<PAGE>
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 August 31, 1998
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 DRIVE, 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 August 31, 1998, 12,636,278 shares of voting common stock were
outstanding.
In addition, 762,874 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 17.
<PAGE>
PART I. FINANCIAL INFORMATION
TOKHEIM CORPORATION AND SUBSIDIARIES
Item 1. Financial Statements
Consolidated Condensed Statement of Earnings
(Amounts in thousands except amounts per share)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- -------------------------
August 31, August 31, August 31, August 31,
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 101,492 $ 91,781 $ 291,997 $ 279,662
Cost of sales, exclusive of items listed below 73,782 68,667 213,975 209,438
Selling, general, and administrative expenses 18,298 15,426 53,192 48,315
Depreciation and amortization 2,681 2,497 7,799 6,877
Merger and acquisition costs and other unusual items 263 348 6,596 826
----------- ----------- ----------- -----------
Operating Profit 6,468 4,843 10,435 14,206
----------- ----------- ----------- -----------
Interest expense, net 2,549 4,248 9,882 12,443
Foreign currency gain (33) (138) (813) (315)
Minority interest 227 119 289 200
Other (income) expense, net (54) 293 (332) 92
----------- ----------- ----------- -----------
Earnings before income taxes 3,779 321 1,409 1,786
Income taxes 850 169 1,658 299
----------- ----------- ----------- -----------
Earnings (loss) before extraordinary item 2,929 152 (249) 1,487
Extraordinary loss on debt extinguishment -- -- (4,965) --
----------- ----------- ----------- -----------
Net Earnings (Loss) 2,929 152 (5,214) 1,487
Preferred stock dividends (370) (378) (1,113) (1,136)
----------- ----------- ----------- -----------
Earnings (Loss) Applicable To Common Stock $ 2,559 $ (226) $ (6,327) $ 351
=========== =========== =========== ===========
Earnings (loss) per common share:
Basic:
Before extraordinary loss $ 0.20 $ (0.03) $ (0.12) $ 0.04
Extraordinary loss on debt extinguishment -- -- (0.45) --
----------- ----------- ----------- -----------
Net earnings (loss) $ 0.20 $ (0.03) $ (0.57) $ 0.04
=========== =========== =========== ===========
Weighted shares outstanding 12,631 8,037 10,925 7,996
Diluted:
Before extraordinary loss $ 0.19 $ (0.03) $ (0.12) $ 0.04
Extraordinary loss on debt extinguishment -- -- (0.45) --
----------- ----------- ----------- -----------
Net earnings (loss) $ 0.19 $ (0.03) $ (0.57) $ 0.04
=========== =========== =========== ===========
Weighted shares outstanding 13,618 8,037 10,925 8,893
</TABLE>
2
<PAGE>
TOKHEIM CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheet
(In thousands)
<TABLE>
<CAPTION>
August 31, November 30,
1998 1997
---------- ------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 10,095 $ 6,438
Receivables, net 79,243 83,011
Inventories:
Raw materials and supplies 31,923 29,427
Work in process 25,710 27,514
Finished goods 5,947 7,406
-------- --------
63,580 64,347
Prepaid expenses 6,691 6,705
-------- --------
Total Current Assets 159,609 160,501
Property, plant, and equipment, net 44,812 42,535
Other tangible assets 3,368 3,615
Goodwill, net 71,416 67,695
Other non-current assets and deferred charges, net 17,824 16,273
-------- --------
Total Assets $297,029 $290,619
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 2,254 $ 2,391
Notes payable, banks 336 98
Cash overdraft 12,733 10,575
Accounts payable 45,692 54,597
Accrued expenses 46,226 51,190
-------- --------
Total Current Liabilities 107,241 118,851
Senior subordinated notes 55,000 90,000
Long-term debt 23,340 28,487
Guaranteed Employees' Stock Ownership Plan obligation 7,615 9,429
Postretirement benefit liability 14,216 14,378
Minimum pension liability 2,173 2,173
Other long-term liabilities 3,654 5,169
Deferred income taxes 247 342
Minority Interest 1,204 1,319
-------- --------
214,690 270,148
-------- --------
Redeemable convertible preferred stock 24,000 24,000
Guaranteed Employees' Stock Ownership Plan obligation (7,615) (9,429)
Treasury stock, at cost (4,927) (4,718)
-------- --------
11,458 9,853
-------- --------
Common stock 89,581 21,158
Minimum pension liability (2,173) (2,173)
Foreign currency translation adjustments (19,341) (18,048)
Retained earnings 3,506 9,821
-------- --------
71,573 10,758
Less treasury stock, at cost (692) (140)
-------- --------
70,881 10,618
-------- --------
Total Liabilities and Shareholders' Equity $297,029 $290,619
======== ========
</TABLE>
3
<PAGE>
TOKHEIM CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statement of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------
August 31, August 31,
1998 1997
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (5,214) $ 1,487
Adjustments to reconcile net earnings (loss) to cash provided from
(used in) operations:
Write-off of in process research and development 5,879 --
Extraordinary loss on debt extinguishment 4,965 --
Amortization of deferred debt issuance costs 1,131 1,381
Depreciation and amortization 7,799 6,877
(Gain) loss on sale of equipment 2 (88)
Minority interest (116) --
Deferred income taxes (87) 22
Changes in assets and liabilities:
Receivables, net 3,559 16,861
Inventories 97 4,755
Prepaid expenses 1 (1,339)
Accounts payable (9,356) (6,530)
Accrued expenses (5,730) (8,760)
U.S. and foreign income taxes 880 528
Other (5,410) (3,348)
-------- -------
Net cash provided from (used in) operations (1,600) 11,846
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition of Management Solutions, Inc. (12,000) --
Investment in Management Solutions, Inc., net of cash acquired (137) --
Proceeds from sale of property, plant, and equipment 411 369
Plant and equipment additions (7,390) (5,507)
-------- -------
Net cash used in investing activities (19,116) (5,138)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in term debt (35,382) (6,967)
Decrease notes payable, banks (4,594) (5,509)
Increase cash overdraft 2,215 2,901
Equity issuance costs (4,885) --
Proceeds from issuance of common stock 73,281 1,419
Premiums paid on debt extinguishment (3,450) --
Minority shareholders dividends -- (70)
Treasury stock, net (760) (384)
Preferred stock dividends (1,113) (1,136)
-------- -------
Net cash provided from (used in) financing activities 25,312 (9,746)
-------- -------
EFFECT OF TRANSLATION ADJUSTMENT ON CASH (939) (908)
CASH AND CASH EQUIVALENTS:
Increase (decrease) in cash and cash equivalents 3,657 (3,946)
Cash and cash equivalents beginning of year 6,438 9,814
-------- -------
Cash and cash equivalents end of period $ 10,095 $ 5,868
======== =======
</TABLE>
4
<PAGE>
TOKHEIM CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Condensed Financial Statements
(In thousands)
The interim financial statements are unaudited and reflect all adjustments
(consisting solely of normal recurring adjustments, other than merger and
acquisition costs and other unusual items and extraordinary loss from debt
extinguishment) that, in the opinion of management, are necessary for a fair
statement of the financial position, results of operations and cash flows for
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 Tokheim Corporation's, including its subsidiaries (the
"Company's") report on Form 10-K for the year ended November 30, 1997, filed
with the Securities and Exchange Commission on February 13, 1998. The results of
operations for the three and nine month periods ended August 31, 1998, are not
necessarily indicative of the results to be expected for the full year or any
other interim period.
Certain prior year amounts in these financial statements have been reclassified
to conform with current period presentation.
Subsequent Events
- -----------------
On September 30, 1998 Tokheim completed the acquisition ("Acquisition") of the
fuel dispenser systems and service business (the "RPS Division") of Schlumberger
for a price equal to $330,000 in cash, notes, and warrants, subject to certain
post-closing adjustments. Of the $330,000 purchase price, $100,000 was paid in
cash borrowed under the terms of a new bank credit agreement (see description
below). The $210,000 note portion of the purchase price consisted of $40,000 in
ten year, 12.0% junior subordinated payment-in-kind notes (the "Junior
Subordinated Notes") and $170,000 in 12.0% senior subordinated notes due one
hundred twenty days after the closing date (the "Senior Subordinated Notes" and,
together with the Junior Subordinated Notes, the "Subordinated Notes"). $20,000
of the purchase price was paid with warrants (the "Warrants") to purchase up to
a maximum of 19.9% of the outstanding shares of Tokheim common stock. The actual
number of shares issued upon exercise will be based upon the $20,000 purchase
price of the Warrants divided by the weighted average closing price of Tokheim
common stock over the thirty day periods prior to and after the closing date.
The Warrants are exercisable for a nominal price for five years beginning one
hundred twenty days after the closing date.
Tokheim has the option, subject to bank approval, to redeem (in whole or in
part) the Subordinated Notes and the Warrants. Under the terms of the Senior
Subordinated Notes, to the extent Tokheim has not refinanced the Senior
Subordinated Notes within one hundred twenty days of the closing date, such
notes convert into an equal principal amount of eight year notes with an
interest rate starting at 12.0% and increasing by 0.5% every three months, to a
maximum of 14.5%. Interest exceeding 12.0% will be payable in kind.
The Acquisition has been accounted for using the purchase method of accounting,
and the RPS Division's results of operations will be included in the
consolidated financial statements of Tokheim from the date of acquisition. The
purchase price has been preliminarily allocated to assets acquired and
liabilities assumed based on the RPS Division's net book value of assets at
December 31, 1997, as adjusted, which is estimated to approximate fair value.
The purchase price allocated under this assumption exceeded the estimated fair
value of net assets acquired by approximately $247,000. This amount will be
recognized as goodwill and will be amortized on a straight-line basis over forty
years.
As part of the purchase price the Company has provided for certain costs the
Company believes will be spent to close down redundant operations in connection
with the reorganization and rationalization of the RPS Division's operations.
The Company expects to incur approximately $18,600 associated with involuntary
termination costs to reduce redundant staffing levels and approximately $4,900
of exit costs and asset write-off costs to close redundant facilities. These
costs will be aggregated and included in accrued liabilities. 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.
Simultaneously with the Acquisition, the Company executed a new Bank Credit
Agreement (the "New Credit Agreement") with a consortium of banks to refinance
previously existing indebtedness, including redemption of the $55,000 of 11 1/2%
Senior Subordinated Notes, and to finance $100,000 of the Acquisition. The New
Credit Agreement provides for a six year $120,000 revolving working capital
facility and a six year $120,000 term loan facility. An additional agreement
provides for the assignment of a three year $7,616 ESOP loan facility. At
October 9, 1998 the outstanding borrowings were $60,700 under the revolving
working capital facility, $120,000 under the term loan, and $7,615 under the
ESOP facility. The term loan calls for equal quarterly principal payments
aggregating $7,500 in year 2000; $10,000 in year 2001; $12,500 in year 2002;
$15,000 in year 2003; $37,500 in a single payment due first quarter 2004; and
the remainder due at maturity. Available borrowings under the revolving working
capital facility were $59,300 at October 9, 1998.
Also, simultaneously with the Acquisition, Tokheim entered into a note purchase
agreement with one or more purchasers, pursuant to which Tokheim issued $22,500
aggregate principal amount of senior notes (the "Senior Notes") with a seven
year term. Tokheim has the option, subject to bank approval, to redeem the
Senior Notes at specified call prices ranging from 100.000% to 107.250%
expressed as a percentage of the original principal balance. The initial
interest rate of 12.5% increases by 0.5% on December 1, 1998, and continues to
increase every three months by 0.5%, to a maximum of 14.5%. Proceeds from the
Senior Notes were used in connection with the Company's refinancing of existing
indebtedness.
On September 30, 1998 the Company completed the repurchase of its then
outstanding $55,000 of 11.5% Senior Subordinated Notes due 2006 ("Notes")
pursuant to the terms of its then outstanding tender offer therefore. These
notes were redeemed at an aggregate premium and consent payment of $12,360 along
with accrued interest of $1,072. The premium and consent payment will be
aggregated with the write off of the remaining deferred issuance costs related
to the Notes and the previous bank credit agreement and reported as an
extraordinary loss on debt extinguishment of approximately $19,000 in the fourth
quarter of 1998.
Common Stock Offering
- ---------------------
In March 1998, the Company completed an offering of 4,370,000 shares of its
common stock (the "Offering"). Net proceeds from the Offering totaled
approximately $67,724. The Company used $39,356 of the proceeds to redeem
$35,000 in aggregate principal amount of its outstanding 11 1/2% Senior
Subordinated Notes (the "Notes"). These Notes were redeemed at the call price of
109.857%, expressed as a percentage of the original face value, resulting in
premiums paid of $3,450 along with accrued interest of $906. Following the
redemption, $55,000 in aggregate principal amount of the Notes remained
outstanding. The Company recorded an extraordinary loss on the extinguishment of
the Notes of approximately $4,965 during the second quarter of 1998. This loss
includes $3,450 of premiums paid to purchase the Notes and $1,515 representing
the write-off of a proportionate share of the original unamortized deferred
issuance costs. In the period after the Offering and before the Company redeemed
the Notes, the proceeds were used to reduce the outstanding balance of the Bank
Credit Facility with the remaining amount placed in short-term investments. The
remaining $28,368 of proceeds was applied to reduce amounts outstanding on the
Bank Credit Facility and general corporate purposes. In December 1997,
approximately $12,000 was borrowed under the Bank Credit Facility to finance the
acquisition of MSI. This amount was repaid as part of the reduction of the Bank
Credit Facility balance.
Acquisition of Management Solutions, Inc.
- -----------------------------------------
In December 1997, the Company acquired Management Solutions, Inc. ("MSI"). MSI
develops and distributes retail automation systems (including Point of Sale
("POS") software), primarily for the convenience store, petroleum dispensing,
and fast food service industries. The Company paid MSI's stockholders an initial
amount of $12,000. The Company is also obligated to make contingent payments of
up to $13,200 over the next three years based upon MSI's performance. The
$13,200 consists of $8,000 of additional purchase price, $2,600 related to a
non-compete agreement, and $2,600 of additional employee compensation. The
Company borrowed funds for the initial purchase price under the Company's bank
credit facility (the "Bank Credit Facility"). As part of the transaction, the
Company entered into an employment relationship with Arthur S. Elston, the
President of MSI, pursuant to which he will oversee the Company's retail
automation systems business.
The transaction was accounted for as a purchase. Intangible assets of $4,800
were recorded which are being amortized over four years. In process research and
development of $5,900 was written off in connection with the acquisition
and is included in merger and acquisition costs and other unusual items ("M&A
Costs") in the consolidated statement of earnings. The portion of the contingent
payments that do not relate to employee compensation will be allocated to
various intangible assets and goodwill amortized over periods ranging from four
to twelve years as the payments are made.
5
<PAGE>
Earnings Per Share
- ------------------
The Company adopted Statement of Financial Accounting Standards SFAS No. 128,
Earnings Per Share, during the first quarter of fiscal 1998. Under SFAS No. 128,
the Company presents two earnings per share ("EPS") amounts, Basic and
Diluted. Basic EPS is calculated based on earnings available to common
shareholders and the weighted average number of shares outstanding during the
reported period. Diluted EPS includes additional dilution from potential common
stock, such as stock issuable pursuant to the conversion of preferred stock or
the exercise of stock options outstanding. The incremental shares from
conversions of preferred stock and the exercise of stock options were not
included in computing diluted EPS for the nine month period ended August 31,
1998, and the three month period ended August 31, 1997, since the effect of such
is antidilutive during periods when a loss from continuing operations applicable
to common shareholders is reported. For the three month and nine month periods
ended August 31, 1998, there were 762,874 shares of convertible preferred stock
outstanding and 223,874 and 254,093 vested and non-vested stock options,
respectively, that could be exercised, which could have a dilutive effect on EPS
in the future. During the three and nine month periods ended August 31, 1998,
20,858 and 95,670, respectively, stock options were exercised. EPS for the three
and nine month periods ended August 31, 1997, has been restated to apply the
provisions of SFAS No. 128. Earnings per common share calculated for the three
and nine month periods ended August 31, 1997, on a primary and fully diluted
basis under the provisions of Accounting Principles Board Opinion No. 15 differs
by less than one cent per share from that calculated on a basic and diluted
basis under SFAS No. 128 as there is no difference in the earnings amounts
applicable to common stock and the difference between the weighted average
shares outstanding used in the two calculations is not material.
6
<PAGE>
The following table presents information necessary to calculate earnings per
share for the three and nine month periods ended August 31, 1998 and 1997.
<TABLE>
<CAPTION>
Basic Basic
Three Months Ended Nine Months Ended
------------------ -----------------
August 31, August 31, August 31, August 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Shares outstanding (in thousands):
Weighted average outstanding 12,631 8,037 10,925 7,996
======= ======= ======= =======
Net earnings (loss):
Before extraordinary item $ 2,929 $ 152 $ (249) $ 1,487
Extraordinary loss on debt
extinguishment -- -- (4,965) --
------- ------- ------- -------
Net earnings (loss) 2,929 152 (5,214) 1,487
Preferred stock dividend (370) (378) (1,113) (1,136)
Earnings (loss) applicable to common ------- ------- ------- -------
stock $ 2,559 $ (226) $(6,327) $ 351
======= ======= ======= =======
Net earnings (loss) per common share:
Before extraordinary item $ 0.20 $ (0.03) $ (0.12) $ 0.04
Extraordinary loss on debt
extinguishment -- -- (0.45) --
------- ------- ------- -------
Net earnings (loss) $ 0.20 $ (0.03) $ (0.57) $ 0.04
======= ======= ======= =======
</TABLE>
7
<PAGE>
For financial reporting purposes, the loss per share, assuming full dilution, is
considered to be the same as basic since the effect of the common stock
equivalents would be antidilutive.
<TABLE>
<CAPTION>
Diluted Diluted
Three Months Ended Nine Months Ended
------------------ -----------------
August 31, August 31, August 31, August 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Shares outstanding (in thousands):
Weighted average outstanding 12,631 8,037 10,925 7,996
Share equivalents 224 -- -- 109
Weighted conversion of preferred stock 763 -- -- 788
------ ----- ------ -------
Adjusted outstanding 13,618 8,037 10,925 8,893
====== ===== ====== =======
Net earnings (loss):
Before extraordinary item $ 2,929 $ 152 $ (249) $ 1,487
Extraordinary loss on debt
extinguishment -- -- (4,965) --
------- -------- ------- -------
Net earnings (loss) 2,929 152 (5,214) 1,487
Preferred stock dividend (370) (378) (1,113) (1,136)
-------- -------- ------- -------
Earnings (loss) applicable to common
stock $ 2,559 $ (226) $(6,327) $ 351
======= ======== ======== =======
Net earnings (loss) per common share:
Before extraordinary item $ 0.19 $ (0.03) $ (0.12) $ 0.04
Extraordinary loss on debt
extinguishment -- -- (0.45) --
-------
Net earnings (loss) $ 0.19 $ (0.03) $ (0.57) $ 0.04
======= ======== ======== =======
</TABLE>
8
<PAGE>
Accounting Pronouncements
- -------------------------
Statement of Financial Accounting Standards ("SFAS") No. 129 "Disclosure of
Information about Capital Structure," was adopted during the first quarter of
the fiscal year ending November 30, 1998. This statement did not have a material
impact on the Company's financial position, results of operations or cash flows
as disclosure requirements did not change for the Company with this new
statement. SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information," and SFAS No. 132 "Employers' Disclosures about Pensions and Other
Postretirement Benefits," are effective for the year ending November 30, 1999.
In the opinion of management, these statements will not have a material impact
on the Company's financial position, results of operations, or cash flows. SFAS
No. 130 "Reporting Comprehensive Income," is effective for the year ending
November 30, 1999. Due to the significance of the foreign currency translation
adjustments recorded, comprehensive income is expected to be significantly lower
than reported net earnings. SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities," was issued in June 1998 and is effective for the year
ending November 30, 2000. SFAS No. 133 establishes a new model for accounting
for derivatives in the balance sheet as either assets or liabilities and
measures them at fair value. Certain disclosures concerning the designation and
assessment of hedging relationships are also required. Management has not yet
determined the impact of this statement on the Company's consolidated financial
statements.
The American Institute of Certified Public Accountants ("AICPA") Statements of
Position("SOP") No. 96-1 "Environmental Remediation Liabilities," and SOP No.
97-2 "Software Revenue Recognition," were adopted during the first quarter of
1998. SOP No. 96-1 provides guidance for recognizing, measuring and disclosing
environmental remediation liabilities. SOP No. 97-2 supersedes SOP No. 91-1 and
provides more specific guidance on revenue recognition related to software
products. The adoption of these statements did not have a material impact on the
Company's financial position, results of operations or cash flows. SOP No. 98-1
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," is effective for the year ending November 30, 2000. The Company
adopted this statement effective March 1, 1998.
9
<PAGE>
See financial statements and accompanying notes in the Company's 1997 Annual
Report to Shareholders.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
- -------
Tokheim Corporation, including its subsidiaries (the "Company"), is the world's
largest manufacturer and servicer of electronic and mechanical petroleum
dispensing systems. These systems include petroleum dispensers and pumps, Retail
Automation Systems (including POS), dispenser payment or "pay-at-the-pump"
terminals, replacement parts and upgrade kits. As a result of its acquisition of
the petroleum dispenser business of Sofitam S.A. ("Sofitam") in September 1996
and the RPS Division of Schlumberger Limited ("RPS Division") in September 1998,
the Company has positioned itself as the largest global competitor in the
petroleum dispenser business, with the ability to provide both products and
services to customers in over 80 countries. The Company is a leading supplier of
petroleum dispensing systems in the United States, France, Canada, Mexico, and
Africa, and has strong market positions in Italy, the United Kingdom, Germany,
and Spain. The Company also has operations established in Asia, Eastern Europe,
and Latin America.
The purchase price of $330,000 for the RPS Division was financed with a
combination of cash, bank borrowings, seller notes, and purchase warrants. The
merger of the RPS Division with Tokheim creates the world's largest manufacturer
and servicer of fuel dispenser systems in the industry with pro forma 1997 sales
of approximately $737,500. The acquisition has been accounted for using the
purchase method of accounting.
Results of Operations
- ---------------------
Consolidated sales for the three and nine month periods ended August 31, 1998
were $101,492 and $291,997, respectively. Consolidated sales, excluding sales of
the newly acquired subsidiary, MSI, were $100,330 and $287,364 as compared to
$91,781 and $279,662 in the year ago three and nine month periods, respectively.
On a comparable basis, consolidated sales for the 1998 three month period
increased 9.3% over the prior year period with the nine month sales increasing
by 2.8% from 1997 levels. Sales for North America, excluding export sales, have
increased 29.8% for the three month period and 21.5% for the nine month period.
This increase is due to a stronger demand in the Company's retail distribution,
commercial dispenser and service parts sales. This demand was driven by new,
more convenient products, such as credit/debit card readers, environmental
regulations, such as those requiring vapor recovery systems, and unusually mild
weather in the northern regions for he first half of the year, which facilitated
an earlier than normal start of the construction period.
International sales, including domestic export sales, have decreased 2.4% for
the three month period and the nine month period sales for 1998 have decreased
7.6% from 1997 amounts. A major contributing factor to this decrease in sales
dollars for the three and nine month periods is attributable to the continued
decline in foreign currency exchange rates from prior year levels. International
sales for the three month periods ended August 31, 1998 would have been $504 and
$7,816 higher, respectively, if average exchange rates of European and African
currencies remained consistent with 1997 rates. The other major contributing
factor is a significant
11
<PAGE>
decline in current year domestic export sales to the Asia Pacific and Middle
East regions compared to prior year levels. The depressed sales to the Asia
Pacific region has been caused by the significant economic downturn in that
region's economy. There can be no assurance as to when Asian market conditions
will improve or whether they may worsen or spread to other regions.
Gross margins as a percent of sales (defined as net sales less cost of sales
divided by net sales) have improved 2.1%, from 25.2% for the three months ended
August 31, 1997 to 27.3% for the 1998 three month period. The gross margin for
the nine month period ended August 31, 1998 was 26.7%, representing a 1.6%
improvement from the year ago period. This improvement was primarily due to
increased manufacturing efficiencies and higher domestic sales volumes, which
enabled the Company to better absorb fixed costs associated with the
manufacturing process.
Selling, general, and administrative expenses as a percent of sales for the
three and nine month periods ended August 31, 1998 were 18.0% and 18.2%,
respectively. On a comparable basis, after excluding the effects of MSI, these
expenses were 17.1% and 17.7% for the three and nine month periods of 1998
compared to 16.8% and 17.3% for the same year ago periods. The increase in the
three and nine month periods of 1998 was attributed to increased costs
associated with year 2000 corrective actions and an increase in royalty
payments.
Merger and acquisition costs and other unusual items ("M&A Costs") for the three
month period ended August 31, 1998 relate to involuntary termination and other
exit costs incurred in connection with the Sofitam restructuring plan. The M&A
Costs for the nine month period ended August 31, 1998 consist primarily of a
$5,987 non-recurring write-off for in process research & development ("R&D")
that was incurred in connection with the acquisition of MSI. This amount
represents the estimated fair value of acquired incomplete R&D projects as
determined by an independent appraisal. In addition, the year to date amount
also includes involuntary termination and other exit costs incurred to execute
certain projects related to the Sofitam restructuring plan and the closure of
the Boca Raton, Florida sales operations.
Net interest expense for the three and the nine month periods ended August 31,
1998 has decreased by $1,699 and $2,561, respectively. These decreases are due
to significantly reduced debt levels from the prior year. The Company reduced
its outstanding borrowing under its Bank Credit Facility by $28,349 and
repurchased $35,000 of its Notes with the net proceeds received from the March
1998 equity offering.
Foreign currency gains for the third quarter of 1998 were $33 versus gains of
$138 in the third quarter of 1997. The current year to date foreign currency
gains were $813 compared to gains of $315 in the first nine months of 1997.
During the second quarter of 1998 the Company realized a foreign currency gain
of $770 associated with the repayment of various French Franc denominated Euro
Currency contracts previously entered into under the Company's Bank Credit
Facility. Under the terms of the Bank Credit Facility, the Company has the
ability to borrow funds under Euro Currency contracts denominated in a variety
of foreign currencies. Due to the decline in the value of the French Franc, the
Company was able to repay these contracts with fewer U.S. Dollars than it
received when the original contracts were entered into. As of August 31, 1998
all remaining contracts held under the Bank Credit Facility were denominated in
U.S. Dollars.
12
<PAGE>
Income taxes have increased in the current year for both the three and nine
month periods ended August 31, 1998, as compared to the year ago periods. This
increase is due to higher aggregate pretax earnings at certain foreign
subsidiaries, losses at certain foreign subsidiaries that provide no tax benefit
and increased state taxes and federal alternative minimum taxes on increased
domestic earnings.
As a result of the above mentioned items, earnings before extraordinary loss on
debt extinguishment were $2,929, or a $0.19 earnings per common share after
preferred stock dividends on a diluted basis for the three months ended August
31, 1998 compared to earnings of $152, or a $0.03 loss per common share after
preferred stock dividends on a diluted basis for the same period in 1997. Loss
before extraordinary loss on debt extinguishment was $249, or a $0.12 loss per
common share after preferred stock dividends on a diluted basis for the nine
months ended August 31, 1998 compared to earnings of $1,487, or a $0.04 earnings
per common share after preferred stock dividends on a diluted basis for the same
period in 1997.
During the second quarter of 1998, the Company recorded an extraordinary loss on
debt extinguishment of $4,965, or a $0.45 loss per diluted common share for the
nine months ended August 31, 1998. This loss was the result of the Company
redeeming $35,000 of its Notes under the call provision of the related
indenture. The amount includes $3,450 of premiums paid to call the Notes and
$1,515 representing the write-off of a proportionate share of the original
unamortized deferred issuance cost.
Liquidity and Capital Resources
- -------------------------------
Cash used in operations for the nine months ended August 31, 1998, was $1,600
versus cash provided by operations of $11,846 in the comparable period of 1997.
This decline from the prior year was caused primarily by decreased accounts
payables, decreased accrued expenses and increased inventories for the nine
month period to a greater extent than in the prior year. Cash flow from accounts
receivable reductions was $16,861 in the year ago nine month period compared to
$3,559 in the current year. During the first nine months of 1997 the Company
significantly decreased the newly acquired Sofitam entities' accounts receivable
collection period and thereby generated a large inflow of cash from receivables
collections at those locations.
In March 1998, the Company completed an offering of 4,370,000 shares of its
common stock (the "Offering"). Net proceeds from the Offering totaled
approximately $67,724. The Company used $39,356 of the proceeds to redeem
$35,000 in aggregate principal amount of the Company's Notes. These Notes were
redeemed at the call price of 109.857%, expressed as a percentage of the
original face value, resulting in premiums paid of $3,450 along with accrued
interest of $906. Following the redemption, $55,000 in aggregate principal
amount of the Notes remained outstanding. Prior to the redemption of the Notes,
the proceeds of the Offering were used to reduce the outstanding balance of the
Bank Credit Facility with the remaining amount placed in short-term investments.
The remaining $28,368 of proceeds was applied toward the Bank Credit Facility
and general corporate purposes. In December 1997, approximately $12,000 was
borrowed under the Bank Credit Facility to finance the acquisition of MSI. This
amount was repaid as part of the reduction of the Bank Credit Facility balance.
13
<PAGE>
The Company incurred capital expenditures of $7,390 and $5,507 for the nine
months ended August 31, 1998 and 1997, respectively. The increase relates
primarily to capital requirements for implementing the consolidation plan for
Sofitam, improvements at the Company's Fort Wayne, Indiana manufacturing
facility, and capitalizable costs associated with the implementation of new
finance and accounting software packages at the Fort Wayne, Indiana, Lansdale,
Pennsylvania and Trembley, France locations.
In connection with the continued implementation of the Sofitam consolidation
plan, the Company expects to incur a number of charges. During the first nine
months of 1998, the Company charged $2,025 against the acquisition accrual
recorded for estimated cost necessary to realign the Sofitam operations in
Europe, including the closure of certain redundant operations. This realignment
also resulted in $378 of charges against operating income for the nine months
ended August 31, 1998. With respect to the consolidation, the Company
anticipates charging $5,259 against the remaining acquisition accrual during the
next twelve to eighteen months. The Company also expects to charge an additional
$1,600 against operating income for continued realignments in the fourth quarter
of 1998. These expenditures were originally scheduled for the 1999 fiscal year;
however, due to changing circumstances, the Company has stepped up its timetable
for these realignments.
As part of the MSI acquisition, the Company is obligated to make contingent
payments of up to $13,200 over the next three years based on MSI's performance.
The $13,200 consists of $8,000 of additional purchase price, $2,600 related to a
non-compete agreement, and $2,600 of additional employee compensation.
The Company has guaranteed loans to the Employees' Stock Ownership Plan ("ESOP")
in the amounts of $8,232 and $9,429 at August 31, 1998 and 1997, respectively.
The Trustee who holds the ESOP Preferred Stock may elect to convert each
preferred share to one common share in the event of a redemption by Tokheim,
certain consolidations or mergers of Tokheim, or a redemption by the Trustee
that is necessary to provide for distributions under the Company's Retirement
Savings Plan. A participant may elect to receive a distribution from the plan
in cash or common stock. If redeemed by the Trustee, the Company is responsible
for purchasing the preferred stock at the twenty-five dollar floor value. The
Company may elect to pay the redemption price in cash or an equivalent amount of
common stock. Preferred stock dividends paid were $1,113 and $1,136 for the
first nine months of 1998 and 1997, respectively.
14
<PAGE>
In December 1997, the Company began to implement its year 2000 plan, including
the organization and staffing of a full-time year 2000 program office. The
Company has organized the plan implementation process into the following
sections: product certification (ensuring all products sold by the Company are
year 2000 compliant); internal information systems (ensuring all internal
hardware and software is year 2000 compliant through upgrades or replacement);
suppliers, distributors and external agents (ensuring all suppliers,
distributors and external agents used by the Company to purchase or sell goods
and services are year 2000 compliant); and manufacturing and infrastructure
(ensuring manufacturing and infrastructure systems are year 2000 compliant).
As of August 31, 1998, all of the Company's products have been tested; all
critical suppliers and distributors have been surveyed with such follow-up as is
needed; 40% of applicable software programs have been converted and tested; and
the manufacturing and infrastructure section of the process is to begin shortly.
The Company expects to complete all of its diagnostics and testing by the end of
the third quarter, 1999 and believes that all sections are on schedule at August
31, 1998. The total cost associated with required modifications to become year
2000 compliant is not expected to be material to the Company's financial
position. The Company estimates that it will spend a total of approximately
$2,200 by December 31, 1999 (of which approximately $660 had been spent by
August 31, 1998), to become year 2000 compliant.
The failure to correct a material year 2000 problem could result in an
interruption in, or a failure of certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity, and financial condition. Due to the general
uncertainty inherent in the year 2000 problem, resulting in part from the
uncertainty of the year 2000 readiness of third-party suppliers and customers,
the Company is unable to determine at this time whether the consequences of year
2000 failures will have a material impact on the Company's results of
operations, liquidity, or financial condition. The year 2000 plan is expected to
significantly reduce the Company's level of uncertainty about the year 2000
problem and, in particular, about the year 2000 compliance and readiness of its
material external agents. The Company believes that with the implementation of
new business systems and completion of the year 2000 plan as scheduled, the
possibility of significant interruptions of normal operations should be reduced.
However, contingency planning for all sections discussed above is scheduled to
commence in the fourth quarter of 1998, at which time the Company will focus on
assessing the risks of not becoming year 2000 compliant for each section
mentioned.
On September 30, 1998 Tokheim completed the acquisition ("Acquisition") of the
fuel dispenser systems and service business (the "RPS Division") of Schlumberger
for a price equal to $330,000 in cash, notes, and warrants, subject to certain
post-closing adjustments. Of the $330,000 purchase price, $100,000 was paid in
cash borrowed under the terms of a new bank credit agreement (see description
below). The $210,000 note portion of the purchase price consisted of $40,000 in
ten year, 12.0% junior subordinated payment-in-kind notes (the "Junior
Subordinated Notes") and $170,000 in 12.0% senior subordinated notes due one
hundred twenty days after the closing date (the "Senior Subordinated Notes" and,
together with the Junior Subordinated Notes, the "Subordinated Notes"). $20,000
of the purchase price was paid with warrants (the "Warrants") to purchase up to
a maximum of 19.9% of the outstanding shares of Tokheim common stock. The actual
number of shares issued upon exercise will be based upon the $20,000 purchase
price of the Warrants divided by the weighted average closing price of Tokheim
common stock over the thirty day period prior to and after the closing date. The
Warrants are exercisable for a nominal price for five years beginning one
hundred twenty days after the closing date.
Tokheim has the option, subject to bank approval, to redeem (in whole or in
part) the Subordinated Notes and the Warrants. Under the terms of the Senior
Subordinated Notes, to the extent Tokheim has not refinanced the Senior
Subordinated Notes within one hundred twenty days of the closing date, such
notes convert into an equal principal amount of eight year notes with an
interest rate starting at 12.0% and increasing by 0.5% every three months, to a
maximum of 14.5%. Interest exceeding 12.0% will be payable in kind.
The Acquisition has been accounted for using the purchase method of accounting,
and the RPS Division's results of operations will be included in the
consolidated financial statements of Tokheim from the date of acquisition. The
purchase price has been preliminarily allocated to assets acquired and
liabilities assumed based on the RPS Division's net book value of assets at
December 31, 1997, as adjusted, which is estimated to approximate fair value.
The purchase price allocated under this assumption exceeded the estimated fair
value of net assets acquired by approximately $247,000. This amount will be
recognized as goodwill and will be amortized on a straight-line basis over forty
years.
As part of the purchase price the Company has provided for certain costs the
Company believes will be spent to close down redundant operations in connection
with the reorganization and rationalization of the RPS Division's operations.
The Company expects to incur approximately $18,600 associated with involuntary
termination costs to reduce redundant staffing levels and approximately $4,900
of exit costs and asset write-off costs to close redundant facilities. These
costs will be aggregated and included in accrued liabilities. 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.
Simultaneously with the Acquisition, the Company executed a new Bank Credit
Agreement (the "New Credit Agreement") with a consortium of banks to refinance
previously existing indebtedness, including redemption of the $55,000 of 11 1/2%
Senior Subordinated Notes, and to finance $100,000 of the Acquisition. The New
Credit Agreement provides for a six year $120,000 revolving working capital
facility and a six year $120,000 term loan facility. An additional agreement
provides for the assignment of a three year $7,616 ESOP loan facility. At
October 9, 1998 the outstanding borrowings were $60,700 under the revolving
working capital facility, $120,000 under the term loan, and $7,615 under the
ESOP facility. The term loan calls for equal quarterly principal payments
aggregating $7,500 in year 2000; $10,000 in year 2001; $12,500 in year 2002;
$15,000 in year 2003; $37,500 in a single payment due first quarter 2004; and
the remainder due at maturity. Available borrowings under the revolving working
capital facility were $59,300 at October 9, 1998.
Also simultaneously with the Acquisition, Tokheim entered into a note purchase
agreement with one or more purchasers, pursuant to which Tokheim issued $22,500
aggregate principal amount of senior notes (the "Senior Notes") with a seven
year term. Tokheim has the option, subject to bank approval, to redeem the
Senior Notes at specified call prices ranging from 100.000% to 107.250%
expressed as a percentage of the original principal balance. The initial
interest rate of 12.5% increases by 0.5% on December 1, 1998, and continues to
increase every three months by 0.5%, to a maximum of 14.5%. Proceeds from the
Senior Notes were used in connection with the Company's refinancing of existing
indebtedness.
On September 30, 1998 the Company completed the repurchase of its then
outstanding $55,000 of 11.5% Senior Subordinated Notes due 2006 ("Notes")
pursuant to the terms of its then outstanding tender offer therefore. These
notes were redeemed at an aggregate premium and consent payment of $12,360 along
with accrued interest of $1,072. The premium and consent payment will be
aggregated with the write off of the remaining deferred issuance costs related
to the Notes and the previous bank credit agreement and reported as an
extraordinary loss on debt extinguishment of approximately $19,000 in the fourth
quarter of 1998.
No cash dividends on common stock were declared or paid during the period.
Currently, the New Credit Agreement and the indenture governing the notes
restrict the payment of dividends.
15
<PAGE>
Due to the indebtedness incurred to complete the Acquisition the Company is
highly leveraged. The Company's principal sources of future liquidity are
expected to be cash flow from operations, an anticipated senior subordinated
note offering and available borrowings under the revolving working capital
facility. It is expected that the Company's principal uses of cash will be to
provide working capital, finance capital expenditures, fund costs associated
with the Acquisition, implement a consolidation plan and meet debt service
requirements. Based upon current operations, anticipated cost savings and future
growth, the Company believes that its cash flow from operations, together with
available borrowings under the revolving working capital facility and its other
sources of liquidity (including leases), will be adequate to meet its
anticipated cash requirements for the next twelve months and the foreseeable
long-term periods. There can be no assurance, however, that the Company's
business will continue to generate cash flow at or above current levels or that
estimated cost savings or growth can be achieved.
16
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits
NO. DESCRIPTION
(a)
2.1 Master Agreement for Purchase and Sale of Shares, Assets, and
Liabilities, dated as of June 19, 1998, between Tokheim and
Schlumberger (incorporated herein by reference to the Company's
Registration Statement on Form 8-K/A dated October 15, 1998).
2.2 Amendment No. 1 to the Master Agreement for Purchase and Sale of
Shares, Assets and Liabilities, dated as of September 30, 1998 between
Tokheim and Schlumberger (incorporated herein by reference to the
Company's Registration Statement on Form 8-K/A dated October 15,
1998).
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 Registrant's Annual Report on Form
10-K/A for the year ended November 30, 1997).
3.2 Bylaws of the Registrant, as restated on July 12, 1995 and amended
March 2, 1998 (incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the period ended May 31, 1998).
4.1 Securities Purchase Agreement, dated September 30, 1998, by Tokheim
and Schlumberger (incorporated herein by reference to the Company's
Registration Statement on Form 8-K/A dated October 15, 1998).
4.2 12% Senior Subordinated Note Due January 28, 1999 in the amount of
$170,000,000 (incorporated herein by reference to the Company's
Registration Statement on Form 8-K/A dated October 15, 1998).
4.3 Senior Subordinated Note Indenture, dated as of September 30, 1998,
among Tokheim, Management Solutions, Inc., Tokheim Equipment
Corporation, Tokheim RPS, LLC, Sunbelt Hose & Petroleum Equipment,
Inc., Envirotronic Systems, Inc., Gasboy International, Inc., Tokheim
Automation Corporation, Tokheim Investment Corp., as guarantors, and
Harris Trust and Savings Bank, as trustee (incorporated herein by
reference to the Company's Registration Statement on Form 8-K/A dated
October 15, 1998).
4.4 12% Junior Subordinated Note Due 2008 in the amount of $40,000,000
(incorporated herein by reference to the Company's Registration
Statement on Form 8-K/A dated October 15, 1998).
4.5 Junior Subordinated Note Indenture, dated as of September 30, 1998,
among Tokheim, Management Solutions, Inc., Tokheim Equipment
Corporation, Tokheim RPS, LLC, Sunbelt Hose & Petroleum Equipment,
Inc., Envirotronic Systems, Inc., Gasboy International, Inc., Tokheim
Automation Corporation, Tokheim Investment Corp., as guarantors, and
Harris Trust and Savings Bank, as trustee (incorporated herein by
reference to the Company's Registration Statement on Form 8-K/A dated
October 15, 1998).
4.6 Warrant to Purchase up to 19.9% of the Shares of Common Stock of
Tokheim (incorporated herein by reference to the Company's
Registration Statement on Form 8-K/A dated October 15, 1998).
4.7 Form of Roll-Over Note (incorporated herein by reference to the
Company's Registration Statement on Form 8-K/A dated October 15,
1998).
4.8 Registration Rights Agreement, dated September 30, 1998, by Tokheim
and Schlumberger (incorporated herein by reference to the Company's
Registration Statement on Form 8-K/A dated October 15, 1998).
4.9 Note Purchase Agreement, dated as of September 30, 1998, among
Tokheim, the Subsidiaries and the Purchasers (incorporated herein by
reference to the Company's Registration Statement on Form 8-K/A dated
October 15, 1998).
4.10 Amended and Restated Credit Agreement, dated as of September 30, 1998,
among Tokheim, the Borrowing Subsidiaries, the Lenders and NBD Bank,
N.A. as administrative agent and Credit Lyonnais as documentation and
collateral agent and Gleacher Natwest Inc. and Bankers Trust Company
as co-syndication agents (incorporated herein by reference to the
Company's Registration Statement on Form 8-K/A dated October 15,
1998).
4.11 Amendment No. 1 to Rights Agreement, dated as of September 30, 1998,
between Tokheim and Harris Trust and Savings Bank (incorporated herein
by reference to the Company's Registration Statement on Form 8-A/A
dated October 14, 1998).
11 Statement regarding computation of per share earnings.
27 Financial data schedule.
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K dated August 3, 1998,
describing the RPS Division acquisition, including financial
statements of the RPS Division and unaudited pro forma financial
statements.
SIGNATURES
Pursuant to the requirements of the Securities 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: October 15, 1998 /S/DOUGLAS K. PINNER
----------------------
Douglas K. Pinner
Chairman, President and Chief Executive
Officer
Date: October 15, 1998 /S/JOHN A. NEGOVETICH
---------------------
John A. Negovetich
Executive Vice-President,
Finance and Administration and
Chief Financial Officer
17
<PAGE>
EXHIBIT INDEX
NO. DESCRIPTION
(a)
2.1 Master Agreement for Purchase and Sale of Shares, Assets, and
Liabilities, dated as of June 19, 1998, between Tokheim and
Schlumberger (incorporated herein by reference to the Company's
Registration Statement on Form 8K/A dated October 15, 1998).
2.2 Amendment No. 1 to the Master Agreement for Purchase and Sale of
Shares, Assets and Liabilities, dated as of September 30, 1998 between
Tokheim and Schlumberger (incorporated herein by reference to the
Company's Registration Statement on Form 8K/A dated October 15, 1998).
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 Registrant's Annual Report on Form
10-K/A for the year ended November 30, 1997).
3.2 Bylaws of the Registrant, as restated on July 12, 1995 and amended
March 2, 1998 (incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the period ended May 31, 1998).
4.1 Securities Purchase Agreement, dated September 30, 1998, by Tokheim
and Schlumberger (incorporated herein by reference to the Company's
Registration Statement on Form 8-K/A dated October 15, 1998).
4.2 12% Senior Subordinated Note Due January 28, 1999 in the amount of
$170,000,000 (incorporated herein by reference to the Company's
Registration Statement on Form 8-K/A dated October 15, 1998).
4.3 Senior Subordinated Note Indenture, dated as of September 30, 1998,
among Tokheim, Management Solutions, Inc., Tokheim Equipment
Corporation, Tokheim RPS, LLC, Sunbelt Hose & Petroleum Equipment,
Inc., Envirotronic Systems, Inc., Gasboy International, Inc., Tokheim
Automation Corporation, Tokheim Investment Corp., as guarantors, and
Harris Trust and Savings Bank, as trustee (incorporated herein by
reference to the Company's Registration Statement on Form 8-K/A dated
October 15, 1998).
4.4 12% Junior Subordinated Note Due 2008 in the amount of $40,000,000
(incorporated herein by reference to the Company's Registration
Statement on Form 8-K/A dated October 15, 1998).
4.5 Junior Subordinated Note Indenture, dated as of September 30, 1998,
among Tokheim, Management Solutions, Inc., Tokheim Equipment
Corporation, Tokheim RPS, LLC, Sunbelt Hose & Petroleum Equipment,
Inc., Envirotronic Systems, Inc., Gasboy International, Inc., Tokheim
Automation Corporation, Tokheim Investment Corp., as guarantors, and
Harris Trust and Savings Bank, as trustee (incorporated herein by
reference to the Company's Registration Statement on Form 8-K/A dated
October 15, 1998).
4.6 Warrant to Purchase up to 19.9% of the Shares of Common Stock of
Tokheim (incorporated herein by reference to the Company's
Registration Statement on Form 8-K/A dated October 15, 1998).
4.7 Form of Roll-Over Note (incorporated herein by reference to the
Company's Registration Statement on Form 8-K/A dated October 15,
1998).
4.8 Registration Rights Agreement, dated September 30, 1998, by Tokheim
and Schlumberger (incorporated herein by reference to the Company's
Registration Statement on Form 8-K/A dated October 15, 1998).
4.9 Note Purchase Agreement, dated as of September 30, 1998, among
Tokheim, the Subsidiaries and the Purchasers (incorporated herein by
reference to the Company's Registration Statement on Form 8-K/A dated
October 15, 1998).
4.10 Amended and Restated Credit Agreement, dated as of September 30, 1998,
among Tokheim, the Borrowing Subsidiaries, the Lenders and NBD Bank,
N.A. as administrative agent and Credit Lyonnais as documentation and
collateral agent and Gleacher Natwest Inc. and Bankers Trust Company
as co-syndication agents (incorporated herein by reference to the
Company's Registration Statement on Form 8-K/A dated October 15,
1998).
4.11 Amendment No. 1 to Rights Agreement, dated as of September 30, 1998,
between Tokheim and Harris Trust and Savings Bank (incorporated herein
by reference to the Company's Registration Statement on Form 8-A/A
dated October 14, 1998).
11 Statement regarding computation of per share earnings.
27 Financial data schedule.
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K dated August 3, 1998,
describing the RPS Division acquisition, including financial
statements of the RPS Division and unaudited pro forma financial
statements.
18
<PAGE>
Tokheim Corporation and Subsidiaries
Exhibit(11) - Earnings Per share
For the three month and nine month periods ended August 31, 1998 and 1997.
Basic earnings per share ("EPS") is calculated based on earnings (loss)
available to common shareholders and the weighted average number of common
stock shares outstanding during each period. Diluted EPS includes additional
dilution from potential common stock equivalents such as stock issued pursuant
to the conversion of preferred stock or the exercise of stock options
outstanding.
The following table presents information necessary to calculate earnings per
share for the three month and nine month periods ended August 31, 1998 and 1997.
<TABLE>
<CAPTION>
Basic
----------------------------------------------------------
Three Months Ended Nine Months Ended
------------------------- -------------------------
August 31, August 31, August 31, August 31,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Shares outstanding (in thousands):
Weighted average outstanding 12,631 8,037 10,925 7,996
====== ====== ======= ======
Net earnings (loss):
Before extraordinary item $2,929 $ 152 $ (249) $1,487
Extraordinary loss on debt extinguishment -- -- (4,965) --
------ ------ ------- ------
Net earnings (loss) 2,929 152 (5,214) 1,487
Preferred stock dividend (370) (378) (1,113) (1,136)
------ ------ ------- ------
Earnings (loss) applicable to common stock $2,559 $ (226) $(6,327) $ 351
====== ====== ======= ======
Net earnings (loss) per common share:
Before extraordinary item $ 0.20 $(0.03) $ (0.12) $ 0.04
Extraordinary loss on debt extinguishment -- -- (0.45) --
------ ------ ------- ------
Net earnings (loss) $ 0.20 $(0.03) $ (0.57) $ 0.04
====== ====== ======= ======
</TABLE>
For financial reporting purposes, the loss per share, assuming full dilution, is
considered to be the same as basic since the effect of the common stock
equivalents would be antidilutive.
<TABLE>
<CAPTION>
Diluted
----------------------------------------------------------
Three Months Ended Nine Months Ended
------------------------- -------------------------
August 31, August 31, August 31, August 31,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Shares outstanding (in thousands):
Weighted average outstanding 12,631 8,037 10,925 7,996
Share equivalents 224 238 254 109
Weighted conversion of preferred stock 763 781 763 788
------ ------ ------- ------
Adjusted outstanding 13,618 9,056 11,942 8,893
====== ====== ======= ======
Net earnings (loss):
Before extraordinary item $2,929 $ 152 $ (249) $1,487
Extraordinary loss on debt extinguishment -- -- (4,965) --
------ ------ ------- ------
Net earnings (loss) 2,929 152 (5,214) 1,487
Incremental RSP expense (370) (378) (1,113) (1,136)
------ ------ ------- ------
Earnings (loss) applicable to common stock $2,559 $ (226) $(6,327) $ 351
====== ====== ======= ======
Net earnings (loss) per common share:
Before extraordinary item $ 0.19 $(0.02) $ (0.11) $ 0.04
Extraordinary loss on debt extinguishment -- -- (0.42) --
------ ------ ------- ------
Net earnings (loss) $ 0.19 $(0.02) $ (0.53) $ 0.04
====== ====== ======= ======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> AUG-31-1998
<CASH> 10,095
<SECURITIES> 0
<RECEIVABLES> 83,261
<ALLOWANCES> 4,018
<INVENTORY> 63,580<F1>
<CURRENT-ASSETS> 159,609
<PP&E> 113,025<F2>
<DEPRECIATION> 68,212
<TOTAL-ASSETS> 297,029
<CURRENT-LIABILITIES> 107,242
<BONDS> 55,000
11,458<F4>
0
<COMMON> 88,889<F3>
<OTHER-SE> (18,008)<F5>
<TOTAL-LIABILITY-AND-EQUITY> 297,029
<SALES> 291,997
<TOTAL-REVENUES> 291,997
<CGS> 213,975<F6>
<TOTAL-COSTS> 213,975
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,882
<INCOME-PRETAX> 1,409
<INCOME-TAX> 1,658
<INCOME-CONTINUING> (249)
<DISCONTINUED> 0
<EXTRAORDINARY> (4,965)
<CHANGES> 0
<NET-INCOME> (5,214)
<EPS-PRIMARY> (0.57)
<EPS-DILUTED> (0.57)
<FN>
<F1> Represents gross inventory net of loss reserve.
<F2> Represents gross PP&E.
<F3> Represents common stock of $89,581 less treasury stock of $692.
<F4> Represents redeemable preferred stock of $24,000 less Guaranteed ESOP of
$7,615 and treasury stock of $4,927.
<F5> Represents retained earnings of $3,506 less minimum pension liability of
$2,173 and foreign currency translation adjustments of $19,341.
<F6> Includes product development expenses and excludes depreciation and
amortization.
</FN>
</TABLE>
