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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For fiscal year ended November 30, 1996
COMMISSION FILE NUMBER 1-6018
TOKHEIM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
35-0712500
INDIANA (I.R.S. EMPLOYER I.D. NO.)
(STATE OF INCORPORATION)
10501 CORPORATE DR., P.O. BOX 360 46801
FORT WAYNE, INDIANA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (219) 470-4600
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
Common Stock, no par value........................ New York Stock Exchange
Preferred Stock Purchase Rights................... New York Stock Exchange
</TABLE>
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 registrant's knowledge, in definitive proxy or information
statements incorporated by references in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of February 7, 1997, 7,945,474 shares of voting common stock were
outstanding. The aggregate market value of shares held by non-affiliates was
$70.9 million (based on the closing price of these shares on the New York
Stock Exchange on such date).
In addition, 793,160 shares of convertible preferred stock were held by the
Trustee of the Retirement Savings Plan for Employees of Tokheim Corporation
and subsidiaries. The liquidation value is $25 per share with an aggregate
liquidation value of $19.8 million. For a complete discussion regarding the
attributes of this preferred stock, see Item 5 on page 7.
DOCUMENTS INCORPORATED BY REFERENCE
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DOCUMENT FORM 10-K/A
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<S> <C>
Proxy Statement.................................. Part III, Item(s) 10-13
</TABLE>
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TOKHEIM CORPORATION
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
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PAGE
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PART I
<C> <S> <C>
Item 1. Business....................................................... 3
Item 2. Properties..................................................... 6
Item 3. Legal Proceedings.............................................. 7
Item 4. Submission of Matters to a Vote of Security Holders............ 7
PART II
Market for the Registrant's Common Equity and Related
Item 5. Stockholder Matters............................................ 7
Item 6. Selected Financial Data........................................ 9
Management's Discussion and Analysis of Financial Condition and
Item 7. Results of Operation........................................... 10
Item 8. Financial Statements and Supplementary Data.................... 15
Item 9. Disagreements on Accounting and Financial Disclosure........... 42
PART III
Item 10. Directors and Executive Officers of the Registrant............. 42
Item 11. Executive Compensation......................................... 43
Item 12. Security Ownership of Certain Beneficial Owners and Management. 43
Item 13. Certain Relationships and Related Transactions................. 44
PART IV
Exhibits, Financial Statement Schedules, and Reports on Form
Item 14. 8-K........................................................... 44
</TABLE>
2
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PART I
ITEM 1. BUSINESS.
(a) General:
Tokheim Corporation and its subsidiaries (the "Company") are engaged in the
design, manufacture and servicing of electronic and mechanical petroleum
dispensing marketing systems, including service station equipment, point-of-
sale (POS) control systems, and card- and cash-activated transaction systems
for customers around the world.
Sales of the Company's products can be affected by a variety of factors,
such as environmental regulations, retail petroleum construction, the price of
oil, interest rates, weather conditions, political stability in foreign
markets, and general economic conditions.
The information that follows should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related Notes
included elsewhere in this Form 10-K.
On September 6, 1996, the Company completed the acquisition of the petroleum
dispenser business ("Sofitam") of Sofitam S.A., a French corporation. The
Company purchased Sofitam's equity for $107.4 million, less Sofitam's debt of
$58.4 million and other adjustments. The transaction was financed by the
private placement of senior subordinated notes (which were subsequently
exchanged for registered senior subordinated Notes) and by the use of a
portion of a bank credit facility. The acquisition of Sofitam materially
impacted the financial position of the Company, increasing sales as well as
debt and leverage ratios.
Headquartered in France, Sofitam is the leading manufacturer and servicer of
petroleum dispensers in France and northern Africa, and a leading manufacturer
in southern Europe. This coverage complements Tokheim's recently-strengthened
positions in the U.S., the Asia Pacific and in eastern and central Europe. The
combination of Tokheim and Sofitam has thus created one of the world's largest
manufacturers and servicers of petroleum dispensing systems, with an ability
to provide its products and services globally. Management believes that the
Company's reach, expanded product offerings and customer relationships has
made it one of the strongest competitors in the industry.
The continuing improvement during 1996 in industry demand for petroleum
marketing equipment was driven by the development of emerging markets,
compliance with U.S. Federal Clean Air Act amendments requiring Stage II vapor
recovery, and the increased demand for automated equipment, including
dispenser payment terminals and point-of-sale systems. In addition, Tokheim's
operating performance continued to benefit from new product introductions,
strengthened distribution channels, increased international market
penetration, and cost-reduction programs which more than offset price
deterioration.
The Board of Directors approved a program to consolidate the Company's
existing European operations with those recently acquired from Sofitam. The
capital expenditures necessary to accomplish the European consolidation are
estimated to be $6.3 million over 1997 and 1998. In addition, the Company
expects to incur $9.7 million of cost to close redundant Sofitam operations.
Cost savings from this investment are expected to be realized over the next
two to three years. In 1996, the Company completed most of a $12.8 million
capital expenditure program at the Company's U.S. facilities, which the Board
of Directors authorized in 1995. The program, which was financed through
operating leases, made important improvements to plant productivity and
capacity, product design, and quality of both products and processes.
During the year, Tokheim achieved a quality milestone--ISO 9000
certification for all of Tokheim operations (excluding Sofitam) that were not
previously certified. This important accomplishment indicates the high quality
standards applied throughout Tokheim's operations and should help the Company
continue its expansion into markets recognizing this certification, especially
European markets.
3
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The International Standards Organization (ISO), in Geneva, Switzerland, was
founded in 1946 to develop a common set of standards in manufacturing, trade
and communications. It is composed of the national standards institutes and
organizations of 97 countries worldwide. First published in 1987, the
standards have been rapidly adopted by organizations in Europe, Asia, and
North America. In addition, there is a movement towards adoption by several
industries in the European Union, where ISO certification is now a
prerequisite to product certification. The standards have been endorsed by the
American Society of Quality Control, the European Standards Institutes, and
the Japanese Industrial Committee.
The standards are designed to: establish consistent language and
terminology; provide baseline quality practices that are accepted
internationally; and reduce the need for costly on-site supplier assessments.
The standards require: a standard language for documenting quality practices;
a system to track and manage evidence that these practices are instituted
throughout the organization; and a third-party auditing model to review,
certify, and maintain certification of organizations.
In this Report, forward-looking statements are made that are subject to
risks and uncertainties. Forward-looking statements include information
concerning possible or assumed future results of the Company, including
statements preceded by, followed by, or including the words "believes,"
"expects," "anticipates," or similar expressions. For those statements, the
Company claims the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
The following factors, in addition to those discussed elsewhere in this
Report, could affect the future results of the Company, and could cause those
results to differ materially from those expressed in the forward-looking
statements made herein: materially adverse changes in the economic conditions
in the market for petroleum dispensing equipment or for petroleum products; a
drop in retail petroleum service station construction; loss of several major
customers; environmental regulatory actions; failure to consolidate Sofitam as
anticipated, in terms of costs, benefits and timing; impairment of cash flows
from foreign subsidiaries; and competition from others in the petroleum
dispensing equipment market.
(b) Financial Information About Industry Segments:
In fiscal years 1996, 1995 and 1994, the Company had only one reportable
industry segment--manufacturing and sales of petroleum dispensing marketing
systems.
(c) Narrative Description of Business:
Petroleum Dispensing Equipment, Systems, and Services--This market is served
by: (a) Tokheim Corporation, United States; Tokheim Europe B.V., the
Netherlands; Tokheim and Gasboy of Canada Limited, Canada; Tokheim GmbH,
Germany; Tokheim Limited, the United Kingdom; and Tokheim South Africa
(Proprietary) Limited, South Africa; Sofitam Equipment, Sogen, and Sofitam
International located in France; and Sofitam International subsidiaries
located throughout Europe and Africa, which are involved in the design,
manufacture, and marketing of petroleum dispensing equipment and services,
point-of-sale systems, card- and cash-activated transaction systems, and
commercial dispensers, and (b) Gasboy International, Inc., United States,
which designs, manufactures, and distributes petroleum dispensing equipment
for the consumer, fleet, and commercial markets. Gasboy also designs and
manufactures vehicle fleet management and control systems and point-of-sale
terminals for dual purpose, retail, and fleet applications.
In 1996, 1995, and 1994, the petroleum industry accounted for all of the
Company's sales. Approximately 86%, 85%, and 83%, respectively, of the
Company's sales were derived from the sale of service station gasoline
dispensers, parts, accessories, and service contracts. These items are sold to
major oil companies for use at their own gasoline stations, and to independent
retail station owners through the Company's distributor and manufacturers'
representative organization.
International sales by foreign subsidiaries and exports from the U.S.
totaled approximately 47%, 38%, and 36% of consolidated net sales in 1996,
1995, and 1994, respectively. While risks attendant to operations in
4
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foreign countries vary widely from country to country, the Company is of the
opinion that, considered in the aggregate, the risks attendant to its
operations in foreign countries are not significantly greater than the risks
attendant to operations in the United States. The acquisition of Sofitam has
significantly extended the Company's international distribution network,
reducing its reliance on (and the risks from) third-party distributors.
Products are distributed in the United States by a sales organization which
operates from national account offices, district sales offices, petroleum
equipment firms, industrial suppliers, and distributors in major cities across
the United States. In areas outside the United States, product distribution is
accomplished by the International Division through foreign subsidiaries,
distributors, and special sales representatives. In addition to its widespread
sales organization, there are more than 1,400 trained field service
representatives acting as independent contractors, many of whom maintain
service parts inventory. The Company's Customer Service Division maintains a
Help Desk which is available 24 hours a day, 365 days a year, for immediate
response to service needs. Additionally, the Customer Service Division
maintains a continuing program of service clinics for personnel of customers
and distributors, both in the field and at the Company's training centers. The
business is somewhat seasonal, primarily relating to the construction season
and increased purchase activity by major oil companies toward the end of the
calendar year.
The market for the Company's products is highly competitive. The Company
competes with a number of companies, some of which may have greater sales and
assets than the Company. Domestically, the Company competes against four
manufacturers of service station dispensers. Internationally, the Company
competes against the same four domestic competitors plus several regional
competitors in Europe and the Far East.
Environmental regulations and service station automation are expected to
continue to impact favorably the future growth of the Company's business both
domestically and internationally. The Company's belief that environmental
regulations will have a favorable impact is based upon experience and
analysis. For example, a significant number of retail service stations across
the United States were impacted by Stage II Vapor Recovery Control regulations
effective in stages through 1996. A study of such regulations, done by an
independent consultant to the Company, indicated that while the majority of
service stations will retrofit existing dispensers, requiring purchase of a
retrofit kit from a dispenser manufacturer, a large number of older dispensers
will be replaced.
The dollar amount of backlog as of the end of fiscal year 1996 was
approximately $28.1 million, compared to approximately $21.0 million and $16.6
million at the end of fiscal years 1995 and 1994, respectively. The Company
expects that the entire backlog will be filled in fiscal year 1996. Backlog
amounts at any fiscal year-end are not an indicator of sales during the
forthcoming year. Factors impacting backlog levels at any point in time
include such events as the timing of purchases by the major oil companies,
announcements of price adjustments, sales promotions, and production delays.
These factors mitigate against comparisons of one period to another.
In fiscal 1996, no one customer accounted for as much as ten percent of the
Company's consolidated sales. The principal raw materials essential to the
Company's business are flat sheet steel, aluminum, copper tubing, iron
castings, and electronic components, all of which are available through
several competitive sources of supply.
The Company holds a number of patents, none of which is considered essential
to its overall operations. The Company relies primarily on its engineering,
production, marketing, and service capabilities to maintain its established
position within the industry. At November 30, 1996, the Company employed
approximately 3,400 persons at its various locations.
New Products--The Company spent approximately $15.9 million in 1996, $12.7
million in 1995, and $10.2 million in 1994 on activities related to the
support and improvement of existing products, manufacturing methods, the
development of new products, and other applied research and development.
Research and development projects are evaluated on cash payback and return on
investment.
During 1996, the Company introduced or implemented a number of new products.
The Company introduced debit card capability, in addition to existing credit
card capabilities, at the pump. These features allow a customer
5
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to use either a debit or credit card at the pump, including utilization of a
customer PIN (personal identification number) as part of a high security
system.
The Columbus Point-of-Sale (POS) system was recently implemented on the
Conoco network, and other networks will be added during 1997. Columbus offers
high-end functionality with mid-range affordability. It uses an Intel
Pentium(R) processor and an open architecture, Microsoft Windows(R) NT
operating system. Columbus features a user-friendly touch screen and allows
for full integration of other functions, such as back office, fuel tank
monitoring, and additional software integration tools.
During 1996, Gasboy, a wholly-owned subsidiary, introduced the TopKAT, a
low-cost card activation fuel management system that mounts directly on the
top of a single or twin dispenser, updating the dispenser's capabilities and
extending the dispenser's useful life.
Gasboy's new Model 9850 became the first high-speed, electronic, commercial
pump in the petroleum industry. This addition to Gasboy's extensive commercial
line gives the fleet operator a modern electronic pump capable of delivering
up to 50 gallons (180 liters) of fuel per minute.
The new inexpensive Model 8800 Series electronic models were developed for
the emerging dispenser markets in Africa, South America, and Southeast Asia.
The 8800 series offers a simple electronic register mounted in an explosion
proof chamber. The pump is also capable of manual operation on the event of a
power interruption.
A number of new products were introduced by the Company during 1995. Major
enhancements were made to the POS systems product line including introduction
of the Windows(R) PC-based Columbus system, an island payment terminal, a card
reader upgrade for the Multi-Modular Dispenser, a retrofit head for Tokheim
Convenience Systems. In 1996, the Tokheim Ruby POS system was installed on 20
major oil company networks.
Products introduced in the commercial and fleet market segments during 1995
included ASTRA, a unique electronic commercial dispenser with a remote display
designed specifically for the above-ground market; Fuel Point, a fully
automated fuel management system which captures vehicle identification and
odometer information at the dispenser nozzle; and Oilex, a fully automated oil
change device capable of changing the oil in a commercial truck in less than
ten minutes through a single connection.
(d) Financial Information About Foreign and Domestic Operations and Export
Sales:
Financial information about foreign and domestic operations and export sales
for the years ended November 30, 1996, 1995, and 1994 is set forth in Item 8
of this Report in Note 15 to the Consolidated Financial Statements, captioned
"Geographical Segments."
ITEM 2. PROPERTIES.
The Company owns properties in: Fort Wayne, Indiana; Fremont, Indiana;
Washington, Indiana; Lansdale, Pennsylvania; Brighton, Ontario, Canada; Kya
Sand, Randburg, South Africa; Glenrothes, Scotland; Weilheim, Germany;
Grentheville, France; Falaise, France; Roche-Les-Beaupre, France; Friorg,
Switzerland; Scurzolengo, Italy; Casablanca, Morocco; Abidjan, Ivory Coast;
and Halstenbek, Germany. Tokheim owns an engineering and design center and a
corporate office building with an adjacent 116-acre tract of unimproved land
located north of Fort Wayne, Indiana. The Jasper, Tennessee and Atlanta,
Georgia facilities are currently being held for sale. The Company leases
properties in Tremblay, France; Asnieres, France; Solothurn, Switzerland; West
Sussex, United Kingdom; Volvoorde, Belgium; Barcelona, Spain; La Sourka,
Tunisia; Dakar, Senagal; Doula, Cameroon; Leiderdorp, the Netherlands; and
Hamburg, Germany. Management anticipates that the Company will have sufficient
capacity to meet future demand over the next several years. The Company
intends to sell or close several properties in fiscal 1997 and 1998 as part of
its European consolidation.
6
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ITEM 3. LEGAL PROCEEDINGS.
As more fully described in Item 8 of this Report in Note 19 to the
Consolidated Financial Statements, captioned "Contingent Liabilities", the
Company is defending various claims and legal actions, including environmental
and product liability actions, which are common to its operations. These legal
actions primarily involve claims for damages arising out of the Company's
manufacturing operations, the use of the Company's products, and allegations
of patent infringement.
In the opinion of the Company's management, amounts accrued for awards or
assessments in connection with environmental, product liability and other
legal matters are adequate, and ultimate resolution of these matters will not
have a material effect on the Company's consolidated financial position,
results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
The Company's common stock is traded on the New York Stock Exchange under
the symbol "TOK". The approximate number of record shareholders of the
Company's common stock as of November 30, 1996, was 7,000. No dividends were
paid on common stock in 1996, 1995, and 1994, in accordance with restrictive
covenants under the Company's loan agreements. The high-low sales prices for
the Company's common stock are set forth as follows:
QUARTERLY HIGH-LOW SHARE PRICES
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1996 1995
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SHARE PRICE SHARE PRICE
QUARTER HIGH-LOW HIGH-LOW
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1................................................ 9 1/2-6 1/8 9 5/8-7 1/4
2................................................ 10 3/4-8 3/4 9 1/4-7 1/2
3................................................ 10 -7 1/2 9 -6 1/2
4................................................ 9 7/8-8 1/2 7 1/4-6 5/8
</TABLE>
On July 10, 1989, the Company sold 960,000 shares of convertible cumulative
preferred stock to the Trust of the Company's Retirement Savings Plan (RSP) at
the liquidation value of $25 per share, or $24 million. The preferred shares
have a dividend rate of 7.75%. The Trustee, who holds the preferred shares,
may elect to convert each preferred share to one common share in the event of
redemption by Tokheim, certain consolidations or mergers of Tokheim, or a
redemption by the Trustee which is necessary to provide for distributions
under the RSP. A participant may elect to receive a distribution from the RSP
in cash or common stock. If redeemed by the Trustee, the Company is
responsible for purchasing the preferred shares at the $25 floor value. The
Company may elect to pay the redemption price in cash or an equivalent amount
of common stock. Due to the redemption characteristics of the stock, the
aggregate amount of future redemptions for the next five years cannot be
determined.
On August 23, 1996, the Company sold $100 million in aggregate principal
amount of its 11 1/2% senior subordinated Notes due 2006 in a private
placement pursuant to Rule 144A. The offering of the Notes was made in
connection with the Company's acquisition of Sofitam. The initial purchasers
of the Notes were BT Securities Corporation and First Chicago Capital Markets,
Inc., who in turn were to sell the Notes to Accredited Investors and Qualified
Institutional Buyers. The initial purchasers' discount on the transaction was
3.00%.
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On January 14, 1997, the Company completed an offer to exchange the original
Notes for its 11 1/2% Series B Senior Subordinated Notes due 2006 (the "New
Notes"). The terms of the New Notes are substantially similar in all material
respects to those of the original Notes, except that the New Notes are
registered under the Securities Act of 1933, as amended, and thus do not bear
legends restricting transfer. All of the original Notes were exchanged for New
Notes before the expiration of the exchange offer.
On January 22, 1997, the Board of Directors of the Company approved the
extension of the benefits afforded by the Company's then-existing rights plan
by adopting a new shareholder rights plan. The new plan, like its predecessor,
is intended to promote continuity and stability, deter coercive or partial
offers which will not provide fair value to all shareholders, and enhance the
Board's ability to represent all shareholders and thereby maximize shareholder
values.
Pursuant to the new Rights Agreement, dated as of January 22, 1997, by and
between the Company and Harris Bank and Trust Company, as Rights Agent, one
Right was issued for each outstanding share of common stock, without par
value, of the Company upon the expiration of the Company's existing rights
(February 9, 1997). Each of the new Rights entitle the registered holder to
purchase from the Company one one-thousandth of a share of Series A Junior
Participating Preferred Stock, without par value, at a price of $44.00 per
one-thousandth of a share. The Rights will not become exercisable, however,
unless and until, among other things, any person acquires 15% or more of the
outstanding common stock of the Company or the Board of Directors determines
that a person is an Adverse Person.
A person who beneficially owns 10% or more of the outstanding common stock
of the Company will be declared an Adverse Person if the Board of Directors
determines (a) that such beneficial ownership is intended to cause the Company
to repurchase the common stock beneficially owned by such person or to
pressure the Company to take action or enter into transactions intended to
provide such person with short-term financial gain that are not in the best
long-term interests of the Company and its shareholders or (b) such beneficial
ownership is causing or reasonably likely to cause a material adverse impact
on the Company to the detriment of the Company's shareholders, employees,
suppliers, customers or community. If a person acquires 15% or more of the
outstanding common stock of the Company or is declared an Adverse Person
(subject to certain conditions and exceptions more fully described in the
Rights Agreement), each Right will entitle the holder (other than the person
who acquired 15% or more of the outstanding common stock or is declared an
Adverse Person) to purchase common stock of the Company having a market value
equal to twice the exercise price of a Right. The new Rights are redeemable
under certain circumstances at $0.01 per Right and will expire, unless earlier
redeemed, on February 9, 2007.
The foregoing summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights
Agreement, a copy of which is incorporated by reference as Exhibit 4.1 to this
Report.
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ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data is not covered by the Independent
Accountant's Report, but should be read in conjunction with the Consolidated
Financial Statements and related Notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
SELECTED FINANCIAL DATA
(AMOUNTS IN THOUSANDS EXCEPT AMOUNTS PER SHARE)
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YEAR ENDED NOVEMBER 30,
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1996(A) 1995 1994 1993 1992
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STATEMENT OF OPERATIONS DATA:
Net Sales.................. $279,799 $221,573 $202,134 $172,306 $162,089
Operating income (loss)(B). 6,356 5,811 3,780 (2,324) (12,709)
Interest expense, net...... 7,191 3,319 2,806 3,443 4,169
Earnings (loss) from
continuing operations
before income taxes....... (1,229) 3,270 1,932 (5,745) (33,801)
Earnings (loss) from
continuing operations..... (2,009) 3,231 1,675 (5,867) (33,184)
Preferred stock dividends.. 1,543 1,580 1,617 1,663 1,790
Earnings (loss) from
continuing operations
applicable to common
stock(C).................. (3,552) 1,651 58 (7,530) (36,974)
Earnings (loss) from
continuing operations per
common share:
Primary.................... (0.45) 0.21 0.01 (1.09) (5.86)
Fully diluted.............. (0.45) 0.17 0.01 (1.09) (5.86)
BALANCE SHEET DATA (AT PERIOD
END):
Working capital............ $ 55,627 $ 50,353 $ 47,040 $ 32,346 $ 28,315
Property, plant and
equipment................. 41,010 28,558 27,425 29,004 32,851
Total assets............... 300,128 124,332 116,251 119,997 124,349
Total debt(D).............. 146,012 38,612 38,825 44,501 57,895
ESOP Preferred Stock, net.. 8,137 6,426 5,005 3,678 3,141
Common shareholders'
equity, net............... 17,678 23,797 22,857 32,894 28,241
OTHER DATA:
Cash flows from operating
activities................ 5,897 3,347 2,069 (5,039) 7,360
Cash flows for financing
activities................ (54,079) (4,910) (2,562) (76) 18,405
Cash flows from investing
activities................ 49,779 555 (5,063) (1,093) (24,543)
Capital expenditures....... 3,061 5,559 2,757 2,503 2,045
Depreciation and
amortization.............. 5,028 4,857 4,672 5,233 7,202
Interest expense and
preferred stock dividends. 9,336 5,168 4,675 5,475 6,812
EBITDA (as defined)(E)..... 17,842 14,126 10,230 2,931 (7,277)
</TABLE>
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(A) Fiscal year 1996 includes the balance sheet of Sofitam and three months of
operating activity since the date of acquisition. In addition, the
financial statements presented have been restated for an accounting change
in the method of valuing inventory, as more fully described in Item 8 of
this Report in Note 1 to the Consolidated Financial Statements, captioned
"Summary of Significant Accounting Policies."
(B) Operating income equals net sales less cost of sales, selling, general and
administrative expenses, merger and acquisition cost and other unusual
items, and depreciation and amortization.
(C) Excludes cumulative effect of change in method of accounting for
postretirement benefits other than pensions of $13,416 in the fiscal year
ended November 30, 1994.
(D) Total debt includes senior subordinated notes, long-term debt, current
maturities of long-term debt, notes payable bank, capitalized lease
obligations and the Guaranteed ESOP Obligation.
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(E) EBITDA (as used herein) represents earnings (loss) from continuing
operations before income taxes and cumulative effect of change in method
of accounting, net interest expense, depreciation and amortization, merger
and acquisition costs and other unusual items and minority interest.
Management uses EBITDA as a financial indicator of a Company's ability to
service debt, although the precise definition of EBITDA is subject to
variation among companies. EBITDA should not be construed as an
alternative to operating income or cash flows from operating activities
(as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of the Company's
operating performance or as a measure of liquidity. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
For additional information concerning the Company's historical cash flows,
see the Consolidated Statement of Cash Flows included elsewhere herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The continuing improvement during fiscal 1996 in industry demand for
petroleum marketing equipment was driven by the development of emerging
markets, compliance with U.S. Federal Clean Air Act amendments requiring Stage
II vapor recovery, and the demand for more automated equipment, including
dispenser payment terminals and point-of-sale systems. In addition, Tokheim's
operating performance continued to benefit from new product introductions,
strengthened distribution channels, increased international market
penetration, and cost-reduction programs which more than offset price
deterioration.
Results of operations in 1996, after merger and acquisition cost and other
unusual items of $6.5 million, were a loss of $2.0 million, or $0.45 per fully
diluted share, versus earnings of $3.2 million, or $0.17 per share, in 1995.
In 1994, the net loss amounted to $11.7 million, or $1.71 net loss per share.
Fiscal 1996 operating earnings were favorably impacted principally by a $58.2
million increase in sales (mostly from the Sofitam acquisition) and by
improved gross margins on product sales resulting from cost control measures,
new product introductions, and product mix improvements. Sofitam accounted for
$46.2 million of the 1996 sales.
Restructuring expenses relating to the Sofitam acquisition were $1,043 in
fiscal 1996. The expenses occurred due to excess and redundant manufacturing
and service operations. In 1997 and 1998, restructuring expenses charged to
operating expenses are expected to total $2,100. In addition, under liquidity
and capital resources, the Company describes additional financial commitments
relating to the restructuring following the Sofitam acquisition. Fiscal 1995
operating earnings were favorably impacted, mainly by a $19.4 million increase
in sales and improved gross margin on product sales.
Consolidated sales were $279.7 million in 1996, an increase of 26.3% from
$221.6 million in 1995 and an increase of 38.4% from 1994 sales of $202.1
million. In addition to the acquisition of Sofitam, the sales increase from
1995 to 1996 was due to unit volume increases. Both domestic and international
sales contributed to this gain. Domestic sales of petroleum dispensing
equipment and systems increased 7.6% from $137.5 million in fiscal 1995 to
$147.8 million in fiscal 1996. International sales were $132.0 million in
fiscal 1996, up 56.9% from fiscal 1995 sales of $84.1 million. 1995 domestic
sales increased $8.7 million, or 6.7%, from 1994, while international sales
increased $10.8 million, or 12.8%. These increases are attributable to sales
promotion efforts to penetrate new markets.
The gross margin on product sales for 1996 was 24.8%, up from the prior
year's 24.6%. The increase is due primarily to higher sales volume and
improvements in the Company's cost structure, offset, in part, by lower
prices. For similar reasons, the gross margin on product sales for 1995 had
increased from the 1994 level of 23.4%.
Selling, general, and administrative expenses as a percentage of net sales
were 18.5% in 1996, compared to 18.6% in 1995, and 18.8% in 1994. Selling,
general, and administrative expenses actually increased to $51.7 million from
$41.3 million in 1995, reflecting the expenses associated with the Sofitam
operations since the date of acquisition. However, the percentage decreased in
1996 because of the increase in sales following the Sofitam acquisition. The
decrease from 1994 to 1995 was due to cost reduction efforts and higher sales
levels.
The combined domestic and international operations incurred operating income
of $6.4 million in 1996 compared to $5.8 million in 1995 and $3.8 million in
1994.
10
<PAGE>
Net interest expense of $7.2 million in 1996 increased over 1995's interest
expense of $3.3 million, reflecting increased borrowings to finance the
acquisition of Sofitam. Interest expense in 1995 was $0.5 million greater than
1994, reflecting higher rates.
A net foreign currency exchange loss of $0.2 million incurred in fiscal 1996
was a change from a gain of $0.1 million in 1995. The loss was due principally
to the devaluation of the French franc against the U.S. dollar during the last
three months of the fiscal year, affecting intercompany accounts. A net
foreign currency exchange gain of $0.2 million was incurred in fiscal 1994.
The Company's long-term investment in foreign subsidiaries, when translated at
fiscal 1996 conversion rates, resulted in a translation adjustment reflected
as a reduction against shareholders' equity of $7.3 million in 1996 and $3.5
million in 1995. The adjustments represent principally the effect of changes
from the beginning to the end of the year in the current rate of exchange used
to translate the net assets, including certain intercompany amounts of foreign
subsidiaries. The majority of the 1996 adjustment is a result of long-term
loans to foreign affiliates, primarily in connection with the acquisition of
Sofitam.
Minority interest for 1996, which reflects minority shareholders in Sofitam
entities, was $0.4. No minority interest was recorded in either 1995 or 1994.
Income tax expense for 1996 was $0.8 million, an increase from $0.04 million
in 1995. The increase was due to income tax expense recorded in the newly-
acquired Sofitam subsidiaries. In addition, at the end of 1996, the Company
has not recorded a net deferred tax asset due largely to uncertainties
associated with the Company's future results of operations on a consolidated
basis, including the results of the newly acquired Sofitam. In 1997, the
Company plans to evaluate the likelihood that all or part of the deferred tax
asset will be realized through the generation of future taxable earnings, and,
if so, the net deferred tax asset will be adjusted. See Note 14 to the
Consolidated Financial Statements for additional information about the
Company's income tax position at November 30, 1996.
Fully diluted results of operations, after merger and acquisition cost and
other unusual items of $6.5 million, were a loss $0.45 per share in 1996
versus 1995 earnings per share of $0.17, and a 1994 net loss of $1.71 per
share after accounting change. The weighted average shares outstanding used in
computing fully-diluted earnings per share were 7,981,000 in 1996, 9,820,000
in 1995, and 7,801,000 in 1994. For fiscal years 1996 and 1994, 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.
In fiscal 1995, the Company sold a non-core product line and related assets.
Net proceeds from the sale were $0.5 million, and a net gain of $0.5 million
was realized. The gain has been included in other income, net in the statement
of earnings and retained earnings.
No dividends were paid on common stock during fiscal years 1994 through 1996
in accordance with restrictive covenants under the Company's loan agreement.
The number of shareholders as of November 30, 1996 was approximately 7,000.
Inflation has not had a significant impact on the Company's results of
operations.
LITIGATION AND ENVIRONMENTAL MATTERS
Claims have been brought against the Company and its subsidiaries for
various legal matters. In addition, the Company's operations are subject to
international, federal, state, and local environmental laws and regulations.
Additional information is set forth in Item 8 of this Report in Note 19 to the
Consolidated Financial Statements, captioned "Contingent Liabilities."
11
<PAGE>
OTHER
During fiscal 1996, the Company changed its method of valuing domestic
inventories from the last-in, first-out (LIFO) method to the first-in, first-
out (FIFO) method. The change was made because the Company had begun to
realize and expects to continue to experience cost reductions as a result of
technological improvements in its manufacturing process. The Company believes
that the FIFO method is preferable to the LIFO method as the change conforms
the inventories of domestic and foreign subsidiaries to the same cost method,
inventories are reflected in the Company's balance sheet at their most recent
value; and revenues are better matched with expenses. Also the FIFO method is
the predominant method used in the industry in which the Company operates.
This change in the method of valuing inventories has been applied
retroactively, and comparative amounts for the two prior periods presented
have been restated to apply the FIFO method. The change was applied as of the
beginning of 1994, increasing inventories, as previously reported, by $2,932,
at December 1, 1993, and increasing retained earnings from $22,829 to $25,761
at that date.
In the first quarter of 1994, the Company adopted a mandatory noncash
accounting change pursuant to Statement of Financial Accounting Standards
(SFAS) No. 106, which governs accounting for non-pension retiree benefit
costs. SFAS No. 106 requires companies to project the future cost of providing
retiree medical, dental, and life insurance benefits and to recognize that
cost as benefits are earned during the employee's career. Tokheim's
actuarially-determined liability was $13.4 million. The Company elected to
record that amount as a one-time, noncash accounting adjustment versus the
alternative of amortizing the amount over a period not to exceed 20 years. At
November 30, 1996, the Company's accrual was $16.9 million. Adoption of the
new accounting standard had no cash flow effect, nor did it represent a change
with respect to previous fiscal years in the benefit levels provided to
employees.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" is effective for the year ending November
30, 1997. This statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be fully recoverable. In the opinion of
management, this statement is not expected to materially impact the Company's
financial position or results of operations.
SFAS No. 123, "Accounting for Stock-Based Compensation," is effective for
the year ending November 30, 1997. This statement encourages, but does not
require, companies to recognize compensation expense for grants of stock,
stock options, and other equity instruments based on a fair value method of
accounting. Companies that choose not to adopt the new expense recognition
rules of SFAS No. 123 will continue to apply the existing accounting rules of
Accounting Principles Board Opinion (APBO) No. 25, but will be required to
provide pro forma disclosure of the compensation expense determined under the
fair value provisions of SFAS No. 123, if material. APBO No. 25 requires that
there be no recognition of compensation expense for the stock-based
compensation arrangements provided by the Company, where the exercise price is
equal to or greater than the market price at the date of grant. The Company
expects to continue to follow the accounting provisions of APBO No. 25 for
stock-based compensation and to furnish the pro forma disclosures required
under SFAS No. 123, if material.
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities," is effective for the year ending November
30, 1998. In the opinion of management, this statement will not have a
material impact on the Company's financial position or results of operations.
American Institute of Certified Public Accountants Statement of Position No.
96-1, "Environmental Remediation Liabilities," is effective for the year
ending November 30, 1998. Management has not yet determined the impact that
adoption of this statement will have on the Company's financial position or
results of operations, but does not anticipate that material liabilities will
need to be recorded in addition to those already provided for under the
provisions of generally accepted accounting principles as prescribed by SFAS
No. 5, "Accounting for Contingencies."
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has available to it a variety of sources of liquidity and
capital resources, both internal and external. These resources provide funds
required for current operations, interest payments, debt retirement, capital
expenditures, and other requirements.
On August 23, 1996, the Company sold $100 million in aggregate principal
amount of its 11 1/2% senior subordinated Notes due 2006 in a private
placement pursuant to Rule 144A. The offering of the Notes was made in
connection with the Company's acquisition of Sofitam.
On September 3, 1996, Tokheim entered into an $80 million bank credit
agreement with five domestic and international banks for a six-year term. This
facility allows the Company to borrow in several currencies. The Company has
pledged as collateral principally all of its assets, including intercompany
notes, receivables and intangibles such as patents and trademarks. The
facility includes numerous covenants, including maintaining minimum levels of
earnings and interest coverage, and restrictions on capital expenditures and
rentals. The Company must be in compliance with the terms and conditions of
the facility before making interest and principal payments on the senior
subordinated Notes. Availability of credit under the bank agreement is subject
to borrowing base requirements and compliance with the facility's covenants.
The Company was in full compliance with all covenants as of November 30, 1996.
Cash provided from operations was $5.9 million in 1996, compared to $3.3
million in 1995 and $2.1 million in 1994. 1996 cash flow from operations was
enhanced by improved collection of receivables and increased accrued expenses.
The increases in 1995 and 1994, in each case relative to the previous year,
reflect an increase in operating earnings and continued improvement in working
capital management.
The Company's investing activities are generally for capital expenditures,
which amounted to $3.1 million in 1996, $5.6 million in 1995, and $2.8 million
in 1994. In addition, 1996 activities reflected the acquisition of Sofitam.
The Company purchased Sofitam for $52.1 million, net of cash acquired. In
1996, the Company received proceeds from sales of property, plant, and
equipment of $1.1 million versus $0.6 million and $0.2 million in 1995 and
1994, respectively. At November 30, 1996, no significant contractual
commitments existed for future capital expenditures. The Company plans,
however, to consolidate its European operations, as described in detail
elsewhere in this Report.
Financing activities in 1996 reflect the impact of the Sofitam acquisition.
The $100 million raised through the sale of senior subordinated Notes was used
to make payments of $32.3 million of term debt and to cover debt issuance
costs of $11.5 million. Financing activities in 1995 were limited to normal
business transactions. Financing activities in 1994 primarily resulted in a
$5.7 million reduction in debt, which aggregated $38.8 million at November 30,
1994 versus $44.5 million at November 30, 1993. Peak short-term borrowings
were $35.5 million in 1996, $19.9 million in 1995, and $18.4 million in 1994.
The weighted average interest rate for short-term borrowings was approximately
8.8% in 1996, 8.6% in 1995, and 8.1% in 1994. Preferred stock dividends paid
were $1.5 million, $1.6 million, and $1.6 million in 1996, 1995, and 1994,
respectively.
Cash and cash equivalents at November 30, 1996 aggregated $0.1 million
versus $3.0 million at November 30, 1995. This decrease is due primarily to
use of most of the Company's cash reserves to pay down $17.7 million of the
amount outstanding under the credit facility at November 30, 1996. Working
capital at November 30, 1996 increased $5.3 million principally due to the
Sofitam acquisition. The Company's current ratio at November 30, 1996 and 1995
was 1.5 and 2.3, respectively.
The Company has guaranteed loans to its Retirement Savings Plan in the
amounts of $12.0 million and $14.6 million at November 30, 1996 and 1995,
respectively. The Company has guaranteed a $25 per share value for its
convertible preferred stock. At conversion, the Company is responsible for any
difference between the market value of the underlying common stock and the $25
guaranteed value of the preferred stock.
Total interest-bearing debt as a percent of equity for 1996 was 565.6%
compared to 200.1% for 1995. The increase in 1996 is primarily due to an
increase in debt following the acquisition of Sofitam, a decrease in
13
<PAGE>
retained earnings, and an increase in the currency reserve offset by a
decrease in Guaranteed Employees' Stock Ownership Plan Obligation, and a
reduction in common treasury stock.
In conjunction with the Sofitam acquisition, the Company expects to incur
the following commitments: the Company will spend $9.8 million to close
redundant Sofitam operations in Europe. This expenditure will be charged
against the acquisition accruals. The Company will also spend $6.3 million for
capital assets to expand the Normandy, France plant and upgrade information
systems. Finally, the Company anticipates incurring expenses of $2.1 million
against operating income to close certain existing operations.
The Company anticipates making between $2.0 million and $3.0 million in
capital expenditures for existing operations. The Company intends to complete
improvements to the paint line at its Fort Wayne, Indiana plant for $4.8
million, which were approved by the Board of Directors in 1995.
Beyond the current year, the substantial credit available on the bank
facility ($51.6 million at year end) should meet working capital and liquidity
needs in the future. Moreover, the Company has experienced strong internal
cash flow in the first three months of 1997, having made a $5.1 million
interest payment on the senior subordinated notes from cash flow without
resorting to the bank facility.
14
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS
FOR THE YEARS ENDED NOVEMBER 30, 1996, 1995, AND 1994
(AMOUNTS IN THOUSANDS EXCEPT AMOUNTS PER SHARE)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net sales........................................ $279,733 $221,573 $202,134
Cost of sales, exclusive of items listed below... 210,223 166,974 154,839
Selling, general, and administrative expenses.... 51,667 41,251 38,023
Depreciation and amortization.................... 5,028 4,857 4,672
Merger and acquisition cost and other unusual
items........................................... 6,459 2,680 820
-------- -------- --------
Operating profit................................. 6,356 5,811 3,780
Interest expense (net of interest income of $602,
$269, and $252, respectively)................... 7,191 3,319 2,806
Foreign currency (gain) loss..................... 159 (143) (172)
Minority interest in subsidiaries................ 393 -- --
Other income, net................................ (158) (635) (786)
-------- -------- --------
Earnings (loss) before income taxes and
cumulative effect of change in accounting....... (1,229) 3,270 1,932
Income taxes..................................... 780 39 257
-------- -------- --------
Earnings (loss) before cumulative effect of
change in accounting............................ (2,009) 3,231 1,675
Cumulative effect of change in accounting........ (13,416)
-------- -------- --------
Net earnings (loss).............................. (2,009) 3,231 (11,741)
Preferred stock dividends ($1.94 per share)...... (1,543) (1,580) (1,617)
-------- -------- --------
Earnings (loss) applicable to common stock....... (3,552) 1,651 (13,358)
Retained earnings, beginning of year............. 12,815 12,024 25,761
Treasury stock transactions...................... (23) (860) (379)
-------- -------- --------
Retained earnings, end of year................... $ 9,240 $ 12,815 $ 12,024
======== ======== ========
Earnings (loss) per common share:
Primary
Before cumulative effect of change in method of
accounting.................................... $ (0.45) $ 0.21 $ 0.01
Cumulative effect of change in method of
accounting.................................... -- -- (1.72)
-------- -------- --------
Net earnings (loss)............................ $ (0.45) $ 0.21 $ (1.71)
======== ======== ========
Weighted average shares outstanding............ 7,981 7,911 7,801
======== ======== ========
Fully diluted
Before cumulative effect of change in method of
accounting.................................... $ (0.45) $ 0.17 $ 0.01
Cumulative effect of change in method of
accounting.................................... -- -- (1.72)
-------- -------- --------
Net earnings (loss)............................ $ (0.45) $ 0.17 $ (1.71)
======== ======== ========
Weighted average shares outstanding............ 7,981 9,820 7,801
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED NOVEMBER 30, 1996, 1995, AND 1994
(AMOUNTS IN THOUSANDS EXCEPT AMOUNTS PER SHARE)
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- --------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings (loss).............................. $ (2,009) $ 3,231 $(11,741)
Adjustments to reconcile net earnings (loss) to
net cash provided from operations:
Cumulative effect of change in method of
accounting for postretirement benefits other
than pensions.................................. -- -- 13,416
Depreciation and amortization................... 5,028 4,857 4,672
Gain on sale of property, plant, and equipment.. (59) (436) (23)
Deferred income taxes........................... (251) (33) (903)
Changes in assets and liabilities, net of assets
acquired and liabilities assumed:
Receivables, net................................ 2,363 (6,140) (1,260)
Inventories..................................... (2,626) 89 (113)
Prepaid expenses................................ 2,187 (877) 229
Accounts payable................................ (1,425) 1,648 (3,694)
Accrued expenses................................ 4,249 2,132 2,486
U.S. and foreign income taxes................... (912) (349) 55
Other........................................... (648) (775) (1,054)
-------- ------- --------
Net cash provided from operations................ 5,897 3,347 2,069
-------- ------- --------
Cash Flows From Investing and Other Activities:
Acquisition of Sofitam, net of cash acquired..... (52,105) -- --
Property, plant, and equipment additions......... (3,061) (5,559) (2,757)
Proceeds from sale of property, plant and
equipment....................................... 1,087 649 195
-------- ------- --------
Net cash used in investing and other activities.. (54,079) (4,910) (2,562)
-------- ------- --------
Cash Flows From Financing Activities:
Proceeds from senior subordinated notes.......... 100,000 -- --
Proceeds from term debt.......................... 490 2,122 485
Payments on term debt............................ (32,290) (819) (3,889)
Net increase (decrease) notes payable, banks..... (5,044) 559 (522)
Debt issuance cost............................... (11,506) -- --
Proceeds from issuance of common stock........... 42 -- 49
Treasury stock, net.............................. (370) 273 431
Preferred stock dividends........................ (1,543) (1,580) (1,617)
-------- ------- --------
Net cash provided from (used in) financing
activities...................................... 49,779 555 (5,063)
-------- ------- --------
Effect of Translation Adjustment on Cash.......... (4,482) 41 392
-------- ------- --------
Cash and Cash Equivalents:
Decrease in cash................................. (2,885) (967) (5,163)
Beginning of year................................ 2,966 3,933 9,097
-------- ------- --------
End of year...................................... $ 81 $ 2,966 $ 3,934
======== ======= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
CONSOLIDATED BALANCE SHEET
AS OF NOVEMBER 30, 1996 AND 1995
(AMOUNTS IN THOUSANDS EXCEPT AMOUNTS PER SHARE)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 81 $ 2,966
Accounts receivable, less allowance for doubtful accounts
of $3,752 and $1,150, respectively........................ 94,402 45,649
Inventories:
Raw materials and supplies................................ 30,689 5,840
Work in process........................................... 33,080 27,344
Finished goods............................................ 11,145 4,911
-------- --------
74,914 38,095
Prepaid expenses........................................... 5,056 3,188
-------- --------
Total current assets..................................... 174,453 89,898
Property, plant, and equipment, at cost:
Land and land improvements.................................. 4,982 3,311
Buildings and building improvements......................... 29,867 22,716
Machinery and equipment..................................... 64,473 57,138
Construction in progress.................................... 1,285 2,867
-------- --------
100,607 86,032
Less accumulated depreciation............................ 59,597 57,474
-------- --------
41,010 28,558
-------- --------
Other tangible assets........................................ 3,836 3,150
Goodwill, net................................................ 62,692 --
Other non-current assets and deferred charges, net........... 18,137 2,726
-------- --------
Total assets............................................. $300,128 $124,332
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
CONSOLIDATED BALANCE SHEET
AS OF NOVEMBER 30, 1996 AND 1995
(AMOUNTS IN THOUSANDS EXCEPT AMOUNTS PER SHARE)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt..................... $ 4,447 $ 351
Notes payable to banks................................... 7,168 2,364
Accounts payable......................................... 53,593 18,689
Accrued expenses......................................... 53,618 18,141
-------- --------
Total current liabilities............................. 118,826 39,545
Senior subordinated notes................................. 100,000 --
Long-term debt, less current maturities................... 22,402 21,321
Guaranteed Employees' Stock Ownership Plan (RSP)
obligation............................................... 11,995 14,576
Post-retirement benefit liability......................... 16,051 13,882
Minimum pension liability................................. 3,248 3,868
Other long-term liabilities............................... 342 110
Deferred income taxes..................................... 524 807
Minority Interest......................................... 925 --
-------- --------
274,313 94,109
-------- --------
Redeemable convertible preferred stock, at liquidation
value of $25 per share, 1,700 shares authorized, 960
shares issued............................................ 24,000 24,000
Guaranteed Employees' Stock Ownership Plan (RSP)
obligation............................................... (11,692) (13,790)
Treasury stock, at cost, 167 and 151 shares, respectively. (4,171) (3,784)
-------- --------
8,137 6,426
-------- --------
Preferred stock, no par value; 3,300 shares authorized and
unissued................................................. -- --
Common stock, no par value; 30,000 shares authorized,
7,954 shares issued...................................... 19,452 19,409
Guaranteed Employers' Stock Ownership Plan (RSP)
obligation............................................... (303) (786)
Minimum pension liability................................. (3,248) (3,868)
Foreign currency translation adjustments.................. (7,271) (3,542)
Retained earnings......................................... 9,240 12,815
-------- --------
17,870 24,028
Treasury stock, at cost, 11 and 13 shares, respectively... (192) (231)
-------- --------
17,678 23,797
-------- --------
Total liabilities and shareholders' equity............ $300,128 $124,332
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT DOLLARS PER SHARE)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations--Tokheim Corporation and its subsidiaries are
principally engaged in the design, manufacture and servicing of electronic and
mechanical petroleum dispensing marketing systems, including service station
equipment, point-of-sale control systems, and card-and cash-activated
transaction systems for customers around the world. The Company markets its
products through subsidiaries located throughout the world. The Company has
major facilities in the United States, France, Canada, Germany, The
Netherlands, Scotland, and South Africa.
Principles of Consolidation--The Consolidated Financial Statements include
the accounts of Tokheim Corporation and its wholly- and majority-owned
subsidiaries (the "Company"). In addition, Bennett Sauser S.A., a 47%-owned
subsidiary in which the Company can directly influence a controlling financial
interest, has been consolidated. The Consolidated Financial Statements include
100% of the assets and liabilities of these subsidiaries, with the ownership
interest of minority participants recorded as "Minority interest" in the
Consolidated Balance Sheet. All significant intercompany accounts and
transactions have been eliminated in consolidation. On September 6, 1996, the
Company acquired the petroleum dispenser business ("Sofitam") of Sofitam,
S.A., which is included in the Consolidated Financial Statements since that
date. (See Note 2).
Translation of Foreign Currency--The financial position and results of
operations of the Company's foreign subsidiaries are measured using local
currency as the functional currency. Revenues and expenses of such
subsidiaries have been translated into U.S. dollars at average exchange rates
prevailing during the period. Assets and liabilities have been translated at
the rates of exchange at the balance sheet date. Translation gains and losses
are deferred as a separate component of shareholders' equity, unless there is
a sale or liquidation of the underlying foreign investments. Aggregate foreign
currency transaction gains and losses are included in determining earnings.
Risks and Uncertainties--Because of its diversity, the Company believes that
the risk of loss from non-insurable events in any one country would not have a
material adverse affect on the Company's operations as a whole. The Company is
not dependent on any single customer, group of customers, market, geographic
area or supplier of materials, labor or services. The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts
reported in the Consolidated Financial Statements and accompanying notes. The
more significant areas requiring the use of management's estimates relate to
allowances for obsolete inventory and uncollectible receivables, warranty
claims, sales commissions, environmental and product liabilities,
postretirement pension, and other employee benefits, valuation allowances for
deferred tax assets, future obligations associated with the Company's
restructuring, future cash flows associated with assets, and useful lives for
depreciation and amortization. Actual results could differ from these
estimates, making it reasonably possible that a change in certain of these
estimates could occur in the near term. Financial instruments which
potentially subject the Company to concentrations of credit risk consist
principally of cash and trade receivables. The Company places its cash with
high credit quality financial institutions. At times, cash in banks may exceed
FDIC insurance limits. Concentration of credit risk with respect to trade
receivables is minimal due to the Company's large customer base and ongoing
control procedures, which monitor the credit worthiness of customers.
Fair Value of Financial Instruments--The fair value of cash and cash
equivalents, trade receivables, and accounts payable approximates the carrying
value because of the short-term maturities of these financial instruments.
The interest rate on the Company's bank debt and short-term notes payable
fluctuates with current market rates. Consequently, the carrying value of the
bank debt and short-term notes payable approximates the market prices for the
same or similar issues in future periods. The estimated fair value of the
Company's senior subordinated Notes was approximately equal to the carrying
value at November 30, 1996, since the Notes were recently issued and not
traded in the open market until December 1996.
19
<PAGE>
The fair value of the Company's convertible cumulative preferred stock,
which is held in the Trust of the Company's Retirement Savings Plan,
approximates the carrying value, as such stock is not traded in the open
market, and the value at conversion is equal to a fixed redemption value in
cash or equivalent amounts of common stock.
Inventory Valuation--Inventories are valued at the lower of cost and market.
Cost is determined using the first-in, first-out (FIFO) method (see accounting
change note below).
Accounting Change--During fiscal 1996, the Company changed its method of
valuing domestic inventories from the last-in, first-out (LIFO) method to the
first-in, first-out (FIFO) method. The change was made because the Company had
begun to realize and expects to continue to experience cost reductions as a
result of technological improvements in its manufacturing process. The Company
believes that the FIFO method is preferable to the LIFO method as the change
conforms the inventories of domestic and foreign subsidiaries to the same cost
method, inventories are reflected in the Company's balance sheet at their most
recent value; and revenues are better matched with expenses. Also the FIFO
method is the predominant method used in the industry in which the Company
operates. This change in the method of valuing inventories has been applied
retroactively, and comparative amounts for the two prior periods presented
have been restated to apply the FIFO method. The change was applied as of the
beginning of 1994, increasing inventories, as previously reported, by $2,932,
at December 1, 1993, and increasing retained earnings from $22,829 to $25,761
at that date.
The effect of the accounting change on income for the years ended November
30, 1995 and 1994 is as follows (see also quarterly financial information Note
13):
<TABLE>
<CAPTION>
1995 1994
------ --------
<S> <C> <C>
Net income (loss), as previously reported.................... $2,876 $(11,554)
Increase to income or loss................................... 355 (187)
------ --------
Net income (loss) after change............................... $3,231 $(11,741)
====== ========
<CAPTION>
PER SHARE BASIS: (SEE ALSO STATEMENT OF EARNINGS AND RETAINED
EARNINGS)
- -------------------------------------------------------------
<S> <C> <C>
Primary...................................................... $ 0.05 $ (0.02)
Fully diluted................................................ $ 0.04 $ (0.02)
</TABLE>
The effect of the accounting change on earnings for the year ended November
30, 1996, was to increase the net loss by $186 or $0.02 per share on a primary
and fully diluted basis.
There was no tax effect from the accounting change for the three years
presented in the statement of earnings and retained earnings due to the
Company's domestic tax position and net operating loss carryforwards. The tax
effects of the accounting change did not impact net income or retained
earnings because the Company's net deferred tax asset increased or decreased
with the corresponding changes in the offsetting valuation allowance.
Property and Depreciation--Depreciation of plant and equipment is determined
generally on a straight-line basis over the estimated useful lives of the
assets. Upon retirement or sale of assets, the cost of the disposed assets and
related accumulated depreciation are removed from the accounts and any
resulting gain or loss is credited or charged to income. These gains and
losses are accumulated and shown as a component of other expense, net in the
statement of earnings and retained earnings. Buildings are generally
depreciated over 40 years. Machinery and equipment are depreciated over
periods ranging from five to ten years.
Software, and Research and Development Costs--Amortization of capitalized
software development costs is provided over the estimated economic useful life
of the software product on a straight-line basis, generally three years.
Unamortized software costs included in other non-current assets were $479 and
$543 at November 30, 1996 and 1995, respectively. The amounts amortized and
charged to expense in 1996, 1995, and 1994 were $163, $109, and $220,
respectively.
20
<PAGE>
All other product development expenditures are charged to research and
development expense in the period incurred. These expenses amounted to
$15,909, $12,746, and $10,239 in 1996, 1995, and 1994, respectively. In 1996
the Company entered into a non-cancelable technology and licensing agreement
related to vapor recovery. Under the terms of the agreement, the Company is
obligated to pay $825 in each of 1997 and 1998 for the use of this technology.
Goodwill and Other Intangible Assets--Goodwill is amortized on a straight-
line basis over 40 years. The Company will continue to review whether the
facts and circumstances indicate that the remaining estimated useful life of
goodwill may warrant revision or that the carrying amount may not be
recoverable, using profitability projections to assess whether future
operating income on a non-discounted basis is likely to exceed the
amortization over the remaining life of the goodwill. The amount amortized and
charged to expense in 1996 was approximately $420.
Other non-current assets and deferred charges consist primarily of debt
issuance costs. These costs are amortized over the terms of the related debt
agreements on a straight-line basis, periods ranging from six to ten years.
Amortization included in interest expense at November 30, 1996 and 1995 was
$401 and $504, respectively. During 1996, the Company wrote-off approximately
$233 of deferred debt issuance costs and capitalized approximately $11,506 of
costs incurred in connection with the refinancing of the Company's preexisting
debt and issuance of senior subordinated Notes for the acquisition of Sofitam.
Advertising and Promotion--All costs associated with advertising and product
promotion are expensed in the period incurred. These expenses amounted to
$2,268, $1,579, and $1,544 in 1996, 1995, and 1994, respectively.
Income Taxes--The provision for income taxes includes federal, foreign,
state and local income taxes currently payable and taxes deferred because of
temporary differences between the financial statement and the tax basis of
assets and liabilities. No additional U.S. income taxes or foreign withholding
taxes have been provided on earnings of foreign subsidiaries which are
expected to be reinvested indefinitely. Additional income and withholding
taxes are provided, however, on planned repatriations of foreign earnings.
(See Note 14).
In the first quarter of 1994, the Company adopted a mandatory noncash
accounting change pursuant to Statement of Financial Accounting Standards
(SFAS) No. 106, which governs accounting for non-pension retiree benefit
costs. SFAS No. 106 requires companies to project the future cost of providing
retiree medical, dental, and life insurance benefits and to recognize that
cost as benefits are earned during the employee's career. Tokheim's
actuarially-determined liability was $13.4 million. The Company elected to
record that amount as a one-time noncash accounting adjustment versus the
alternative of amortizing the amount over a period not to exceed 20 years. At
November 30, 1996, the Company's accrual was $16.9 million. Adoption of the
new accounting standard had no cash flow effect, nor did it represent a change
with respect to previous fiscal years in the benefit levels provided to
employees.
Accounting Pronouncements--SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" is effective
for the year ending November 30, 1997. This statement requires that long-lived
assets and certain identifiable intangibles to be held and used by an entity
be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable. In
the opinion of management, this statement is not expected to materially impact
the Company's financial position or results of operations.
21
<PAGE>
SFAS No. 123, "Accounting for Stock-Based Compensation," is effective for
the year ending November 30, 1997. This statement encourages, but does not
require, companies to recognize compensation expense for grants of stock,
stock options, and other equity instruments based on a fair value method of
accounting. Companies that choose not to adopt the new expense recognition
rules of SFAS No. 123 will continue to apply the existing accounting rules of
Accounting Principles Board Opinion (APBO) No. 25, but will be required to
provide pro forma disclosure of the compensation expense determined under the
fair value provisions of SFAS No. 123, if material. APBO No. 25 requires that
there be no recognition of compensation expense for the stock-based
compensation arrangements provided by the Company, where the exercise price is
equal to or greater than the market price at the date of grant. The Company
expects to continue to follow the accounting provisions of APBO No. 25 for
stock-based compensation and to furnish the pro forma disclosures required
under SFAS No. 123, if material.
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities," is effective for the year ending November
30, 1998. In the opinion of management, this statement will not have a
material impact on the Company's financial position or results of operations.
American Institute of Certified Public Accountants Statement of Position No.
96-1, "Environmental Remediation Liabilities," is effective for the year
ending November 30, 1998. Management has not yet determined the impact that
adoption of this statement will have on the Company's financial position or
results of operations, but does not anticipate that material liabilities will
need to be recorded in addition to those already provided for under the
provisions of generally accepted accounting principles as prescribed by SFAS
No. 5, "Accounting for Contingencies."
Product Warranty Costs--Anticipated costs related to product warranty are
expensed in the period of sales.
Cash Flows--For purposes of the statement of cash flows, the Company
considers all highly liquid investments purchased with an initial maturity of
90 days or less to be cash equivalents. At November 30, 1996, $566 of cash was
restricted for the purchase of minority interest shares related to the
acquisition of Sofitam. This amount is included in "Other tangible assets" on
the balance sheet.
Supplemental disclosures of cash flow information:
Cash paid during the year for:
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------ ------
<S> <C> <C> <C>
Interest.............................................. $ 4,918 $3,060 $2,441
Income taxes.......................................... 1,013 976 894
Noncash transactions primarily related to the issuance
of treasury stock in settlement of Retirement Savings
Plan distributions................................... 23 976 612
Noncash adjustments to certain assets and liabilities
in connection with the settlement of the corporate
reorganization....................................... -- 383 224
Liabilities assumed................................... 113,776 -- --
Deferred merger and acquisition cost.................. 9,799 -- --
</TABLE>
Reclassifications--Certain prior year amounts in these financial statements
have been reclassified to conform with current year presentation.
2. ACQUISITION
On September 6, 1996, the Company acquired the petroleum dispenser business
("Sofitam") of Sofitam S.A., for $107,400. The acquisition was financed
through the issuance of $100,000 in aggregate principal amount of 11 1/2%
senior subordinated Notes due 2006, and by an $80,000 revolving credit
facility. Sofitam, which is based in Paris, France, designs and manufactures
products that are similar to those produced by the Company. Sofitam's
operations are included in the Company's African and European geographical
segments.
22
<PAGE>
The acquisition has been accounted for as a purchase, and Sofitam's
financial results have been included in the Consolidated Financial Statements
since the date of acquisition. The purchase price has been allocated to assets
acquired and liabilities assumed based on estimated fair market values at the
date of acquisition. The purchase price exceeded the fair value of net assets
acquired by $63,113. This amount is recognized as goodwill and is being
amortized on a straight-line basis over 40 years. The amount amortized and
charged to expense in 1996 was approximately $420.
Included in the $63,113 goodwill amount are certain costs the Company
believes will be spent to close down redundant operations in connection with
the reorganization and rationalization of Sofitam's operations. The table
below summarizes the deferred costs included in goodwill and accrued expenses
as they relate to the redundancy plan for Sofitam. The amounts do not include
costs associated with consolidation of previously-existing Tokheim
subsidiaries, which will be expensed as incurred, nor do these costs benefit
production in future periods. (See Note 3).
<TABLE>
<CAPTION>
ITEM AMOUNT DESCRIPTION
- ---- ------ -----------
<S> <C> <C>
Employee termination
benefits............... $6,651 Approximately 300 employees (principally at 2 locations)
Asset write-off and
disposal cost.......... 2,108 Up to 10 locations
Other plant closing
cost................... 1,040 Leases and other contract terminations
------
$9,799
======
</TABLE>
In 1996, the Company charged $1,043 of restructuring expenses associated
with the Company's plan for merging the operations of Tokheim and Sofitam.
These items were charged to operating expenses as "Merger and acquisition cost
and other unusual items." The Company estimates future non-accruable
restructuring charges related to the merger plan at approximately $2,000 in
fiscal year 1997. In addition, normal operating charges associated with the
plan, which will be expensed as incurred, are estimated at $2,100 in total for
fiscal years 1997 and 1998.
The following unaudited pro forma information summarizes consolidated
results of operations of Tokheim and Sofitam as if the acquisition had
occurred at the beginning of 1996 and 1995. These unaudited pro forma results
have been prepared for comparative purposes only and include certain
adjustments, such as additional amortization expense as a result of goodwill
and other intangible assets, and increased interest expense on acquisition
debt. They do not purport to be indicative of the results of operation which
actually would have resulted had the combination been in effect on December 1,
1994 or 1995, or the future results of operations of the consolidated
entities. The Company is in the process of closing several manufacturing,
sales, service and administrative operations in Europe, consolidating these
operations into its administrative center in Tremblay, France and into its
manufacturing facility in Normandy, France. Anticipated efficiencies from the
merger of Tokheim and Sofitam are not fully determinable and therefore have
been excluded from the amounts included in the pro forma summary presented
below.
<TABLE>
<CAPTION>
UNAUDITED
YEARS ENDED
NOVEMBER 30,
------------------
(IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNTS) 1996 1995
- ----------------------------------------------- -------- --------
<S> <C> <C>
Revenues.................................................... $413,143 $399,023
Merger and acquisition cost and other unusual items......... 6,459 4,294
Net income (loss)........................................... (4,999) (5,208)
Net income (loss) per common share.......................... (0.82) (0.86)
</TABLE>
Merger and acquisition cost and other unusual items included in pro forma
net loss for 1996 and 1995 was $6,459 and $4,294, respectively. The $4,294
figure represents a one-time charge to prepare Sofitam for sale.
23
<PAGE>
3. MERGER AND ACQUISITION COST AND OTHER UNUSUAL ITEMS
At November 30, 1996, the Company had identified expenses brought about by
the acquisition of Sofitam, costs associated with the restructuring of the
Company, pending and settled litigation, and policy adjustments above and
beyond the normal recurring amounts. These cost have been aggregated and shown
as a single operating line item, "Merger and acquisition cost and other
unusual items," in the Statement of Earnings and Retained Earnings.
Merger and acquisition cost/Restructuring--During 1996, the Company
implemented several corporate realignment initiatives, including work force
reductions and reorganization of its domestic and international operations
related to the consolidation of Sofitam. In addition, during 1995, the Company
reorganized its European operations to improve manufacturing and service
efficiencies and to reduce cost. Amounts charged to operations for the years
ended November 30, 1996 and 1995 approximated $2,035 and $842, respectively.
Litigation/Other--During 1996, the Company settled claims related to prior
divestitures and to the termination of an exclusive sales representative
agreement with a foreign distributor. The Company also accrued and charged to
operations the potential adverse outcome of a Pension Benefit Guaranty
Corporation inquiry with respect to a terminated benefit plan payout in 1991.
In 1995 and 1994 the Company settled two environmental related matters in the
amounts of $300 and $650, respectively. In addition, the Company incurred
charges in 1996, 1995, and 1994 in connection with customer satisfaction
programs relating to previously-sold dispensers. Total amounts charged to
operations relating to litigation/other for fiscal years 1996, 1995, and 1994
were $4,680, $1,838, and $820, respectively
The above costs, although not uncommon to the Company's industry, are
considered by management to be significant in size and nature, and warrant
separate disclosure. Amounts within the Consolidated Statement of Earnings and
Retained Earnings have been reclassified for all periods presented, including
the quarterly financial information in Note 13, to reflect the
reclassification of these cost for 1995 and 1994, to "Merger and acquisition
cost and other unusual items."
4. ACCRUED EXPENSES
Accrued expenses consisted of the following at November 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Deferred acquisition cost...................................... $ 9,799 --
Salaries, wages, and commissions............................... 9,240 $ 4,308
Compensated absences........................................... 6,833 3,480
Warranty....................................................... 5,193 2,821
Retirement benefits and profit sharing......................... 4,659 1,403
Interest....................................................... 3,294 418
Employee payroll taxes......................................... 3,091 132
Taxes (sales, VAT, and other).................................. 2,924 972
Legal and professional......................................... 2,393 1,783
Deferred revenue............................................... 1,989 309
Other.......................................................... 4,203 2,515
------- -------
$53,618 $18,141
======= =======
</TABLE>
5. NOTES PAYABLE TO BANKS
Notes payable to banks represent short-term borrowings under domestic and
foreign lines of credit. At November 30, 1996, aggregate amounts outstanding
under these lines were $23,300. $16,144 of this amount has been classified as
long-term debt since the Company has the ability (under the terms of the
agreement) and the
24
<PAGE>
intent to finance these obligations beyond one year. Domestic and foreign
credit lines totaled approximately $75,311, of which $52,011 was unused at
November 30, 1996. The weighted average annual interest rate was 8.8% for
fiscal 1996. The range of domestic and foreign rates at November 30, 1996 was
8.2% to 10.0% and 4.4% to 6.7%, respectively.
On September 3, 1996 the parent Company (the "Parent") and certain of its
French subsidiaries (the "French Borrowing Subsidiaries") entered into a six-
year $80,000 credit facility (the "Bank Credit Agreement"). The agreement
consists of a working capital/letter of credit facility in the amount of
$67,768 (the "Credit Agreement") and an Employee Stock Ownership plan
assignment facility in the amount of $12,232 (the "ESOP Credit Agreement").
The Credit Agreement can be drawn down by the Parent and/or the French
Borrowing Subsidiaries if they are in compliance with a borrowing base
limitation. The borrowing base is calculated on specified percentages of
eligible receivables and inventories and is determined independently for the
Parent and the French Borrowing Subsidiaries. The unused portion of this
commitment is subject to a commitment fee ranging from 0.375% to 0.5%,
depending on the aggregate leverage ratio of the Parent and the French
Borrowing Subsidiaries. The Credit Agreement permits borrowings in U.S.
dollars, French francs, British pounds sterling, German deutsche marks and
other currencies which are freely available and convertible into U.S. dollars.
At November 30, 1996, the aggregate amount outstanding under the Credit
Agreement was $16,144. This amount has been classified as long-term debt,
since the Company has the ability under the terms of the agreement, which
expires on September 3, 2002, and the intent, to finance these obligations
beyond one year.
The ESOP Credit Agreement was used to assign existing indebtedness of the
Parent and the Tokheim Employee Stock Ownership Plan (the "ESOP"). The unused
portion of the ESOP Credit Agreement can not be reclaimed as part of the
Credit Agreement, nor can any amounts be re-borrowed by the Parent or the
French Borrowing Subsidiaries. The principal amount outstanding at November
30, 1996 aggregated to $11,692 and is amortized over the remaining life of the
pre-existing agreement. (See Note 7, captioned "Term Debt and Guaranteed
Employees' Stock Ownership Plan (RSP) Obligation").
Indebtedness of the Parent under the Bank Credit Agreement is collateralized
by (i) a first perfected security interest in and lien on certain of the real
and personal assets of the Parent (including claims against subsidiaries to
which the Parent has made an intercompany loan) and each of the Parent's
direct and indirect wholly-owned United States subsidiaries, (ii) a pledge of
100% of the stock of the Parent's direct and indirect wholly-owned United
States subsidiaries, (iii) a pledge of 65% of the stock of the French holding
company, and (iv) a guarantee by all of the Parent's direct and indirect
wholly-owned United States subsidiaries. Indebtedness of the French Borrowing
Subsidiaries under the Bank Credit Agreement is collateralized by (i) a first
perfected security interest in certain of the real and personal assets of the
French Borrowing Subsidiaries, the Parent and all of the Parent's direct and
indirect wholly-owned United States subsidiaries, (ii) a pledge of 100% of the
stock of the French Borrowing Subsidiaries, and (iii) a guarantee by the
Parent, the French holding company, and all of the Parent's direct and
indirect wholly-owned United States subsidiaries. Any lien on the real
property in France will be limited to the fair market value of such property.
Indebtedness under the Bank Credit Agreement bears interest based (at the
applicable borrower's option) upon (i) the Base Rate in the case of U.S.
dollar-denominated loans (defined as the higher of the applicable prime rate
and the federal funds rate plus 0.5%) plus an applicable margin based upon the
Company's leverage ratio (with a range of 0.5% to 1.75%) or (ii) the
applicable Eurocurrency rate for one, two, three, or six months, plus an
applicable margin based upon the Company's leverage ratio (with a range of
1.50% to 2.75%). The Bank Credit Agreement contains customary provisions
relating to yield protection, availability and capital adequacy. In the event
of an occurrence and the continuation of a default, the agent or the bank may
increase the interest rate payable to the otherwise applicable rate plus 2%.
The Bank Credit Agreement requires the Company to meet certain consolidated
financial tests, including minimum levels of consolidated net worth, minimum
levels of consolidated EBITDA (as defined), minimum
25
<PAGE>
consolidated interest coverage, maximum consolidated leverage ratio and
minimum consolidated fixed charge coverage ratio. The Bank Credit Agreement
also contains certain covenants common to such agreements, which among other
things, limit the incurrence of additional indebtedness and guarantees,
dividends, transactions with affiliates, significant asset sales, investments
and acquisitions, mergers and consolidations, prepayments and amendments to
other indebtedness, liens and encumbrances and other matters customarily
restricted in such agreements.
The Bank Credit Agreement contains events of default, including payment
defaults, breaches of representation and warranties, covenant defaults, cross
default to certain other indebtedness, certain events of bankruptcy and
insolvency, ERISA defaults, a change in control default, judgment defaults and
failure of any guaranty or security agreement supporting the Bank Credit
Agreement to be in full force and effect.
In 1995, the aggregate amount outstanding under revolving credit agreements
was $19,064, of which $16,700 was classified as long-term debt since the
Company had the ability, under the terms of the agreement, and at that time
the intent, to finance these obligations beyond one year. The weighted average
annual interest rate was 8.6% for fiscal 1995. The range of domestic and
foreign rates at November 30, 1995 was 7.1% to 9.8%.
6. SENIOR SUBORDINATED NOTES
During 1996 the Company issued senior subordinated Notes (Notes) to finance
the acquisition of Sofitam.
The aggregate principal amount of the Notes, which mature on August 1, 2006
is $100 million. Interest on the Notes accrues at the rate of 11 1/2% per
annum and is payable semi-annually in cash on each February 1 and August 1
commencing on February 1, 1997, to the registered holders at the close of
business on the January 15 and July 15 immediately preceding the applicable
interest payment date.
The Notes are general unsecured obligations of the Company, subordinate in
right of payment to all existing and future senior debt of the Company,
including the Company's obligations under the Bank Credit Agreement, and to
all indebtedness and other obligations of the Company's subsidiaries. Evidence
of default under the Bank Credit Agreement could prevent payment of principal
and interest on the Notes.
The Notes are redeemable, at the Company's option, in whole at any time or
in part from time to time, on and after August 1, 2001, upon not less than 30
nor more than 60 days' notice, at the following redemption prices (expressed
as percentages of the principal amount thereof), if redeemed during the
twelve-month period commencing on August 1 of the year set forth below, plus,
in each case, accrued and unpaid interest thereon, if any, to the date of
redemption.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001........................................................... 105.750%
2002........................................................... 103.833%
2003........................................................... 101.917%
2004 and thereafter............................................ 100.000%
</TABLE>
On or prior to August 1, 1999, the Company may, at its option, use the net
cash proceeds of one or more public equity offerings to redeem up to an
aggregate of 35% of the principal amount of the Notes originally issued at the
following redemption prices (expressed as percentages of the principal amount
thereof), if redeemed during the twelve-month period ending on August 1 of the
year set forth below, plus, in each case, accrued and unpaid interest thereon,
if any, to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1997........................................................... 111.500%
1998........................................................... 109.857%
1999........................................................... 108.214%
</TABLE>
26
<PAGE>
To effect the foregoing redemption with the proceeds of any public equity
offering, the Company must make such redemption not more than 120 days after
the consummation of any such public equity offering.
The indenture under which the Notes are issued provides that, upon the
occurrence of a "Change of Control," each Note holder will have the right to
require that the Company purchase all or a portion of the holder's Notes at a
purchase price equal to 101% of the principal amount thereof plus accrued and
unpaid interest to the date of purchase.
The indenture also contains restrictions common to such agreements,
including among others: limitation on incurrence of additional indebtedness;
limitation on restricted payments; limitation on asset sales; limitation on
dividend and other payment restrictions affecting subsidiaries; limitation on
preferred stock of subsidiaries; limitation on liens, merger, consolidation
and sale of assets; and limitations on transactions with affiliates.
7. TERM DEBT AND GUARANTEED EMPLOYEES' STOCK OWNERSHIP PLAN (RSP) OBLIGATION
Term debt at November 30, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
0.0% Belgian government note, maturing $25, due in quarterly
installments switching to $25, due in annual installments
through 1999 (a)............................................. $ 129 $ --
3.5% German bonds, maturing $46, due in semiannual
installments through 1998 (a)................................ 184 292
5.0% to 9.6% notes payable, maturing $561 to $992, due in
annual installments through 1997 (a)......................... 1,553 --
8.1% notes payable, maturing $7 to $12, due in semiannual
installments through
2001 (a)..................................................... 85 --
11.0% notes payable, maturing $1 to $27, due in quarterly
installments through
2006 (a)..................................................... 327 --
11.5% notes payable, maturing $53 to $66, due in quarterly
installments through
1998 (a)..................................................... 346 --
12.0% to 15.0% notes payable, maturing $15 to $26, due in
quarterly installments through 2002 (a)...................... 879 --
14.3% notes payable, maturing $4 to $7, due in monthly
installments through
2000 (a)..................................................... 223 --
18.5% note payable, maturing $6, due in monthly installments
through 1999 (a)............................................. 153 253
10.5% to 12.5% capital lease obligations, maturing $1 to $4,
in annual installments through 2000 (a)...................... 3,300 --
9.15% capital lease obligation, maturing $280 to $543, in
annual installments through 2004 (a)......................... 3,230 --
Credit Agreement, variable rate, due 2002, rates ranging from
8.18% to 10.0% at November 30, 1996 (b)...................... 16,144 --
Other......................................................... 296 259
Industrial Revenue Bonds, variable rate, paid in full during
1996, rate of 4.1% at
November 30, 1995 (a)........................................ -- 4,000
Capital lease obligations, variable rate, maturing $1 each,
due in monthly installments through 1996, rate of 18.5% at
November 30, 1995 (a)........................................ -- 168
Revolving credit facility, variable rate, refinanced in 1996,
rates ranging from 8.8% to 9.8% at November 30, 1995 (c)..... -- 16,700
------- -------
26,849 21,672
Less: Current maturities...................................... 4,447 351
------- -------
$22,402 $21,321
======= =======
</TABLE>
27
<PAGE>
Guaranteed Employees' Stock Ownership Plan (RSP) obligation at November 30,
1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Guaranteed Employees' Stock Ownership Plan (RSP) obligation,
variable rate, maturing $550 to $760 quarterly through 2001,
rate of 7.013% at November 30, 1996 (b)...................... $11,692 $13,790
Guaranteed Employees' Stock Ownership Plan (RSP) obligation,
variable rate maturing $303 annually through 1997, rate of
8.075% at November 30, 1996 (b).............................. 303 786
------- -------
$11,995 $14,576
======= =======
</TABLE>
- --------
(a) Aggregate cost of plant and equipment pledged as collateral under revenue
bonds and lease obligations is $13,258
(b) Per the Bank Credit Agreement as described in Note 5, the term obligation
matures on September 3, 2002.
(c) Per the domestic revolving credit agreement as described in Note 5. This
agreement was paid in full through utilization of proceeds from the
Company's existing Bank Credit Agreement.
Aggregate scheduled maturities of the above term debt and Guaranteed
Employees' Stock Ownership Plan (RSP) obligation during the ensuing five years
approximate $7,013, $4,679, $3,775, $3,521, and $2,146 respectively.
8. OPERATING LEASES
The Company leases certain manufacturing and office equipment, vehicles, and
office and warehousing space under operating leases. These leases generally
expire in periods ranging from one to eight years.
In 1996 the Company executed various operating leases for manufacturing
equipment. The leases are effective for a term of eight years with interest
rates ranging from 9.7% to 10.4% and monthly rentals ranging from $3 to $72.
The leases contain early purchase options based on estimated fair market
value. The options are exercisable at the Company's discretion beginning in
the fifth and seventh years.
In 1995 the Company leased a CAD/CAM system. The lease is effective for a
term of three years with an interest rate of 12% and monthly rentals ranging
from $55 to $65. The lease contains a fair market value purchase option at the
end of the lease term.
Amounts charged to expenses under operating leases in 1996, 1995, and 1994
were $2,835, $1,986, and $1,077, respectively. Future minimum rental payments
under noncancelable operating leases during the ensuing five years approximate
$3,030, $1,984, $1,592, $1,472, and $1,458.
9. STOCK OPTION PLANS
The Company has three separate Stock Option Plans, as outlined below:
1992 Stock Incentive Plan (SIP)
The Plan contains both incentive stock options (ISOs) and non-qualified
stock options (NSOs). The price of each share under this Plan for an ISO or
NSO shall not be less than the fair market value of Tokheim Common Stock on
the date the option is granted.
Options granted under the SIP become exercisable at the rate of
approximately 25% of the total options granted per year, beginning one year
after the grant date. All options expire within ten years from the date on
which they were granted.
In addition, the SIP provides for the granting of Stock Appreciation Rights
(SARs) and Restricted Stock Awards (RSAs). At November 30, 1996 no SARs or
RSAs had been granted.
1982 Incentive Stock Option Plan (ISOP) and 1982 Unqualified Stock Option
Plan (USOP)
Effective January 21, 1992, no additional shares could be granted under
these plans. All options expire within ten years from the date on which they
were granted.
28
<PAGE>
The price of each share under the ISOP was not less than fair market value of
Tokheim Common Stock on the date the option was granted, and under the USOP was
not less than 85% of the fair market value of Tokheim Common Stock on the date
the option was granted.
Options granted under the respective plans during 1996, 1995, and 1994, are
as follows:
<TABLE>
<CAPTION>
1992 STOCK INCENTIVE PLAN
-------------------------
YEAR OF GRANT ISO NSO
------------- -------------- ------------
<S> <C> <C>
1996......................................... 45,000 --
1995......................................... 35,000 --
1994......................................... 19,000 --
</TABLE>
The following table sets forth the status of all outstanding options at
November 30, 1996:
<TABLE>
<CAPTION>
EXERCISABLE IN
OPTION PRICE OPTIONS THE NEXT ONE TOTAL OPTIONS
PER SHARE EXERCISABLE TO FOUR YEARS OUTSTANDING
------------ ----------- -------------- -------------
<S> <C> <C> <C>
$20.0000........................ 23,550 -- 23,550
$12.3750........................ 3,000 -- 3,000
$12.2500........................ 500 -- 500
$11.9375........................ 4,500 4,500 9,000
$ 9.3750........................ 11,250 3,750 15,000
$ 9.0000........................ -- 2,000 2,000
$ 8.8800........................ 90,870 -- 90,870
$ 8.5000........................ 3,750 11,250 15,000
$ 7.8750........................ 15,000 -- 15,000
$ 7.7500........................ 30,000 -- 30,000
$ 7.1250........................ -- 43,000 43,000
$ 6.8750........................ 15,000 -- 15,000
$ 6.8125........................ 137,968 52,366 190,334
------- ------- -------
335,388 116,866 452,254
======= ======= =======
</TABLE>
Transactions in stock options under these plans are summarized as follows:
<TABLE>
<CAPTION>
SHARES
UNDER
OPTION PRICE RANGE
------- --------------
<S> <C> <C> <C>
Outstanding, November 30, 1993................... 565,728 $ 6.81- $20.00
Granted.......................................... 19,000 $10.75- $11.94
Exercised........................................ (29,950) $ 6.81- $ 8.88
Canceled or expired.............................. (12,250) $ 8.88- $20.00
-------
Outstanding, November 30, 1994................... 542,528 $ 6.81- $20.00
Granted.......................................... 35,000 $ 8.50
Exercised........................................ --
Canceled or expired.............................. (95,187) $ 6.81- $20.00
-------
Outstanding, November 30, 1995................... 482,341 $ 6.81- $20.00
Granted.......................................... 45,000 $ 7.13- $ 9.00
Exercised........................................ (5,000) $ 8.75
Canceled or expired.............................. (70,087) $ 6.81- $20.00
-------
Outstanding, November 30, 1996................... 452,254 $ 6.81- $20.00
=======
<CAPTION>
SHARES
-------
<S> <C> <C> <C>
Reserved for options:
November 30, 1994.............................. 98,550
November 30, 1995.............................. 95,462
November 30, 1996.............................. 98,774
</TABLE>
29
<PAGE>
10. COMMON AND PREFERRED STOCK
Changes in common stock and common treasury stock are shown below:
<TABLE>
<CAPTION>
COMMON COMMON
STOCK TREASURY STOCK
--------- ---------------
SHARES AMOUNT SHARES AMOUNT
--------- ------- ------- ------
<S> <C> <C> <C> <C>
Balance, November 30, 1993............... 7,942,000 $19,594 191,000 $3,403
Shares purchased......................... -- -- -- 3
Stock options exercised.................. 7,000 (184) (22,000) (405)
Redemption of preferred stock............ -- -- (48,000) (852)
Employee termination benefits............ -- -- (13,000) (230)
Other.................................... -- -- (2,000) (32)
--------- ------- ------- ------
Balance, November 30, 1994............... 7,949,000 19,410 106,000 1,887
Redemption of preferred stock............ -- -- (59,000) (1,057)
Employee termination benefits............ -- -- (24,000) (427)
RSP Diversification...................... -- -- (8,000) (139)
Other.................................... -- (1) (2,000) (33)
--------- ------- ------- ------
Balance, November 30, 1995............... 7,949,000 19,409 13,000 231
Stock options exercised.................. 5,000 43 -- --
Employee termination benefits............ -- -- (1,000) (11)
Other.................................... -- -- (1,000) (28)
--------- ------- ------- ------
Balance, November 30, 1996............... 7,954,000 $19,452 11,000 $ 192
========= ======= ======= ======
</TABLE>
Changes in preferred stock and preferred treasury stock are shown below:
<TABLE>
<CAPTION>
PREFERRED
PREFERRED STOCK TREASURY STOCK
--------------- ---------------
SHARES AMOUNT SHARES AMOUNT
------- ------- ------- ------
<S> <C> <C> <C> <C>
Balance, November 30, 1993.................. 960,000 $24,000 112,000 $2,789
Shares redeemed............................. -- -- 22,000 562
RSP Contributions........................... -- -- (4,000) (89)
------- ------- ------- ------
Balance, November 30, 1994.................. 960,000 24,000 130,000 3,262
Shares redeemed............................. -- -- 29,000 720
RSP Contributions........................... -- -- (8,000) (198)
------- ------- ------- ------
Balance, November 30, 1995.................. 960,000 24,000 151,000 3,784
Shares redeemed............................. -- -- 31,000 771
RSP Contributions........................... -- -- (15,000) (384)
------- ------- ------- ------
Balance, November 30, 1996.................. 960,000 $24,000 167,000 $4,171
======= ======= ======= ======
</TABLE>
On July 10, 1989, the Company sold 960,000 shares of convertible cumulative
preferred stock to the Trust of the Company's Retirement Savings Plan (RSP) at
the liquidation value of $25 per share or $24,000. The preferred shares have a
dividend rate of 7.75%. The Trustees, who hold the preferred shares, may elect
to convert each preferred share to one common share in the event of redemption
by Tokheim, certain consolidations or mergers of Tokheim, or a redemption by
the Trustees which is necessary to provide for distributions under the RSP. A
participant may elect to receive a distribution from the RSP in cash or common
stock. If redeemed by the Trustees, the Company is responsible for purchasing
the preferred shares at the $25 floor value. The Company may elect to pay the
redemption price in cash or an equivalent amount of common stock. Due to the
redemption characteristics of the stock, the aggregate amount of future
redemptions for the next five years cannot be determined. See Note 17 to the
Consolidated Financial Statements, captioned "Retirement Plan Cost," for
further discussions on the preferred stock.
30
<PAGE>
11. EARNINGS PER SHARE
Primary earnings per share are based on the weighted average number of shares
outstanding during each year and the assumed exercise of dilutive 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.
The following table presents information necessary to calculate earnings
(loss) per share for fiscal years ended November 30, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
PRIMARY
-------------------------
RESTATED
----------------
1996 1995 1994
------- ------ --------
<S> <C> <C> <C>
Shares outstanding (in thousands):
Weighted average outstanding...................... 7,939 7,893 7,801
Share equivalents................................. 42 18 --
------- ------ --------
Adjusted outstanding.............................. 7,981 7,911 7,801
======= ====== ========
Net earnings (loss):
Before cumulative effect of change in method of
accounting....................................... $(2,009) $3,231 $ 1,675
Cumulative effect of change in method of
accounting....................................... -- -- (13,416)
------- ------ --------
Net earnings (loss)............................... (2,009) 3,231 (11,741)
Preferred stock dividends......................... (1,543) (1,580) (1,617)
------- ------ --------
Earnings (loss) applicable to common stock........ $(3,552) $1,651 $(13,358)
======= ====== ========
Net earnings (loss) per common share:
Before cumulative effect of change in method of
accounting....................................... $ (0.45) $ 0.21 $ 0.01
Cumulative effect of change in method of
accounting....................................... -- -- (1.72)
------- ------ --------
Net earnings (loss)............................... $ (0.45) $ 0.21 $ (1.71)
======= ====== ========
</TABLE>
For 1996 and 1994, 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.
<TABLE>
<CAPTION>
FULLY DILUTED
-------------------------
RESTATED
----------------
1996 1995 1994
------- ------ --------
<S> <C> <C> <C>
Shares outstanding (in thousands):
Weighted average outstanding...................... 7,939 7,893 7,801
Share equivalents................................. 42 18 --
Weighted conversion of preferred stock............ -- 1,909 --
------- ------ --------
Adjusted outstanding.............................. 7,981 9,820 7,801
======= ====== ========
Net earnings (loss):
Before cumulative effect of change in method of
accounting....................................... $(2,009) $3,231 $ 1,675
Cumulative effect of change in method of
accounting....................................... -- -- (13,416)
------- ------ --------
Net earnings (loss)............................... (2,009) 3,231 (11,741)
Incremental RSP expense........................... (1,543) (1,580) (1,617)
------- ------ --------
Earnings (loss) applicable to common stock........ $(3,552) $1,651 $(13,358)
======= ====== ========
Net earnings (loss) per common share:
Before cumulative effect of change in method of
accounting....................................... $ (0.45) $ 0.17 $ 0.01
Cumulative effect of change in method of
accounting....................................... -- -- (1.72)
------- ------ --------
Net earnings (loss)............................... $ (0.45) $ 0.17 $ (1.71)
======= ====== ========
</TABLE>
31
<PAGE>
12. FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
Consolidated foreign currency translation adjustments are as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Foreign currency translation adjustments, beginning of
year................................................. $(3,542) $(3,543)
Current year adjustments.............................. (3,729) 1
------- -------
Foreign currency translation adjustments, end of year. $(7,271) $(3,542)
======= =======
</TABLE>
The adjustments represent principally the effect of changes from the
beginning to the end of the year in the current rate of exchange translating
the net assets, including certain intercompany amounts of foreign
Subsidiaries. The majority of the 1996 adjustment is a result of long-term
loans to foreign affiliates, principally to execute the acquisition of
Sofitam.
13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
During the fourth quarter of fiscal year 1996, the Company changed its
inventory valuation method to first-in, first-out for those inventories
previously accounted for under the last-in, first-out method. As such, all
previously reported quarterly financial information for fiscal years 1996 and
1995 has been restated.
Restated quarterly financial information for 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996
------------------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER (A) TOTAL (A)
------- ------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales................ $49,548 $57,620 $59,044 $113,521 (D) $279,733
Cost of products sold
(B)..................... 37,805 43,547 45,221 83,650 210,223
Net earnings (loss)...... (613) 486 (37)(C) (1,845)(E) (2,009)
Earnings (loss) per
share:
Primary:
Net earnings (loss).. (0.13) 0.01 (0.05) (0.28) (0.45)
Fully dilutive:
Net earnings (loss).. (0.13) 0.01 (0.05) (0.28) (0.45)
Earnings (loss) impact of
inventory valuation
change.................. $ 55 $ (50) $ 75 $ (266) $ (186)
</TABLE>
- --------
(A) Includes the results of operations for the three-month period ended
November 30, 1996, of Sofitam.
(B) Includes product development expenses and excludes depreciation and
amortization.
(C) Includes approximately $254 charged to operations for employee termination
benefits related to corporate restructuring brought on by the acquisition
and $669 for a litigation settlement.
(D) Sales of petroleum dispenser equipment have historically been seasonal.
Approximately 30% of Tokheim's annual net sales volume is recorded in the
fourth quarter of its fiscal year, with no significant variation among the
other three quarters. Amounts include approximately $46,228 of sales from
Sofitam.
(E) Includes approximately $387 charged to operations for employee termination
benefits related to corporate restructuring brought on by the acquisition,
$455 for various other acquisition charges, $780 for product/service exit
and $866 of accruals for a legal settlement and a possible adverse outcome
related to Pension Benefit Guaranty Corporation inquiries.
32
<PAGE>
<TABLE>
<CAPTION>
1995
------------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net sales..................... $45,845 $54,127 $52,935 $68,666(C) $221,573
Cost of products sold (A)..... 36,324 40,464 40,487 49,699 166,974
Net earnings (loss)........... (1,273) 616 (851)(B) 4,739(D) 3,231
Earnings (loss) per share:
Primary:
Net earnings (loss)....... (0.21) 0.03 (0.16) 0.55 0.21
Fully dilutive:
Net earnings (loss)....... (0.21) 0.02 (0.16) 0.43 0.17
Earnings (loss) impact of
inventory valuation change... $ 90 $ 90 $ 90 $ 85 $ 355
</TABLE>
- --------
(A) Includes product development expenses and excludes depreciation and
amortization.
(B) Includes $500 nonrecurring operating expense in connection with developing
and implementing an earnings improvement plan for the Company's
international operations.
(C) Sales of petroleum dispenser equipment have historically been seasonal.
Approximately 30% of the Company's annual net sales volume is recorded in
the fourth quarter of its fiscal year, with no significant variation among
the other three quarters.
(D) Includes a net gain of $500 on the sale of a non-core product line and
related assets.
14. INCOME TAXES
The Company accounts for income taxes using the provisions of SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 requires recognition of deferred
tax liabilities and assets for the expected future tax consequences of events
that have been included in the Company's financial statements or tax returns.
Under this method, deferred tax liabilities and assets are determined based on
the difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. A valuation allowance is established to
reduce the deferred tax assets when it is considered "more likely than not"
that some portion or all of the deferred tax assets will not be realized.
Tokheim Corporation acquired Sofitam, a French based Company, and its
subsidiaries, also foreign-based companies, on September 6, 1996. Included in
current foreign income tax provision is $904 and in current foreign income tax
payable is $(258) that relates to Sofitam and its subsidiaries.
Earnings (loss) before provision for (benefit from) income taxes consist of
the following:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Domestic....................................... $ (542) $ 8,946 $ 6,269
Foreign........................................ (687) (5,676) (4,337)
------- ------- -------
$(1,229) $ 3,270 $ 1,932
======= ======= =======
</TABLE>
Income tax provision (benefit) consist of the following:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Current:
Federal............................................ $(460) $(272) $ --
State.............................................. 277 249 673
Foreign............................................ 906 132 409
Deferred:
Foreign............................................ 57 (70) (825)
----- ----- -----
Total tax provision.............................. $ 780 $ 39 $ 257
===== ===== =====
</TABLE>
33
<PAGE>
A reconciliation of the reported tax expense (benefit) from continuing
operations and the amount computed by applying the statutory United States
federal income tax rate of 35% for November 30, 1996, 1995 and 34% for
November 30, 1994 to earnings before income taxes is as stated below. This
information has been restated for 1995 and 1994 to account for the change in
the method of valuing inventories from the LIFO method to the FIFO method as
more fully disclosed in Note 2.
<TABLE>
<CAPTION>
1996 1995 1994
------ ------- -------
<S> <C> <C> <C>
Computed "expected" tax expense (benefit)...... $ (430) $ 1,144 $ 657
Increase (decrease) in taxes resulting from:
State income taxes net of federal tax
benefit..................................... 180 162 444
Tax effect of dividends paid on stock held in
Retirement Savings Plan (RSP)............... (540) (553) (550)
Settlement of prior income tax returns and
adjustments to prior year accruals.......... (111) (572) 326
Difference in foreign and U.S. tax rates..... (78) (6) (104)
Change in book method of valuing inventories. -- -- 933
Increase (decrease) in valuation allowance... 316 (2,250) (2,425)
Earnings with no current tax benefit/(expense):
Domestic..................................... -- -- --
Foreign...................................... 1,201 1,985 1,089
Repatriation of foreign earnings............. 125 41 (162)
Miscellaneous items, net..................... 117 88 49
------ ------- -------
Provision (benefit)............................ $ 780 $ 39 $ 257
====== ======= =======
</TABLE>
The components of the deferred tax assets and liabilities as of November 30,
1996, 1995, and 1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Gross deferred tax assets:
Accounts receivable.......................... $ 215 $ 187 $ 322
Employee compensation & benefit accruals..... 7,107 6,198 5,949
Workers' compensation and other claims....... 242 153 215
Other........................................ 14 58 184
Warranty accrual............................. 1,032 946 818
EPA accrual.................................. 322 315 307
Net operating loss carryforwards............. 7,137 9,430 12,171
Alternative Minimum Tax credit............... 331 295 5
Valuation allowance.......................... (14,885) (14,569) (16,819)
-------- -------- --------
Total deferred tax asset................... $ 1,515 $ 3,013 $ 3,152
======== ======== ========
Gross deferred tax liabilities:
Property, plant and equipment................ 1,158 1,425 1,479
Pension assets............................... 524 253 151
Inventory.................................... (707) (867) 1,134
Investment in property....................... 214 214 208
Foreign earnings not permanently invested.... 327 202 161
Foreign exchange............................. 235 236 236
Export sales provision....................... 288 623 574
-------- -------- --------
Total deferred tax liability............... 2,039 3,820 3,943
-------- -------- --------
Net deferred tax liability..................... $ (524) $ (807) $ (791)
======== ======== ========
</TABLE>
34
<PAGE>
For domestic federal income tax purposes, the Net Operating Loss (NOL)
carryover amounts to $20,378, which will expire from 2006 to 2008. For
purposes of the Alternative Minimum Tax (AMT), the NOL carryover is $10,570
and the credit carryforward is $331.
15. GEOGRAPHICAL SEGMENTS
As a result of the acquisition of Sofitam and realignment of the Company in
1996, geographical segment information for 1995 and 1994 has been restated.
Amounts included in "Other" in prior year financial statements have been
reclassified to "North America." In addition, Merger and acquisition cost and
other unusual items have been accounted for in the originating segment.
Domestic and foreign operations information for 1996, 1995, and 1994 is as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Net sales--unaffiliated customers:
North America............................ $ 147,763 $137,470 $128,819
Export................................... 38,541 36,238 28,848
Europe................................... 80,370 37,068 35,234
Other.................................... 13,059 10,797 9,233
--------- -------- --------
$ 279,733 $221,573 $202,134
========= ======== ========
Inter-area sales eliminations:
North America............................ $ 9,471 $ 10,778 $ 9,917
========= ======== ========
Europe................................... $ 1,100 $ 47 $ 202
========= ======== ========
Other.................................... $ 510 -- --
========= ======== ========
Operating income (loss):
North America............................ $ 494 $ 8,812 $ 5,613
Europe................................... 2,649 (4,232) (2,971)
Other.................................... 633 165 141
Adjustments and eliminations............. 2,580 1,066 997
--------- -------- --------
$ 6,356 $ 5,811 $ 3,780
========= ======== ========
Identifiable assets:
North America............................ $ 215,939 $121,044 $111,748
Europe................................... 177,689 22,914 25,189
Other.................................... 14,955 7,025 6,339
Adjustments and eliminations............. (108,455) (26,651) (27,025)
--------- -------- --------
$ 300,128 $124,332 $116,251
========= ======== ========
</TABLE>
The Company's foreign operations are located in Canada; Belgium; France;
Germany; Italy; Spain; Switzerland; the Netherlands; the United Kingdom;
Cameroon; Ivory Coast; Morocco; Senegal; South Africa; and Tunisia. Transfers
between geographical areas are at cost plus an incremental amount intended to
provide a reasonable profit margin to the selling enterprises. Amounts
relating to foreign operations included in the consolidated financial
statements are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Working capital........................... $ 31,567 $ 14,717 $ 14,828
Property, plant, and equipment (net) and
other.................................... 83,059 5,997 5,717
Noncurrent liabilities.................... (104,988) (12,666) (6,683)
--------- -------- --------
Net foreign assets...................... $ 9,638 $ 8,048 $ 13,862
========= ======== ========
Net loss of foreign operations............ $ (1,512) $ (5,620) $ (4,438)
========= ======== ========
</TABLE>
35
<PAGE>
16. ALLOWANCE FOR DOUBTFUL ACCOUNTS
Changes in the allowance for doubtful accounts are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Balance, beginning of year....................... $1,150 $1,295 $1,267
Beginning balance from Sofitam................... 2,928 -- --
Charged to operations............................ 667 367 291
Uncollectible accounts written off, less
recoveries...................................... (900) (519) (278)
Foreign currency translation adjustments (93) 7 15
------ ------ ------
Balance, end of year........................... $3,752 $1,150 $1,295
====== ====== ======
</TABLE>
17. RETIREMENT PLAN COST
The Company has several retirement plans covering most of its employees,
including certain employees in foreign countries. Charges to operations for
the cost of the Company's retirement plans, including the Retirement Savings
Plan (RSP), were $3,052 in 1996, $3,054 in 1995, and $2,421 in 1994.
Defined Benefit Plans (U.S.)--The Company maintains two noncontributory
defined benefit pension plans which cover certain union employees. The
Company's funding to the plans is equal to the minimum contribution required
by the Internal Revenue Code. The benefits are based upon a fixed benefit rate
and years of service. Future benefits under these plans were frozen as of
December 31, 1990. The participants under these plans became eligible to
participate in the Retirement Savings Plan (RSP) beginning January 1, 1991.
The following table sets forth the aggregate defined benefit plans' funded
status and amounts reflected in the accompanying consolidated balance sheets
as of November 30, 1996 and 1995:
<TABLE>
<CAPTION>
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS
-------------- ----------------
1996 1995 1996 1995
------ ------ ------- -------
<S> <C> <C> <C> <C>
Actuarial present value of accumulated
plan benefits:
Vested.................................. $1,592 $1,599 $10,046 $10,226
Non-vested.............................. 89 57 703 769
------ ------ ------- -------
Accumulated benefit obligations......... $1,681 $1,656 $10,749 $10,995
====== ====== ======= =======
Projected benefit obligations............. $1,681 $1,656 $10,749 $10,995
Plan assets at fair value, principally
common stocks, bonds, and GIC funds,
including $555 in 1996 and $409 in 1995
of the Company's common stock............ 1,967 1,924 8,424 7,325
------ ------ ------- -------
Plan assets in excess of (less than)
projected benefit obligations............ 287 268 (2,325) (3,670)
Unrecognized net loss..................... 520 516 3,360 4,002
Unrecognized net assets at December 1,
1991 and 1990 being recognized over 15
years.................................... (231) (260) (112) (134)
Adjustment required to recognize minimum
liability................................ -- -- (3,248) (3,868)
------ ------ ------- -------
Prepaid pension cost (pension liability)
recognized in the consolidated balance
sheet.................................... $ 576 $ 524 $(2,325) $(3,670)
====== ====== ======= =======
The net periodic pension expense amounts were based on actuarial assumptions
as follows:
<CAPTION>
1996 1995 1996 1995
------ ------ ------- -------
<S> <C> <C> <C> <C>
Discount rate on plan liabilities......... 7.00% 7.00% 7.00% 7.00%
Rate of return on plan assets............. 8.00% 8.00% 8.00% 8.00%
</TABLE>
36
<PAGE>
In accordance with Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions," the Company has recorded an additional
minimum pension liability for the under funded plan of $3,248 and $3,868 at
November 30, 1996 and 1995, respectively, representing the excess of unfunded
accumulated benefit obligations over previously recorded pension cost
liabilities.
The net periodic pension cost of U.S. defined benefit plans for 1996, 1995,
and 1994 includes the following components:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -----
<S> <C> <C> <C>
Interest cost on
projected benefit
obligations............ $ 842 $ 857 $ 849
Return on plan assets... (1,204) (1,138) 82
Net amortization and
deferral............... 619 558 (625)
------- ------- -----
Net periodic pension
expense................ $ 257 $ 277 $ 306
======= ======= =====
</TABLE>
Defined Benefit Plans (Foreign)--Certain Sofitam companies have defined
benefit plans covering all of their employees. These plans provide for lump-
sum benefit payments upon retirement unless employment is terminated prior to
retirement age. The following table sets forth the funded status of these
defined benefit plans as of the most recent date for which this information
was available:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------
<S> <C>
Projected benefit obligation............................ $ 3,451
Plan assets at fair value............................... --
Projected benefit obligation in excess of plan assets... 3,451
Unrecognized transition obligation...................... (1,063)
Unrecognized actuarial gains/(losses)................... (398)
-------
Pension liability..................................... $ 1,990
=======
</TABLE>
The discount rate used in determining the actuarial present value of
projected benefit obligations was 7% for 1995.
The information presented above was not available as of November 30, 1996.
An actuarial valuation performed as of August 31, 1996 was used to estimate
the pension liability for Sofitam's defined benefit plans as of November 30,
1996. This liability was estimated to be approximately $2,356. The net
periodic pension cost for Sofitam's defined benefit plans for the three month
period ended November 30, 1996 was estimated at $120.
The Company's other foreign retirement plans are an insignificant portion of
the Company's total retirement plans and are not required to report to certain
governmental agencies. These plans do not otherwise determine actuarial value
of accumulated plan benefits and are omitted from the above table.
Defined Contribution Plan (U.S.)--The RSP covers substantially all U.S.
employees of Tokheim. Through the RSP, employee ownership of the Company is
increased approximately 11%. The RSP includes a common stock ESOP and a
preferred stock ESOP, which provide a retirement contribution of 1.5% of
salary to all employees in the plan and a matching contribution of at least
two-thirds of the first 6% of employee contributions. The matching
contribution can increase to 150% of the first 6% of contributions, depending
on the performance of the Company.
The Accounting Standards Division of the American Institute of Certified
Public Accountants issued Statement of Position (SOP) 93-6, Employers'
Accounting for Employee Stock Ownership Plans, in November 1993. As allowed by
that statement, the Company has elected to continue its current practices,
which are based
37
<PAGE>
on SOP 76-3 and subject to consensuses of the Emerging Issues Task Force of
the Financial Accounting Standards Board. Dividends paid on ESOP shares are
considered outstanding for earnings per share computations. Preferred ESOP
shares which have not been allocated to participants' accounts are assumed to
be outstanding based on the stated conversion ratio of one-for-one. Preferred
ESOP shares which have been allocated to participants' accounts are included
in the computation of earnings per share based on the weighted average market
value of the Company's common stock relative to the $25 liquidation value of
the preferred stock. The number of allocated preferred ESOP shares and common
ESOP shares at November 30, 1996 was 410,515 and 127,494, respectively.
362,112 preferred shares and 10,150 common shares were held in suspense by the
ESOPs at November 30, 1996. At November 30, 1996, the value of the shares
allocated to participants was $11,410,956.
The number of preferred shares in the RSP at November 30, 1996 and 1995 was
793,160 and 808,620, respectively, at a cost of $25 per share. The number of
common shares in the RSP at November 30, 1996 and 1995 was 137,645 and
145,545, respectively, at an average cost of $18.22 and $21.09 per share. The
dividend yield on the preferred stock is 7.75%, and the conversion rate is one
share of preferred stock to one share of common stock. Each year,
approximately 8% of the preferred stock held by the plan is allocated to
participants' accounts. The Company has guaranteed the RSP loans as described
in Note 7. A like amount entitled "Guaranteed Employees' Stock Ownership Plan
(RSP) obligation" is recorded as a reduction of shareholders' equity. As the
Company makes contributions to the RSP, these contributions, plus the
dividends paid on the Company's preferred and common stock held by the RSP,
are used to repay the loans. As the principal amounts of the loans are repaid,
the "Guaranteed Employees' Stock Ownership Plan (RSP) obligation" in the
equity and liability sections of the balance sheet is reduced accordingly.
Company contributions in excess of dividends are allocated to interest and
compensation expense on a basis proportional to the required debt service on
RSP loans. Amounts allocated to interest expense were $715, $832, and $746,
for 1996, 1995, and 1994, respectively.
The table below sets forth the interest expense, the amounts contributed to
the RSP (excluding preferred stock dividends), and the amount of dividends on
preferred stock used for debt service by the RSP:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Interest expense incurred by the Plan Trust(s) on
RSP debt........................................... $1,075 $1,265 $1,367
Company contributions to the RSP.................... 2,541 2,300 1,719
Dividends on preferred stock used for debt service
by the RSP......................................... 1,543 1,580 1,617
</TABLE>
18. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides defined benefit postretirement health and life
insurance benefits to most of its U.S. employees. Covered employees become
eligible for these benefits at retirement, after meeting minimum age and
service requirements. Effective December 1, 1993, the Company adopted the
provisions of Statement of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." This
statement requires that the costs of future benefits be accrued during an
employee's active working career. The cost of providing these benefits was
previously recognized as claims were incurred. The Company continues to fund
benefits on a pay-as-you-go basis, with some retirees paying a portion of the
costs.
The Company recorded the discounted value of expected future benefits earned
as of December 1, 1993 as a cumulative effect of accounting change. This one-
time, noncash accounting change resulted in a charge to earnings of $13,416,
or $1.72 per share. Due to the Company's net operating loss carry forward
position (see Note 11), the Company established a valuation allowance to
offset the deferred tax asset created by this charge to operations.
38
<PAGE>
The accumulated postretirement benefit obligation as of November 30, 1996
and 1995 consisted of unfunded obligations related to the following:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Retirees and dependents.................................. $ 8,220 $ 8,333
Fully eligible active plan participants.................. 1,088 1,114
Other active plan participants........................... 7,742 5,631
------- -------
Total accumulated postretirement benefit obligation.... 17,050 15,078
Unrecognized net gain (loss)............................. (1,531) (309)
------- -------
Accrued postretirement benefit cost...................... 15,519 14,769
Less current portion..................................... (895) (887)
------- -------
$14,624 $13,882
======= =======
</TABLE>
Net postretirement benefit cost for 1996 and 1995 includes the following
components:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Service cost.............................................. $ 603 $ 422
Interest cost on accumulated postretirement benefit
obligation............................................... 1,108 1,034
Amortization (gain) loss.................................. -- (25)
------ ------
Net postretirement benefit cost........................... $1,711 $1,431
====== ======
</TABLE>
The assumptions used to develop the net postretirement benefit expense and
the present value of benefit obligations are as follows:
<TABLE>
<CAPTION>
1996 1995
----- ------
<S> <C> <C>
Discount rate................................................ 7.00% 7.00%
Health care cost trend rate for the next year................ 9.00% 10.00%
</TABLE>
The health care cost trend rate used to value the accumulated postretirement
benefit obligation is assumed to decrease gradually to an ultimate rate of 5%
in 2005. A 1% increase in this annual trend rate would increase the
accumulated postretirement benefit obligation as of November 30, 1996 by
approximately $2,454 and the combined service and interest components of the
annual net post-retirement health care cost by approximately $295.
19. CONTINGENT LIABILITIES
The Company is defending various claims and legal actions which are common
to its operations. These legal actions primarily involve claims for damages
arising out of the Company's manufacturing operations, including environmental
actions, product liability matters, one allegation of patent infringement, and
various contract and employment matters.
Environmental Matters--Total amounts included in accrued expenses related to
environmental matters were $878 and $872 at November 30, 1996 and 1995,
respectively. The Company has been designated as a "potentially responsible
party" (PRP), in conjunction with other parties, in four governmental actions
associated with hazardous waste sites falling under the Comprehensive
Environmental Response Compensation and Liability Act (CERCLA). Such actions
seek recovery of certain clean-up costs. Dates on which the Company received
notice as a PRP range from January 1988 to January 1992. The Company has
attempted, where possible,
39
<PAGE>
to develop a reasonable estimate of the cost or range of costs which may
accrue from these actions. Likewise, the Company has attempted, where
possible, to assess the likelihood of an unfavorable outcome to the Company as
a result of these actions. Legal counsel has been retained to assist the
Company in making these determinations, and clean-up costs are accrued when an
unfavorable outcome is determined to be probable and a reasonable estimate can
be made.
The Company is a "de minimis" party in one of the sites mentioned above.
During 1996, the Company paid less than $3 in expenses for this matter.
During 1995, the Company settled two actions with the Environmental
Protection Agency (EPA). One matter the Company settled for $627 as part of a
global settlement with other PRPs, and the Company recorded the liability in
full at November 30, 1994. The Company is still awaiting court approval of the
settlement before it can pay its portion. In the other action, the Company
settled as a participating generator as part of a global settlement. The
Company provided a letter of credit in the amount of $148 to cover its
projected future costs. In 1996, this letter of credit was reduced to $43.
This action is still pending with respect to EPA oversight costs and potential
natural resource damages owed to the State of Indiana. Management believes
that the letter of credit of $43 is adequate to cover any future cost relating
to this matter.
With respect to the fourth site, the Company has proven to the EPA that it
should not be a responsible party, and should be dismissed from this action.
The Company is also involved in one lawsuit with respect to environmental
liabilities under an indemnity provision of a sale agreement concerning the
sale of the die casting facility of a former subsidiary to a third party. The
Company is negotiating with the other party to settle this matter to avoid
litigation expenses.
Product Liability and Other Matters--The Company is subject to various other
legal actions arising out of the conduct of its business, including actions
relating to product liability, one patent infringement claim, and claims for
damages alleging violations of federal, state, or local statutes or ordinances
dealing with civil rights, equal pay, and sex discrimination. Total amounts
included in accrued expenses related to these actions were $382 and $156 at
November 30, 1996 and 1995, respectively. In addition, during 1996, the
Company settled various product liability and other matters, with aggregate
settlement charges of approximately $875.
In the opinion of the Company's management, amounts accrued for awards or
assessments in connection with these matters at this time are adequate, and
the ultimate resolution of environmental, product liability, and other legal
matters will not have a material effect on the Company's consolidated
financial position, results of operations, or cash flows. The Company is not
able to estimate accurately the additional loss or range of loss that is
reasonably possible, in addition to the amounts accrued. The Company
reassesses these matters as new facts and cases are brought to management's
attention.
Subsequent to November 30, 1996, the Company received a jury verdict against
it in the amount of $350 with respect to an equal pay act and sex
discrimination claim. The Company believes the jury verdict award is contrary
to the law and will appeal this award. Accordingly, an accrued expense has not
been recorded for the $350.
40
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Shareholders and Directors, Tokheim Corporation:
We have audited the accompanying consolidated balance sheets of Tokheim
Corporation and Subsidiaries as of November 30, 1996 and 1995, and the related
consolidated statements of earnings and retained earnings, and cash flows for
each of the three years in the period ended November 30, 1996. These
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 Tokheim
Corporation and Subsidiaries as of November 30, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended November 30, 1996, in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for inventories in 1996.
Coopers & Lybrand L.L.P.
Fort Wayne, Indiana
January 24, 1997
41
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS OF THE REGISTRANT
The information required by this Item is set forth on pages 1 through 4 in
the Registrant's Proxy Statement for the 1997 Annual Meeting of Shareholders,
which information is incorporated herein by reference.
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to item 401 of Regulation S-K, the following information is
presented herein in lieu of presenting such information in a definitive Proxy
Statement to be filed as described under Part III.
The names, ages, and positions of all of the executive officers of the
Company are listed below, along with their business experience during the past
five years. Officers are appointed annually by the Board of Directors at the
meeting of Directors immediately following the Annual Meeting of Shareholders.
There are no family relationships among any of the officers of the Company,
nor any arrangement or understanding between any such officer and any other
person pursuant to which he was elected as an officer.
<TABLE>
<CAPTION>
NAME, AGE, AND POSITION BUSINESS EXPERIENCE DURING PAST 5 YEARS
----------------------- ---------------------------------------
<S> <C>
DOUGLAS K. PINNER, 56 Joined Tokheim as President and Chief Executive
Chairman of the Board, Officer in 1992; elected Chairman and Chief Ex-
President & Chief Executive ecutive Officer in 1996. During the last five
Officer years was also President and Chief Executive of
Slater Steels, Fort Wayne Specialty Alloys.
GERALD H. FRIELING, JR., 66 Elected Vice Chairman of the Board in 1996; dur-
Vice Chairman of the Board ing the last 5 years, also served as Chairman
and Chief Executive Officer of the Company.
JOHN A. NEGOVETICH, 51 Elected President, Tokheim North America in
President, Tokheim North 1996; joined Tokheim as Vice President and
America and Acting Chief Fi- Chief Financial Officer in 1995; during the
nancial Officer last 5 years, also served as Vice President,
Finance, Chief Financial Officer and Director
of Ardco, Inc. and as Vice President, Finance,
Hawker Siddeley, Inc.
JACQUES ST.-DENIS, 39 Joined Tokheim in November 1993 as Manager of
President and Directeur Gen- Export Operations; subsequently promoted to
eral of Tokheim Sofitam Vice President, International, President
Tokheim International, and upon completion of
the Sofitam acquisition, President and
Director--Generale of Tokheim-Sofitam, and its
subsidiaries.
CONDELL B. ELLIS, 64 Elected Senior Vice President, North America
Senior Vice President, North Sales & Marketing in 1996; during the last 5
America Sales & Marketing years, also served as Vice President, Domestic
Sales; served as Vice President, Sales of
CANMAX; served in various executive sales offi-
cer positions of Tokheim Corporation; and
as Vice President, Sales, Wayne Division of
Dresser Industries, Inc.
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, AND POSITION BUSINESS EXPERIENCE DURING PAST 5 YEARS
----------------------- ---------------------------------------
<S> <C>
TERRY M. FULMER, 53 Elected Senior Vice President, Global Manufac-
Senior Vice President, turing/
Global Operations in 1996; during the last 5 years,
Manufacturing/Operations also served as Vice President, Global Manufac-
turing; Vice President, Corporate Operations
and Planning; Vice President, Corporate Plan-
ning; General Manager, Small Pumps Division;
and Manager of Manufacturing, Newbern Plant of
the Company.
ARTHUR C. PREWITT, 55 Elected Vice President, Technology and Venture
Vice President, Technology Development in 1995; during the last five
and Venture Development years, also served as Vice President, Technolo-
gy; Vice President, Corporate Engineering and
Marketing; and Vice President, Product Engi-
neering, of the Company; and as Manager, Tech-
nical Products of Gilbarco, Inc.
NORMAN L. ROELKE, 47 Elected Vice President, Secretary and General
Vice President, Secretary Counsel in 1995; during the last 5 years, also
and General Counsel served as Vice President and General Counsel
and as Corporate Counsel of the Company.
SCOTT A. SWOGGER, 44 Elected Vice President, Quality Systems in 1995;
Vice President, Quality Sys- during the last 5 years, also served as Direc-
tems tor, Quality Assurance, of the Company; Corpo-
rate Quality Engineer and Senior Quality Engi-
neer of DePuy, Inc.; and as Senior Manager,
Quality Assurance of Tokheim Corporation.
JOHN M. TOMLINSON, 47(1) During the last five years, served in the capac-
ity as a turnaround and international business
consultant. Previously, served in senior level
positions for Alliance Ceramic Products and
Genonex Corporation.
</TABLE>
- --------
(1) Mr. Tomlinson joined the Company in December 1996. It is the intention of
the Board of Directors to elect him Vice President, Finance and Chief
Financial Officer immediately following the Annual Meeting of
Shareholders.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors, executive (and certain other) officers, and persons who own more
than 10% of the Company's common stock to file reports of ownership and
changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. Directors, officers, and greater-than-10% shareholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on review of copies of such forms
furnished to the Company, or written representations that no Form 5s were
required, the Company believes that during fiscal year 1995, all Section 16(a)
filing requirements applicable to its Directors, officers and greater-than-10%
shareholders were held in compliance.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is set forth on pages 4 through 6 in
the Registrant's Proxy Statement for the 1997 Annual Meeting of Shareholders,
which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is set forth on pages 9 through 11 in
the Registrant's Proxy Statement for the 1997 Annual Meeting of Shareholders,
which information is incorporated herein by reference.
43
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is set forth on pages 9 through 11 in
the Registrant's Proxy Statement for the 1997 Annual Meeting of Shareholders,
which information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
<TABLE>
<S> <C>
1. FINANCIAL STATEMENTS:
Included as outlined in Item 8 of Part II of this Report:
Consolidated Statement of Earnings and Retained Earnings for
each of the three years in the period ended November 30, 1996.. Page 15
Consolidated Statement of Cash Flows for each of the three years
in the period ended November 30, 1996.......................... Page 16
Consolidated Balance Sheet as of November 30, 1996, and 1995.... Page 17
Notes to Consolidated Financial Statements...................... Page 19
Independent Accountants Report.................................. Page 41
2. SUPPLEMENTAL DATA AND FINANCIAL STATEMENT SCHEDULES:
Included as outlined in Item 8 of Part II of this Report:
Quarterly Financial Information (unaudited) in Note 13 to the
Consolidated Financial Statements.............................. Page 32
</TABLE>
3(A). EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
2 Option Agreement, dated as of May 7, 1996, between the
Registrant and Sofitam S.A. (incorporated by reference to
the Registrant's Current Report on Form 8-K, File No. 001-
6018, dated September 23, 1996).
3.1 Restated Articles of Incorporation of the Registrant, as
amended, as filed with the Indiana Secretary of State on
February 5, 1997 (incorporated by reference to the Regis-
trant's Annual Report on Form 10-K, for the year ended No-
vember 30, 1996, filed February 28, 1997).
3.2 Bylaws of the Registrant, as restated on July 12, 1995
(incorporated by reference to the Registrant's Annual Re-
port on Form 10-K/A, for the year ended November 30, 1995,
filed November 20, 1996).
4.1 Rights Agreement, dated as of January 22, 1997, between
the Registrant and Harris Trust and Savings Bank, as
Rights Agent (incorporated by reference to the Regis-
trant's Current Report on Form 8-K, File No. 1-6018, dated
February 6, 1997).
4.2 Indenture dated as of August 23, 1996, between the Regis-
trant and Harris Trust and Savings Bank, as Trustee (in-
corporated by reference to the Registrant's Current Report
on Form 8-K, File No. 96-633231, dated September 23,
1996).
4.3 Credit Agreement dated as of September 3, 1996, among the
Registrant, certain subsidiaries of the Registrant (the
"Borrowing Subsidiaries"), certain banks (the "Lenders")
and NBD Bank, N.A. ("Agent") (incorporated by reference to
the Registrant's Current Report on Form 8-K, File No. 96-
63323, dated September 6, 1996).
10.1 Tokheim Corporation 1992 Stock Incentive Plan, established
December 15, 1992 (incorporated by reference to the Regis-
trant's Registration Statement on Form S-8, File No.
33-52167, dated February 4, 1994).
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
10.2 Retirement Savings Plan for Employees of Tokheim Corpora-
tion and Subsidiaries (incorporated by reference to Amend-
ment No. 1 to the Registrant's Registration Statement on
Form S-8, File No. 33-29710, dated August 1, 1989).
10.3 Tokheim Corporation 1996 Key Management Incentive Bonus
Plan (incorporated by reference to the Registrant's Report
on Form 10-Q/A, for the quarter ended February 29, 1996,
filed November 20, 1996).
10.4 Employment Agreement, dated December 17, 1996, between the
Registrant and Douglas K. Pinner (incorporated by refer-
ence to the Registrant's Annual Report on Form 10-K, for
the year ended November 30, 1996, filed February 28,
1997).
10.5 Employment Agreement, dated December 17, 1996, between the
Registrant and John A. Negovetich (incorporated by refer-
ence to the Registrant's Annual Report on Form 10-K, for
the year ended November 30, 1996, filed February 28,
1997).
10.6 Employment Agreement, dated April 1, 1996, between the
Registrant and C.B. Ellis, Jr. (incorporated by reference
to the Registrant's Report on Form 10-Q/A, for the quarter
ended May 31, 1996, filed November 20, 1996).
10.7 Employment Agreement, dated September 22, 1995, between
the Registrant and Terry M. Fulmer (incorporated by refer-
ence to the Registrant's Report on Form 10-Q/A, for the
quarter ended May 31, 1996, filed November 20, 1996).
10.8 Employment Agreement, dated September 25, 1996, between
the Registrant and Arthur C. Prewitt (incorporated by ref-
erence to the Registrant's Registration Statement on Form
S-4, File No. 33-316503, dated November 20, 1996).
10.9 Employment Agreement, dated December 17, 1996, between the
Registrant and Jacques St- Denis (incorporated by refer-
ence to the Registrant's Annual Report on Form 10-K, for
the year ended November 30, 1996, filed February 28,
1997).
10.10 Employment Agreement, dated January 1, 1997, between the
Registrant and Norman L. Roelke (incorporated by reference
to the Registrant's Annual Report on Form 10-K, for the
year ended November 30, 1996, filed February 28, 1997).
10.11 Employment Agreement, dated January 1, 1997, between the
Registrant and Scott A. Swogger (incorporated by reference
to the Registrant's Annual Report on Form 10-K, for the
year ended November 30, 1996, filed February 28, 1997).
10.12 Employment Agreement, dated December 17, 1996, between the
Registrant and John M. Tomlinson (incorporated by refer-
ence to the Registrant's Annual Report on Form 10-K, for
the year ended November 30, 1996, filed February 28,
1997).
18 Preferability accounting letter from Coopers & Lybrand
L.L.P. on the change to first-in, first-out (FIFO) from
last-in, first-out (LIFO) for purposes of inventory calcu-
lation (incorporated by reference to the Registrant's An-
nual Report on Form 10-K, for the year ended November 30,
1996, filed February 28, 1997).
21 List of Subsidiaries of the Registrant (incorporated by
reference to the Registrant's Annual Report on Form 10-K,
for the year ended November 30, 1996, filed February 28,
1997).
23 Consent of Coopers & Lybrand L.L.P. (incorporated by ref-
erence to the Registrant's Annual Report on Form 10-K, for
the year ended November 30, 1996, filed February 28,
1997).
27 Financial Data Schedule (incorporated by reference to the
Registrant's Annual Report on Form 10-K, for the year
ended November 30, 1996, filed February 28, 1997).
</TABLE>
(B) REPORTS ON FORM 8-K
On September 23, 1996, the Company filed a Current Report on Form 8-K to
report the Company's acquisition of Sofitam. The required financial statements
and interim pro forma information, which were unavailable at that time, were
filed on November 20, 1996, on a subsequent Form 8-K/A.
45
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) THE SECURITIES EXCHANGE
ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS AMENDMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Tokheim Corporation
/s/ Douglas K. Pinner
By: _________________________________
Douglas K. Pinner
Chairman of the Board, President,
Chief Executive Officer and
Director
June 17, 1997
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, THIS AMENDMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Douglas K. Pinner Chairman of the Board, June 17, 1997
____________________________________ President and Chief
Douglas K. Pinner Executive Officer and
Director
/s/ John M. Tomlinson Vice President and Chief June 17, 1997
____________________________________ Financial Officer
John M. Tomlinson
/s/ Gerald H. Frieling, Jr. Vice Chairman of the Board June 17, 1997
____________________________________ and Director
Gerald H. Frieling, Jr.
/s/ Walter S. Ainsworth Director June 17, 1997
____________________________________
Walter S. Ainsworth
/s/ Robert M. Akin, III Director June 17, 1997
____________________________________
Robert M. Akin, III
/s/ James K. Baker Director June 17, 1997
____________________________________
James K. Baker
/s/ Bernard D. Cooper Director June 17, 1997
____________________________________
Bernard D. Cooper
/s/ Richard W. Hansen Director June 17, 1997
____________________________________
Richard W. Hansen
/s/ Dr. Winfred M. Phillips Director June 17, 1997
____________________________________
Dr. Winfred M. Phillips
/s/ Ian M. Rolland Director June 17, 1997
____________________________________
Ian M. Rolland
</TABLE>
46
