April 14, 1994
Securities & Exchange Commission
Division of Corporate Finance
500 North Capitol Street
Washington, D.C. 20549
Gentlemen:
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934,
enclosed is Tokheim's Form 10-Q for the period ended February 28, 1994.
Sincerely,
TOKHEIM CORPORATION
Jess B. Ford
Vice President, Finance
Secretary, and Chief
Financial Officer
Enclosure
cc: New York Stock Exchange
Division of Stock List - 2
Fred Axley - McDermott, Will & Emery
Louis Pach - Coopers & Lybrand
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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended FEBRUARY 28, 1994
------------------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ------------------- to -----------------
Commission File Number 1-6018
TOKHEIM CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
INDIANA 35-0712500
- ------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10501 CORPORATE DR., FORT WAYNE, IN 46845
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number including area code) (219) 423-2552
NOT APPLICABLE
- --------------------------------------------------------------------------
(Former name, former address, and former fiscal year if changed since last
report)
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 .
--- ----
As of February 28, 1994, 7,761,203 shares of voting common stock were
outstanding.
In addition, 848,432 shares of convertible preferred stock were held by
the Retirement Savings Plan for Employees of Tokheim Corporation and
Subsidiaries.
The exhibit index is located on page 7.
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PART I. FINANCIAL INFORMATION
TOKHEIM CORPORATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Amounts in thousands except amounts per share)
THREE MONTHS ENDED
FEBRUARY 28 FEBRUARY 28
1994 1993
----------- -----------
NET SALES.......................................... $ 45,236 $31,949
Cost of sales, exclusive of items listed below..... 34,352 25,778
Selling, general, and administrative expenses...... 8,667 8,243
Depreciation and amortization...................... 1,186 1,360
Interest expense (net of interest income of $88
and $98 in 1994 and 1993, respectively)......... 630 736
Foreign currency losses............................ (64) (373)
Other expense, net ................................ (140) (533)
Earnings (loss) before income taxes and
cumulative effect of change in method of
accounting for postretirement benefits other
than pensions................................... 197 (5,074)
Income taxes....................................... 42 127
Earnings (loss) before cumulative effect of
change in method of accounting for
postretirement benefits other than pensions..... 155 (5,201)
Cumulative effect of change in method of
accounting for postretirement benefits other
than pensions................................... (13,416) --
NET LOSS........................................... $(13,261) $(5,201)
Preferred stock dividends.......................... $ 411 $ 421
Net loss applicable to common stock................ $(13,672) $(5,622)
Loss per common share:
Primary:
Loss before cumulative effect of change in
method of accounting for postretirement
benefits other than pensions.. ............. $ (0.03) $ (0.89)
Cumulative effect of change in method of
accounting for postretirement benefits
other than pensions......................... (1.73) --
Net loss....................................... $ (1.76) $ (0.89)
Weighted average shares outstanding............ 7,755 6,328
2
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring items) necessary to present fairly its financial position
as of February 28, 1994, and the results of operations and cash flows for the
three month periods ended February 28, 1994 and 1993.
Amounts for interim periods are unaudited. Amounts for the year ended November
30, 1993, were derived from audited financial statements included in the 1993
Annual Report to Stockholders.
Certain prior year amounts in these financial statements have been reclassified
to conform with current year presentation.
Effective December 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" which requires that certain postretirement
medical and life insurance benefits be accounted for on an accrual basis.
Fully diluted loss per share is considered to be the same as primary loss per
share, since the effect of certain potentially dilutive securities would be
antidilutive.
See financial statements and accompanying notes in the Company's 1993 Annual
Report.
3
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CONSOLIDATED CONDENSED BALANCE SHEET
(In thousands)
FEBRUARY 28 NOVEMBER 30
1994 1993
ASSETS ----------- -----------
Current assets:
Cash and short-term investments.................... $ 3,930 $ 9,097
Receivables, net................................... 30,518 36,644
Inventories:
Raw materials and supplies...................... 8,156 6,295
Work in process................................. 23,803 22,864
Finished goods.................................. 7,497 8,644
39,456 37,803
Less amount necessary to reduce
certain inventories to
LIFO method..................................... 3,022 2,932
36,434 34,871
Prepaid expenses................................... 2,773 2,527
Total current assets............................... 73,655 83,139
Property, plant, and equipment, net................ 28,298 29,004
Other assets and deferred charges.................. 4,894 4,922
Total assets....................................... $106,847 $117,065
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of term debt.................... $ 1,214 $ 1,237
Notes payable, banks............................... 16,702 18,684
Accounts payable................................... 12,830 19,333
Accrued expenses................................... 14,102 14,471
Total current liabilities.......................... 44,848 53,725
Term debt.......................................... 4,812 5,374
Guaranteed Employees' Stock Ownership
Plan obligation................................. 18,339 19,206
Postretirement benefit liability.................. 12,993 --
Minimum pension liability.......................... 3,348 3,348
Other long-term liabilities........................ 150 150
Deferred income taxes.............................. 1,542 1,622
86,032 83,425
Redeemable convertible preferred stock............. 24,000 24,000
Guaranteed Employees' Stock Ownership
Plan obligation................................. (17,096) (17,533)
Treasury stock, at cost............................ (2,789) (2,789)
4,115 3,678
Common stock....................................... 19,563 19,594
Guaranteed Employees' Stock Ownership
Plan obligation................................. (1,243) (1,673)
Minimum pension liability.......................... (3,348) (3,348)
Foreign currency translation adjustments........... (4,174) (4,037)
Retained earnings.................................. 9,123 22,829
19,921 33,365
Less treasury stock, at cost....................... 3,221 3,403
16,700 29,962
Total liabilities and stockholders' equity......... $106,847 $117,065
4
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CONSOLIDATED CONDENSED
STATEMENT OF CASH FLOWS
(In thousands)
THREE MONTHS ENDED
FEBRUARY 28 FEBRUARY 28
1994 1993
CASH FLOWS FROM --------- --------
OPERATING ACTIVITIES:
Net loss........................................... $(13,261) $(5,201)
Adjustments to reconcile net loss to cash
used in operations:
Cumulative effect of change in method of
accounting for postretirement benefits
other than pensions......................... 13,416 --
Depreciation and amortization.................. 1,186 1,360
Gain on sale of property, plant, and equipment. (6) (30)
Deferred income taxes.......................... (84) (122)
Changes in assets and liabilities:
Receivables, net........................... 6,069 8,114
Inventories................................ (1,645) (1,054)
Prepaid expenses........................... (252) 464
Accounts payable........................... (6,445) (2,160)
Accrued expenses........................... (748) (2,160)
U.S. and foreign income taxes.............. (34) 113
Other...................................... (101) (1,949)
Net cash used in operations........................ (1,905) (2,625)
CASH FLOWS FROM INVESTING AND OTHER
ACTIVITIES:
Plant and equipment additions...................... (413) (731)
Proceeds from sale of property, plant, and
equipment....................................... 8 389
Net cash used in investing and other activities.... (405) (342)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in term debt................... (595) 34
Decrease notes payable, banks...................... (1,998) (7,399)
Treasury stock, net................................ 148 --
Cash dividends..................................... (411) (421)
Net cash used in financing activities.............. (2,856) (7,786)
EFFECT OF TRANSLATION ADJUSTMENT ON
CASH............................................ (1) (131)
CASH AND SHORT-TERM INVESTMENTS:
Decrease in cash................................... (5,167) (10,884)
Beginning of year.................................. 9,097 15,517
End of period...................................... $ 3,930 $ 4,633
5
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
We are pleased to report that an unseasonably strong sales demand in the
opening months of the new fiscal year resulted in our achieving earnings from
operations for the fiscal 1994 first quarter ended February 28, 1994 compared
to a substantial year-ago loss. As discussed in the 1993 Fourth Quarter Report
to Stockholders, in the 1994 first quarter the Company also adopted the
mandatory accounting change pursuant to Statement of Financial Accounting
Standards (SFAS) 106 which governs accounting for nonpension retiree benefit
costs.
SALES: Sales for the first quarter were $45,236,000, a 42% increase over
sales of $31,949,000 in the comparable period of 1993. The increase in sales
revenue reflects continued improvement in the domestic petroleum dispensing
equipment market, which was up 49% over the prior year, and continued growth
in the international market, which showed an increase of 32% relative to the
prior-year first quarter.
EARNINGS: The Company reported earnings of $155,000 before the cumulative
effect of the SFAS 106 accounting change noted above. This is a significant
improvement over the $5,201,000 loss reported in the first quarter of 1993.
Increased sales, improved margins, and lower operating expenses as a percent
of sales contributed to the continued turnaround in earnings. The cumulative
noncash effect of adopting SFAS 106 was $13,416,000 representing the actuarially
determined transition obligation for retiree health benefits at the date of
adoption.
COSTS AND EXPENSES: Cost of goods sold as a percent of sales for the three-
month period improved, relative to 1993, due primarily to reduced manufac-
turing costs. Selling, general, and administrative expenses, as a percent of
sales, were below the prior-year first quarter as a result of cost containment
initiatives implemented throughout the quarter. Interest expense was below
the prior year due to a lower level of debt outstanding during the quarter.
Other expense, net, was below the prior year in that the year-ago first
quarter included a loss of $500,000 on the sale of a nonproductive asset.
OTHER: Cash used in operations for the quarter ended February 28, 1994 was
$1,905,000 versus $2,625,000 used in the prior-year first quarter. The
improvement relative to the prior year resulted from the higher sales level,
higher inventory turns, and improved receivables collections.
Net cash used in investing and other activities was $405,000 in 1994,
primarily for capital expenditures. Net cash used in investing and other
activities in the 1993 first quarter was $342,000, reflecting capital
expenditures of $731,000 offset, in part, by proceeds from the sale of
property, plant, and equipment of $389,000.
Net cash used in financing activities of $2,856,000, principally representing
debt reduction and preferred stock dividend payments, was $4,930,000 less than
the prior year.
DIVIDENDS: Financial covenants of Tokheim's current bank agreement preclude
the payment of cash dividends on common stock throughout the term of the
agreement.
OTHER DEVELOPMENTS: Most other public companies with fiscal years ended
December 31, adopted the SFAS 106 accounting change at 1993 year-end. Because
of its November 30 fiscal year-end, Tokheim's adoption was in the 1994 first
quarter. Like many of those companies, Tokheim elected to recognize the
entire SFAS 106 amount as a one-time charge rather than the alternative of
6
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spreading the adjustment over a period not to exceed 20 years. In making the
decision to take the one-time charge in the first quarter, we conferred with
representatives from the financial community and others, including our
customers, many of whom had addressed the same issue in their own companies.
Without exception, we were advised to take the mandatory charge as a one-time
adjustment. Analysts, customers, and other sophisticated business people
focus on the pure operating results of a company, not the effects of
accounting changes whether they be positive or negative. As we indicated in
our 1993 Fourth Quarter Report to Stockholders, adoption of SFAS 106 has no
cash flow effect and does not represent any change in the way the Company has
administered or paid retiree health care benefits in past years.
Recently, Tokheim negotiated a three-year, $47 million bank commitment to
refinance its existing loan agreement which was to have matured on December 1,
1994. By all measures, the favorable terms of the new agreement reflect the
substantial progress the Company has made in improving its results from
operations and reducing its debt from $85 million approximately two years ago
to the present level of $41 million. The new agreement will result in
substantial savings in interest cost relative to the amount the Company is
paying currently. The new credit agreement, along with the equity private
placement of 1.3 million shares last July, successfully completes the
Company's overall recapitalization plan and provides a sound foundation to
finance the renewed growth of the business.
In the area of product development, the Company recently passed all
requirements of the California Air Resources Board (CARB) with its new
MAXVAC(TM) vacuum-assist vapor recovery system. Tokheim's new MAXVAC(TM)
system uses the latest technology to prevent the escape of gasoline vapors
during refueling. Research commissioned by Tokheim shows that consumers
prefer the "ease of use" features incorporated in the new MAXVAC(TM) system.
Under Environmental Protection Agency (EPA) Stage II regulations, 57 ozone
nonattainment areas in the United States must come into compliance with EPA
air emissions standards by 1996. It is estimated that over 30,000 retail
service station locations across the country will be impacted potentially by
Stage II vapor recovery control according to an independent market research
study. The estimated number of stations converting to Stage II vapor recovery
in 1994 is approximately 12,000. This translates to about 56,000 dispensers
that will require replacement or retrofitting to comply with the Clean Air Act
amendments of 1990.
We are more than gratified with having achieved profitability in the fiscal
first quarter which, as noted at the outset, traditionally represents the
seasonal trough of sales activity in the industry. We interpret these results
as further validation of our expectations of a return to more normal levels of
business activity. Our strong product position; the important strategic
alliances we have forged with Shell in Europe, Amoco here in the United
States, and VeriFone for development of POS technology; the cost reductions we
have implemented; and improvements we have made in operating efficiency, all
position the Company strongly to participate in the recovering market.
We look forward to outlining our 1994 objectives for our stockholders at the
annual stockholders' meeting to be held on April 13, 1994, at our corporate
offices in Fort Wayne.
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit (11) Computation of Primary and Fully Diluted Earnings per
Share for the three months ended February 28, 1994 and 1993, is
located on page 9.
(b) Reports on Form 8-K - None.
7
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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 thereunto duly authorized.
TOKHEIM CORPORATION
Date April 14, 1994 Douglas K. Pinner
President and Chief Executive Officer
Date April 14, 1994 Jess B. Ford
Vice President, Finance, Secretary, and
Chief Financial Officer
8
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TOKHEIM CORPORATION AND SUBSIDIARIES
EXHIBIT (11) - EARNINGS PER SHARE
FOR THE QUARTERS ENDED FEBRUARY 28, 1994 AND FEBRUARY 28, 1993
Primary earnings per share are based on the weighted average number of shares
outstanding during each year. The assumed exercise of employees' stock options
less the number of treasury shares assumed to be purchased from the proceeds
using the average market price of the Company's common stock is antidilutive,
and is, therefore, not included in the primary earnings per share calculation.
The following table presents information necessary to calculate earnings per
share for quarters ended February 28, 1994, and February 28, 1993.
Primary
--------------------
1994 1993
-------- --------
SHARES OUTSTANDING (IN THOUSANDS):
Weighted average outstanding.................. 7,755 6,328
Share equivalents............................. -- --
Adjusted outstanding.......................... 7,755 6,328
NET EARNINGS (LOSS):
Loss before cumulative effect of change in
method of accounting for postretirement
benefits other than pensions............... $ 155 $(5,201)
Cumulative effect of change in method of
accounting for postretirement benefits
other than pensions........................ (13,416) --
Net loss...................................... (13,261) (5,201)
Less preferred stock dividend................. 411 421
Loss applicable to common stock............... $(13,672) $(5,622)
NET LOSS PER COMMON SHARE:
Loss before cumulative effect of change in
method of accounting for postretirement
benefits other than pensions............... $ (0.03) $ (0.89)
Cumulative effect of change in method of
accounting for postretirement benefits
other than pensions....................... (1.73) --
Net loss per common share.................... $ (1.76) $ (0.89)
9
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TOKHEIM CORPORATION AND SUBSIDIARIES
EXHIBIT (11) - EARNINGS PER SHARE
FOR THE QUARTERS ENDED FEBRUARY 1994 AND FEBRUARY 28, 1993
(CONTINUED)
For 1993, fully diluted earnings per share is considered to be the same
as primary earnings per share, since the effect of certain potentially
dilutive securities would be antidilutive.
Fully Diluted
--------------------
1994 1993
-------- --------
SHARES OUTSTANDING (IN THOUSANDS):
Weighted average outstanding.................. 7,755 6,328
Share equivalents............................. 92 --
Weighted conversion of preferred stock........ 1,171 882
Adjusted outstanding.......................... 9,018 7,210
NET EARNINGS (LOSS):
Loss before cumulative effect of change
in method of accounting for postretirement
benefits other than pension................ $ 155 $(5,201)
Cumulative effect of change in method of
accounting for postretirement benefits
other than pensions........................ (13,416) --
Net earnings (loss)........................... (13,261) (5,201)
Less preferred stock dividend................. 411 421
Loss applicable to common stock............... $(13,672) $(5,622)
NET EARNINGS (LOSS) PER COMMON SHARE:
Loss before cumulative effect of change
in method of accounting for
postretirement benefits other
than pensions.............................. $ (0.03) $ (0.78)
Cumulative effect of change in method of
accounting for postretirement benefits
other than pensions........................ (1.49) --
Net loss per common share..................... $ (1.52) $ (0.78)
10
