FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1997
Commission File Number 1-6018
TOKHEIM CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-0712500
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10501 CORPORATE DR., FORT WAYNE, IN 46845
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number including area code)(219) 470-4600
NOT APPLICABLE
(Former name, former address, and former fiscal year if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months(or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ___
As of May 31, 1997, 7,988,644 shares of voting common stock were
outstanding.
In addition, 781,172 shares of convertible preferred stock were held by
the Retirement Savings Plan for Employees of Tokheim Corporation and
Subsidiaries.
The exhibit index is located on page 10.
<PAGE> 1
PART I. FINANCIAL INFORMATION
TOKHEIM CORPORATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT AMOUNTS PER SHARE)
<TABLE>
<CAPTION>
Unaudited
Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
1997 1996 1997 1996
------------ -------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES $ 95,857 $ 57,620 $ 187,881 $ 107,167
Cost of sales, exclusive of
items listed below 70,379 43,546 140,771 81,350
Selling, general,
administrative expenses 16,985 10,536 32,888 20,951
Depreciation and amortization 2,452 1,067 4,380 2,137
Merger and acquisition costs
and other unusual items 478 1,545 478 2,145
------------ -------------- ------------- --------------
Operating Profit 5,563 926 9,364 584
------------ -------------- ------------- --------------
Interest expense, net 4,455 718 8,195 1,466
Foreign currency gains (57) 40 (177) (250)
Minority Interest 124 -- 81 --
Other (income) expense, net (132) 33 (200) 1
------------ -------------- ------------- --------------
Earnings (loss) before
income taxes 1,173 135 1,465 (633)
Income taxes (37) (351) 130 (506)
------------ -------------- ------------- --------------
Net Earnings (loss) $ 1,210 $ 486 $ 1,335 $ (127)
============ ============== ============= ==============
Preferred stock dividends $ 375 $ 385 $ 758 $ 774
Net earnings (loss)
applicable to common stock $ 835 $ 101 $ 577 $ (901)
Primary earnings (loss)
per common share $ 0.10 $ 0.01 $ 0.07 $ (0.11)
============ ============== ============= ==============
Weighted average shares
outstanding 8,021 8,009 8,005 7,938
Fully diluted earnings
(loss) per common share $ 0.08 $ 0.01 $ 0.06 $ (0.11)
============ ============== ============= ==============
Weighted average shares
outstanding 9,851 9,681 9,839 7,938
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED BALANCE SHEET Unaudited
(AMOUNTS IN THOUSANDS) May 31, November 30,
ASSETS 1997 1996
------------- -----------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 9,036 $ 9,814
Receivables, net 74,278 94,402
Inventories:
Raw materials and supplies 30,598 30,689
Work in process 31,044 33,080
Finished goods 11,311 11,145
------------- --------------
72,953 74,914
Prepaid expenses 6,248 5,056
------------- --------------
Total current assets 162,515 184,186
Property, plant, and equipment, net 39,109 41,010
Other tangible assets 3,505 3,836
Goodwill, net 57,722 62,692
Other non-current assets and deferred charges, net 16,571 18,137
------------- --------------
Total assets $ 279,422 $ 309,861
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 1,962 $ 4,447
Notes payable, banks 100 7,168
Cash overdraft 11,188 9,733
Accounts payable 49,304 53,593
Accrued expenses 47,202 53,618
------------- --------------
Total current liabilities 109,756 128,559
Senior subordinated notes 100,000 100,000
Long-term debt 19,301 22,402
Guaranteed Employees' Stock Ownership Plan obligation 10,583 11,995
Postretirement benefit liability 15,221 16,051
Minimum pension liability 3,248 3,248
Other long-term liabilities 332 342
Deferred income taxes 515 524
Minority Interest 1,007 925
------------- --------------
259,963 284,046
------------- --------------
Redeemable convertible preferred stock 24,000 24,000
Guaranteed Employees' Stock Ownership Plan obligation (10,583) (11,692)
Treasury stock, at cost (4,470) (4,171)
------------- --------------
8,947 8,137
------------- --------------
Common stock 19,738 19,452
Guaranteed Employees' Stock Ownership Plan obligation -- (303)
Minimum pension liability (3,248) (3,248)
Foreign currency translation adjustments (15,603) (7,271)
Retained earnings 9,817 9,240
------------- --------------
10,704 17,870
Less treasury stock, at cost (192) (192)
------------- --------------
10,512 17,678
------------- --------------
Total liabilities and stockholders' equity $ 279,422 $ 309,861
============= ==============
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Amounts in Thousands)
Unaudited
Six Months Ended
May 31, May 31,
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings (loss) $ 1,335 $ (127)
Adjustments to reconcile net earnings (loss)
to cash provided from (used in) operations:
Depreciation and amortization 4,380 2,137
Gain on sale of property, plant, and equipment (77) (65)
Deferred income taxes 22 (55)
Changes in assets and liabilities:
Receivables, net 14,585 7,289
Inventories (1,755) (4,267)
Prepaid expenses (1,475) 639
Accounts payable (877) 1,277
Accrued expenses (4,073) (2,604)
U.S. and foreign income taxes 521 (663)
Other (869) (6,444)
------------- -------------
Net cash provided from (used in) operations 11,717 (2,883)
------------- -------------
CASH FLOWS FROM INVESTING AND OTHER ACTIVITIES:
Plant and equipment additions (3,375) (1,986)
Proceeds from sale of property, plant, and equipment 379 977
------------- -------------
Net cash used in investing and other activities (2,996) (1,009)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in term debt (4,548) 3,295
Increase (decrease) notes payable, banks (6,327) 725
Increase (decrease) cash overdraft 2,332 1,322
Proceeds from issuance of common stock 286 --
Treasury stock, net (300) (310)
Preferred stock dividends (758) (774)
------------- -------------
Net cash provided from (used in) financing activities (9,315) 4,258
------------- -------------
EFFECT OF TRANSLATION ADJUSTMENT ON CASH (184) (5)
CASH AND CASH EQUIVALENTS:
Increase (decrease) in cash (778) 361
Beginning of year 9,814 5,462
------------- -------------
End of period $ 9,036 $ 5,823
============= =============
</TABLE>
<PAGE> 4
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The interim financial statements are unaudited and reflect all
adjustments(consisting solely of normal recurring adjustments) that, in
the opinion of management, are necessary for a fair statement of results
of the interim periods presented. This report includes information in a
condensed form and should be read in conjunction with the audited
consolidated financial statements included in Form 10-K for the fiscal
year ending November 30, 1996, filed by the Company with the Securities
and Exchange Commission on February 28,1997. The results of the
operations for the three month and six month periods ended May 31, 1997
are not necessarily indicative of the results to be expected for the
full year or any other interim period.
Amounts for interim periods are unaudited. Amounts for the year ended
November 30, 1996 were derived from audited financial statements
included in the 1996 Annual Report to Stockholders.
Certain prior year amounts in these financial statements have been
reclassified to conform with current year presentation.
Prior year quarter amounts have been restated for a change in inventory
valuation from the last-in, first-out method to the first-in, first-out
method. In addition the three month and six month periods ended May 31,
1997 includes the operations of the newly acquired subsidiaries
(Sofitam). For further discussions with regard to these matters, see the
Company's 1996 Annual Report to Stockholders.
Fully diluted loss per share for the six month period ended May 31, 1996
is considered to be the same as primary loss per share, since the effect
of certain potentially dilutive securities would be antidilutive.
Statement of Financial Accounting Standards (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
<PAGE> 5
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", SFAS No. 128, "Earnings Per
Share", and SFAS No. 129,"Disclosure of Information about Capital
Structure", are effective for the year ending November 30, 1998. In the
opinion of management, SFAS No. 125 and 129 will not have a material
impact on the Company's financial position or results of operations.
Management has not yet determined the impact that SFAS No. 128 will have
on the presentation of the Company's 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".
See financial statements and accompanying notes in the Company's 1996
Annual Report.
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SALES: Sales for the second quarter reflected a 66% increase over those
recorded in the same quarter in the prior year with international sales
totaling $50,429,000 and domestic demand remaining strong. International
sales totaled 52% of revenue. The proportion of international sales
would even be greater if export sales were included.
Consolidated sales for the fiscal 1997 second quarter were $95,857,000
versus sales of $57,620,000 reported in the comparable period in 1996.
The improvement in sales is attributable to the acceptance of new
products by the domestic marketplace and the September 6, 1996 Sofitam
acquisition.
For the first six months of 1997, consolidated sales were $187,881,000
versus $107,167,000 in the prior year.
EARNINGS: Consolidated profit in the 1997 second quarter was $1,210,000
or $0.10 per share on a primary basis, compared to a net profit of
$486,000 or $0.01 per share, reported in the previous year's first
quarter. On a fully diluted basis, the second quarter earnings per
common share was $0.08, compared to $0.01 per share in the year ago
period.
Year to date for six months, consolidated profit was $1,335,000 or $0.07
per share on a primary basis, compared to a net loss of $127,000 or
$0.11 per share on a primary basis. On a fully diluted basis the six
month period earnings per common share was $0.06 per share compared to a
loss of $0.11 per share in the year ago period.
COSTS AND EXPENSES: Gross margin excluding depreciation during the
second quarter was 26.6% compared to 24.4% in the fiscal 1996 second
quarter. Year to date gross margin excluding depreciation was 25.1%
compared to 24.1% in the first six months of the prior year. The
increase in gross margin was due primarily to a change in product mix
and aggressive cost containment efforts.
Selling, general, and administrative expenses decreased to 17.7% as a
percent of sales for the second quarter compared to 18.3% for the
comparable quarter last year. For the first six months of the year,
selling, general, and administrative expenses decreased to 17.5% from
19.5% in the first six months of the prior year. The Company started a
cost containment program in the fourth quarter of 1996 to reduce
personnel headcount. In addition the Sofitam acquisition substantially
increased revenue during the quarter as compared to the prior year. The
Company has implemented a program of improved efficiency and reduced
headcount during the current quarter. This headcount reduction
translated into a reduced actuarial valuation for the postretirement
liability for the quarter.
<PAGE> 7
Net interest expense for the fiscal 1997 second quarter was $4,455,000
versus $718,000 in the second quarter of 1996. Year to date interest
expense was $8,195,000 for the first six months of 1997 versus
$1,466,000 for the first six months of 1996. This increase was due to
the Company issuing $100,000,000 of senior subordinated notes in the
third quarter of 1996 to finance the acquisition of Sofitam.
Depreciation and amortization increased to $2,452,000 in the second
quarter of 1997 from $1,067,000 in the second quarter of 1996. Year to
date depreciation and amortization expense is $4,380,000 compared to
$2,137,000 in the first six months of 1996. The increase was due to
depreciation on assets acquired as part of the Sofitam acquisition. In
addition as part of the acquisition, the Company's recorded depreciation
expense includes the amortization of goodwill as part of this expense.
The decrease in goodwill in the balance sheet is primarily due to
translation adjustments caused by the declining value of European
currencies, primarily the French Franc.
The Company expects to incur approximately $2,100,000 of restructuring
charges related to the consolidation of certain existing Tokheim
companies into the newly acquired Sofitam. These amounts will be charged
to expense as employee groups are notified. The Company expects to incur
up to $900,000 of restructuring charges to occur in the third quarter.
Foreign currency gain for the second quarter was $57,000 versus a loss
of $47,000 in the second quarter of 1996. The Company incurred a gain on
the prepayment of interest from Sofitam. The amount owed to Sofitam is
in French Francs and as the French Franc depreciated against the U.S.
dollar in the second quarter, less dollars are needed to repay the
prepayment of interest. Year to date foreign currency gain is $177,000
compared to a gain of $250,000 in the first six months of 1996.
The Company recorded minority interest of $124,000 and $81,000 in the
three month and six month periods ended May 31, 1997, respectively. The
Company acquired certain companies as part of the Sofitam acquisition
that have minority interest.
Income taxes for the second quarter was a benefit of $37,000 compared to
a benefit of $351,000 in the prior year. The benefit in the quarter was
due to an adjustment of the accrual originally recorded in the first
quarter of 1997. Year to date income taxes was an expense of $130,000
versus a benefit of $507,000 in the prior year. The increase in income
taxes was due to foreign taxes being accrued for the Sofitam companies
that recorded taxable income in the first six months of 1997.
OTHER: Cash provided from operations was $11,717,000 in the first six
months of 1997 versus a use of $2,883,000 in the first six months of
1996. The major difference is due to the decrease in receivables of
$14,585,000 year to date versus a decrease of $7,289,000 in the first
six months of 1996. The Company recorded decreases in receivables both
domestically and in the Sofitam operation.
<PAGE> 8
Cash flows used in investing activities relate to capital expenditures
of $3,375,000 for the first six months of 1997 compared to $1,986,000 in
the first six months of 1996. The increase in 1997 versus 1996 is due to
the consolidation of administrative centers in France into an operations
center in Tremblay near Charles DeGaulle airport.
Cash flows from investing activities showed a $10,875,000 decrease in
term debt and notes payable, banks combined during the first six months
of 1997 versus an increase of $4,020,000 in the first six months of
1996.
DIVIDENDS: No cash dividends on common stock were paid or declared
during the quarter.
OTHER DEVELOPMENTS: The Company incurred a foreign translation loss
during the quarter of $1,046,000, which is accounted for as a separate
component of stockholders' equity. This loss was due to the decline of
the French Franc against the U.S. dollar on long term intercompany
assets. It should be noted that the Company's bank covenants exclude
foreign currency gains or losses in the calculation of bank covenants.
The Company was in compliance with the required financial ratios to
remain in compliance with all bank covenants during the second quarter
of 1997.
In conjunction with the Sofitam acquisition, the Company expects to
spend $9,800,000 to close redundant Sofitam operations in Europe, of
which $1,119,000 has been spent during the first six months of 1997.
These expenditures have been and will continue to be charged against the
acquisition accruals originally created as part of the acquisition of
Sofitam. The Company will also spend $6,300,000 for capital assets to
expand the Normandy, France plant and upgrade information systems. In
addition, the Company has committed to an information systems upgrade at
one of its North American Subsidiaries. This commitment will incur cost
of approximately $1,000,000 over the next several months. Finally, the
Company anticipates incurring expenses of $2.1 million against operating
income to close certain existing operations. None of the commitments
have been incurred as of the second quarter of 1997 and remain
outstanding and will effect the results of operations in future periods.
During the quarter the Company entered into an Interest Rate Collar
between the Company and certain financial institutions allowing the
company to sell French francs to this group of financial institutions.
The amount of this contract totals approximately $14,145,000 decreasing
by $2,360,000 every six months on August 1, and February 1,. The collar
is tied to the French franc exchange rate with a floor of 6.0 French
francs to one U.S. dollar and a ceiling of 5.25 French francs to one
U.S. dollar. If at any time during the three year contract the French
franc is greater then 6.0 French francs to one U.S. dollar then the
financial institution is obligated to pay the Company the difference
between the actual rate at that time and 6.0 French francs to one U.S.
dollar. Conversely if at any time during the three year contract the
French franc is less then 5.25 French francs to one U.S. dollar then the
Company is obligated to pay the financial institution the difference
<PAGE> 9
between the actual rate at that time and 5.25 French francs to one U.S.
dollar. The obligation for either party only exists if the French franc
exchange rate is outside the above specified range on the interest
payment dates of August 1, and February 1,. The amount of risk is
limited to the difference in the range multiplied by the contractual
obligation of $2,360,000 in any given six month period.
ITEM 6. EXHIBITS
(a) Exhibits:
(11) Details supporting the computation of primary and fully
diluted earnings per share.
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
TOKHEIM CORPORATION
-------------------------------
Date: July 14, 1997 /s/ DOUGLAS K. PINNER
--------------------------------
Douglas K. Pinner
Chairman, President and
Chief Executive Officer
Date: July 14, 1997 /s/ JOHN M. TOMLINSON
--------------------------------
John M. Tomlinson
Vice-President and
Chief Financial Officer
<PAGE>
Tokheim Corporation and Subsidiaries
Exhibit (11) - Earnings Per share
For the three month and six month periods
ended May 31, 1997 and May 31, 1996
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
per share for the three month and six month periods ended May 31, 1997
and May 31, 1996
<TABLE>
<CAPTION>
Primary
-----------------------------------------------------------------------------
Three Months Ended Six Months Ended
----------------------------------- -------------------------------------
May 31, May 31, May 31, May 31,
1997 1996 1997 1996
------------ ------------ ----------------- --------------
Shares outstanding (in thousands):
<S> <C> <C> <C> <C>
Weighted average outstanding 7,977 7,938 7,964 7,938
Share equivalents 44 71 41 --
------------ ------------ ----------------- --------------
Adjusted outstanding 8,021 8,009 8,005 7,938
============ ============ ================= ==============
Net earnings (loss) $ 1,210 $ 486 $ 1,335 $ (127)
Preferred stock dividends (375) (385) (758) (774)
------------ ---------------- ----------------- -----------------
Loss applicable to common stock $ 835 $ 101 $ 577 $ (901)
============ ================ ================= =================
Net earnings (loss) per common share $ 0.10 $ 0.01 $ 0.07 $ (0.11)
============ ================ ================= =================
</TABLE>
For financial reporting purposes, the loss per share, assuming full
dilution, is considered to be the same as primary since the effect of
the common stock equivalents would be antidilutive.
<TABLE>
<CAPTION>
Fully Diluted
----------------------------------------------------------------------------
Three Months Ended Six Months Ended
---------------------------------- -------------------------------------
May 31, May 31, May 31, May 31,
1997 1996 1997 1996
------------ ------------ ----------------- --------------
Shares outstanding (in thousands):
<S> <C> <C> <C> <C>
Weighted average outstanding 7,977 7,938 7,964 7,938
Share equivalents 66 71 66 63
Weighted conversion of preferred stock 1,808 1,672 1,809 1,714
------------ ------------ ------------- --------------
Adjusted outstanding 9,851 9,681 9,839 9,715
============ ============ ============= ==============
Net earnings (loss) $ 1,210 $ 486 $ 1,335 $ (127)
Incremental RSP expense (375) (385) (758) (774)
------------ ---------------- ----------------- -----------------
Loss applicable to common stock $ 835 $ 101 $ 577 $ (901)
============ ================ ================= =================
Net loss per common share $ 0.08 $ 0.01 $ 0.06 $ (0.09)
============ ================ ================= =================
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000098559
<NAME> TOKHEIM CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> MAY-31-1997
<CASH> 9036
<SECURITIES> 0
<RECEIVABLES> 77650
<ALLOWANCES> 3372
<INVENTORY> 72953<F1>
<CURRENT-ASSETS> 162515
<PP&E> 101187<F2>
<DEPRECIATION> 62078
<TOTAL-ASSETS> 279422
<CURRENT-LIABILITIES> 109756
<BONDS> 100000
<COMMON> 19546<F4>
8947<F3>
0
<OTHER-SE> (9034)<F5>
<TOTAL-LIABILITY-AND-EQUITY> 279422
<SALES> 187881
<TOTAL-REVENUES> 187881
<CGS> 140771<F6>
<TOTAL-COSTS> 140771<F6>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8195
<INCOME-PRETAX> 1465
<INCOME-TAX> 130
<INCOME-CONTINUING> 1335
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1335
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.06
<FN>
<F1>Represents gross inventory net of loss reserves.
<F2>Represents gross PP&E.
<F3>Represents redeemable preferred stock of $24,000 less Guaranteed ESOP
of $10,583 and treasury stock of $4,470.
<F4>Represents common stock of $19,738 less treasury stock of $192.
<F5>Represents retained earnings of $9,817 less minimum pension liability
of $3,248 and foreign currency translation adjustments of $15,603.
<F6>Includes product development expenses and excludes depreciation and
amortization.
</TABLE>
