SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 16, 1998
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MARK IV INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-8862 23-1733979
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(Commission File Number) (IRS Employer Identification No.)
501 John James Audubon Pkwy., Amherst, New York 14226-0810
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716) 689-4972
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________________________________________________________________________
(Former name or former address, if changed since last report.)
<PAGE>2
Item 5 - Other Events
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On January 4, 1999, the Registrant will distribute to its shareholders of
record at the close of business on December 18, 1998 its Fiscal 1999 Third
Quarter Quarterly Report (the "Report"). A copy of the Report is attached
hereto as Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
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(a) Financial Statements of Business Acquired. - Not applicable.
(b) Pro Forma financial Information. - Not applicable.
(c) Exhibits.
99.1 Copy of Fiscal 1999 Third Quarter Quarterly Report,
distributed January 4, 1999 to the Registrant's shareholders
of record at the close of business on December 18, 1998.
<PAGE>3
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MARK IV INDUSTRIES, INC.
BY: /s/ Richard L. Grenolds
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Richard L. Grenolds
Vice President and Chief
Accounting Officer
Dated: December 31, 1998
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<PAGE>4
EXHIBIT 99.1
Quarterly Report
Third Quarter
Fiscal 1999
AMHERST, N.Y., December 16, 1998 - Mark IV Industries, Inc. (NYSE: IV) today
reported results for its third fiscal quarter and nine months ended November
30, 1998.
Operating Results
In the quarter, diluted earnings per share before special items increased ten
percent, to 46 cents from 42 cents last year, while income before special
items was $27.0 million in the period compared to $27.3 million last year.
Sales for the period increased three percent, to $580.2 million from $564.1
million, while operating income (income before special items, interest expense
and taxes) in this year's third quarter was $60.0 million versus $60.8 million
in fiscal 1998.
Diluted weighted average shares outstanding decreased six percent in the
quarter, to 63.0 million from 67.3 million in fiscal 1998, due to the
company's stock repurchase program. All share and share related amounts are
diluted.
In addition, as planned and previously discussed, the company took a $40
million (63 cents per share) after-tax charge in the third quarter, primarily
to reposition its automotive aftermarket business unit, resulting in a loss
for the period of $13.0 million (17 cents per share) versus last year's net
income of $16.7 million (26 cents per share). Last year's period reflects an
extraordinary charge for early debt extinguishment of $10.6 million (16 cents
per share) after taxes.
For the first nine months of fiscal 1999, earnings before special items were
$74.8 million ($1.22 per share) compared to $84.9 million ($1.30 per share)
last year.
Sales for the nine-month period increased seven percent, to $1.76 billion from
$1.66 billion last year. Operating income for the period was down ten
percent, to $166.9 million from $184.9 million in fiscal 1998.
Net income for the nine months ended November 30, 1998, decreased to $32.2
million (58 cents per share) from $74.3 million ($1.14 per share) last year,
reflecting the previously mentioned repositioning charge of $40 million, as
well as an extraordinary after-tax charge for early debt extinguishment of
$2.6 million (four cents per share) taken in the first quarter. In fiscal
1998, net income for the first nine months of the year includes an early debt
extinguishment charge of $10.6 million (16 cents per share) taken in the third
quarter.
<PAGE>5
Reflecting on positive developments in the year, Sal H. Alfiero, chairman and
chief executive officer of Mark IV, said, "Fiscal 1999, although a difficult
and changing year, is proving to be about in line with our expectations as
detailed at the start of the year, with the exception of the GM strike, which
was not expected at that time, but ultimately did occur during the second
quarter, resulting in a cost to the company of five cents per share. As
anticipated, this year's third quarter marked our return to positive quarterly
earnings comparisons. Our operating income margin, before the repositioning
charge as a percentage of revenue, improved to 10.3 percent from nine percent
in the first half of the year. Through the nine-month period, free cash flow
increased by $151 million over last year, including an operating working
capital reduction of $42 million exclusive of the repositioning charge. The
restructuring initiated in fiscal 1997 has finally been completed. Looking
forward, further improvements are expected in the fourth quarter and into the
following fiscal year, particularly as it relates to the aftermarket
repositioning.
"In October, we announced plans to open a North American manufacturing
facility/technical center in Montreal, Canada, to provide injection
molded/welded nylon air intake manifolds for automotive OEM customers in North
America. The facility, which is expected to start up in the second half of
next fiscal year, is approximately 175,000 square feet and will employ 150 to
200 people initially. Use of this air intake technology, acquired with the
October 1997 purchase of LPI Systemes Moteurs, of France, will result in lower
costs and a lighter weight product, with more efficient airflow, leading to
improved engine performance and, most importantly, lower emissions.
"While the new technology has been in use in Europe for the past decade--where
it has achieved a 50 percent penetration of the new vehicle market--it is an
emerging technology in North America. The potential for this product in North
America affords us an opportunity to add $80-$100 million to our revenue base
over the next two to three years, as new engine designs increasingly
incorporate these new types of manifolds. At this point, we have been awarded
contracts for application of the new technology commencing with the 2000 model
year vehicles."
Automotive Aftermarket Repositioning Charge
Mark IV has instituted a plan to reposition its automotive aftermarket
business, which accounts for approximately 20 percent of the company's total
revenue. This sector of the company's business has been negatively impacted
by fundamental changes taking place in the aftermarket. Revenue growth rates
and margins have been on the decline over the past several years, due to
slowing demand resulting from improvements in the quality and performance of
components and systems being supplied to the automotive OEM market. The
effect has been to defer, or in some cases eliminate, the need for replacement
parts. In addition, significant consolidation within the distribution
channels has increased pricing pressures, reduced margins and affected terms
of sale, requiring increased working capital.
<PAGE>6
These factors have led Mark IV to reposition its aftermarket business in order
to better align its assets with the company's business base in this sector.
In that context, Mr. Alfiero said, "A pre-tax charge of $66.0 million, or $40
million after taxes, has been reflected in this year's third quarter results.
Nearly half of the pre-tax charge consists of non-cash items primarily related
to inventory and fixed asset write-offs. The balance of the charge includes
employee-related transition and other costs incurred in the current fiscal
year needed to complete the restructuring program begun in the latter part of
fiscal 1997, and employee-related and other cash costs associated with the
aftermarket repositioning.
"Our aftermarket plan includes consolidation of distribution facilities, the
elimination of low margin, slow-moving product lines, a reduction of inventory
levels, rationalization of our customer base, and employee reductions. As a
result of these actions, we expect to realize improved margins and reduced
capital employed, while continuing to provide our customers with the same high
level quality of products and service."
Earnings Outlook
Mr. Alfiero went on to state that, "As we look at our fourth quarter and next
fiscal year, we believe that we will experience improvements both quarter-
over-quarter and year-over-year. However, there are a number of factors which
are negatively impacting us presently and we believe will continue to do so in
the next year.
"Latin America, Australia/Asia, Agricultural Equipment and Petrochemical
Markets, both domestic and foreign, and a general weakening manufacturing
sector of our domestic economy, will negatively affect the company's earnings
outlook from planned levels in the fourth quarter and next fiscal year.
"In addition to the above market- and geographical-related conditions, the
company will reduce pension income assumptions from its over funded pension
plans to reflect more conservative estimates going forward as a result of the
extreme capital markets volatility experienced this year. While this will
reduce book income, it has no impact on cash earnings to the company. Net
earnings of the pension assets are retained by the plan and used to fund
future retirement benefits without the need for the company to provide cash
funding on an annual basis. The Mark IV retirement plan is and has been in an
over funded position for the past ten years.
"In all of the above geographical locations, the company is operating
profitably and expects to continue to do so for the balance of this year and
next. However, the negative pressures being felt in Brazil and Australia,
coupled with severe slowdowns in worldwide agricultural and petrochemical
markets, and start-up costs in bringing new facilities on line, will reduce
the level of profitability expected from these markets.
<PAGE>7
"While there are a number of factors that will positively affect the company's
earnings, including an increasing benefit flow from the completed
restructuring, sales increases resulting from new products, and increased
content per vehicle on new auto builds, the net result will be a lowering of
diluted earnings per share expectations of five to seven cents in the fourth
quarter (from 44 cents to 37-39 cents, versus 36 cents last year).
"Additionally, next year's expectation will be tempered by all of the factors
outlined above, including revised pension income estimates, and the
anticipated impact will be to lower fiscal year 2000 earnings expectations
from $1.90 to a range of $1.65 to $1.75 per diluted share.
"We believe the depressed market and geographic conditions are temporary in
nature, and that there will be a recovery over time. Our strategies with
regard to markets and products is to stay the course, and our actions will be
flexible enough so as to take advantage of any mitigation of these conditions.
"Management's view of the company's future prospects is reflected by the fact
that, since March 1997 to date, Mark IV has repurchased an aggregate of 12.0
million shares of common stock, with 8.5 million being bought in this fiscal
year. The company has 4.7 million shares remaining under its currently
authorized share repurchase program."
Mr. Alfiero added, "The continuing improvement in cash flow, completion of our
restructuring program, and implementation of the aftermarket repositioning,
bodes well for future earnings prospects. The capital being invested, and the
research and development programs being pursued, will help us maintain
leadership positions in the market segments we serve. Our internal focus on
cash flow, customer service, and new technologies and product development,
coupled with an aggressive but selective acquisition effort, will enhance our
competitive position and secure added value for our shareholders."
This report contains forward-looking statements that involve risk and
uncertainties as detailed from time to time in the company's SEC reports,
including its report on Form 10-K for its fiscal year ended February 28, 1998.
These risks and uncertainties could affect the company's actual results and
cause them to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the company.
Mark IV Industries, Inc. is a $2.2 billion global manufacturing company
headquartered in the Buffalo suburb of Amherst, New York, employing 17,000
people worldwide. The company's core technologies include power transmission,
fluid transfer and filtration systems and components for global industrial and
automotive markets. For more information on Mark IV, visit the company's web
site at http://www.mark-iv.com.
<PAGE>8
Consolidated Statements of Income (Unaudited)
(Amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
November 30, November 30,
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1998 1997 1998 1997
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Net sales $580,200 $564,100 $1,763,200 $1,655,300
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Operating costs:
Cost of products sold 392,700 381,600 1,209,700 1,116,000
Selling and administration 88,400 88,300 270,500 260,200
Research and development 13,700 12,700 42,500 36,500
Depreciation and amortization 25,400 20,700 73,600 57,700
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Total operating costs 520,200 503,300 1,596,300 1,470,400
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Operating income 60,000 60,800 166,900 184,900
Interest expense 17,700 16,800 50,100 46,700
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Income before taxes and
special items 42,300 44,000 116,800 138,200
Provision for income taxes 15,300 16,700 42,000 53,300
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Income before special items 27,000 27,300 74,800 84,900
Repositioning charge,
net of tax benefits (40,000) - (40,000) -
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Income (loss) before
extraordinary item (13,000) 27,300 34,800 84,900
Extraordinary loss from
early extinguishment of debt,
net of tax benefits - (10,600) (2,600) (10,600)
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NET INCOME (LOSS) $(13,000) $ 16,700 $ 32,200 $ 74,300
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Net income (loss) per share
of common stock:
Basic:
Income before special items $ .50 $ .43 $ 1.29 $ 1.32
Repositioning charge (.74) - (.69) -
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Income (loss) before
extraordinary item (.24) .43 .60 1.32
Extraordinary loss - (.17) (.04) (.16)
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NET INCOME (LOSS) $ (.24) $ .26 $ .56 $ 1.16
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Diluted:
Income before special items $ .46 $ .42 $ 1.22 $ 1.30
Repositioning charge (.63) - (.60) -
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Income (loss) before
extraordinary item (.17) .42 .62 1.30
Extraordinary loss - (.16) (.04) (.16)
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NET INCOME (LOSS) $ (.17) $ .26 $ .58 $ 1.14
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Weighted average number
of shares outstanding:
Basic 54,500 63,700 57,900 64,300
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Diluted 63,000 67,300 66,500 65,800
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<PAGE>9
Consolidated Condensed Balance Sheets
(Dollars in thousands)
November 30, 1998 February 28, 1998
(Unaudited)
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Assets
Accounts receivable, net $ 460,300 $ 466,400
Inventories 364,300 393,400
Other current assets 146,000 226,500
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Total current assets 970,600 1,086,300
Pension and other non-current assets 239,300 226,600
Property, plant and equipment, net 664,900 668,400
Goodwill 431,300 439,200
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TOTAL ASSETS $2,306,100 $2,420,500
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Liabilities & Stockholders' Equity
Current debt $ 66,200 $ 206,900
Accounts payable and other
current liabilities 429,700 421,000
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Total current liabilities 495,900 627,900
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Long-term debt 934,600 793,900
Other non-current liabilities 263,800 246,700
Stockholders' equity 611,800 752,000
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,306,100 $2,420,500
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