperial Eastman and FitzSimons (as discussed following).
Changes in foreign currency exchange rates had a nominal effect on net sales
for the quarter ended May 31, 1996, as compared to the comparable period last
year.
<PAGE>9
In the Company's Automotive segment, net sales increased $42.8 million (17%)
for the three month period ended May 31, 1996 over the comparable period last
year. Approximately $19.3 million (7%) of the Automotive segment's increase
was attributable to the inclusion of the results of operations of FitzSimons
Manufacturing Company, which was acquired in the last quarter of fiscal 1996.
Excluding FitzSimons, the Automotive segment's net sales increased
approximately $23.5 million (10%) for the three month period ended May 31,
1996 over the comparable period last year. The internal growth in the
Automotive segment was primarily lead by the segment's foreign operations.
In the aggregate, sales in the after-market increased in the current period
compared to the comparable period in the previous fiscal year. Improved
sales in the traditional after-market were somewhat offset by competitive
conditions in the maintenance side of the business.
In the Company's Industrial segment, net sales increased $55.6 million (21%)
for the three month period ended May 31, 1996 over the comparable period last
year. Approximately $27.5 million (11%) of the Industrial segment's increase
was attributable to the inclusion of the results of operations of Imperial
Eastman, which was acquired at the beginning of fiscal 1997. Excluding
Imperial Eastman, the Industrial segment's net sales increased approximately
$28.1 million (10%) for the three month period ended May 31, 1996 over the
comparable period last year. This internal growth was lead by the segment's
general industrial and transportation products which significantly offset some
softening in the segment's Audio markets.
The cost of products sold as a percentage of consolidated net sales increased
to 68% for the three month period ended May 31, 1996, as compared to 67% for
the three month period ended May 31, 1995. The increase was primarily as a
result of the Imperial Eastman and FitzSimons acquisitions referred to above,
which have a higher level of costs than the Company's existing businesses.
The increase in the percentage of costs also reflects negative pressures on
margins experienced by the Filters unit of the Automotive business segment.
Selling and administration costs as a percentage of consolidated net sales
were 16% for the three month period ended May 31, 1996 as compared to 17% for
the three month period ended May 31, 1995. The reduced level of costs as a
percentage of sales reflects operating efficiencies achieved from the
integration of the Purolator businesses and the reorganization of the
Company's business segments. The reduction in the level of costs also
indicates the Company's continued emphasis on cost control has been successful
in substantially offsetting the impact of inflation on such costs.
Research and development costs increased by $2.3 million (21%) for the three
month period ended May 31, 1996 as compared to the three month period ended
May 31, 1995. As a percentage of consolidated net sales, these expenses
remained consistent at approximately 2% in each period. This consistent level
of investment reflects the Company's continuing emphasis on new product
development.
Depreciation and amortization expense increased by $2.6 million (16%) for the
three month period ended May 31, 1996 as compared to the three month period
ended May 31, 1995. The increase is primarily attributable to the Company's
increased level of capital equipment expenditures, which included a new
manufacturing facility and increased capacity requirements in the Company's
Automotive segment, primarily in Europe, and a new domestic distribution
facility in the Company's Industrial segment.
<PAGE>10
Interest expense for the three month period ended May 31, 1996 increased by
$2.8 million (19%) as compared to the three month period ended May 31, 1995.
The increase is primarily due to an increase in the weighted average debt
outstanding resulting from borrowings incurred to finance the acquisitions of
FitzSimons and Imperial Eastman, and to support temporarily higher working
capital levels. The Company experienced increases in economic rates on the
Company's domestic debt, primarily related to the private placement of $250.0
million 7-3/4% Senior Subordinated Notes at the beginning of fiscal 1997,
offset slightly by lower rates on the Company's Credit Agreement, as a result
of its being amended and restated at the beginning of fiscal 1997. The
Company also experienced a slight reduction in the economic rates on its
foreign debt.
The Company's provision for income taxes as a percentage of pre-tax accounting
income for the three month periods ended May 31, 1996 and 1995 remained
relatively constant at approximately 39%. The benefit of increased domestic
income resulting from acquisitions and internal growth were substantially
offset by increased income in foreign locations with higher statutory tax
rates than in the U.S.
The adoption of SFAS No. 121 did not require a charge in the Company's first
quarter ended May 31, 1996. However, in conjunction with the Company's
realignment of its business segments and refocusing of its factories which is
currently taking place, it is anticipated that certain long-lived assets will
need to be written-off in accordance with SFAS No. 121. The SFAS No. 121
charges, as well as any realignment costs will be recognized as soon as
management's assessment and a formal plan for the realignment have been
completed, which is expected to occur later in the current fiscal year.
As a result of all of the above, the Company's net income for the three month
period ended May 31, 1996 increased $3,900,000 (16%) over the comparable
period last year.
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.
<PAGE>11
Part II. OTHER INFORMATION
- ---------------------------
Items 1, 2, 3, 4 and 5 are inapplicable and have been omitted.
Item 6(a) - Exhibits
- --------------------
Exhibit No.
11 Statement Regarding Computation of Per Share Earnings
27 Financial Data Schedule
Item 6(b) Reports on Form 8-K
- -----------------------------
The following report on Form 8-K was filed pertaining to events
occurring during the quarter ended May 31, 1996.
1. A current report on Form 8-K, dated March 6, 1996, as amended by
the Company's current report on Form 8-K/A dated March 27, 1996
was filed to report under Items 5, pertaining to the Company's (i)
entering into a Amended and Restated Credit and Guarantee
Agreement with various financial institutions. The Credit
Agreement provides for a five-year, non-amortizing revolving
credit facility with borrowing availability of $400.0 million
under a domestic facility and $100.0 million under a multi-
currency facility; and (ii) the Company's private placement of
$250.0 million principal amount of its 7-3/4% Senior Subordinated
Notes at a purchase price of 99.36% of their face amount.
<PAGE>12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARK IV INDUSTRIES, INC.
Registrant
DATE: July 1, 1996 /s/ Sal H. Alfiero
----------------------
Sal H. Alfiero
Chairman of the Board
DATE: July 1, 1996 /s/ William P. Montague
-----------------------
William P. Montague
President
DATE: July 1, 1996 /s/ John J. Byrne
-----------------------
John J. Byrne
Vice President-Finance and
Chief Financial Officer
DATE: July 1, 1996 /s/ Richard L. Grenolds
-----------------------
Richard L. Grenolds
Vice President and
Chief Accounting Officer
DATE: July 1, 1996 /s/ Clement R. Arrison
-----------------------
Clement R. Arrison
Director
<PAGE>13
EXHIBIT INDEX
Description
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Page No.
11 Statement Regarding Computation of Per Share Earnings 14
27 Financial Data Schedule 15
EXHIBIT 11
MARK IV INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (UNAUDITED)
For the Three Month Periods Ended May 31, 1996 and 1995
(Amounts in thousands, except per share data)
Three Months
Ended May 31,
1996 1995
PRIMARY
Shares outstanding:
Weighted average number of
shares outstanding 63,100 63,000
Net effect of dilutive stock
options (1) 400 400
Total 63,500 63,400
Net income $28,500 $ 24,600
Net income per share (2) $ .45 $ .39
FULLY-DILUTED
Shares outstanding:
Weighted average number of
shares outstanding 63,100 63,000
Net effect of dilutive stock
options (1) 400 400
Total 63,500 63,400
Net Income $28,500 $24,600
Net income per share $ .45 $ .39
- ------------------------------------
(1) The net effects for the three month periods ended May 31, 1996 and 1995
are based upon the treasury stock method using the average market price
during the periods for the primary amounts, and the higher of the
average market price or the market price at the end of the period for
the fully-diluted amounts.
(2) Primary earnings per share have been reported in the Company's
financial statements based only upon the shares of common stock
outstanding, since the dilutive effect of the stock options
is not considered to be material.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Mark IV Industries, Inc. and is qualfied in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> MAY-31-1996
<CASH> 1,100
<SECURITIES> 0
<RECEIVABLES> 468,500
<ALLOWANCES> 16,900
<INVENTORY> 425,300
<CURRENT-ASSETS> 959,500
<PP&E> 805,300
<DEPRECIATION> 206,200
<TOTAL-ASSETS> 2,200,900
<CURRENT-LIABILITIES> 486,100
<BONDS> 753,600
0
0
<COMMON> 600
<OTHER-SE> 749,600
<TOTAL-LIABILITY-AND-EQUITY> 2,200,900
<SALES> 616,900
<TOTAL-REVENUES> 616,900
<CGS> 420,900
<TOTAL-COSTS> 552,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,800
<INCOME-PRETAX> 46,800
<INCOME-TAX> 18,300
<INCOME-CONTINUING> 28,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,500
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
