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 28, 1997
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.
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(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
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(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
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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 1, 1997 on the New York Stock Exchange was $1,262,013,328.
As of May 1, 1997, the number of outstanding shares of Registrant's
Common Stock, $.01 par value, was 64,899,030 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 ...............................................15
Item 3: Legal Proceedings ........................................16
Item 4: Submission of Matters to a Vote
of Security Holders .....................................16
PART II
Item 5: Market for the Company's Common Stock and
Related Security Holder Matters .........................17
Item 6: Selected Financial Data ..................................18
Item 7: Management's Discussion and Analysis
of Financial Condition and Results
of Operations ...........................................20
Item 8: Financial Statements and Supplementary
Data ....................................................26
Item 9: Disagreement on Accounting and Financial
Disclosure ..............................................48
PART III
Item 10: Directors and Executive Officers of the
Registrant ..............................................48
Item 11: Executive Compensation ...................................48
Item 12: Security Ownership of Certain Beneficial
Owners and Management ...................................48
Item 13: Certain Relationships and Related
Transactions ............................................48
PART IV
Item 14: Exhibits, Financial Statement Schedules and
Reports on Form 8-K .....................................48
Signatures ...............................................54
Exhibit Index ............................................55
<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 in the United States and Europe and, to a lesser extent,
in Canada, Latin America and the Far East. Mark IV operates 63 manufacturing
facilities and 45 distribution and sales locations and employs approximately
15,800 people in 19 countries.
Mark IV's business strategy is focused on building its worldwide
Automotive and Industrial business segments through internal growth and
selective strategic acquisitions, and the continuation of cost control and
quality improvement programs. The Company's operating strategy emphasizes
establishing cooperative programs with customers to engineer, design and
develop higher value-added systems in addition to individual products, the
introduction of new, more cost effective and durable products, and management
for continuous improvement.
In furtherance of these strategies, over its last five fiscal years,
Mark IV has:
(i) enhanced its ability to provide a broader range of products to its
existing customers through its $286.3 million acquisition of
Purolator Products Inc. ("Purolator"), a leading manufacturer of
automotive and industrial filtration products and systems in late-
fiscal 1995;
(ii) established joint ventures in Latin America and is in the process
of establishing manufacturing facilities in both Argentina and
Brazil;
(iii) established distribution centers to serve markets in Latin America
and the Pacific Rim, and acquired manufacturing and distribution
facilities in Mexico;
(iv) increased its industrial hose and couplings production capacity
and strengthened its position in the hose and couplings products
market through its $78 million acquisition of Imperial Eastman at
the beginning of fiscal 1997;
(v) 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; and
(vi) initiated a restructuring of the Company's manufacturing and
distribution facilities to make them more focused and cost
effective.
<PAGE>4
Recent Developments
At the beginning of fiscal 1997, the Company acquired the net assets of
Imperial Eastman for a cash purchase price of approximately $78 million.
Imperial Eastman is a 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.
Imperial Eastman is included in the Company's Industrial business segment.
During fiscal 1997, the Company also acquired the net assets of Cinotto
Tecnomeccanica S.p.A. ("CTM") for a cash purchase price of approximately
$17.2 million. This acquisition enabled Mark IV Automotive to extend its
systems delivery capability in the power transmission area by broadening its
spectrum of systems and components offered to its OEM customers.
As part of the Company's strategy to become more focused within its
Industrial business segment, the Company sold its Professional Audio, Vapor
Corporation, Interstate Highway Signs, and Eagle Signal businesses and certain
other non-operating assets during fiscal 1997. Shortly after the end of the
fiscal year, the Company also sold its Gulton Data Systems and LFE Industrial
Systems businesses. The total of all of these divestitures generated gross
proceeds of approximately $313 million.
During fiscal 1997, the Company also initiated a restructuring of its
manufacturing and distribution facilities, which is expected to improve
customer service, reduce costs and dedicate its facilities to either the
Automotive or Industrial business segments. The restructuring resulted in a
pre-tax charge against earnings of $112.5 million, with $51.8 million related
to cash expenditures required to be made primarily over a two-year period.
The remaining $60.7 million non-cash portion of the charge represents
primarily asset write-offs and pension benefits to be paid out of the
Company's pension fund.
In March 1997, the Company announced its intention to acquire up to 7.3
million shares of its outstanding Common Stock. It is expected that such
shares would be purchased in the open-market, or through privately negotiated
transactions, at prices which the Company considers to be attractive. Through
May 1, 1997, the Company acquired approximately 1.5 million of such shares, at
an average cost of $23.33 per share, or a total cost of approximately $35
million.
Segment Information
The Company classifies its operations into the following two business
segments:
(i) Mark IV Automotive, which includes the design, manufacture and
distribution of (a) fuel, power transmission, and fluid handling
systems and components, and (b) filters and filtration systems,
for the global automotive aftermarket and OEM (original equipment
manufacturers) market; and
(ii) Mark IV Industrial, which includes the design, manufacture and
distribution of power and fluid management systems and components
for industrial OEM and distribution markets worldwide.
<PAGE>5
Financial information regarding the business segments is presented in
Note 14 to the Company's audited consolidated financial statements included
elsewhere herein. A more detailed discussion concerning the make-up of the
Company's two business segments follows.
MARK IV AUTOMOTIVE
Overview
Mark IV Automotive is 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 approximately 53%, or $1.1 billion,
of the Company's consolidated net sales in fiscal 1997, with approximately 40%
of such sales made 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 include accessory drive and camshaft
drive systems, consisting of components such as belts, pulleys, idlers,
tensioners and dampers 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.
Mark IV Automotive also manufactures automotive filtration products, including
a complete line of filters and filter housings for automotive, light truck and
heavy duty applications.
Automotive OEM
Mark IV Automotive designs and manufactures systems and components for
most automotive producers in the world, including OEMs in North America,
Europe, South America and the Asia/Pacific region. The segment's Automotive
OEM business accounted for approximately 25% of the Company's consolidated net
sales in fiscal 1997.
In the automotive OEM market, Mark IV's emphasis is on providing
complete systems or subsystems to meet the needs of its global customers,
rather than simply providing components, which helps OEM customers minimize
their fixed expense and allows Mark IV to increase its sales dollars per
vehicle. Over the past several years, Mark IV's efforts have been focused on
expanding its technological and engineering capabilities.
<PAGE>6
Mark IV Automotive has nine technical centers located in the U.S. and
Europe, each of which is dedicated to the development of products in the
Company's core automotive technology areas. Mark IV's research and
development activities and resources are coordinated on a global basis to
avoid duplication, and to enable the Company to capitalize on developments and
improvements in its core technology areas by applying them throughout the
entire organization.
Flexibility in automotive systems design plays a key role in the
development of the Company's OEM products. Until five years ago, the Company
was basically an automotive parts manufacturer, and the vast majority of those
parts were rubber-based. Over the past five years, as the Company has evolved
into a systems supplier, its engineers began to incorporate new and different
materials into their systems designs in order to meet customer specifications
regarding performance criteria, such as permeation, noise, temperature, weight
and durability.
Mark IV Automotive designs, manufactures and distributes automotive
systems and components in the following core technology areas: Power
Transmission, Fuel, Fluid Handling and Filtration.
Power Transmission Systems
Mark IV Automotive manufactures accessory drive and camshaft drive
systems, consisting of components such as belts, pulleys, idlers, tensioners
and dampers for the global automotive market. The Company's goal is to
continue providing its customers with innovative power transmission products
with performance characteristics that meet or exceed their changing needs. At
the Company's technical centers in Rochester Hills, Michigan; Springfield,
Missouri; and Chieti, Italy, systems engineering capabilities and knowledge
are utilized to serve customers around the world.
Over the past several years, the layouts of a majority of the Company's
power transmission manufacturing plants have been redesigned, and the balance
of these facilities are scheduled for similar improvement. As a result of
recent capital investments in this area, quality, productivity and lead time
at these operations have improved dramatically.
The acquisition of CTM, an Italian manufacturer of automotive vibration
dampers, located in Valperga, Italy, expands the Company's capabilities in the
power transmission area by broadening the spectrum of systems and components
offered to automotive OEM customers. From a technical standpoint, dampers are
being used in increasingly more power transmission applications, making CTM a
strategic acquisition.
In Cordoba, Argentina, ground has been broken for a new manufacturing
facility to produce camshaft and accessory drive systems and components for
the South American automotive OEM and aftermarket. This wholly-owned
subsidiary, Dayco Argentina, S.A., was established primarily to serve the
Company's European OEM customers, including Fiat, VW, Ford, Renault and
Peugeot, who manufacture in the region.
<PAGE>7
Fuel Systems
Mark IV Automotive's fuel systems 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. The
Company's products vary from complete systems to individual components,
including tubes, hoses, couplings, fuel fillers and other assemblies,
fittings, valves, canisters, filters and quick connectors. These products
currently are manufactured in North America, Europe and South America, and are
sold to major OEM customers around the world.
With a focus on expansion, Daytec, S.A. -- the Company's joint venture
established in the growing industrial region of Juatuba, Minas Gerais,
Brazil -- is now operational, and delivery of fuel systems, primarily to Fiat,
has begun.
Fluid Handling Systems
The Company's fluid handling systems 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.
During fiscal 1997, the Company introduced a quieter, patented noise-
tuning device for use in power steering hose assemblies. In addition, late in
fiscal 1997, production began at the Company's new power steering and air
conditioning hose manufacturing plant in Follonica, Italy, which will help the
Company meet the increasing demand for these products in Europe. Almost 50%
of vehicles produced today in Europe include both air conditioning and power
steering, while in the U.S., over 95% of all new vehicles are comparably
equipped. 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.
During the year, a manufacturing plant was built in Melbourne,
Australia, to supply power steering and air conditioning hose assemblies to
Ford and other OEM customers. Production at the facility is expected to begin
this summer.
Filters and Filtration Systems
Mark IV Automotive manufactures a complete line of automotive oil, air
and fuel filters manufactured and sold primarily in North America. Through
its ownership position in Purolator India Ltd, the Company also supplies
filtration products to the Indian automotive market, while licensees
manufacture and distribute the Company's filters in Columbia, Peru, Argentina
and Saudi Arabia.
The Company plans to expand its filters production in Europe, in order
to serve the growing markets in that region. In addition, the Company is
exploring opportunities in fast-growing markets such as Mexico, South America,
the Middle East, South Africa and the Asia/Pacific region. Penetration in
these areas will utilize the strength of the Company's existing distribution
and sales networks.
<PAGE>8
In addition to geographic expansion, the Company's growth in its filters
business will be pursued through the introduction of new products. On the OEM
side of the business, the Company has new filter programs in place which are
strengthening its position with customers. Today, 33% of the filters the
Company manufactures are sold to its OEM/OES ("Service") customers, such as
Ford, Chrysler, Renault, Toyota, Nissan, Mazda and Subaru. Utilizing its
research and development capabilities, the Company is working together with
its customers to develop new oil, cabin air, fuel and in-tank fuel filters.
Automotive Aftermarket
The Company's products in the automotive aftermarket include a vast
array of automotive belts, hose, filters and accessories 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 28% of the Company's consolidated net sales in fiscal 1997.
The Company's automotive aftermarket business is divided between the
"traditional" and "maintenance" markets. The traditional market, which
accounts for approximately 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.
Mark IV Automotive's 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,
the Company's 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 integration of the belts and hose manufactured and marketed by the
Company's Dayco Products operations, and the filters supplied by Purolator
Products is essentially complete. Sales and marketing activities have been
merged, and in Europe, all of the Company's aftermarket products are being
distributed from a new warehouse facility in Turin, Italy. This facility
replaces three previously-existing locations in Europe. In Canada, two
warehouses have been consolidated into one location, which now houses the full
range of the Company's aftermarket products.
In Fayetteville, North Carolina, construction has begun on a new,
506,000 square-foot North American distribution facility, which should be
operational by the end of fiscal 1998. Consolidating four existing facilities
into one distribution center, this location will supply aftermarket products
to customers in the Eastern portion of the U.S., representing 70%-80% of the
Company's aftermarket volume in the U.S.
<PAGE>9
During fiscal 1997, the Company developed and introduced a new premium
oil filter -- PureONE(tm) -- to its North American aftermarket customers. The
PureONE filter features an improved Micronic(R) filter medium, with 96%
efficiency and more pleats for enhanced flow. Marketing surveys indicated
that consumers would be willing to pay a premium over standard pricing for a
filter that delivered a real performance improvement. Consequently, PureONE
filter merchandising includes attractive, self-selling packaging and an
attention-grabbing shelf display, which features cutaway views of three actual
oil filters -- the PureONE and two competitors' filters -- so that consumers
can see for themselves the distinct features, advantages and benefits of the
PureONE filter.
Also during the year, the Company developed a complete line of automatic
serpentine belt tensioners for the aftermarket, representing the first
automotive tensioners made available to this market. This makes it possible
to replace 56 original equipment part numbers with only 24 replacement parts.
The flat-spring design and thicker aluminum casing give these Dayco(R) brand
tensioners a performance and quality edge over the competition.
In South America and the Asia/Pacific region, the Company is utilizing
its position as an OEM supplier to introduce products to the automotive
aftermarket. In Asia, the Company's position has been strengthened by the
opening of a sales office in Hong Kong, and a distribution network is being
established in China.
MARK IV INDUSTRIAL
Overview
Mark IV Industrial provides Power and Fluid Management systems and
components to specifically targeted industrial markets around the world. Mark
IV Industrial accounted for approximately 47%, or $1.0 billion, of the
Company's consolidated net sales in fiscal 1997, with approximately 25% of
such sales to customers outside of the U.S.
Mark IV Industrial combines the strengths of Dayco Products, Imperial
Eastman, Dayco Swan, Facet International, Purolator Filter Products and
Purolator Products Air Filtration, in addition to several transportation and
other businesses.
During fiscal 1997, as part of a company-wide restructuring program,
Mark IV Industrial continued streamlining its organizational structure and
production techniques, and sold several non-core operations. A fundamental
driver of this ongoing strategy is to better serve the Company's customers
through expanded product offerings, improved operating efficiencies and better
utilization of resources.
To guide the Company's growth into the next century, its approach to its
target markets has been refocused on two primary areas: Power Management and
Fluid Management. The Company's Power Management systems and components are
used in the transmission of power -- either mechanically, or through the use
of hydraulics or fluid power. Fluid Management systems and components are
used in the movement, containment, processing, treatment or control of fluids.
<PAGE>10
The Company works closely with its customers to design products
tailored to their individual needs. The systems and components in these areas
primarily consist of a variety of belts, tensioners and pulleys; hose,
couplings and assemblies; and filters, coalescers, separators and vessels,
which are specially designed for a variety of industrial applications.
In the Power and Fluid Management areas, the Company is targeting the
following markets: petroleum and natural gas, mining, agriculture, wood,
water, chemical, pharmaceutical, and heating, ventilation and air conditioning
(HVAC). In these markets, the Company's products are supplied either directly
to industrial OEMs, or through established distribution networks. In
addition, each of the Company's business units continues to target markets
that are unique to its specific product capabilities. Mark IV's
transportation products are sold to government agencies and contractors, as
well as to aircraft and mass transit vehicle equipment manufacturers.
Power Management Systems and Components
Early in fiscal 1997, the Company acquired Imperial Eastman, a North
American manufacturer of hydraulic and pneumatic hose and fittings. This
acquisition expanded the Company's customer base and market share, while
strengthening its competitive position with industrial OEMs.
Following the acquisition, a significant effort was undertaken to merge
the fluid power products of Dayco Products and Imperial Eastman -- with an
emphasis on maintaining the proprietary strengths of each product line, while
eliminating areas of duplication. The product offerings of the two companies
have now been consolidated and divided into two offerings -- Dayco(R)
Eastman(tm) hydraulic products, and Dayco Imperial(tm) pneumatic products --
both of which fall into the Company's Power Management area.
In fiscal 1997, the Company had growth in its high-torque synchronous
power transmission belt sales. Increased production capabilities in this
product area have allowed Mark IV to begin to pursue the roller chain market,
which is estimated to exceed $1 billion worldwide. Dayco-designed products --
like its RPP(R) Panther(R) Synchronous Belt Drive System -- are ideal
alternatives to roller chains. In comparison, the Company's Panther belt
drive system offers improved performance, increased drive life, and
drastically reduced maintenance and downtime. This high-growth area provides
Mark IV with many opportunities for geographic and product expansion.
For over 30 years, Purolator Filter Products has supplied specialized
hydraulic fluid filters for aerospace and military applications. This
capability will be utilized in targeted industrial markets in the current
year, with the introduction of a broad line of hydraulic filters. The line
will include high-pressure hydraulic and low-pressure spin-on filters, and
replacement filter elements, and will be marketed through Dayco Eastman
product distributors, as well as through traditional hydraulic filter
distributors.
<PAGE>11
Fluid Management Systems and Components
Facet International designs and manufactures filters, water separators,
bilge separators, refueling or filtration systems, and anti-pollution and
water recycling systems for all types of liquids, gases, or liquid gases, for
aviation, marine, petrochemical, power generation and general industrial
markets. During the year, Facet was selected as the exclusive supplier of all
aviation fuel filtration equipment for the new Hong Kong Airport, which is
expected to open in calendar year 1998. New products include pits, pit
valves, pit couplings, underwing couplings, meters and overflow control
valves, which are used in aviation refueling systems. In addition, the
Company has developed a line of water recycling systems for car wash
applications, a line of small bilge separators, and a spin-on filter for gas
stations.
The Dayco Eastman Predator(tm) sewer cleaning hose was introduced during
fiscal 1997. This newly-designed hose features a unique, totally bonded
construction, which prevents kinking of the hose in difficult applications.
In the general service and multi-purpose hose area, Dayco's air and water hose
were improved and consolidated in fiscal 1997, allowing distributors to stock
less inventory while still meeting the needs of their customers.
Dayco has entered a new hose market through the introduction of a highly
flexible energy transfer hose used primarily for radiant heating applications
in residential and commercial buildings. Marketed through an OEM partner,
this product replaces the stiffer, thermoplastic pipe used in current radiant
heating systems. An alternative to forced air systems, radiant heating
systems run under the floor boards, providing consistent, economical heat by
passing hot liquids through the energy transfer hose.
Purolator Filter Products has developed a unique sand filtration
technology for use in the exploration and extraction of crude oil. Using the
new, PoroPlus(tm) metal filter technology, oil rigs can pump more crude oil,
faster, and with less downtime caused by clogging -- a common problem of
current sand filters.
Dayco Swan, a manufacturer of garden hose, introduced its Hoze-O-
Saurus(tm), a new, light-weight, easy to handle "Kidz Water Hoze." The Hoze-
O-Saurus is a brightly colored purple on the outside, with an FDA-approved
drinking water safe tube specifically designed for use by children. Another
new product is the Swan(R) chemical safety hose, which uses a backflow
preventer designed to keep lawn and garden chemicals in sprayers from flowing
back into the garden hose and contaminating it.
Through Purolator Products Air Filtration, Mark IV Industrial
manufactures and distributes heating and air conditioning filters for
residential, commercial and industrial uses. The company manufactures a broad
range of filters -- from basic efficiency panel filters used in homes, to
medium- and high-efficiency products used in office buildings, hospitals and
manufacturing facilities.
<PAGE>12
During fiscal 1997, efforts to improve indoor air quality through
refined medias for existing products continued, while advances were made in
technology for new filter products. The Company's new Defiant(tm) bag and
rigid box filters and pleat media are specifically manufactured for system
applications requiring high-efficiency, non-shedding media filtration.
Customers include hospitals, health care facilities, food processing plants,
pharmaceutical manufacturing, telecommunications and other HVAC applications.
Defiant filters redefine filtration technology by outperforming similar
products in efficiency and dust-holding capacity, as well as affordability.
The Defiant media was created through the research and development
capabilities of Kimberly-Clark, who has given Purolator an "exclusive" on this
media for an introductory period of time. The Defiant media gives Purolator a
distinct advantage over the competition, which is expected to result in
additional sales and profits for the Company.
During the year, the Company's Kenly, North Carolina, operation
installed specialized equipment for the production of High Efficiency
Particulate Air (HEPA) filters and hardware. HEPA equipment operates in an
efficiency range of 99.97% to 99.999% on .3 micron particles. HEPA filters
are used in clean room areas, and in such industries as biotechnology,
micro-electronics and pharmaceutical, as well as in nuclear applications. In
order to more fully participate in the HEPA market, the Company has been
working with its customers to design a new line of housings and specialized
hardware for HEPA filters, which incorporates features and benefits that are
attractive to the industry.
Industrial Distribution Center Update
After one year of operation, the Company's distribution center in
Louisville, Kentucky, is already shipping more than twice the product
originally anticipated. In addition, as part of the integration of Imperial
Eastman, two of their warehouses were also consolidated into Louisville in the
past year. The advanced technology systems designed into this distribution
center from the start enabled the facility to handle the large volume
increase. Further efficiencies and cost savings have been realized by
instituting a cycle-counting system that eliminates the need for a yearly
inventory, while maintaining nearly 100% accuracy in tracking which products
are on the shelf and ready to ship.
Transportation and Other
Also included in Mark IV Industrial are mass transit businesses which
provide a variety of road and highway products serving the transportation and
infrastructure industries in North America, Europe and Asia. The product
lines in this group include intelligent vehicle highway systems and
information display and lighting systems, which are sold to mass transit
agencies, transportation authorities, bus, rail and aircraft OEMs, state and
local municipalities, and the transportation aftermarket.
In the electronic toll collection market, the Company has leveraged this
success with the Interagency Group and the E-ZPass(sm) system, to secure new
business. The Interagency Group represents the ten transportation authorities
in New York, New Jersey, Pennsylvania, Delaware and Maryland, which account
for more than 70% of the toll collection activity in the U.S.
<PAGE>13
Also included in this group are Luminator Mass Transit, SLE and LLE.
Together, these companies position Mark IV as a worldwide supplier of
electronic passenger information displays for public transportation vehicles.
Late in fiscal 1997, SLE won a contract to equip 6,000 buses and install the
central software for the Countdown(tm) vehicle location and passenger
information system in London, England.
Utilizing technology developed by the Company's F-P Electronics unit,
Mark IV provides the Optima(tm) line of high-intensity, high-visibility and
low-maintenance signs -- which combine the best features of its LED and flip
dot technology designs -- for fixed installation and mass transit vehicle
applications.
In addition to transportation products, the Company's Protective
Closures operation manufactures plastic and metal caps, plugs, seals and
protective netting sold to a broad base of industrial and automotive OEM
customers, while its Mokon operation produces circulating oil and water
temperature control systems.
Marketing and Competition
Mark IV's products are marketed primarily in the United States and
Europe, and to a lesser extent in Canada, Latin America 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.
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>14
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 $44.5 million; $36.8 million and $27.8
million for the Company's continuing operations in fiscal 1997, 1996 and 1995,
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 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 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 small 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.
Certain federal and state environmental superfund statutes generally
impose joint and several liability on present and former owners and operators,
transporters and generators for remediation of contaminated properties,
regardless of fault. The Company has been designated as a potentially
responsible party under these statutes at a number of sites. Based on the
facts currently known to the Company, management expects that the costs to the
Company of remedial actions at the sites where it has been named a potentially
responsible party, will not have a material adverse effect on the Company's
results of operations or financial condition.
The Company's facilities are also subject to many other federal, state
and local requirements relating to the protection of the environment, and the
Company has made, and will continue to make, expenditures to comply with such
provisions. The Company believes that its facilities are in material
compliance with these laws and regulations and does not believe that future
compliance with such laws and regulations will have a material adverse affect
on its results of operations or financial condition.
<PAGE>15
The Company's operations are also governed by many other laws and
regulations, including those relating to workplace safety and worker health,
principally the "Occupational Safety and Health Act" and regulations
thereunder which, among other requirements, establish noise and dust
standards. The Company believes that it is in material compliance with these
laws and regulations and does not believe that future compliance with such
laws and regulations will have a material adverse affect on its results of
operations or financial condition.
Employees
The Company currently employs approximately 15,800 persons, of whom
approximately 12,400 are production employees, with the remainder serving in
executive, administrative, engineering or sales capacities. Approximately
2,700 production employees are covered by 12 collective bargaining agreements
which expire at various times through the year 2001. The Company believes its
relationship with its employees is good.
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 - 31,000 31,000
Automotive (1) (3) 3,783,000 1,079,000 4,862,000
Industrial (2) (3) 3,477,000 621,000 4,098,000
(1) Consisting of the following twenty-five facilities:
North American facilities (approximately 3,759,000 square feet):
Waynesville, NC; Walterboro, SC; Williston, SC; Ocala, FL; Ft. Worth,
TX; Fayetteville, AR; Weston, Ontario, Canada; Easley, SC; Lexington,
TN; Fayetteville, NC; Salt Lake City, UT; Mississauga, Ontario, Canada;
Detroit, MI; Big Rapids, MI.
European facilities (approximately 1,103,000 square feet): Torino, Italy
(2); Baudour, Belgium; Chieti, Italy; Manopello, Italy; Varberg, Sweden;
Ulricehamn, Sweden; Blidsberg, Sweden: Valperga, Italy; Follonica,
Italy; Melbourne, Australia.
<PAGE>16
(2) Consisting of the following thirty-eight facilities:
North American facilities (approximately 3,640,000 square feet):
Springfield, MO; Fort Scott, KS; Alliance, NE; Eldora, IA; McCook, NE;
Walnut, CA; Davenport, IA; 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; Mississauga, Ontario, Canada (2); Cobourg, Ontario, Canada; Grand
Island, NY; Hudsonville, MI; Costa Messa, CA; Manitowoc, WI (2); Barrie,
Ontario, Canada; Red Wing, MI; El Paso, TX.
European Facilities (approximately 458,000 square feet): Halesowen,
U.K.; Torino, Italy; Barcelona, Spain; Treforest, Wales, UK; Lacoruna,
Spain; Rastatt, Germany; 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 manufacture products the
Company classifies in its Automotive segment.
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>17
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 declared in April 1997.
Fiscal 1997 Fiscal 1996
---------------- ------------------
Low High Low High
--- ---- --- ----
1st Quarter $18.125 $21.125 $15.375 $18.250
2nd Quarter $19.500 $22.375 $18.250 $21.375
3rd Quarter $19.000 $22.625 $16.750 $21.375
4th Quarter $19.875 $22.500 $16.375 $20.000
As of February 28, 1997, the approximate number of holders of record of
the Company's Common Stock was 2,400.
The Company declared total cash dividends of $.138 and $.113 per share
during fiscal 1997 and 1996, respectively.
<PAGE>18
<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA
FIVE YEAR SUMMARY OF OPERATIONS
(Amounts in thousands, except per share data)
Fiscal Year Ended the Last Day of February,
------------------------------------------------
1997 1996 (a) 1995 (a) 1994 (a) 1993 (a)
---- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales from
continuing operations $2,076,000 $1,779,200 $1,306,400 $ 958,900 $ 806,700
Operating income (b) $ 223,200 $ 188,300 $ 135,500 $ 104,100 $ 86,700
Restructuring charge $ 112,500 - - - -
Interest expense $ 59,000 $ 52,600 $ 46,300 $ 43,100 $ 44,400
Income from continuing
operations(c):
Before restructuring
charge $ 100,200 $ 82,800 $ 55,000 $ 38,200 $ 26,700
Restructuring charge (67,500) - - - -
Total continuing 32,700 82,800 55,000 38,200 26,700
Income from discontinued
operations (c):
Before divestitures 5,900 9,600 12,900 12,900 16,000
Gain on divestitures 17,500 - - - -
Total discontinued 23,400 9,600 12,900 12,900 16,000
Extraordinary items (c) - - (1,100) (21,700) (3,700)
Cumulative effect of
accounting change(c) - - - (26,000) -
NET INCOME $ 56,100 $ 92,400 $ 66,800 $ 3,400 $ 39,000
Primary earnings
per share (d):
Continuing operations:
Before restructuring
charge $ 1.51 $ 1.25 $ 1.03 $ .78 $ .55
Restructuring charge (1.02) - - - -
Total continuing .49 1.25 1.03 .78 .55
Discontinued operations:
Before divestitures .09 .15 .24 .26 .33
Gain on divestitures .26 - - - -
Total discontinued .35 .15 .24 .26 .33
Extraordinary items - - (.02) (.44) (.08)
Accounting change - - - (.53) -
NET INCOME $ .84 $ 1.40 $ 1.25 $ .07 $ .80
<PAGE>19
Fiscal Year Ended the Last Day of February,
------------------------------------------------
1997 1996 (a) 1995 (a) 1994 (a) 1993 (a)
----- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Fully-diluted earnings
per share (d):
Continuing operations:
Before restructuring
charge $ 1.50 $ 1.24 $ .96 $ .72 $ .54
Restructuring charge (1.01) - - - -
Total continuing .49 1.24 .96 .72 .54
Discontinued operations:
Before divestitures .09 .15 .21 .22 .27
Gain on divestitures .26 - - - -
Total discontinued .35 .15 .21 .22 .27
Extraordinary items - - (.02) (.37) (.06)
Accounting change - - - (.44) -
NET INCOME $ .84 $ 1.39 $ 1.15 $ .13 $ .75
Cash dividends paid
per share (d) $ .138 $ .113 $ .097 $ .084 $ .073
Weighted average
number of shares
outstanding (d):
Primary 66,300 66,200 53,600 49,100 48,600
Fully-diluted 66,700 66,600 60,700 58,700 58,200
As of the Last Day of February,
------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital $ 364,600 $ 404,900 $ 379,700 $ 312,800 $ 275,400
Total assets $1,974,600 $2,013,100 $1,846,400 $1,282,300 $1,124,800
Long-term debt $ 528,500 $ 642,500 $ 610,700 $ 567,200 $ 497,100
Stockholders' equity $ 758,400 $ 725,500 $ 635,500 $ 345,400 $ 345,600
<FN>
____________________________
(a) Restated to reflect discontinued operations.
(b) Income from continuing operations before restructuring charge, interest expense
and taxes.
(c) Net of related tax effects.
(d) Restated to reflect the effects of the 5% stock dividend declared in April 1997.
</TABLE>
<PAGE>20
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 borrowings under various credit facilities to
the extent required. During fiscal 1997, net cash provided by earnings
(income before restructuring and non-cash items) was $200 million, a 9.3%
increase over the $183 million generated in fiscal 1996, which in turn
represented an increase of $56.5 million (45%) over fiscal 1995. At February
28, 1997, the Company's working capital investment was $364.6 million, a net
decrease of $40.3 million (10%) in comparison to $404.9 million at February
29, 1996, which in turn represented an increase of $25.2 million (6.6%) over
the total at February 28, 1995.
Capital expenditures related to continuing operations in fiscal 1997 were
$109.2 million, which exceeded depreciation and amortization expense of $69
million for the year, and reflect an increase of $18.7 million over fiscal
1996's expenditures. The increased level of expenditures in fiscal 1997
relates to the Automotive segment, with new facilities and equipment
expenditures required to support new products and increased business
opportunities primarily in the U.S. and Italy, and also in its expansion
efforts in Brazil, Argentina and Australia. Excluding the effects of Imperial
Eastman, expenditures in the Industrial segment in fiscal 1997 were up
slightly from the level incurred in fiscal 1996. Capital expenditures related
to continuing operations in fiscal 1996 were $90.5 million, which exceeded
depreciation and amortization expense of $59.2 million for the year, and
reflect an increase of $44.7 million over fiscal 1995's expenditures of $45.8
million. Approximately $11 million of the fiscal 1996 increase resulted from
the capital requirements of Purolator for all of fiscal 1996, and only four
months of fiscal 1995. Additionally, approximately $21 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 in fiscal 1996
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 in
fiscal 1998, due in part to capital required to effect the restructuring.
Cash provided by earnings in fiscal 1997 was sufficient to fund the Company's
capital expenditure investments, as well as the cash expenditure requirements
of its restructuring efforts during the fiscal year. Management believes that
cash generated from earnings will continue to be sufficient to fund such needs
for the foreseeable future.
<PAGE>21
In addition to the capital expenditures identified above, other investment
activities of the Company during the past few years include the following:
- - In March 1997, the Company announced its intention to acquire up to 7.3
million shares of its Common Stock outstanding. It is expected that
such shares would be purchased in the open-market, or through privately
negotiated transactions, at prices which the Company considers to be
attractive. Through May 1, 1997, the Company acquired approximately
1.5 million of such shares, at an average cost of $23.33 per share, or
a total cost of approximately $35 million.
- - As part of the Company's strategy to become more focused within its
Industrial business segment, the Company sold its Professional Audio,
Vapor Corporation, Interstate Highway Signs, and Eagle Signal
businesses and certain other non-operating assets during fiscal 1997.
Shortly after the end of the fiscal year, the Company also sold its
Gulton Data Systems and LFE Industrial Systems businesses. The total
of all of these divestitures generated gross proceeds of approximately
$313 million.
- - During fiscal 1997, the Company initiated a restructuring of its
manufacturing and distribution facilities, which is expected to improve
customer service, reduce costs and dedicate its facilities to either
the Automotive or Industrial business segments. The restructuring
resulted in a pre-tax charge against earnings of $112.5 million, with
$51.8 million related to cash expenditures required to be made
primarily over a two-year period. The remaining $60.7 million non-cash
portion of the charge represents primarily asset write-offs and pension
benefits to be paid out of the Company's pension fund.
- - At the beginning of fiscal 1997, the Company acquired the net assets of
Imperial Eastman for a cash purchase price of approximately $78
million. Imperial Eastman is a 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. Imperial Eastman is included in the Company's
Industrial business segment.
- - Near the end of fiscal 1996, the Company acquired the net assets of
FitzSimons Manufacturing Company ("FitzSimons") for a cash purchase
price of approximately $24.4 million. During fiscal 1997, the Company
also acquired the net assets of Cinotto Tecnomeccanica S.p.A. ("CTM")
for a cash purchase price of approximately $17.2 million. Both of
these acquisitions are a part of the Automotive segment, and enabled
the segment to expand in the U.S. and Europe, and extend its systems
delivery capability in its fuel systems and power transmission
businesses worldwide.
- - In November 1994, the Company acquired all of the stock of Purolator
Products Company ("Purolator") for a total cash purchase price of
approximately $286.3 million. Purolator is a manufacturer of a broad
range of filtration products used principally in the automotive
aftermarket, and in specialized industrial applications. The Purolator
acquisition provided a significant increase to the Automotive segment's
existing aftermarket business, and provided opportunities for each
product group to benefit from the segment's combined marketing and
distribution capabilities and complementary customer base.
<PAGE>22
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 March 1996, the Company entered into a $500 million, five-year non-
amortizing revolving credit facility (the "Credit Agreement") with
various financial institutions. The proceeds of the initial borrowings
under the Credit Agreement were used to repay amounts outstanding under
the Company's previously existing credit agreements.
- - In March 1996, the Company also completed the private placement of $250
million principal amount of its 7-3/4% Senior Subordinated Notes due
2006 (the "7-3/4% Notes"). The net proceeds from the sale of the 7-
3/4% Notes were used to reduce outstanding indebtedness under the
Credit Agreement.
- - In December 1994, the Company completed an underwritten public offering
of 7.1 million shares of its Common Stock at a public offering price of
$16.41 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.
- - During fiscal 1995, through privately negotiated transactions and a
call for redemption, all of the Company's 6-1/4% Convertible Debentures
(due February 15, 2011), with a face value of approximately $114.2
million, were converted into approximately 9.1 million shares of the
Company's Common Stock.
As of February 28, 1997, the Company had borrowing availability under its
Credit Agreement of $500 million and availability under its various other
domestic and foreign demand lines of credit of approximately $130 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 1997 amounted to approximately $20
million and the notional amount of such contracts outstanding at February 28,
1997 was approximately $2 million.
Results of Operations
The Company classifies its operations into the following two business
segments:
(i) Automotive, which includes the design, manufacture and
distribution of (a) fuel, power transmission, and fluid handling
systems and components, and (b) filters and filtration systems,
for the global automotive aftermarket and OEM (original equipment
manufacturers) market; and
<PAGE>23
(ii) Industrial, which includes the design, manufacture and
distribution of power and fluid management systems and components
for industrial OEM and distribution markets worldwide.
The results of operations of Imperial Eastman, CTM, FitzSimons and Purolator
have been included in the Company's results of operations from their
respective dates of acquisition, as reflected in the Company's audited
financial statements, including the segment information identified in Note 14
to such financial statements. Results related to the Company's discontinued
operations have been excluded from the results of continuing operations for
all periods presented and discussed herein.
Net sales increased approximately $300 million (16.7%) in fiscal 1997 in
comparison to fiscal 1996, with approximately $190 million of the increase
generated by the Industrial segment (a 24.5% increase) and approximately $110
million generated by the Automotive segment (a 11% increase). Reflecting the
effects of acquisitions during the periods, the increase on a pro forma basis
was approximately $140 million, with $75 million generated by the Automotive
segment and $65 million generated by the Industrial segment, with each segment
reflecting an increase of approximately 7% over fiscal 1996.
The pro forma sales increase in the Automotive segment for fiscal 1997 was led
by growth in markets outside of the U.S. of approximately 13%, with the
majority of the increase occurring in both the aftermarket and OEM markets in
Europe. The segment's sales in the U.S. were up approximately 4%, with the
growth in the OEM market somewhat stronger than in the aftermarket. The pro
forma sales increase in the Industrial segment for fiscal 1997 was led by
growth in the U.S. markets of approximately 8%, while the segment's sales
outside of the U.S. were up approximately 4%.
Net sales in fiscal 1996 reflect an increase of approximately $475 million
(36%) compared to fiscal 1995, with approximately $285 million generated by
the Automotive segment (a 40% increase) and approximately $190 million
generated by the Industrial segment (a 32% increase). Reflecting the effects
of acquisitions during the periods, most significantly the Purolator
acquisition, the sales increase on a pro forma basis was approximately $150
million (8%), with approximately $55 million generated by the Automotive
segment (a 6% increase) and $95 million generated by the Industrial segment (a
12% increase).
The pro forma sales increase in the Automotive segment for fiscal 1996 was led
by growth in markets outside of the U.S. of approximately 20%, with the
majority of the increase occurring in both the aftermarket and OEM markets in
Europe. The segment's sales in the U.S. were relatively flat in fiscal 1996
in both the segment's aftermarket and OEM markets. The pro forma sales
increase in the Industrial segment for fiscal 1996 was attributable to
significant growth of approximately 17% in the segment's European markets, and
10 % in the segment's U.S. markets.
Cost of products sold as a percentage of consolidated net sales were 67.8%,
67.7%, and 66.0% in fiscal 1997, 1996 and 1995, respectively. The increase in
the percentage of costs from fiscal 1995 is primarily the result of the
<PAGE>24
Purolator acquisition, due to its historically lower gross margin. On a pro
forma basis including Purolator for the entire fiscal year, such costs were
67.5% for fiscal 1995. This level of costs indicates the negative pressures
on the margins experienced by both of the Company's business segments, a
portion of which has been substantially offset by the positive effects of the
Company's cost control and cycle time reduction programs. It is anticipated
that the Company's current restructuring program will have a beneficial effect
on the level of such costs by the end of fiscal 1998 or early fiscal 1999.
Selling and administration costs as a percentage of consolidated net sales
were 16.0%, 16.3% and 18.1% in fiscal 1997, 1996 and 1995, respectively. The
reduction in the percentage of costs from fiscal 1995 are partially 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
17.6% for fiscal 1995. The reduced level of costs also reflects operating
efficiencies achieved 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 $7.7 million (21%) in fiscal 1997
over fiscal 1996, which in turn increased by $9.0 million (32%) over fiscal
1995. The increases are primarily due to the acquisition of Imperial Eastman
and FitzSimons for fiscal 1997 and Purolator for fiscal 1996. As a percentage
of consolidated net sales, such costs were 2.1% in each of fiscal 1997, 1996
and 1995. This consistent level of investment reflects the Company's
continuing emphasis on new product development.
Depreciation and amortization expense increased by $9.8 million (17%) in
fiscal 1997 over fiscal 1996, which in turn increased by $14.9 million (34%)
over fiscal 1995. The increases are attributable to the acquisition of
Imperial Eastman and FitzSimons for fiscal 1997 and Purolator for fiscal 1996,
as well as the increased level of capital equipment expenditures in the past
two years.
The above mentioned items resulted in the following operating income (before
the restructuring charge) for each of the fiscal years presented (dollars in
millions):
1997 1996 1995
----------------- --------------- ---------------
% of % of % of
Related Related Related
Amount Sales Amount Sales Amount Sales
------ ------- ----- ------- ------ ------
OPERATING INCOME
Automotive $122.1 11.0% $110.6 11.0% $ 79.3 11.0%
Industrial 120.5 12.5% 95.1 12.3% 72.1 12.3%
Total operating
income before
corporate expenses 242.6 11.7% 205.7 11.6% 151.4 11.6%
Corporate expenses (19.4) (0.9)% (17.4) (1.0)% (15.9) (1.2)%
Operating Income $223.2 10.8% $188.3 10.6% $135.5 10.4%
<PAGE>25
The $112.5 million restructuring charge recognized in fiscal 1997 relates to
the Company's decision to realign and refocus its operations. The effect of
this charge, after taxes, reduced income from continuing operations by $67.5
million, or $1.01 per fully-diluted share of common stock.
Interest expense in fiscal 1997 increased $6.4 million (12.2%) over fiscal
1996, which in turn increased $6.3 million (13.6%) over fiscal 1995. The
increase in fiscal 1997 is primarily the result of increased borrowings
required to finance the Imperial Eastman and FitzSimons acquisitions. The
increase in fiscal 1996 represents the net effects of increased borrowings to
finance the Purolator acquisition, substantially offset 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.
The Company's provision for income taxes as a percentage of income before
taxes was 39.0% (excluding the restructuring charge), 39.0% and 38.3% in
fiscal 1997, 1996 and 1995, respectively. The higher rates in comparison to
the U.S. statutory tax rate are primarily the result of income in foreign
jurisdictions with higher statutory tax rates than in the U.S., and state and
local taxes.
As a result of all of the above, income from continuing operations, before the
restructuring charge, was $100.2 million, an increase of $17.4 million (21%)
over the $82.8 million reported for fiscal 1996, which in turn increased $27.8
million (50%) over fiscal 1995.
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.
Forward-Looking Information
This Management's Discussion and Analysis of Financial Condition and Results
of Operations and other sections of this Annual Report contain forward-looking
statements that are based on current expectations, estimates and projections
about the industries in which the Company operates, as well as management's
beliefs and assumptions. Words such as "expects", "anticipates", "intends",
"plans", "believes", "seeks", "estimates", variations of such words and
similar expressions are intended to identify such forward-looking statements.
These statements are not guarantees of future performance and involve certain
risks, uncertainties and assumptions ("Future Factors") which are difficult to
predict. Therefore, actual outcomes and results may differ materially from
what is expressed or forecasted in such forward-looking statements. The
Company undertakes no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or
otherwise.
<PAGE>26
The Future Factors that may affect the operations, performance and results of
the Company's businesses include the following:
a. general economic and competitive conditions in the markets and
countries in which the Company operates, and the risks inherent
in international operations and joint ventures;
b. the Company's ability to continue to control and reduce its costs
of production;
c. the level of consumer demand for new vehicles equipped with the
Company's products;
d. the level of consumer demand for the Company's aftermarket
products, which varies based on such factors as the severity of
winter weather, the age of automobiles in the Company's markets
and the impact of improvements or changes in original equipment
products;
e. the effect of changes in the distribution channels for the
Company's aftermarket and industrial products;
f. the strength of the U.S. dollar against currencies of other
countries where the Company operates, as well as cross-currencies
between the Company's operations outside of the U.S. and other
countries with whom they transact business; and
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially
from those described in the forward-looking statements. The Company does not
intend to update forward-looking statements.
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 28, 1997......................................... 27
Consolidated Balance Sheets at February 28, 1997
and February 29, 1996 ....................................................28
Consolidated Statements of Income for each of
the three fiscal years in the period ended
February 28, 1997........................................................29
Consolidated Statements of Stockholders' Equity for
each of the three fiscal years in the period
ended February 28, 1997..................................................30
Consolidated Statements of Cash Flows
for each of the three fiscal years in
the period ended February 28, 1997.......................................31
Notes to Consolidated Financial Statements ................................32
<PAGE>27
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Stockholders
of Mark IV Industries, Inc.
We have audited the accompanying consolidated balance sheets of Mark IV
Industries, Inc. and Subsidiaries as of February 28, 1997 and February 29,
1996, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three fiscal years in the period ended February
28, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Mark IV
Industries, Inc. and Subsidiaries as of February 28, 1997 and February 29,
1996, and the consolidated results of their operations and their cash flows
for each of the three fiscal years in the period ended February 28, 1997, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Rochester, New York
March 18, 1997
<PAGE>28
MARK IV INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
Last Day of February 1997 and 1996
(Dollars in Thousands)
ASSETS 1997 1996
----- -----
Current Assets:
Cash $ 1,300 $ 900
Accounts receivable 390,100 399,600
Inventories 377,600 405,000
Other current assets 76,500 68,300
Total current assets 845,500 873,800
Pension and other non-current assets 214,000 216,500
Property, plant and equipment, net 553,300 553,700
Cost in excess of net assets acquired 361,800 369,100
TOTAL ASSETS $1,974,600 $2,013,100
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current maturities of debt $ 89,300 $ 95,100
Accounts payable 188,400 191,300
Compensation related liabilities 89,300 71,300
Accrued interest 20,400 12,700
Other current liabilities 93,500 98,500
Total current liabilities 480,900 468,900
Long-Term Debt:
Senior debt 22,000 136,100
Subordinated debt 506,500 506,400
Total long-term debt 528,500 642,500
Other non-current liabilities 206,800 176,200
Stockholders' Equity:
Preferred stock - $.01 par value;
Authorized 10 million shares;
No issued shares - -
Common stock - $.01 par value;
Authorized 200 million shares;
Issued 66.3 million shares in 1997 and
66.2 million shares in 1996 700 600
Additional paid-in capital 696,500 617,600
Retained earnings 79,300 109,700
Foreign currency translation adjustment (18,100) (2,400)
Total stockholders' equity 758,400 725,500
TOTAL LIABILITIES
& STOCKHOLDERS' EQUITY $1,974,600 $2,013,100
The accompanying notes are an integral part of these financial statements.
<PAGE>29
<TABLE>
<CAPTION>
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED THE LAST DAY OF FEBRUARY 1997, 1996 and 1995
(Amounts in Thousands, Except Per Share Data)
1997 1996 1995
(As Restated) (As Restated)
------- ------- ------
<S> <C> <C> <C>
Net sales from continuing operations $2,076,000 $1,779,200 $1,306,400
Operating costs:
Cost of products sold 1,408,100 1,205,100 862,100
Selling and administration 331,200 289,800 236,700
Research and development 44,500 36,800 27,800
Depreciation and amortization 69,000 59,200 44,300
Total operating costs 1,852,800 1,590,900 1,170,900
Operating income, before restructuring charge 223,200 188,300 135,500
Restructuring charge 112,500 - -
Interest expense 59,000 52,600 46,300
Income from continuing operations,
before provision for taxes 51,700 135,700 89,200
Provision for taxes 19,000 52,900 34,200
Income from continuing operations 32,700 82,800 55,000
Income from discontinued operations:
Income from operations, net of taxes 5,900 9,600 12,900
Gain on divestitures, net of taxes 17,500 - -
Total from discontinued operations 23,400 9,600 12,900
Extraordinary loss from early
extinguishment of debt, net of tax - - (1,100)
NET INCOME $ 56,100 $ 92,400 $ 66,800
Net income per share of common stock:
Primary:
Income from continuing operations $ .49 $ 1.25 $ 1.03
Income from discontinued operations .35 .15 .24
Extraordinary loss - - (.02)
NET INCOME $ .84 $ 1.40 $ 1.25
Fully-diluted:
Income from continuing operations $ .49 $ 1.24 $ .96
Income from discontinued operations .35 .15 .21
Extraordinary loss - - (.02)
NET INCOME $ .84 $ 1.39 $ 1.15
Weighted average number of shares outstanding:
Primary 66,300 66,200 53,600
Fully-diluted 66,700 66,600 60,700
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>30
<TABLE>
<CAPTION>
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED THE LAST DAY OF FEBRUARY 1997, 1996 AND 1995
(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, 1994 $ 400 $261,500 $ 88,600 $ (5,100)
Net income for fiscal 1995 66,800
Cash dividends of $.097 per share (5,600)
Stock dividend of 5% 59,000 (59,000)
Sale of Common Stock at
$16.41 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 $.113 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)
Net income for fiscal 1997 56,100
Cash dividends of $.138 per share (9,100)
Stock dividend of 5% 100 77,300 (77,400)
Restricted stock amortization 1,300
Stock options activity,
including related tax benefits 300
Translation adjustment (15,700)
Balance at February 28, 1997 $ 700 $696,500 $ 79,300 $(18,100)
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>31
<TABLE>
<CAPTION>
MARK IV INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED THE LAST DAY OF FEBRUARY 1997, 1996 AND 1995
(Dollars in Thousands)
1997 1996 1995
(As Restated) (As Restated)
------ --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Income from continuing operations $ 32,700 $ 82,800 $ 55,000
Items not affecting cash:
Depreciation and amortization 69,000 59,200 44,300
Deferred income taxes 23,200 25,700 14,500
Pension income, net of other items (4,800) (4,900) (11,100)
Restructuring charge, net of tax 36,400 - -
Income from discontinued operations,
before non-cash items 12,300 20,200 23,800
Changes in assets and liabilities, net
of effects of acquired and
divested businesses:
Accounts receivable (43,200) 5,900 (10,400)
Inventories (31,900) (27,800) (18,900)
Other assets (20,700) (22,400) (3,800)
Accounts payable and other liabilities (1,200) (26,800) 17,700
Net assets of discontinued operations (10,900) (22,300) (13,700)
Net cash provided by
operating activities 60,900 89,600 97,400
Cash flows from investing activities:
Acquisitions (95,200) (28,200) (300,900)
Divestitures and asset sales 276,600 1,600 12,100
Purchase of plant and equipment, net:
Continuing operations (106,900) (87,100) (44,600)
Discontinued operations (4,000) (5,000) (5,000)
Net cash provided from (used in)
investing activities 70,500 (118,700) (338,400)
Cash flows from financing activities:
Credit agreement borrowings, net (97,300) (242,700) 111,200
Issuance of subordinated debt - 248,400 -
Other changes in long-term debt, net (16,700) 3,400 900
Changes in short-term bank borrowings (8,200) 27,500 19,500
Common stock transactions 300 100 114,800
Cash dividends paid (9,100) (7,500) (5,100)
Net cash provided from (used in)
financing activities (131,000) 29,200 241,300
Net increase in cash 400 100 300
Cash and cash equivalents:
Beginning of the year 900 800 500
End of the year $ 1,300 $ 900 $ 800
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>32
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 automotive and industrial power and fluid
transfer and filtration 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.
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.
<PAGE>33
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 period outstanding
during fiscal 1995.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128 - Earnings Per Share (SFAS
No. 128), which will be effective for the Company's fiscal year ended February
28, 1998. SFAS No. 128 is intended to simplify the earnings per share
computations and make them more comparable from company to company. The
adoption of SFAS No. 128 is not expected to have a significant impact on the
Company's earnings per share as currently determined.
Stock-Based Compensation
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123 - Accounting for Stock-Based Compensation ("SFAS No. 123"), which is
effective for the Company's fiscal year ended February 28, 1997. SFAS No. 123
requires companies to recognize compensation expense for grants of stock
options, or provide pro forma disclosures relative to what the effect of such
accounting recognition would have been. The Company has chosen not to
recognize compensation expense for options granted under its Incentive Stock
Option Plans, and the related pro forma information has not been presented,
since such accounting recognition would not have a substantive effect on the
Company's reported results of operations. Tax benefits received by the
Company upon the exercise and subsequent sale of the options by its employees
are recognized as an increase in additional paid in capital as they occur.
Consolidated Statements of Cash Flows
For purposes of cash flows, the Company considers overnight investments as
cash equivalents. The Company paid interest of approximately $62 million; $64
million and $56 million in fiscal 1997, 1996 and 1995, respectively. The
Company paid income taxes of approximately $26 million; $26 million and $22
million in fiscal 1997, 1996 and 1995, respectively.
<PAGE>34
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Restructuring
During fiscal 1997, the Company began to realign and refocus its operations,
including the closure of certain facilities with an aggregate of one million
square feet of manufacturing and distribution/warehousing space. The
realignment will result in the termination of approximately 1,700 employees,
with a net reduction of approximately 1,000 employee positions. As a part of
this realignment, facilities producing both automotive and industrial products
will become dedicated to one or the other of the Company's business segments.
The restructuring is expected to be substantially completed by the middle of
fiscal 1999. In this regard, the Company recognized a restructuring charge of
$112.5 million in fiscal 1997, and such amount has been identified separately
in the accompanying consolidated statements of income. The primary elements
of the charge are as follows (dollars in thousands, except per share amount):
Amount
Expended or Balance
Adjusted at Remaining at
Total February 28, February 28,
Charge 1997 1997
-------- ----------- ----------
Non-cash charges $ 60,700 $ 60,700 $ -
Facility closing and lease
run-out costs 24,700 5,500 19,200
Employee termination
and other costs 27,100 13,100 14,000
Pre-tax charge 112,500 79,300 33,200
Tax benefit 45,000 31,700 13,300
Net of tax charge $ 67,500 $ 47,600 $ 19,900
Net of tax charge per
fully-diluted share
of Common Stock $ 1.01
The non-cash charges include fixed asset impairments, and also include amounts
to be paid to employees out of the Company's master defined-benefit pension
plan, as well as the accelerated recognition of related unamortized pension
costs. The employee termination and other costs include amounts to be paid
directly by the Company to employees of certain of the Company's manufacturing
and distribution facilities in the U.S. and Europe.
<PAGE>35
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Acquisitions and Divestitures
In fiscal 1997, the Company acquired the net assets of Imperial Eastman for a
cash purchase price of approximately $78 million. Imperial Eastman is a
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. Imperial Eastman is
included in the Company's Industrial business segment.
In fiscal 1996, the Company acquired the net assets of FitzSimons
Manufacturing Company ("FitzSimons") for a cash purchase price of
approximately $24.4 million. FitzSimons is a manufacturer of fuel system
components for the North American automobile and truck industries, and is
included in the Company's Automotive business segment.
In fiscal 1995, the Company acquired Purolator Products Company ("Purolator")
for a total cash purchase price of approximately $286 million. Purolator is a
manufacturer of a broad range of filtration products used principally in the
automotive aftermarket, and in specialized industrial applications.
In February 1997, the Company completed the sale of its Professional Audio
business for cash proceeds of approximately $156.4 million. Earlier in the
fiscal year, the Company also completed the sale of its Vapor Corporation
business and certain other divestitures, bringing total proceeds received for
all divestitures in the fiscal year to approximately $277 million. As a
result of the significance of the operations divested, all of which were a
part of the Company's Industrial business segment, their results of operations
up to their disposal dates have been segregated from the Company's continuing
operations and presented as discontinued operations in the accompanying
consolidated statements of income and cash flows for fiscal 1997. The
consolidated statements of income and cash flows for fiscal 1996 and 1995 have
been restated to reflect such discontinued operations in a manner consistent
with the presentation for fiscal 1997. The results of operations of these
discontinued businesses up to their respective disposal dates were as follows
(dollars in thousands):
1997 1996 1995
Sales $218,100 $309,300 $296,900
Income before taxes $ 9,700 $ 15,700 $ 21,200
Provision for taxes 3,800 6,100 8,300
Income from discontinued operations $ 5,900 $ 9,600 $ 12,900
Income from discontinued operations reflects the allocation of interest
expense to discontinued operations, after tax effects, of $4.8 million, $5.2
million and $4.6 million in fiscal 1997, 1996 and 1995, respectively.
<PAGE>36
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Accounts Receivable and Inventories
Accounts receivable are reflected net of allowances for doubtful accounts of
$14.7 million and $16.7 million at February 28, 1997 and February 29, 1996,
respectively. The amount at February 29, 1996 included $2.4 million related
to discontinued operations.
Inventories consist of the following at February 28, 1997 and February 29,
1996 (dollars in thousands):
1997 1996
Raw materials $ 87,200 $ 112,900
Work-in-process 68,700 57,500
Finished goods 221,700 234,600
Total $ 377,600 $ 405,000
The total at February 29, 1996, includes $75.3 million related to discontinued
operations.
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 historical FIFO costs by approximately $37.2 million
and $40.0 million at February 28, 1997 and February 29, 1996, respectively.
The excess at February 29, 1996, includes $1.8 million related to discontinued
operations.
5. Property, Plant and Equipment
Property, plant and equipment are stated at cost and consist of the following
at February 28, 1997 and February 29, 1996 (dollars in thousands):
1997 1996
Land and land improvements $ 25,000 $ 43,400
Buildings 146,800 155,300
Machinery and equipment 529,800 547,700
Total property, plant and equipment 701,600 746,400
Less accumulated depreciation 148,300 192,700
Property, plant and equipment, net $553,300 $553,700
The net amount at February 29, 1996, includes approximately $56 million
related to discontinued operations.
Depreciation expense related to continuing operations was approximately $55.7
million; $46.8 million; and $34.9 million in fiscal 1997, 1996 and 1995,
respectively.
<PAGE>37
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired is presented net of accumulated
amortization of approximately $41.2 million and $39.3 million at February 28,
1997 and February 29, 1996, respectively. Cost in excess of net assets
acquired at February 28, 1997 reflects approximately $41.3 million related to
the Company's acquisitions in fiscal 1997, and also reflects the elimination
of approximately $40.1 million which related to discontinued operations.
Amortization expense related to continuing operations was approximately $9.6
million; $8.4 million; and $5.8 million in fiscal 1997, 1996 and 1995,
respectively.
7. Long-Term Debt
Long-term debt consists of the following at February 28, 1997 and February 29,
1996 (dollars in thousands):
1997 1996
Senior debt:
Credit Agreement $ - $ 97,300
Other items 27,400 46,700
Total senior debt 27,400 144,000
Less current maturities (5,400) (7,900)
Net senior debt 22,000 136,100
Subordinated debt:
7-3/4% Senior Subordinated Notes 248,500 248,400
8-3/4% Senior Subordinated Notes 258,000 258,000
Total subordinated debt 506,500 506,400
Total long-term debt 528,500 642,500
Stockholders' equity 758,400 725,500
Total capitalization $1,286,900 $1,368,000
Long-term debt as a percentage
of total capitalization 41.1% 47.0%
The Company's primary credit agreement (the "Credit Agreement") 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.
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 28, 1997, the Applicable Margin and Facility Fee Rate are 0.225% and
.15% respectively.
<PAGE>38
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
The 7-3/4% Notes are due 2006, and are general unsecured obligations of the
Company. The 7-3/4% Notes 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 8-3/4% Notes are due 2003, and are
redeemable beginning in April 1998, at 104.375% of principal amount, and
thereafter at an annually declining premium over par until April 2001, when
they are redeemable at par. The related Indentures for these Notes limit the
payment of dividends and the repurchase of the Company's Common Stock, and
include certain other restrictions and limitations customary with subordinated
indebtedness of this type.
The Company has an interest rate swap agreement in an aggregate notional
amount of approximately $30 million, denominated in Italian Lire, under which
it is paying interest at an annual rate of approximately 12.0%. The
agreement, which expires in March 1998, effectively converts the variable rate
of interest payable by the Company on such amount of its indebtedness to a
fixed annual rate of interest.
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 28, 1997 and February 29, 1996 was
approximately $526 million and $650 million, respectively.
Annual maturities of long-term debt for the next five fiscal years are
approximately: 1998-$5.4 million; 1999-$9.3 million; 2000-$4.0 million;
2001-$3.4 million; and 2002-$3.3 million.
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 related to continuing operations was
approximately $16.8 million; $16.5 million and $14.7 million in fiscal 1997,
1996 and 1995, respectively. Future minimum rental payments under operating
leases related to continuing operations are approximately: 1998-$13.6
million; 1999-$9.4 million; 2000-$6.5 million; 2001-$4.2 million; 2002-$3.6
million; and 2003 and thereafter - $13.3 million.
<PAGE>39
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Income Taxes
Income from continuing operations, before provision for taxes, and the related
provision for taxes for fiscal 1997, 1996 and 1995 consists of the following
(dollars in thousands):
1997 1996 1995
Income before provision for taxes:
United States $ 87,700 $ 71,900 $ 56,200
Foreign 76,500 63,800 33,000
Restructuring charge (112,500) - -
Total $ 51,700 $135,700 $ 89,200
Provision for taxes:
Currently payable:
United States $ 24,600 $ 13,700 $ 10,100
Foreign 16,200 13,500 9,600
Restructuring related (8,000) - -
Total currently payable 32,800 27,200 19,700
Deferred:
United States 12,900 14,800 6,100
Foreign 10,300 10,900 8,400
Restructuring related (37,000) - -
Total deferred (13,800) 25,700 14,500
Total provision for taxes $ 19,000 $ 52,900 $ 34,200
The provision for taxes on income from continuing operations for fiscal 1997,
1996, and 1995 differs from the amount computed using the United States
statutory income tax rate as follows (dollars in thousands):
1997 1996 1995
Expected tax at United States
statutory income tax rate $18,100 $47,500 $ 31,200
Permanent differences 2,100 1,400 1,700
State and local income taxes (1,300) 2,300 1,500
Foreign tax rate differences
and other items, net 100 1,700 (200)
Total provision for taxes $19,000 $52,900 $ 34,200
The provision for taxes on income from discontinued operations, before
divestiture considerations, was approximately 39% in each of fiscal 1997, 1996
and 1995. The higher effective tax rate than the U.S. statutory tax rate is
due primarily to foreign income taxed at higher statutory tax rates. The gain
on divestitures in fiscal 1997, before taxes, was approximately $25.2 million,
which resulted in a tax provision of $7.7 million, for an effective tax rate
of approximately 31%. This lower effective tax rate was caused by a higher
tax basis in the stock of certain of the entities sold, in comparison to the
underlying book basis in the net assets included in such entities.
<PAGE>40
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 28, 1997 and February 29, 1996 (dollars in thousands):
1997 1996
Current:
Accounts receivable $ 5,600 $ 6,500
Inventories (4,200) (5,100)
Compensation related liabilities 6,200 7,800
Restructuring liabilities 8,300 -
Tax credit carryforwards 12,000 4,000
Other items 7,500 (8,000)
Net current asset $ 35,400 $ 5,200
Non-current:
Fixed and intangible assets $(20,800) $(41,000)
Pension and postretirement related items (12,000) (11,300)
Restructuring liabilities 5,000 -
Tax credit carryforwards - 17,000
Other items 2,900 2,200
Net non-current liability $(24,900) $(33,100)
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.
The funded status of the Company's defined benefit plans consists of the
following at February 28, 1997 and February 29, 1996 (dollars in thousands):
1997 1996
Actuarial present value of benefit obligations:
Vested $(313,600) $(283,500)
Accumulated $(326,800) $(289,600)
Projected $(337,100) $(303,100)
Plan assets at fair value 418,000 366,400
Plan assets in excess of projected
benefit obligations 80,900 63,300
Unrecognized net loss and
differences in assumptions 30,900 48,800
Unrecognized prior service costs 1,100 7,500
Prepaid pension cost recognized in the
consolidated balance sheets $ 112,900 $ 119,600
<PAGE>41
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 $44.3 million of the Company's securities at
February 28, 1997.
Net pension income for the defined benefit pension plans in fiscal 1997, 1996,
and 1995 includes the following components (dollars in thousands):
1997 1996 1995
Service cost-benefits
earned during the period $ (5,600) $ (3,700) $ (3,600)
Interest cost on projected
benefit obligation (23,300) (22,400) (19,500)
Actual return on assets 59,900 68,600 4,300
Curtailment losses (2,400) (1,200) -
Amortization and
unrecognized losses (gains) (18,100) (34,800) 31,300
Net pension income $ 10,500 $ 6,500 $ 12,500
The restructuring plan discussed in Note 2 will result in the termination of
employment of a number of employees covered by the Company's defined benefit
plans. As a result, the Company recognized a charge in fiscal 1997 of
approximately $16 million for pension curtailment and special termination
benefits expense. Such amount has been included in the restructuring charge
identified in Note 2, and excluded from the net pension income determination
identified above.
The assumptions utilized to measure the projected benefit obligations and net
pension income are as follows:
1997 1996 1995
Discount rate 7.50% 7.50% 8.75%
Expected long-term rate of return 11.50% 11.50% 11.50%
Average increase in compensation 4.00% 4.00% 4.00%
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 $13.9 million; $10.6 million and $8.1 million in fiscal 1997,
1996 and 1995, respectively.
11. Post-retirement Benefits
The Company currently provides health and life insurance benefits to a number
of existing retirees from certain of its operations under the provisions of a
number of different plans. Contributions currently required to be paid by the
retirees towards the cost of such plans range from zero to 100%. The Company
also has a number of active employees who might receive such benefits upon
their retirement.
<PAGE>42
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the liability for the cost of these plans,
referred to as the accumulated post-retirement benefit obligation (APBO).
Such amounts are included with other non-current liabilities in the
consolidated balance sheets at February 28, 1997 and February 29, 1996
(dollars in thousands):
1997 1996
Accumulated post-retirement benefit obligation:
Retirees and beneficiaries receiving benefits $76,500 $68,300
Active employees, fully eligible for benefits 5,800 6,500
Active employees, not fully eligible for benefits 5,900 9,300
Total accumulated benefit obligation 88,200 84,100
Unrecognized net loss (18,000) (13,500)
Post-retirement benefit liability recognized
in the consolidated balance sheets $70,200 $70,600
The Company's post-retirement benefit expense for fiscal 1997, 1996 and 1995
includes the following components (dollars in thousands):
1997 1996 1995
Service cost-benefits earned
during the period $ 600 $ 600 $ 500
Interest cost on the APBO 6,200 6,000 4,600
Amortization expense 100 100 -
Total expense $6,900 $6,700 $5,100
The APBO was calculated using a discount rate of 7.50% at February 28, 1997,
and February 29, 1996. 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 fiscal 2003. The impact of a one-percentage-point increase in
such trend rate would be to increase the APBO at February 28, 1997 by
approximately $1.6 million and increase annual expense by approximately $0.1
million.
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
The Company has 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.
<PAGE>43
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's Board of Directors declared a five percent stock dividend in
April 1997, as well as previous five percent stock dividends which were
distributed in each of April 1996 and 1995. All share amounts have been
presented as if the stock distributions had occurred at the beginning of
fiscal 1995. The Company is currently authorized to repurchase up to 7.3
million shares of its outstanding Common Stock. The Company is also
authorized to issue 10 million shares of Preferred Stock, and there are no
shares outstanding at the present time.
The Company's qualified Incentive Stock Option Plans provide for granting
options to key employees to allow them 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.
During fiscal 1997, the Company's shareholders approved the 1996 Incentive
Stock Option Plan, which allocated 3.1 million shares of the Company's
authorized Common Stock to be used for granting of stock options. There were
approximately 3.5 million and 0.4 million shares reserved for the future
granting of options at February 28, 1997 and February 29, 1996, respectively.
The following table summarizes the status of all of the Company's stock option
transactions for fiscal 1997, 1996 and 1995 (share amounts in thousands):
1997 1996 1995
----------------- --------------- ---------------
Average Average Average
Option Option Option Option Option Option
Shares Price Shares Price Shares Price
------ ------ ------ ------ ------ -----
Balance at
beginning
of year 1,841 $14.08 1,500 $11.90 658 $ 7.75
Activity during
the year:
Granted - - 712 $17.02 960 $14.00
Exercised (410) $10.45 (338) $10.68 (110) $ 5.43
Canceled (10) $16.15 (33) $13.35 (8) $10.42
Balance at
end of year:
Outstanding 1,421 $15.11 1,841 $14.08 1,500 $11.90
Exercisable 684 $13.60 649 $10.13 711 $ 9.52
Under the Company's Restricted Stock Plan, there are approximately 348,000
restricted shares outstanding under various restricted stock awards as of
February 28, 1997. Approximately 276,000 shares remain available for issuance
under the Plan as of that date. The fair market value of restricted stock
awards as of the date of grant is recognized as it is earned over the
restriction period, with $1.3 million; $1.3 million; and $1.6 million
recognized as an expense in fiscal 1997, 1996, and 1995, respectively.
<PAGE>44
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Industry Segments and Geographic Areas
The Company classifies its operations into the following two business
segments:
(i) Automotive, which includes the design, manufacture and
distribution of (a) fuel, power transmission, and fluid handling
systems and components, and (b) filters and filtration systems,
for the global automotive aftermarket and OEM (original equipment
manufacturers) market; and
(ii) Industrial, which includes the design, manufacture and
distribution of power and fluid management systems and components
for industrial OEM and distribution markets worldwide.
As a result of the discontinued operations discussed in Note 3, the Company's
industry segment and geographic information for fiscal 1996 and 1995 has been
restated to exclude the discontinued operations. Information concerning the
Company's business segments for fiscal 1997, 1996 and 1995 is as follows
(dollars in thousands):
1997 1996 1995
NET SALES TO CUSTOMERS
Automotive $1,111,700 $1,004,300 $ 718,900
Industrial 964,300 774,900 587,500
Total related to
continuing operations $2,076,000 $1,779,200 $1,306,400
OPERATING INCOME
Automotive $ 122,100 $ 110,600 $ 79,300
Industrial 120,500 95,100 72,100
Sub-total 242,600 205,700 151,400
Restructuring charge (112,500) - -
Total operating income 130,100 205,700 151,400
General corporate expense (19,400) (17,400) (15,900)
Interest expense (59,000) (52,600) (46,300)
Income from continuing
operations before
provision for taxes $ 51,700 $ 135,700 $ 89,200
<PAGE>45
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1997 1996 1995
IDENTIFIABLE ASSETS
Automotive $1,107,900 $1,030,000 $ 922,700
Industrial 833,900 684,100 652,400
General corporate 32,800 29,600 32,700
Total related to
continuing operations 1,974,600 1,743,700 1,607,800
Discontinued operations - 269,400 238,600
Total $1,974,600 $2,013,100 $1,846,400
DEPRECIATION AND AMORTIZATION
Automotive $ 38,900 $ 33,100 $ 23,100
Industrial 26,400 22,500 17,500
General corporate 3,700 3,600 3,700
Total related to
continuing operations $ 69,000 $ 59,200 $ 44,300
CAPITAL OUTLAYS
Automotive $ 68,300 $ 57,600 $ 29,100
Industrial 40,900 32,900 16,700
Total related to
continuing operations $ 109,200 $ 90,500 $ 45,800
The Company's operations outside of the United States are located primarily in
Europe, and to a lesser extent in Canada, Latin America and the Far East.
Information concerning the Company's operations by geographic area for fiscal
1997, 1996 and 1995 is as follows (dollars in thousands):
1997 1996 1995
NET SALES FROM
CONTINUING OPERATIONS
United States $1,496,400 $1,271,300 $ 912,900
Foreign 579,600 507,900 393,500
Total related to
continuing operations $2,076,000 $1,779,200 $1,306,400
OPERATING INCOME FROM
CONTINUING OPERATIONS
United States $ 166,400 $ 138,200 $ 102,900
Foreign 76,200 67,500 48,500
Sub-total 242,600 205,700 151,400
Restructuring charge (112,500) - -
Total related to
continuing operations $ 130,100 $ 205,700 $ 151,400
<PAGE>46
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1997 1996 1995
IDENTIFIABLE ASSETS
United States $1,438,600 $1,259,800 $1,207,400
Foreign 536,000 483,900 400,400
Total related to
continuing operations 1,974,600 1,743,700 1,607,800
Discontinued operations - 269,400 238,600
Total $1,974,600 $2,013,100 $1,846,400
The net sales to customers reflect the sales of the continuing operating units
in each geographic area to unaffiliated customers. Export sales of continuing
operating units from the United States to unaffiliated customers were $95.4
million, $91.6 million, and $70.3 million in fiscal 1997, 1996, and 1995,
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.
15. Quarterly Financial Data and Information (Unaudited)
The following table sets forth the Company's unaudited results of operations
for each of the fiscal quarters in the years ended February 28, 1997 and
February 29, 1996. Amounts have been restated to reflect the discontinued
operations identified in Note 3, as well as the Company's 5% stock dividend
issued in April 1997. All amounts are presented in thousands of dollars,
except for the per share data:
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- -----
Fiscal 1997
- -----------
Continuing operations:
Net sales $540,900 $494,300 $521,600 $519,200 $2,076,000
Gross profit (a) $175,800 $161,100 $170,400 $160,600 $ 667,900
Operating income before
restructuring charge $ 59,700 $ 55,100 $ 55,800 $ 52,600 $ 223,200
Restructuring charge - - (112,500) - (112,500)
Interest expense (14,900) (15,400) (14,500) (14,200) (59,000)
Provision for taxes (17,500) (15,500) 28,900 (14,900) (19,000)
Total continuing 27,300 24,200 (42,300) 23,500 32,700
Discontinued operations 1,200 2,600 13,600 6,000 23,400
Net income (loss) $ 28,500 $ 26,800 $(28,700) $ 29,500 $ 56,100
<PAGE>47
MARK IV INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
--------- ------- ------- ------- -----
Fiscal 1997
- -----------
Primary earnings
per share:
Continuing operations:
Before restructuring
charge $ .41 $ .37 $ .38 $ .35 $ 1.51
Restructuring charge - - (1.02) - (1.02)
Total continuing .41 .37 (.64) .35 .49
Discontinued operations .02 .04 .20 .09 .35
Net income (loss) $ .43 $ .41 $ (.44) $ .44 $ .84
Fully-diluted earnings
per share:
Continuing operations:
Before restructuring
charge $ .41 $ .36 $ .38 $ .35 $ 1.50
Restructuring charge - - (1.01) - (1.01)
Total continuing .41 .36 (.63) .35 .49
Discontinued operations .02 .04 .20 .09 .35
Net income (loss) $ .43 $ .40 $ (.43) $ .44 $ .84
Fiscal 1996
- -----------
Continuing Operations:
Net sales $443,300 $433,900 $447,000 $455,000 $1,779,200
Gross profit (a) $151,100 $141,400 $147,000 $134,600 $ 574,100
Operating income $ 49,300 $ 48,200 $ 47,600 $ 43,200 $ 188,300
Interest expense (12,900) (12,900) (13,300) (13,500) (52,600)
Provision for taxes (14,200) (13,700) (13,400) (11,600) (52,900)
Total continuing 22,200 21,600 20,900 18,100 82,800
Discontinued Operations 2,400 2,500 2,100 2,600 9,600
Net income $ 24,600 $ 24,100 $ 23,000 $ 20,700 $ 92,400
Primary earnings
per share:
Continuing operations $ .34 $ .33 $ .31 $ .27 $ 1.25
Discontinued operations .04 .03 .04 .04 .15
Net income $ .38 $ .36 $ .35 $ .31 $ 1.40
Fully-diluted earnings
per share:
Continuing operations $ .33 $ .33 $ .31 $ .27 $ 1.24
Discontinued operations .04 .03 .04 .04 .15
Net income $ .37 $ .36 $ .35 $ .31 $ 1.39
___________________________________
(a) Excluding depreciation expense.
<PAGE>48
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 1997 Annual Meeting of Stockholders which will
be filed with the Securities and Exchange Commission not later than 120 days
after February 28, 1997.
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 28, 1997.................................27
Consolidated Balance Sheets at February 28, 1997
and February 29, 1996...........................................28
Consolidated Statements of Income for each of
the three fiscal years in the period ended
February 28, 1997...............................................29
Consolidated Statements of Stockholders' Equity for
each of the three fiscal years in the period
ended February 28, 1997.........................................30
Consolidated Statements of Cash Flows
for each of the three fiscal years in
the period ended February 28, 1997 .............................31
Notes to Consolidated Financial Statements.......................32
(2) Financial Statement Schedule
Report of Independent Accountants
for each of the three fiscal years in the
period ended February 28, 1997 .................................52
II. Valuation and Qualifying Accounts...............................53
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
<PAGE>49
(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-1 (Tender Offer) dated
October 7, 1994, as filed with the SEC on such date).
2.2 Offer to Purchase by and among Mark IV Industries, Inc., Mark IV
Acquisition corp., and Purolator Products Company, 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.
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).
10.2 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).
<PAGE>50
10.3 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).
10.4 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).
10.5 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).
10.6 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).
10.7 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).
10.8 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).
10.9 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).
10.10 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).
10.11 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).
10.12 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).
10.13 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).
<PAGE>51
10.14 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).
10.15 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).
10.16 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).
10.17 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).
10.18 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).
10.19 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).
10.20* Executive Loan Program
Other Material Contract Exhibits
10.21 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>52
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 18, 1997
<PAGE>53
<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 28, 1997
Allowance for doubtful
accounts $ 16,700,000 $ 4,800,000 $ (4,700,000) $ (2,100,000) $ 14,700,000
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
(a) Represents the following
February February February
28, 1997 29, 1996 28, 1995
----------- ---------- ----------
<S> <C> <C> <C>
Reserve at date of acquisition of subsidiary $ 500,000 $ 100,000 $5,500,000
Reclassification from other reserves 200,000 200,000 400,000
Reserves of discontinued operations disposed (2,400,000) - -
Foreign currency translation adjustment (400,000) 500,000 500,000
$(2,100,000) $ 800,000 $6,400,000
</TABLE>
<PAGE>54
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 5, 1997
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
- ------------------
Sal H. Alfiero Chairman of the Board May 5, 1997
and Chief Executive Officer
/s/ William P. Montague
- -----------------------
William P. Montague President, Director May 5, 1997
/s/ John J. Byrne
- -----------------------
John J. Byrne Vice President and May 5, 1997
Chief Financial Officer
/s/ Richard L. Grenolds
- -----------------------
Richard L. Grenolds Vice President and May 5, 1997
Chief Accounting Officer
/s/ Gerald S. Lippes
- -----------------------
Gerald S. Lippes Secretary and Director May 5, 1997
/s/ Clement R. Arrison
- ----------------------
Clement R. Arrison Director May 5, 1997
<PAGE>55
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-1 (Tender Offer) dated
October 7, 1994, as filed with the SEC on such date).
2.2 Offer to Purchase by and among Mark IV Industries, Inc., Mark IV
Acquisition Corp., and Purolator Products Company, 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.
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).
10.2 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).
<PAGE>56
10.3 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).
10.4 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).
10.5 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).
10.6 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).
10.7 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).
10.8 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).
10.9 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).
10.10 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).
10.11 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).
10.12 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).
10.13 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).
<PAGE>57
10.14 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).
10.15 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).
10.16 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).
10.17 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).
10.18 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).
10.19 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).
10.20* Executive Loan Program
Other Material Contract Exhibits
10.21 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>59
<TABLE>
<CAPTION>
EXHIBIT 11
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
-----------------------------
Primary Earnings Per Share 1997 1996 1995
- -------------------------- ---- ---- ----
<S> <C> <C> <C>
Primary Shares Outstanding:
Weighted average number of shares outstanding 66,263 66,151 53,566
Net effect of dilutive stock options (1) 394 454 446
Total 66,657 66,605 54,012
Income from continuing operations $ 32,700 $ 82,800 $ 55,000
Income per share from continuing operations (2) $ .49 $ 1.24 $ 1.02
Income from discontinued operations $ 23,400 $ 9,600 $ 12,900
Income per share from discontinued
operations (2) $ .35 $ .15 $ .24
Loss from extraordinary items $ - $ - $ (1,100)
Loss per share from extraordinary items (2) $ - $ - $ (.02)
Fully-diluted Earnings Per Share
Fully-diluted Shares Outstanding:
Weighted average number of shares
outstanding 66,263 66,151 53,566
Shares issuable upon conversion of the
Company's 6-1/4% Convertible Debentures - - 6,617
Net effect of dilutive stock options (1) 456 454 471
Total 66,719 66,605 60,654
Income from continuing operations $32,700 $ 82,800 $ 55,000
Interest for 6-1/4% Convertible Debentures,
net of tax effect - - 3,200
Income from continuing operations applicable
to fully diluted shares $ 32,700 $ 82,800 $ 58,200
Income per share from continuing operations $ .49 $ 1.24 $ .96
Income from discontinued operations $ 23,400 $ 9,600 $ 12,900
Income per share from discontinued operations $ .35 $ .15 $ .21
Loss from extraordinary items $ - $ - $ (1,100)
Loss per share from extraordinary items $ - $ - $ (.02)
<FN>
_________________
(1) The net effects for fiscal 1997, 1996 and 1995 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 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>
<PAGE>60
EXHIBIT 21
----------
SUBSIDIARIES
The following is a list of the subsidiaries of Mark IV Industries, Inc.
at May 1, 1997. Except as otherwise indicated, the names of indirectly- owned
subsidiaries are indented under the names of their immediate parent.
Dayco Products, Inc. (Delaware)
Controladora Dayco SA de C.V. (Mexico)
Dayco Products S.A. de C.V. (Mexico)
Industrial de Plasticos Y Elastmeros, S.A. (Mexico)
Dayco Canada Holdings, Inc. (Canada)
Mark IV Industries Canada Inc. (Canada) (100% owned, in the aggregate, by
Dayco Products, Inc.; Purolator Products NA, Inc. and Purolator Products
Co.)
Mark IV Industries Limited (Canada)
Dayco Europe S.p.A. (Italy)
Dayco SACIC S.A. (Belgium)
Prelasti S.A. (Belgium) (50% ownership)
Dayco PTI S.A. (Spain)
Dayco PTI GmbH (Germany)
Tubi Speciali Auto S.p.A. (Italy)
Mark IV Automotive AB (Sweden)
Dayco Hevas AB (Sweden)
Dayco Bjorkmans AB (Sweden)
Dayco Ireland (Ireland)
Cifra SRL (Italy) (75% ownership)
CTM Cinotto Tenomeccanica S.p.A. (Italy)
Dayco Distributing, Inc. (Kentucky)
Imperial Eastman Acquisition Corp. (Delaware)
Purolator Products Company (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) (100% owned, in the aggregate,
by Purolator Products Company; Facet Italiana SpA, and 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 NA, Inc. (Delaware)
Woods Liquidating Corporation (Delaware)
Mark IV Holdings, S.A. (Belgium)
Mark IV PLC (United Kingdom)
Dayco Europe Ltd. (United Kingdom)
Caplugs Ltd. (United Kingdom)
<PAGE>61
Klark Teknik Electronics, Inc. (New York)
Mark IV Ventures Ltd. (United Kingdom)
Pietranera S.r.L. (Italy) (100% owned, in the aggregate by the
Company and Armtek International Holding Company, Inc.)
F-P Technologies Holding Corporation (Delaware) (100% owned in the aggregate
by the Company and Mark IV Industries Ltd.)
Gulton-Statham Transducers, Inc. (Delaware)
F-P Displays, Inc. (Massachusetts)
Mark IV Holding AG (Switzerland)
F-P Displays AG (Switzerland)
Mark IV France S.A.S. (France)
Dayco Products - Europe S.A.R.L. (France)
Gulton S.A. (France)
SLE S.A.R.L. (France)
Kirkhof/Goodrich Corp. (Delaware)
Armtek International Holding Company, Inc. (Delaware)
Dayco Pacific Pty. Limited (Australia) (100% owned, in the aggregate, by
the Company, 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)
Mark IV Industries GmbH (Germany)
Mark IV Vertriebs GmbH (Germany)
Dayco Europe GmbH (Germany)
Mark IV Audio Deutschland GmbH (Germany)
Eagle Funding Corporation (Delaware)
Automatic Signal/Eagle Signal Corp.(Delaware)
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, in the aggregate, by the
Company and Mark IV Holdings, Inc.)
Mark IV IVHS, Inc. (Delaware)
NRD, Inc. (New York)
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)
Mark IV Automotive do Brasil Ltda (Brasil) (100% owned, in the aggregate by
Mark IV Industries, Inc. and Dayco Europe SpA)
Daytec Tecolan S.A. (Brazil) (60% ownership)
Dayco Tecalon Brasileira de Auto Pecas S.A. (Brazil)(24% ownership)
Dayco Argentina (Argentina) (100% owned in the aggregate by Mark IV
Industries, Inc. and Dayco Europe SpA)
<PAGE>62
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 18, 1997, on our audits
of the consolidated financial statements and financial statement schedule of
Mark IV Industries, Inc. as of February 28, 1997 and February 29, 1996, and
for each of the three fiscal years in the period ended February 28, 1997,
which reports are included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Rochester, New York
May 2, 1997
<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-28-1997
<PERIOD-END> FEB-28-1997
<CASH> 1,300
<SECURITIES> 0
<RECEIVABLES> 404,800
<ALLOWANCES> 14,700
<INVENTORY> 377,600
<CURRENT-ASSETS> 845,500
<PP&E> 701,600
<DEPRECIATION> 148,300
<TOTAL-ASSETS> 1,974,600
<CURRENT-LIABILITIES> 480,900
<BONDS> 528,500
0
0
<COMMON> 700
<OTHER-SE> 757,700
<TOTAL-LIABILITY-AND-EQUITY> 1,974,600
<SALES> 2,076,000
<TOTAL-REVENUES> 2,076,000
<CGS> 1,408,100
<TOTAL-COSTS> 1,852,800
<OTHER-EXPENSES> 112,500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,000
<INCOME-PRETAX> 51,700
<INCOME-TAX> 19,000
<INCOME-CONTINUING> 32,700
<DISCONTINUED> 23,400
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,100
<EPS-PRIMARY> .84
<EPS-DILUTED> .84
</TABLE>
<PAGE>58
EXHIBIT 10.20
-------------
MARK IV INDUSTRIES, INC.
EXECUTIVE LOAN PROGRAM
1. Purposes. Senior corporate executives of the Company find it
necessary from time to time to borrow funds for various purposes, including to
finance the exercise of stock options granted to them under the Company's
various stock option plans or to pay income taxes associated with the exercise
of such options or the vesting of restricted stock awards to them under the
Company's restricted stock plans, or to finance their personal or family
needs. Since the Company maintains working relationships with a substantial
number of the major banks and other financial institutions, both foreign and
domestic, the Board of Directors believes it desirable for executives involved
in decisions on behalf of the Company in connection with transactions with
such banks and financial institutions not to have borrowing relationships with
such institutions. Accordingly, the Board of Directors believes it is in the
best interests of the Company to establish a program for the making of loans
to eligible senior executives upon the terms and condition set forth herein.
2. Eligibility. Executives who are Mark IV Industries, Inc. officers
and received awards pursuant to Mark IV Industries, Inc. Enhanced Executive
Incentive Plan during fiscal 1990.
3. Terms. Eligible executives may obtain loans in an amount up to
four times his/her annual rate of salary during the calendar year in which the
borrowing occurs; provided that the aggregate principal amount of loans
outstanding at any time may not exceed such amount. Interest shall accrue at
a rate equal to the effective average interest rate payable by the Company on
borrowings under its principal revolving credit facility in effect from time
to time with the Company's institutional lenders for a term of not more than
twelve months, but in no event later than February 27th of the year of the
borrowing. Interest shall be payable at the maturity of each loan.
4. How. Written request made to the Chief Executive Officer.
5. Miscellaneous. All principal and interest shall become due and
payable within one year of the loan or upon the executive's employment ceasing
for whatever reason. Each loan shall be evidenced by a promissory note of the
executive in form and substance satisfactory to the Company's legal counsel.
Any compensation due the executive at termination of employment may be used,
subject to applicable law, to offset the principal and interest due and owing
under his/her loan.
