FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
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For the fiscal year ended DECEMBER 31, 1993
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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For the transition period from to
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Commission file number 1-5599
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INTERNATIONAL CONTROLS CORP.
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(Exact name of registrant as specified in its charter)
FLORIDA 54-0698116
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(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
2016 North Pitcher Street, Kalamazoo, Michigan 49007
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (616) 343-6121
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Securities Registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Subordinated Discount Debentures American Stock Exchange, Inc.
Due January 1, 2006
12-3/4% Senior Subordinated Debentures American Stock Exchange, Inc.
Due 2001
Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether Registrant (1) 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 Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy of information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. X
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There were 9,036,700 shares of Registrant's only class of common stock
outstanding as of March 10, 1994.
There are no shares of voting stock held by non-affiliates of the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE: None
1
PART I
ITEM 1. BUSINESS
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A. OVERVIEW. International Controls Corp. ("ICC, Registrant or the
Company") is a holding company and its business is conducted by its operating
subsidiaries. Through its subsidiaries, the Company is engaged in four major
lines of business. Through Great Dane Trailers, Inc. ("Great Dane"), the
Company manufactures a full line of truck trailers for the over-the-road
tractor trailer long and short haul market and containers and chassis for
intermodal shipping. Checker Motors Corporation ("Checker") and its
subsidiary, South Charleston Stamping & Manufacturing Company ("SCSM"), are
major manufacturers of sheet metal stampings for automotive and light truck
and van components and subassemblies, primarily for General Motors
Corporation ("GM"). The Company, through its Yellow Cab Company division
("Yellow Cab"), is currently the largest owner of taxicabs and provider of
taxi-related services in Chicago, Illinois. American Country Insurance
Company ("Country") underwrites property and casualty insurance, including
taxicab insurance, workers' compensation and other commercial and personal
lines.
The Company was incorporated in 1959 under the laws of the State of
Florida. On January 1, 1989, the Company's continuing operations consisted
solely of Great Dane's truck trailer manufacturing operations. On January
11, 1989, the Company acquired all of the outstanding capital stock of
Checker. Immediately following the acquisition of Checker by the Company,
Checker Holding Corp. ("Holding"), a privately-held company owned by
substantially all of the former shareholders of Checker, acquired all of the
outstanding capital stock of the Company (the "Holding Buyout").
Subsequently, Holding was merged into the Company. The Holding Buyout has
been accounted for as if Checker acquired the Company (a "reverse
acquisition"), since there was no significant change in control of Checker.
B. INFORMATION CONCERNING INDUSTRY SEGMENTS. Certain financial data
with respect to Registrant's industry segments appear in Note N of Notes to
Consolidated Financial Statements and are incorporated herein by reference.
As of December 31, 1993, the Company employed a total of 5,055 people.
The chart below details the number of persons employed as of that date in
each of the Company's industry segments:
Administrative
Hourly and Executive
------ --------------
Truck Trailer Manufacturing 3,265 546
Automotive Products Operations 697 142
Vehicular Operations 228 21
Insurance Operations 8 148
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C. NARRATIVE DESCRIPTION OF BUSINESS.
TRUCK TRAILER MANUFACTURING. Great Dane designs, manufactures and
distributes a full line of truck trailers and containers and chassis. In
1993, Great Dane, the largest truck trailer manufacturer in the United
States, accounted for approximately 12.7% of the new truck trailer market,
11.7% of the new van market, 11.9% of the new platform trailer market, 38.0%
of the new refrigerated van ("reefer") market and 23.4% of the market for
intermodal containers and chassis. Great Dane sells its trailers primarily
through a nationwide network of branches and independent dealers to gain
access to smaller, less price sensitive customers. The Company believes it
offers the largest line of trailers in the industry and works closely with
customers to customize products to their specific needs. Great Dane strives
to stay at the forefront of the industry in the design and development of new
and improved products.
In addition to manufacturing, Great Dane's business includes a parts
sales operation, sales of used trailers acquired mainly in trade-in
transactions, and retail services (including repair and maintenance) which
enable it to be a full service provider. The parts and service operations
are less sensitive to the economic environment mitigating the impact of the
cyclical product lines.
Late in 1991, Great Dane hired new operating management to implement
several important strategies designed to position Great Dane to take
advantage of both expected industry growth in the trailer market and the
expansion of the intermodal container and chassis market. As part of this
strategy, Great Dane adapted certain of its manufacturing facilities to
enable it to fill orders for high-volume purchasers without sacrificing its
ability to cater to the special needs of its many smaller customers. In
addition, Great Dane broadened its network of distributors and branches,
initially focused on the Southeast, to develop a nationwide presence and to
expand Great Dane's businesses into Canada and Mexico, thereby increasing its
access to trailer customers, as well as providing new outlets for its parts
and services business, which is less vulnerable to economic downturns and
produces higher margins. Great Dane believes it currently has the largest
marketing organization in the trailer industry.
Furthermore, during 1992, Great Dane's engineering department, working
in conjunction with J.B. Hunt Transport, one of the largest truckload
carriers in the United States ("J. B. Hunt"), developed a unique line of
intermodal containers and matching ultra lightweight chassis, which allows
Great Dane's customers to take advantage of new double stack intermodal
shipping methods, the most economical method of hauling freight over long and
intermediate distances. Great Dane's intermodal containers are designed for
use on rail but may also be transported over the road on chassis to and from
rail yards. In connection with an approximately $125 million initial
purchase order from J. B. Hunt for these new intermodal products, Great Dane
installed new assembly lines within three existing factories and initiated
production for the order in early 1993. Great Dane has, subsequently,
received an additional order of approximately $48 million from J. B. Hunt.
Although J. B. Hunt's requirements for these containers and chassis will
level off, Great Dane believes that intermodal transportation will provide
growth opportunities as other carriers replace some or all of their trailers
with containers and chassis. The Company believes that Great Dane, which has
also manufactured refrigerated containers for others, is well-positioned to
maintain a substantial share of the new and growing intermodal market.
3
Great Dane's headquarters are located in Savannah, Georgia, and its
manufacturing is performed in Savannah, Georgia; Brazil, Indiana; Memphis,
Tennessee; and Wayne, Nebraska. These plants include assembly lines for the
various types of trailers and containers and fabricating departments which
produce from raw or semi-finished material the components used in the
assembly of its products other than those items requiring machine shop or
foundry work and except for certain components, such as brakes, tires,
wheels, rims, axles, landing gear and springs, which are purchased as
finished items.
The national truck trailer market is fragmented and competitive due to
the relative ease of entrance (with the exception of the higher technology
refrigerated trailers). There are approximately 180 companies in the truck
trailer manufacturing industry. In 1993, the two largest companies, Great
Dane and Wabash National Corporation, accounted for approximately 24% of the
market and the ten largest companies accounted for approximately 65% of
sales. The basis of competition in the truck trailer industry is quality,
durability, price, warranties, service and relationships. Due in large part
to the quality of its products and its strong distribution system, the
Company believes that Great Dane has built sustainable competitive advantages
in each of these important areas.
Management believes its "Great Dane" trademark, which identifies all of
its products, to be of value and to contribute significantly to the wide
acceptance of its products.
Truck trailer and container backlog was approximately $365 million at
December 31, 1993, and $259 million at December 31, 1992. The increase in
backlog is attributed to the previously discussed dry freight containers and
chassis order and increased orders for truck trailers.
AUTOMOTIVE PRODUCTS OPERATIONS. Through SCSM and the Partnership, the
Company is currently engaged in the fabrication of various sheet metal
components and subassemblies, including automotive doors, roofs and hoods,
primarily for light trucks and vans, which tend to have longer model lives
and less frequent design changes than passenger cars. Through the purchase
of SCSM in 1989 and the expansion of that facility's press lines, the Company
acquired a modernized stamping facility covering an area of more than 900,000
square feet. SCSM presently has the capability to produce virtually any
automotive stamping product, carrying out substantially all phases of the
project under one roof. SCSM holds GM's "Mark of Excellence" award and The
Chrysler Corporation's "Quality of Excellence" designation.
The automotive operations' primary customer is GM, which has,
historically, accounted for more than 95% of this segment's revenues.
Management is, however, increasing its efforts to broaden its customer base.
The effect of that effort is evidenced by the expansion of the customer base
to include Freightliner Corp. ("Freightliner"), Ford Motor Company ("Ford"),
and the Chrysler Corporation ("Chrysler"). In addition, the automotive
segment recently received a letter of intent from Mercedes-Benz for products
which, subject to the execution of final documentation, are currently
scheduled for shipment commencing in 1997.
Shipments of customers' orders are made on a daily or weekly basis as
required by the customers. GM provides an estimated 13 week forecast for
material and fabrication planning purposes. Nevertheless, changes in
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production by the customer may be reflected in increases or decreases in
these forecasts.
The fabrication business is highly competitive and SCSM and the
Partnership compete with numerous other industrial manufacturers, as well as
with the in-house capabilities of its customers (i.e., GM). The failure to
obtain future orders from GM could have a material adverse impact on SCSM
and/or the Partnership despite the fact that the Company is expanding its
customer base. The automotive products industry is experiencing increased
pricing pressure from GM which is continuing its aggressive measures to
reduce its operating costs, including obtaining significant price reductions
from suppliers. Although opportunities for new business may arise as a
result of GM's pressure on other suppliers and, while the Company believes
that it has adequately provided for any price reductions which may result
from discussions with GM in near-term financial plans, future earnings of the
automotive products operations may be materially adversely affected by
additional price reductions requested or required by GM.
VEHICULAR OPERATIONS. Yellow Cab is the largest taxicab fleet owner in
the City of Chicago and, as of February 1, 1994, owned approximately 2,370 of
the roughly 5,400 taxicab licenses ("medallions") available in Chicago.
Yellow Cab leases its medallions and its owned vehicles to independent, non-
employee taxi operators pursuant to two programs; the owner-operator program
and the daily-lease program. The owner-operator program relieves Yellow Cab
of vehicle maintenance and repair costs, as well as the cost of housing and
storing a large fleet. The Partnership and affiliated entities also provide
a variety of other services to taxi drivers and non-affiliated medallion
holders, including insurance coverage and repair and maintenance services.
Pursuant to a 1988 agreement with the City of Chicago to settle various
lawsuits, Yellow Cab is required to relinquish to the City of Chicago and not
renew 100 taxicab licenses on January 1 of each year through 1997 (the
"Agreement"). In addition, the Agreement limits to 100 per year the number
of new licenses that the City of Chicago may add to the total medallions
outstanding through 1997, bringing the total number of available licenses to
a maximum of 5,700 on December 31, 1997. At the required surrender rates,
assuming no additional medallions are sold by Yellow Cab, Yellow Cab would
hold approximately 2,070 medallions after January 1, 1997, or approximately
36% of the maximum total then-to-be outstanding.
The scheduled decline in the number of licenses allowed to be held by
Yellow Cab pursuant to the Agreement has had, and will continue to have, a
negative effect on the revenue-generating capability of the taxi leasing
operations. Yellow Cab has been able to offset these declines to some extent
through increases in the average lease rates charged to its customers. At
the same time, as the number of medallions held by Yellow Cab declines,
Yellow Cab will require fewer new vehicles to support its taxi leasing
operations and, consequently, a lower level of capital spending.
The Agreement has also had the effect of allowing the Company to
purchase and sell licenses in the open market for the first time since 1982.
In 1993, sales of these licenses have been recorded at prices of
approximately $38,000 per medallion, and the prices realized by Yellow Cab
have been consistent with the prices realized in license sales by other, non-
affiliated, medallion holders. Although the value of Yellow Cab's fleet of
vehicles is reflected on the Company's balance sheet, the significant value
of its medallions is not.
5
Although Yellow Cab is the largest provider of taxicab related services
in Chicago, it faces competition from a number of other medallion owners who
lease medallions and vehicles to independent operators. The most significant
of these competitors are Flash Cab Company, American United and Abernathy.
Yellow Cab management believes that each of these competitors owns
approximately 150 to 200 medallions, although each competitor operates under
a variety of individual cab service names and logos.
Yellow Cab currently maintains liability insurance coverage for losses
of up to $350,000 per occurrence, as well as an "excess layer" of coverage
for losses over $600,000 and up to $29,000,000. The initial $350,000 layer
of insurance is issued by Country. See "Business--Insurance Operations."
During several periods in the past, Yellow Cab did not maintain the level of
coverage that Yellow Cab currently maintains for any losses over $350,000 per
occurrence. As a result, there are currently nine outstanding claims against
Yellow Cab for which it is not fully covered by third-party insurance.
Yellow Cab maintains balance sheet reserves totalling $3 million for these
claims. Management believes that these reserves will be sufficient to cover
its outstanding claims.
Yellow Cab's operations are regulated extensively by the Department of
Consumer Services of the City of Chicago which regulates Chicago taxicab
operations with regard to certain requirements including vehicle maintenance,
insurance and inspections, among others. The City Council of Chicago has
authority for setting taxicab rates of fare. Effective January 18, 1994,
rates of fare increased by 10%. However, lessors may increase the rates paid
by lessee drivers by not more than 2.8% until April 1, 1994, and thereafter
may not raise such rates at all without the consent of the City of Chicago.
The City of Chicago is required to establish rules before April 1, 1994,
pursuant to which they will hold hearings on any proposed rate increase.
INSURANCE OPERATIONS. Country, a wholly-owned subsidiary of the
Partnership, historically concentrated solely on underwriting affiliated taxi
liability, collision and workers' compensation insurance. During the past
seven years, however, Country has expanded its operating focus to include
underwriting non-affiliated personal and commercial property/casualty lines.
During 1993 and 1992, 67% of Country's total premium revenue was attributable
to nonaffiliated property and casualty lines.
Country is one of the few voluntary providers of taxi liability
insurance in the industry. Most insurers which have previously written taxi
insurance coverage on a voluntary basis experienced poor underwriting results
and have withdrawn from the business. Management believes that Country's
longstanding relationship with Yellow has provided it with a stable market
for this type of coverage and has enabled it to develop a comprehensive
understanding of the business and to assess more properly the associated
risk.
The taxicab liability coverage which Country writes carries a $350,000
limit of liability for each driver. In addition, Country makes collision
insurance available to licensees and owner-operators at premium rates which
are favorable relative to the rates charged by competitors for equivalent
coverage. Country also writes full lines of commercial and personal property
and casualty insurance for risks located in the City of Chicago and the
surrounding metropolitan area. With the exception of a specialty public
transportation program, which program policies are reinsured for amounts
6
above $350,000, all non-affiliate policies are reinsured for amounts above
$150,000.
Country is domiciled in the State of Illinois and is a licensed carrier
in Michigan, as well as being admitted as an excess and surplus lines carrier
in 36 other states. To the best of management's knowledge, Country is in
compliance with all applicable statutory requirements and regulations.
Country is currently rated "A" by A. M. Best Company.
LABOR RELATIONS. Approximately 286 employees in the Company's
automotive products operations, 295 in the Company's truck trailer
manufacturing operations and 63 in the Company's vehicular operations are
covered by collective bargaining agreements. The Partnership entered into a
new contract with the Allied Industrial Workers of America, AFL-CIO, Local
682 in Kalamazoo--currently known as Local Union No. 7682 of the United
Paperworkers International Union, AFL-CIO--which expires in May 1996. The
Partnership is party to a contract with D.U.O.C. Local 777, a division of
National Production Workers of Chicago and Vicinity, Local 777 which expires
in November 1995. During February 1993, Great Dane Trailers, Tennessee,
Inc., a subsidiary of Great Dane, negotiated a new contract (expiring in
January 1996) with Talbot Lodge No. 61 of the International Association of
Machinists and Aerospace Workers. In general, the Company believes its
relationship with its employees to be satisfactory.
COMPLIANCE WITH ENVIRONMENTAL PROTECTION PROVISIONS. The Company
believes that future compliance with federal, state and local provisions
which have been enacted or adopted regulating the discharge of materials into
the environment, or otherwise relating to the protection of the environment,
will have no material effect upon the capital expenditures, earnings and
competitive position of the Company.
ITEM 2. PROPERTIES
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The Company's principal executive offices are located at the
Partnership's facility at 2016 North Pitcher Street, Kalamazoo, Michigan
49007.
The location and general description of the principal properties owned
or leased by the Company are as follows:
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Owned or Leased;
If Leased,
Location Type of Facility Area Expiration Year
-------- ---------------- ---- ---------------
TRUCK TRAILERS MANUFACTURING:
Savannah, Manufacturing Plant 61 acres (including Owned
Georgia and Office 455,000 sq. ft. mfg./
office bldg.)
Brazil, Manufacturing Plant 80 acres (including Owned
Indiana and Office 564,000 sq. ft. mfg./
office bldg.)
Memphis, Manufacturing Plant 8 acres (including Leased;
Tennessee 107,000 sq. ft. mfg.) 2003
3.5 acres (including Owned
13,000 sq. ft. mfg.)
Wayne, Manufacturing Plant 35 acres (including Owned
Nebraska and Office 179,000 sq. ft. mfg./
office bldg.)
14 Locations Sales and Service 98 acres (including Owned
in 10 States Branches buildings aggregating
303,000 sq. ft.)
13 Locations Sales and Service 28 acres (including Leases
in 8 states Branches buildings aggregating expiring
198,000 sq. ft.) 1994 to 2015
AUTOMOTIVE PRODUCTS OPERATIONS:
Kalamazoo, Manufacturing Plant 71 acres (including Owned
Michigan and Office 750,000 sq. ft. mfg./
office bldg.)
South Manufacturing Plant 922,000 sq. ft. (mfg./ Leased;
Charleston, and Office office bldg.) 2028
West Virginia
VEHICULAR OPERATIONS:
Chicago, Garages, Parking Approximately 620,000 Owned
Illinois Lots and Offices sq. ft. (including
(13 Loca- garages/office
tions) facilities)
INSURANCE OPERATIONS:
Chicago, Offices/Storage 39,000 sq. ft. Leased;
Illinois Facility 2002
(3 Loca-
tions)
8
The principal facilities owned by the Company and its subsidiaries are
considered by the Company to be well maintained, in good condition and
suitable for their intended use.
ITEM 3. LEGAL PROCEEDINGS
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EXECUTIVE LIFE LITIGATION. By order of the Superior Court of Los
Angeles County on April 11, 1991 (the "California order"), the California
State Insurance Commissioner was appointed conservator (the "Conservator")
for Executive Life Insurance Company ("ELIC"), a limited partner in the
Partnership. By letter dated May 20, 1991, Checker and the Partnership
advised ELIC and the Conservator that the appointment of the Conservator
pursuant to the California Order constituted an "Event of Default" under the
Amended and Restated Agreement of Limited Partnership of the Partnership (the
"Agreement"), and that, therefore, ELIC's rights under the Agreement and
interest in the Partnership were altered. More specifically, Checker and the
Partnership asserted that ELIC's rights, as of April 11, 1991, were limited
to the right to receive a payout of its capital account, calculated as of
that date, in quarterly installments over approximately a 23-year period. By
letter dated June 28, 1991, the Conservator notified Checker and the
Partnership that he did not accept the position set forth in the May 20
letter.
On July 8, 1991, Checker and the Partnership filed suit against ELIC and
the Conservator in the Delaware Chancery Court for New Castle County. In
that action, Checker and the Partnership sought a declaratory judgment that
they had properly invoked the provisions of the Agreement relating to an
Event of Default and that they are not in violation of the California Order.
In addition, they sought an order declaring that ELIC has no further interest
in the Partnership or any rights under the Agreement, except the right to
receive its capital account, with interest, as provided in the Agreement, and
that Checker and the Partnership have no additional liability or obligation
to ELIC. Checker and the Partnership sought to enjoin ELIC from taking a
position inconsistent with their interpretation of the Agreement.
On September 10, 1991, ELIC and the Conservator moved to stay or dismiss
the complaint in the Delaware action. On February 13, 1992, the judge
granted the motion to dismiss on the basis that Checker's action constituted
a "claim" under the Uniform Insurers Liquidation Act, as adopted in Delaware,
which could not be brought in the absence of an ancillary receiver for ELIC
having been appointed in Delaware. On September 14, 1992, the portion of
this opinion which would have required Checker and the Partnership to bring
their action in California because no ancillary receiver had been appointed
for ELIC in Delaware was modified. The Delaware Supreme Court held that a
resident of an ancillary state could file "claims" with either the ancillary
receiver of such state or with the domiciliary receiver, thereby allowing
Checker and the Partnership to pursue their claim in a jurisdiction in which
they are resident and in which an ancillary receiver was appointed in October
1991. Checker and the Partnership have now filed a claim against ELIC in
Michigan.
On March 4, 1992, the Company received a copy of the Conservator's
filing in California of an Amendment to its Application for Order of
Conservation adding Checker, the Partnership and Checker Holding Corp. III as
parties (the Checker Entities") to its original order and seeking (a) damages
in an unspecified amount for their alleged "forfeiture" or ELIC's partnership
9
interest, their breach of fiduciary duties, and their interference with the
conservatorship proceedings and waste of conservatorship assets and (b) a
declaration of ELIC's rights under the Agreement. The Company made a limited
appearance in California to dispute the jurisdiction of the court over the
Checker Entities. On June 10, 1992, the California court ruled that the
Checker Entities are subject to jurisdiction in California. The Checker
Entities filed a Petition for Writ of Mandate and Request for Temporary Stay
of Proceedings in the Court of Appeal of the State of California, Second
Appellate district, and a hearing on the Petition was held on November 5,
1992. On February 24, 1993, the court denied the writ. On March 11, 1993,
the Checker Entities filed a Petition for Rehearing based on their belief
that the Appellate Court's opinion was predicated upon omissions of material
facts and misstatements of material facts, which Petition for Rehearing was
denied by the court.
The Company has offered to redeem ELIC's interest in the Partnership and
South Charleston Stamping & Manufacturing Company for $32 million. The
Conservator has not yet responded to the offer.
BOEING LITIGATION. On February 8, 1989, the Boeing Company ("Boeing")
filed a lawsuit naming the Company, together with three prior subsidiaries of
the Company, as defendants in Case No. CV89-119MA, United States District
Court for the District of Oregon. In that lawsuit, Boeing sought damages and
declaratory relief for past and future costs resulting from alleged
groundwater contamination at a location in Gresham, Oregon, where the three
prior subsidiaries of the Company formerly conducted business operations. On
December 22, 1993, the Company entered into a settlement with Boeing,
settling all claims asserted by Boeing in the lawsuit. Pursuant to the
settlement terms, the Company will pay Boeing $12.5 million over the course
of five years, $5 million of which has been committed by certain insurance
companies in the form of cash or irrevocable letters of credit. In
accordance with the settlement agreement, Boeing will move to dismiss its
claims against the Company and the three former subsidiaries and will release
and indemnify the Company with respect to certain claims.
CERTAIN ENVIRONMENTAL MATTERS. Within the past five years, Great Dane
and Checker have entered into certain consent decrees with federal and state
governments relating to the cleanup of waste materials. The aggregate
obligations of Great Dane and Checker pursuant to these consent decrees are
not material.
In May 1988, the Company sold all of the stock of its subsidiaries,
Datron Systems, Inc. ("Datron") and All American Industries, Inc., and in
connection therewith agreed to indemnify the purchaser for, among other
things, certain potential environmental liabilities. The purchaser asserted
various claims for indemnification and had commenced litigation in
Connecticut with respect to alleged contamination at a manufacturing facility
owned by a former second-tier subsidiary. The court denied one of the
purchaser's claims and another was dismissed. The balance of the claims for
reimbursement of monitoring and clean up costs were dismissed without
prejudice and the Company is discussing with the purchaser the resolution of
approximately $625,000 in claims previously submitted by the purchaser for
cleanup and monitoring costs at the facility, as well as its responsibility
for future costs. The Company does not believe that its obligations will be
material. The purchaser has also put the Company on notice of certain other
alleged environmental and other matters for which it intends to seek
10
indemnification as costs are incurred. The Company does not believe that its
obligations, if any, to pay these claims will be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
There is no market for Registrant's common stock; all issued and
outstanding common stock is owned of record by David R. Markin, Martin L.
Solomon, Allan R. Tessler and Wilmer J. Thomas, Jr.
ITEM 6. SELECTED FINANCIAL DATA
Summarized below is selected financial data for the years 1989 through
1993. The extraordinary items in all years relate to the gain or loss on the
repurchase of indebtedness (see Note L of the Notes to Consolidated Financial
Statements). The accounting changes represent the cumulative effect of
changes in accounting principles as a result of adopting, as of January 1,
1993, the provisions of Statement of Financial Accounting Standard ("SFAS")
No. 106, "Employers Accounting for Postretirement Benefits Other Than
Pensions," and SFAS No. 109, "Accounting for Income Taxes" (see Notes I and
K of the Notes to Consolidated Financial Statements). Per share amounts for
all of the years are based on 9,036,700 shares.
Selected Financial Data
(in thousands, except per share amounts)
Year Ended December 31,
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
Revenues $ 909,326 $ 716,733 $ 555,266 $ 693,211 $ 738,387
========== ========== ========== ========== ==========
Income (loss) before
extraordinary items
and accounting
changes $ 3,364 $ (7,555) $ (27,006) $ (20,274) $ (1,856)
Extraordinary items --- --- 31,188 27,749 4,799
Accounting changes (46,626) --- --- --- ---
---------- ---------- ---------- ---------- ----------
Net income (loss) $ (43,262) $ (7,555) $ 4,182 $ 7,475 $ 2,943
========== ========== ========== ========== ==========
Income per share:
Income (loss) before
extraordinary items
and accounting
changes $ 0.37 $ (0.84) $ (2.99) $ (2.24) $ (0.20)
Extraordinary items --- --- 3.45 3.07 0.52
Accounting changes (5.16) --- --- --- ---
---------- ---------- ---------- ---------- ----------
Net income (loss) $ (4.79) $ (0.84) $ 0.46 $ 0.83 $ 0.32
========== ========== ========== ========== ==========
Total assets $ 517,336 $ 493,763 $ 481,305 $ 537,677 $ 536,084
========== ========== ========== ========== ==========
Long-term debt, less
debt discount $ 291,273 $ 305,368 $ 312,324 $ 376,692 $ 405,167
========== ========== ========== ========== ==========
Cash dividend
declared per
common share $ --- $ --- $ --- $ --- $ ---
========== ========== ========== ========== ==========
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL.
From the time that present management assumed control of the Company in
January 1989, it has been continually reassessing the Company's financial
condition and prospects. During March 1990, Great Dane obtained a loan
commitment of $80 million. A substantial portion of the loan proceeds was
utilized to repurchase, in the open market, a portion of the Company's
outstanding 12-3/4% Senior Debentures due 2001 (the "12-3/4% Debentures") and
Subordinated Discount Debentures due January 1, 2006 (the 14-1/2%
Debentures"). During September 1992, Checker Motors Co., L.P. (the
"Partnership") entered into a Loan and Security Agreement with a bank
pursuant to which the bank provided a $30 million term loan. Approximately
$18 million of the proceeds from the loan was used to repay certain
indebtedness of a subsidiary of Checker, which debt had been guaranteed by
the Partnership, and to pay certain costs associated with the financing and
repayments.
The Company was hampered in its efforts to achieve a refinancing of its
debt in recent years, in part because of certain litigation arising out of
alleged groundwater contamination at a location where three prior
subsidiaries of the Company formerly conducted business. That lawsuit has
now been settled. See "Business--Legal Proceedings--Boeing Litigation." The
Company has also been engaged in litigation with the Conservator of ELIC, a
limited partner in the Partnership, seeking, among other things, a
declaratory judgment regarding ELIC's rights in the Partnership. See
"Business--Legal Proceedings--Executive Life Litigation."
With the settlement of the Boeing litigation and negotiations in
progress to settle the Executive Life Litigation, the ability of the Company
to achieve a successful refinancing has been enhanced. Accordingly, in
February 1994, the Company filed a Registration Statement on Form S-1 with
the Securities and Exchange Commission in connection with an overall
refinancing of the Company's outstanding indebtedness. The proposed
refinancing, as described in the registration statement, involves the Company
entering into a credit facility consisting of a $60 million term loan and a
revolving credit facility which would provide up to $115 million, subject to
the Company's ability to meet certain financial tests (the term loan and the
revolving credit facility being known as the "New Credit Facility").
Additionally, the Company is proposing to offer $265 million (adjusted from
$225 million) of new Senior Secured Notes (the "Senior Notes"). If the
refinancing is successfully completed, the proceeds from the new Credit
Facility would be utilized to redeem substantially all of the currently
outstanding indebtedness of the Company's subsidiaries and the proceeds from
the offering of the Senior Notes would be used to redeem parent company
indebtedness and to redeem the Minority Interest held by ELIC, in each case
together with any accrued interest and transaction fees and expenses. A
successful completion of the refinancing, the terms of which are still
subject to change, is expected to help the Company achieve increased
liquidity from reduced principal debt amortization requirements, the removal
of certain restrictions on the use of cash from the Company's subsidiaries
and more flexible and efficient cash management at the holding company level.
13
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES.
Available cash and cash equivalents, cash flow generated from operations
($30.7 million, $25.2 million and $37.8 million for the years ended December
31, 1993, 1992 and 1991, respectively), proceeds from borrowings and proceeds
from disposal of assets have provided sufficient liquidity and capital
resources for the Company to conduct its operations.
Effective January 1, 1993, the Company adopted the provisions of SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." The impact of adopting SFAS No. 106 was a charge to net income of
$29.7 million (net of taxes of $16.5 million) which was recorded as a
cumulative effect adjustment in the quarter ended March 31, 1993.
The Company also adopted the provisions of SFAS No. 109, "Accounting for
Income Taxes," effective January 1, 1993. The impact of adopting SFAS No.
109 was a charge to net income of $16.9 million which was recorded as a
cumulative effect adjustment in the quarter ended March 31, 1993.
During the quarter ended March 31, 1993, the Company adopted the
provisions of SFAS No. 113, "Accounting and Reporting for Reinsurance of
Short Duration and Long Duration Contracts." Because of the type of
insurance contract Country provides, the adoption of this statement had no
impact on earnings; however, it requires the disaggregation of various
balance sheet accounts. For financial reporting purposes, the 1992 balance
sheet and 1992 and 1991 statements of cash flows have been restated as if
SFAS No. 113 were adopted as of the beginning of the earliest period
presented.
While the adoption of the above SFAS's has a significant effect on the
Company's financial position, it does not adversely affect liquidity and
capital resources.
The Company is a holding company and is, therefore, dependent on cash
flow from its subsidiaries in order to meet its obligations.
Purchases of property, plant and equipment have averaged approximately
$18.0 million per year over the past three years and have been funded
principally by cash flow generated from operations as well as proceeds from
disposal of assets. Purchases of property, plant and equipment for 1994 are
anticipated to be approximately $26.0 million and are expected to be funded
principally by cash flow generated from operations.
During the fourth quarter of 1993, the Company entered into a settlement
of the Boeing litigation (see "Business--Legal Proceedings--Boeing
Litigation"). It is anticipated that the settlement ($12.5 million over five
years) will be paid by the Company through recoveries from insurance
carriers, the sale of assets of certain of the subsidiaries, cash currently
on hand and cash flow generated from operations.
GM, a major customer of the Company's automotive products segment, is
resorting to many measures, including obtaining significant price reductions
from its suppliers, in an effort to reduce its operating costs. Management
of the Company's automotive products segment is currently engaged in
discussions with GM concerning future pricing of parts presently being
manufactured. Automotive products segment management believes that it has
adequately provided in its near-term financial plans for any price reductions
14
which may result from its current discussions with GM. However, price
reductions in excess of those anticipated could have a material adverse
effect on the automotive products operations.
IMPACT OF INFLATION.
Recently, due to competitive market conditions, the Company has been
unable to factor all cost increases into selling prices for its products and
services. The Company does not believe, however, that the impact of
inflation affects the Company any more than it affects the Company's
competitors.
RESULTS OF OPERATIONS.
1993 COMPARED TO 1992:
During 1993, revenues increased $192.6 million and gross profit
increased $24.7 million as compared to 1992. The Truck Trailer Manufacturing
and the Automotive Products segment operations benefited from increased
demand for their products. Truck Trailer Manufacturing revenues increased by
$175.5 million as compared to 1992, primarily due to the sale of containers
and chassis which were introduced in late 1992 and sold principally to one
customer, and a higher volume of truck trailer sales. Automotive Products
revenues increased $15.3 million as compared to 1992. Increased production
of the General Motors Blazer and Suburban models and crew cab products and
other general increases in volumes to accommodate automotive customers'
demands are the principle reasons for the increase. Vehicular Operations
revenues increased $1.5 million in 1993 as compared to 1992. The increase
was attributed to lease rate increases obtained in 1993 to cover certain
Vehicular Operations cost increases. The revenue increase was somewhat
offset by the impact of tendering medallions to the City of Chicago.
The factors impacting sales, as discussed previously, had the effect of
increasing the Company's 1993 operating profit (gross profit less selling,
general and administrative expenses) by $18.4 million as compared to 1992.
Truck Trailer Manufacturing operating profit increased by $14.8 million as
compared to 1992. This increase is principally due to higher volumes, partly
offset by higher selling, general and administrative expenses ("S G & A").
Higher volumes were also the principal reason for an increase of $3.7 million
of Automotive Products operating profits as compared to 1992.
S G & A expenses were $6.3 million higher in 1993 as compared to 1992,
but as a percentage of sales, S G & A expense is 1.7 percentage points lower
in 1993 as compared to 1992.
Other expenses decreased $5.5 million in 1993 as compared to 1992. The
decrease in expense resulted primarily from $1.4 million income from the
settlement of a dispute in 1993 and $2.8 million income from sales of taxi
medallions in 1993.
On February 8, 1989, the Boeing Company ("Boeing") filed a lawsuit
naming the Company, together with three prior subsidiaries of the Company, as
defendants in Case No. CV89-199MA, United States District Court for the
District of Oregon. In that lawsuit, Boeing sought damages and declaratory
relief for past and future costs resulting from alleged groundwater
contamination at a location in Gresham, Oregon, where the three prior
subsidiaries of the Company formerly conducted business operations. On
15
December 22, 1993, the Company entered into a settlement with Boeing,
settling all claims asserted by Boeing in the lawsuit. Pursuant to the
settlement terms, the Company will pay Boeing $12.5 million over the course
of five years, $5 million of which has been committed by certain insurance
carriers in the form of cash or irrevocable letters of credit. Accordingly,
the Company recorded a $7.5 million special charge during 1993 to provide for
the cost associated with this legal proceeding. In accordance with the
settlement agreement, Boeing will move to dismiss its claims against the
Company and the three former subsidiaries and will release and indemnify the
Company with respect to certain claims.
1992 COMPARED TO 1991:
During 1992, revenues increased $161.5 million and gross profit
increased $31.1 million as compared to 1991. The Truck Trailer Manufacturing
and the Automotive Products segment operations were positively impacted by
increased demand for their products. Truck Trailer Manufacturing revenues
increased by $136.1 million as compared to 1991, primarily resulting from a
higher volume of truck trailer sales. Automotive Products revenues increased
$28.2 million as compared to 1991. Increased production of the General
Motors Blazer and Suburban models and crew cab products for the 1993 model
year and other general increases in volumes to accommodate automotive
customers' demands were partly offset by a $6.1 million decrease in revenues
associated with the coordination of tooling programs for General Motors.
Vehicular Operations revenues decreased $2.5 million as compared to 1991.
The decrease in revenues is principally attributed to a continuing downturn
in taxicab leasing in the City of Chicago, as well as a decrease in the
number of cabs available for lease from Yellow Cab as a result of the
settlement agreement reached with the City of Chicago in 1988. The negative
trend to revenue changes for this segment could continue if the economic
environment does not improve and if the segment is not successful in
continuing to develop new sources of revenue as the settlement agreement
requires the tendering of 100 additional licenses to the City of Chicago in
each of the next five years.
The factors impacting sales, as discussed previously, had the effect of
increasing the Company's 1992 operating profit (gross profit less selling,
general and administrative expenses) by $26.3 million as compared to 1991.
Truck Trailer Manufacturing operating profit increased by $10.5 million as
compared to 1991. This increase is principally due to higher volumes, partly
offset by higher selling, general and administrative expenses ("S G & A").
Higher volumes were also the principal reason for an increase of $15.9
million of Automotive Products operating profits as compared to 1991.
Automotive Products Operations' S G & A expenses were only slightly higher in
1992 as compared to 1991. Vehicular Operations operating profits decreased
$1.4 million in 1992 compared to 1991 due to lower revenues. While efforts
were made to reduce Vehicular Operations' operating costs through the
combination of the two taxicab operations in late 1991, the decrease in
revenues previously discussed was not fully offset by decreased operating and
sales, general and administrative costs.
S G & A expenses were $4.9 million higher in 1992 as compared to 1991,
but as a percentage of sales, S G & A expense is 2.2 percentage points lower
in 1992 as compared to 1991. Other expenses increased $0.9 million in 1992
as compared to 1991. Higher gains realized on investment transactions during
1992 compared to 1991 were offset by lower gains on sale of assets in 1992 as
compared to 1991.
16
Interest expense was $4.7 million lower in 1992 than in 1991. The
decrease can be attributed to lower interest rates during 1992 compared to
1991 as well as lower levels of debt outstanding during 1992 compared to
1991.
There is no minority equity expense in 1992 because ELIC was placed into
conservatorship in 1991 and, as a result, its interest in the Partnership and
rights under the Partnership Agreement became limited to the right to receive
the balance of its capital account as of April 11, 1991. (See "Business--
Legal Proceedings--Executive Life Litigation.")
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Registrant's response to this item is incorporated herein by reference
to the consolidated financial statements and consolidated financial statement
schedules, and the report thereon of independent auditors, listed in Item
14(a)1 and (2) and appearing after the signature page to this Annual Report
on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
David R. Markin, age 63, President and Chief Executive Officer of the
Company since January 11, 1989, has been President and Chief Executive
Officer of Checker since 1970. Mr. Markin serves on the Boards of Directors
of Jackpot Enterprises, Inc., an operator of gaming machines, Enhance
Financial Services Group Inc., a reinsurance company, and Data Broadcasting
Corporation, a provider of market data services to the investment community.
Allan R. Tessler, age 57, Chairman of the Board of the Company since
January 11, 1989, is also Chairman of the Boards of Directors of
International Financial Group, Inc., a merchant banking firm ("IFG"), Enhance
Financial Services Group Inc., a reinsurance company, and Allis-Chalmers
Corporation, a manufacturer of miscellaneous fabricated textile products
("Allis-Chalmers"), and is Chief Executive Officer of IFG (since 1987) and
Allis-Chalmers (beginning in 1994). Mr. Tessler serves on the Boards of
Directors of Jackpot Enterprises, Inc., an operator of gaming machines, and
The Limited, Inc., a manufacturer and retailer of apparel. Mr. Tessler is
also an attorney and from 1976 through 1988, he was a member of the Executive
Committee of the law firm of Shea & Gould; from 1989 through March 1, 1993,
he was of counsel to that firm. Beginning in 1990, Mr. Tessler and another
person were retained by Infotechnology, Inc., and Financial News Network Inc.
as a restructuring team and to serve as Co-Chief Executive Officers during
the restructuring of those companies. As part of the plan implemented by the
restructuring team, those companies were placed in bankruptcy, from which
they emerged in 1992 as Data Broadcasting Corporation, a provider of market
data services to the investment community. Mr. Tessler continues to serve as
Co-Chairman of the Board and Co-Chief Executive Officer of the restructured
company.
Martin L. Solomon, age 57, Vice Chairman and Secretary of the Company
since January 11, 1989, is a private investor. Mr. Solomon was employed as
a securities and portfolio analyst at Steinhardt Partners, an investment
firm, from 1985 through 1987. From 1988 through September 1990, he was the
Managing Partner and Director at Value Equity Associates I, Limited
Partnership, an investment firm. Mr. Solomon serves on the Board of
Directors of Xtra Corporation, a truck leasing company.
Wilmer J. Thomas, Jr., age 67, Vice Chairman of the Company since
January 11, 1989, is a private investor. Mr. Thomas served as Treasurer of
the Company from January 1989 to January 1994. Mr. Thomas serves on the
Boards of Directors of Moore Medical Corp., a pharmaceutical and surgical
supply company, and Oak Hills Sportswear Corp., a clothing company, and RCL
Capital Corp. a development-stage company whose business objective is to
acquire an operating company.
The executive officers of the Registrant, in addition to Messrs. Markin,
Tessler, Solomon and Thomas, are:
Jay H. Harris, age 57, who has been Executive Vice President and Chief
Operating Officer of the Company for more than the past five years and a Vice
President of Checker since 1991. Mr. Harris was a director of the Company
from 1978 until January 11, 1989.
18
Marlan R. Smith, age 50, who has been Treasurer of the Company since
January 1994 and Vice President and Treasurer of Checker since March 1988.
Prior to being elected Treasurer of the Company, he served as Assistant
Treasurer since January 1989.
Kevin J. Hanley, age 38, who has been Controller of the Company since
January 1994 and Secretary and Controller of Checker since December 1989 and
for more than 5 years prior thereto served as a senior manager with Ernst &
Young.
Willard R. Hildebrand, age 54, who was elected as President and Chief
Executive Officer of Great Dane effective January 1, 1992. Mr. Hildebrand
had served as President and Chief Operating Officer of Fiatallis North
America, Inc., a manufacturer of heavy construction and agricultural
equipment, for more than five years prior thereto.
Larry D. Temple, age 47, who has been Group Vice President of Checker
since September 1989. Mr. Temple served as Vice President of Manufacturing
from 1988 to 1989 and, prior thereto, as Assistant Vice President of
Manufacturing.
Jeffrey M. Feldman, age 43, nephew of David R. Markin, who has been
President of Yellow Cab since 1983.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION
The following table sets forth the 1993 annual compensation for the
Company's Chief Executive Officer and the five highest paid executive
officers, as well as the total compensation paid to each individual for the
Company's two previous fiscal years:
19
SUMMARY COMPENSATION TABLE
Name and Other Annual All Other
Principal Position Year Salary Bonus Compensation Compensation
------------------ ---- ------ ----- ------------ ------------
David R. Markin 1993 $1,230,000 $250,000 $246,519<F1> $2,249<F4>
President, Chief 1992 1,230,000 150,000 239,594<F1> 2,182<F4>
Executive Officer 1991 1,230,000 0 258,072<F1> 915<F4>
and Director
Jay H. Harris 1993 350,000 250,000 0 2,249<F4>
Executive Vice 1992 326,016 125,000 0 2,182<F4>
President and Chief 1991 302,032 50,000 0 915<F4>
Operating Officer
Jeffrey M. Feldman 1993 210,000 150,000 85,008<F2> 2,249<F4>
President of 1992 186,667 150,000 77,755<F2> 2,182<F4>
Yellow Cab 1991 138,906 150,000 53,328<F2> 659<F4>
Martin L. Solomon 1993 0 0 400,000<F3> 0
Vice Chairman and 1992 0 0 400,000<F3> 0
Secretary 1991 0 0 405,000<F3> 0
Allan R. Tessler 1993 0 0 400,000<F3> 0
Chairman of the 1992 0 0 400,000<F3> 0
Board 1991 0 0 405,000<F3> 0
Wilmer J. Thomas, Jr. 1993 0 0 400,000<F3> 0
Vice Chairman and 1992 0 0 400,000<F3> 0
Treasurer 1991 0 0 405,000<F3> 0
- ---------------
<FN>
<F1>Other compensation for Mr. Markin includes:
1993 1992 1991
------ ------ ------
Consulting fees $190,000 $190,000 $195,000
Life insurance 41,027 37,023 40,527
Automobile 8,125 5,100 15,400
Club dues 7,367 7,471 7,145
-------- -------- --------
$246,519 $239,594 $258,072
======== ======== ========
<F2>Other compensation for Mr. Feldman includes:
1993 1992 1991
------ ------ ------
Consulting fees $ 57,000 $ 57,000 $ 40,000
Life insurance 11,253 10,739 7,861
Automobile 1,748 1,537 1,481
Club dues 15,007 8,479 3,986
-------- -------- --------
$ 85,008 $ 77,755 $ 53,328
======== ======== ========
<F3>Consulting fees.
<F4>Matching contributions under the Partnership 401(k) plan.
20
COMPENSATION PURSUANT TO PLANS
GREAT DANE PENSION PLAN
Great Dane has in effect a defined benefit employee pension plan
entitled Retirement Plan For Great Dane Trailers, Inc. (the "Retirement
Plan") covering substantially all of its employees. Pension benefits are
subject to limitations imposed by the Internal Revenue Code of 1986, as
amended, and the Employee Retirement Income Security Act of 1974, as amended,
with respect to the annual amount of benefits provided by employer
contributions.
Effective as of July 1, 1988, the assets and the liabilities
attributable to active and former employees under the Amended and Restated
International Controls Corp. Pension Plan as of June 30, 1988 were
transferred to the Retirement Plan and the Company adopted the Retirement
Plan for the benefit of its employees. With respect to benefits accruing
after June 30, 1984, to a participant who was a participant under the Amended
and Restated International Controls Corp. Pension Plan as of June 30, 1988,
the following table shows the estimated annual benefits payable upon
retirement at age 65 under the plan to specified average annual compensation
and years of benefit service classifications. The following amounts would be
reduced by a Social Security offset:
Years of Benefit Service
--------------------------------------------------------
Average
Annual
Compensation 1 5 10 15 20
- ------------ --- --- ---- ---- ----
$100,000 $2,000 $10,000 $ 20,000 $ 30,000 $ 40,000
150,000 3,000 15,000 30,000 45,000 60,000
200,000 4,000 20,000 40,000 60,000 80,000
250,000 5,000 25,000 50,000 75,000 100,000
300,000 5,000 25,000 60,000 90,000 115,641*
400,000 5,000 25,000 80,000 115,641* 115,641*
500,000 5,000 25,000 100,000 115,641* 115,641*
- --------------------
<FN>
*Maximum permitted in 1993
Mr. Harris has an aggregate of 24 years of benefit service under the
Retirement Plan (8 years) and the Amended and Restated International Controls
Corp. Pension Plan (16 years) and will receive benefits of approximately
$74,000 per year at age 65.
PARTNERSHIP PENSION AND EXCESS BENEFIT PLANS
The Partnership maintains a defined benefit employee pension plan
entitled Checker Motors Pension Plan (the "Pension Plan") covering
substantially all of its non-union employees, and, effective January 1, 1992,
the employees of the Company.
21
The Partnership also maintains the Checker Motors Co., L.P. Excess
Benefit Retirement Plan (the "Excess Benefit Plan"). An employee of the
Partnership will become a participant in the Excess Benefit Plan if the
benefits which would be payable under the Pension Plan are not fully provided
thereunder because of the annual maximum benefit limitations of Section 415
of the Internal Revenue Code of 1986, as amended. The amount that the
participant is entitled to receive under the Excess Benefit Plan is an amount
equal to the amount that would have been payable under the Pension Plan if
Section 415 did not apply, minus the amount that is actually payable under
the Pension Plan. At the present time, David R. Markin and Jeffrey M.
Feldman are the only individuals named above who would receive benefits under
the Excess Benefit Plan. Considered compensation under the Excess Benefit
Plan is limited to $300,000.
Set forth below are the estimated annual benefits for participants in
the Pension Plan (including benefits payable under the Excess Benefit Plan)
who have been employed by the Partnership and its predecessors for the
indicated number of years prior to retirement, assuming retirement at age 65
in 1993:
Average
Compensation Estimated Annual Benefits for Years of Service Indicated
(as defined in --------------------------------------------------------
plan) 10 20 30 40 50
------------- ---- ---- ---- ---- ----
$100,000 $ 13,950 $ 28,756 $ 47,024 $ 66,159 $ 75,870
150,000 21,450 46,256 74,524 103,659 118,370
200,000 28,950 63,756 102,024 141,159 160,870
250,000 36,450 81,256 129,524 178,659 203,370
300,000 43,950 98,756 157,024 216,159 245,870
400,000 43,950 98,756 157,024 216,159 245,870
500,000 43,950 98,756 157,024 216,159 245,870
The above benefit projections were prepared on the assumption that the
participant made participant contributions to the Pension Plan for all years
in which he was eligible to contribute. The benefit projection would be
reduced by a Social Security offset.
For those executive officers named above, the following are credited
years of service under the Pension Plan and Excess Benefit Plans and 1993
salary covered by the Pension Plan:
Expected 1993 Salary
Credited Credited Covered
Years Year of by
of Service Pension
Service at 65 Plan
------- ------- -------
David R. Markin 39 41 $235,840
Jay H. Harris 2 10 235,840
Jeffrey M. Feldman 15 37 235,840
22
SALARY CONTINUATION PLAN
Checker entered into Stated Benefit Salary Continuation Agreements (the
"Agreements") with certain officers and employees (the "Salary Plan")
pursuant to which such participants will receive benefits upon attaining age
65 (or their beneficiaries will receive benefits upon their death prior to or
within 120 months after such executives or employees attain age 65).
Checker's obligations pursuant to the Salary Plan were assumed by the
Partnership in 1986.
For those executive officers named above, the following table sets forth
the benefits payable pursuant to the Salary Plan:
Annual
Survivorship
Benefit
Annual Payable Total
Benefit Total Upon Survivorship
Payable Benefit Death Benefit
Upon Payable Prior to Payable
Attaining Over Attaining Over Three
Age 65 the Years Age 65 Years
--------- --------- --------- ----------
David R. Markin $240,000 $2,400,000 $368,000 $1,104,000
Jeffrey M. Feldman 19,950 199,500 79,800 239,400
COMPENSATION OF DIRECTORS
The directors did not receive any fees for their services as directors
in 1993. See "Compensation Committee Interlocks and Insider Participation."
EMPLOYMENT AGREEMENTS
The Partnership, as the assignee of Checker, is party to an Amended and
Restated Employment Agreement dated as of November 1, 1985, as further
amended, with David R. Markin pursuant to which Mr. Markin is to serve as
President, Chief Executive Officer and Chief Operating Officer of the
Partnership until March 31, 1996, subject to extension (the "Termination
Date"), at a minimum salary of $600,000 per annum, together with the payment
of certain insurance premiums, the value of which have been included in the
Summary Compensation Table above, and the beneficiaries of which have been
designated by Mr. Markin. Mr. Markin continues to be eligible to participate
in profit sharing, pension or other bonus plans of the Partnership. Pursuant
to the Amended and Restated Employment Agreement, in the event of Mr.
Markin's death, the Company shall pay Mr. Markin's estate the compensation
which would otherwise be payable to him for the period ending on the last day
of the month in which death occurs. In addition, the Company shall pay to
Mr. Markin's beneficiaries deferred compensation from the date of his death
through the Termination Date in an annual amount equal to one-third of his
base salary at the date of his death. In the event of termination of the
Amended and Restated Employment Agreement for any reason other than cause,
disability or death, Mr. Markin shall continue to serve as a consultant to
the Company for a period of five years, for which he shall receive additional
23
compensation in the amount of $50,000 per annum. The Partnership has agreed
to indemnify Mr. Markin from certain liabilities arising out of his service
to the Partnership, except for liabilities resulting from his gross
negligence or willful misconduct. Effective January 1, 1994, Mr. Markin and
the Company memorialized in writing their agreement, pursuant to which Mr.
Markin has been compensated by the Company since January 11, 1989, on
substantially the same terms as are set forth above.
The Company entered into an employment agreement as of July 1, 1992,
with Jay H. Harris pursuant to which Mr. Harris serves as Executive Vice
President and Chief Operating Officer of the Company until June 30, 1994,
subject to extension, at a minimum salary of $350,000 per annum, an incentive
bonus to be determined by the Board of Directors, and such other fringe
benefits and plans as are available to other executives of the Company. Upon
the happening of certain events, including a change in control (as defined
therein) of ICC or retirement after June 30, 1994, Mr. Harris is entitled to
compensation in an amount equal to the greater of (a) five percent of the
increase in the Company's retained earnings, subject to certain adjustments,
during the period commencing on March 31, 1992, and ending on the last day of
the month preceding the event which triggers the payment (the "Termination
Payment") and (b) 2.99 times the then base. If Mr. Harris were to leave the
Company before July 1, 1994, or if he were to die or become disabled, he or
his estate would receive the greater of (a) one year's base compensation or
(b) the Termination Payment. Payments in either case would be made over a
period of time, the length of which would be dependent on the amount due to
Mr. Harris. Mr. Harris has agreed to serve as a consultant to the Company
during the first year after termination for no compensation beyond his
expenses incurred in connection with rendering such services. The Company
has agreed to indemnify Mr. Harris to the full extent allowed by law.
Checker has guaranteed the Company's obligations.
The Partnership is party to an Amended and Restated Employment Agreement
dated as of June 1, 1992, with Jeffrey Feldman pursuant to which Mr. Feldman
serves as President of the Partnership's Vehicular Operations division until
February 1, 1996, subject to extension (the "Termination Date"), at a minimum
salary of $200,000 per annum, together with certain insurance premiums, the
value of which have been included in the Summary Compensation Table above,
and the beneficiaries of which have been designated by Mr. Feldman. Mr.
Feldman is eligible to participate in profit sharing, pension or other bonus
plans implemented by the Vehicular Operations division of the Partnership.
Pursuant to the Amended and Restated Employment Agreement, in the event of
Mr. Feldman's death, the Partnership shall pay Mr. Feldman's estate the
amount of compensation which would otherwise be payable to him for the period
ending on the last day of the month in which death occurs. In addition, the
Partnership shall pay to Mr. Feldman's estate deferred compensation from the
date of his death to the Termination Date in an annual amount equal to one-
third of his base salary at the date of his death. In the event of the
termination of the Amended and Restated Employment Agreement for any reason
other than cause, disability or death, Mr. Feldman shall continue to serve as
a consultant to the Partnership for a period of five years (if terminated by
Mr. Feldman) or seven years if terminated by the Partnership, for which he
shall receive compensation in the amount of $75,000 per annum. The
Partnership has agreed to indemnify Mr. Feldman from certain liabilities
arising out of his service to the Partnership, except for liabilities
resulting from his gross negligence or willful misconduct.
24
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Each of Messrs. Markin, Solomon, Tessler and Thomas is an executive
officer of the Company and participates, as a director, in the deliberations
concerning executive officer compensation. During 1993, Mr. Markin served on
the compensation committee of Enhance Financial Services Group Inc.,
Ameriscribe Corp. and Data Broadcasting Corporation and Mr. Tessler served as
an executive officer of each of these companies.
As of December 31, 1993, Country holds $0.9 million principal amount of
Enhance Financial Services Group, Inc., 7% Senior Notes due December 1, 1996.
During 1993, the Company used, on a month-to-month basis, an airplane
owned by a corporation of which Mr. Tessler is the sole shareholder. The
Company pays $60,000 per month for such use.
Each of Messrs. Markin, Solomon, Tessler and Thomas provides consulting
services to Yellow Cab and each receives for such services (commencing in
January 1988) $10,000 per month. Messrs. Solomon, Thomas and Tessler also
provide consulting services (a) to Checker for which they each receive
monthly fees of $5,000 (commencing in January 1988) and (b) to Country for
which they each receive monthly fees of approximately $18,300. Mr. Markin
serves as a consultant to Chicago AutoWerks, a division of the Partnership,
for which he receives monthly fees of approximately $1,200 (commencing in
January 1988), and to Country, for which he receives monthly fees of
approximately $4,600.
Until March 1, 1993, Mr. Tessler was of counsel to Shea & Gould, a law
firm retained by the Company for certain matters.
Frances Tessler, the wife of Allan R. Tessler, is employed by Smith
Barney Shearson which executes trades for Country's investment portfolio.
During 1993, Mrs. Tessler received for her services approximately $78,000 of
the commissions paid to Smith Barney Shearson.
On September 24, 1992, American Country Financial Services Corp.
("AFSC"), a subsidiary of Country, purchased from The Mid City National Bank
of Chicago the promissory note dated July 30, 1992, made by King Cars, Inc.
("King Cars") in the principal amount of $381,500 plus accrued interest in
the amount of $3,560. On September 24, 1992, the King Cars note purchased by
AFSC was paid and a new note dated September 24, 1992 and payable on January
30, 1993, in the principal amount of $398,482 bearing interest at the rate of
6.5% per annum was executed and delivered by King Cars to AFSC. On January
30, 1993, the note was renewed in the principal amount of $407,691 with a
maturity date of May 30, 1993. On November 30, 1993, the note, then in the
principal amount of $416,524, was once again renewed, with a maturity date of
December 31, 1994. King Cars is owned by Messrs. Markin, Tessler, Solomon,
Thomas and Feldman. King Cars is a party to an agreement dated December 15,
1992, with Yellow Cab pursuant to which Yellow Cab purchases from King Cars
display frames for installation in its taxicabs and King Cars furnishes
Yellow Cab advertising copy for insertion into the frames. King Cars
receives such advertising copy as an agent in Chicago for an unrelated
company which is in the business of selling and arranging for local and
national advertising. Of the revenues generated from such advertising, 30%
will be retained by King Cars and the balance will be delivered to Yellow Cab
until such time as Yellow Cab has recovered costs advanced by it for the
installation of advertising frames in 500 of its taxicabs (approximately
25
$78,000). The terms to Yellow Cab are the same or more favorable than those
offered by King Cars to unrelated third parties.
Each of Messrs. Markin, Solomon, Tessler and Thomas received interest
payments of $704,795 in 1993 pursuant to the terms of the Company's senior
notes held by them (See Note G of the Notes to Consolidated Financial
Statements--December 31, 1993).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Common Stock, which is the only class of stock of the Company, is
owned as follows:
No. of Shares of Common Stock Percent of
Name of Record and Beneficially Owned Class
- ---- -------------------------------- ----------
David R. Markin 2,936,927.5 32.5
Martin L. Solomon 2,033,257.5 22.5
Allan R. Tessler 2,033,257.5 22.5
Wilmer J. Thomas, Jr. 2,033,257.5 22.5
The address of each of the shareholders is c/o International Controls
Corp., 2016 North Pitcher Street, Kalamazoo, Michigan 49007.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Jeffrey M. Feldman is the nephew of David R. Markin.
The Company received revenues of approximately $4.4 million in 1993 from
Checker Taxi Association, an independent affiliation of medallion owners
including approximately 1,100 independent owners, which amount includes
reimbursement of certain management, general and administrative costs.
Checker has guaranteed certain of Checker Taxi Association's
obligations. The outstanding principal balance of these obligations was
approximately $0.7 million, as of December 31, 1993.
The Partnership has borrowed $2.5 million from Country, which loan is
secured by certain of the Partnership's property.
See also "Compensation Committee Interlocks and Insider Participation."
26
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1 and 2. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES:
The following consolidated financial statements and consolidated
financial statement schedules of International Controls Corp. and
subsidiaries and the report thereon of independent auditors are filed as part
of this Annual Report on Form 10-K and are incorporated by reference in Item
8:
A. Report of Independent Auditors.
B. Consolidated Financial Statements.
Consolidated Balance Sheets as of December 31, 1993 and 1992.
Consolidated Statements of Shareholders' Deficit for the years
ended December 31, 1993, 1992 and 1991.
Consolidated Statements of Operations for the years ended
December 31, 1993, 1992 and 1991.
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991.
Notes to Consolidated Financial Statements - December 31, 1993.
C. Consolidated Financial Statement Schedules.
Schedule I - Marketable Securities - Other Investments
Schedule II - Amounts Receivable from Related Parties and
Underwriters, Promoters and Employees Other Than
Related Parties
Schedule III - Condensed Financial Information of Registrant
Schedule IV - Indebtedness of and to Related Parties - Not
Current
Schedule VIII - Valuation and Qualifying Accounts
Schedule IX - Short-Term Borrowings
Schedule X - Supplemental Income Statement Information
Schedule XIV - Supplemental Information Concerning Property-
Casualty Insurance Operations
See the accompanying Index to Financial Statements and Financial
Statement Schedules Covered by Report of Independent Auditors appearing after
the signature page to this Annual Report on Form 10-K.
3. See the accompanying Index to Exhibits which precedes the Exhibits
filed with this Annual Report on Form 10-K.
27
(b) REPORTS ON FORM 8-K:
None
(c) EXHIBITS:
See the accompanying Index to Exhibits which precedes the Exhibits filed
with this Annual Report on Form 10-K.
(d) FINANCIAL STATEMENT SCHEDULES REQUIRED BY REGULATION S-X:
See the accompanying Index to Financial Statements and Financial
Statement Schedules Covered by Report of Independent Auditors which
appears after the signature page to this Annual Report on Form 10-K.
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
March 10, 1994 INTERNATIONAL CONTROLS CORP.
By: /s/ David R. Markin
------------------------------------------
David R. Markin
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons, including at least a
majority of the members of its Board of Directors, on behalf of Registrant
and in the capacities and on the dates indicated.
/s/ Allan R. Tessler Chairman of the Board March 10, 1994
- --------------------------
Allan R. Tessler
/s/ David R. Markin President, Chief Executive March 10, 1994
- -------------------------- Officer and Director
David R. Markin
/s/ Jay H. Harris Executive Vice President and March 10, 1994
- -------------------------- Chief Operating Officer
Jay H. Harris
/s/ Marlan R. Smith Treasurer (Principal March 10, 1994
- -------------------------- Financial Officer and
Marlan R. Smith Principal Accounting Officer)
/s/ Martin L. Solomon Vice Chairman of the Board March 10, 1994
- -------------------------- and Secretary
Martin L. Solomon
/s/ Wilmer J. Thomas, Jr. Vice Chairman of the Board March 10, 1994
- --------------------------
Wilmer J. Thomas, Jr.
29
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
COVERED BY REPORT OF INDEPENDENT AUDITORS
The following consolidated financial statements of International Controls
Corp. and subsidiaries are submitted herewith in response to Item 8:
Page
----
- - Report of Independent Auditors F-1
- - Consolidated Balance Sheets as of December 31, 1993 and 1992 F-2
- - Consolidated Statements of Shareholders' Deficit for the
Years Ended December 31, 1993, 1992 and 1991 F-4
- - Consolidated Statements of Operations for the Years Ended
December 31, 1993, 1992 and 1991 F-5
- - Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993, 1992 and 1991 F-7
- - Notes to Consolidated Financial Statements--December 31, 1993 F-9
The following consolidated financial statement schedules of International
Controls Corp. and subsidiaries are submitted herewith in response to Item
14(d):
Schedule I - Marketable Securities - Other Investments S-1
Schedule II - Amounts Receivable from Related Parties and Underwriters,
Promoters and Employees Other Than Related Parties S-8
Schedule III - Condensed Financial Information of Registrant S-9
Schedule IV - Indebtedness of and to Related Parties - Not Current S-12
Schedule VIII - Valuation and Qualifying Accounts S-13
Schedule IX - Short-Term Borrowings S-15
Schedule X - Supplementary Income Statement Information S-16
Schedule XIV - Supplemental Information Concerning Property-Casualty
Insurance Operations S-17
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been
omitted.
F-1
REPORT OF INDEPENDENT AUDITORS
Board of Directors
International Controls Corp.
We have audited the accompanying consolidated balance sheets of International
Controls Corp. and subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of operations, shareholders' deficit and cash
flows for each of the three years in the period ended December 31, 1993. Our
audits also included the financial statement schedules listed in the Index at
Item 14(a). These financial statements and schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedules 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 International
Controls Corp. and subsidiaries at December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
As discussed in Notes I and K to the consolidated financial statements, the
Company changed its methods of accounting for postretirement benefits other
than pensions and income taxes in the year ended December 31, 1993.
/s/ Ernst & Young
Kalamazoo, Michigan
March 1, 1994
F-2
CONSOLIDATED BALANCE SHEETS
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(dollars in thousands, except share data)
December 31,
1993 1992
-------- --------
ASSETS:
Cash and cash equivalents $ 40,078 $ 42,199
Accounts receivable, less allowance for doubtful
accounts of $748 (1992--$623) (Note G) 75,701 64,115
Current portion of finance lease receivables 764 2,352
Inventories (Notes D and G) 94,112 71,861
Other current assets 11,059 8,897
---------- ----------
Total current assets 221,714 189,424
Property, plant and equipment, net (Notes E,
G and H) 122,355 119,492
Insurance Subsidiary's investments (Note F) 90,838 84,616
Noncurrent finance lease receivables
(Notes C and H) 575 2,863
Insurance Subsidiary's reinsurance receivable 11,378 17,366
Cost in excess of net assets acquired, net of
accumulated amortization of $6,252
(1992--$5,002) 43,743 44,993
Trademark, net of accumulated amortization
of $1,750 (1992--$1,400) 11,696 12,046
Other assets 15,037 22,963
---------- ----------
Total assets $ 517,336 $ 493,763
========== ==========
F-3
December 31,
1993 1992
-------- --------
LIABILITIES AND SHAREHOLDERS' DEFICIT:
Accounts payable $ 77,876 $ 56,684
Notes payable (Note G) 5,000 5,000
Income taxes payable (Note K) 7,726 6,739
Accrued compensation 15,838 13,729
Accrued interest 11,746 11,596
Other accrued liabilities 38,071 28,833
Current portion of long-term debt 14,321 15,752
---------- ----------
Total current liabilities 170,578 138,333
Long-term debt, excluding current portion
(Note G):
Shareholders 30,000 30,000
Other 246,952 259,616
---------- ----------
276,952 289,616
Insurance Subsidiary's unpaid losses and loss
adjustment expenses 71,179 75,780
Unearned insurance premiums 9,547 10,463
Deferred income taxes 9,803 11,187
Postretirement benefits other than pensions
(Note I) 49,609 ---
Other noncurrent liabilities 39,053 33,654
Minority interest (Notes H and J) 40,132 41,026
---------- ----------
Total liabilities 666,853 600,059
Shareholders' deficit (Notes A, F and G):
Common stock, par value $0.01:
Authorized 15,000,000 shares
Outstanding 9,036,700 shares 90 90
Additional paid-in capital 14,910 14,910
Retained earnings (deficit) (36,217) 7,045
Unrealized appreciation on Insurance Subsidiary's
investments in equity securities 73 32
Notes receivable from shareholders (625) (625)
Amount paid in excess of Checker's net assets (127,748) (127,748)
---------- ----------
Total shareholders' deficit (149,517) (106,296)
Commitments and contingencies (Note H)
---------- ----------
Total liabilities and
shareholders' deficit $ 517,336 $ 493,763
========== ==========
See notes to consolidated financial statements.
F-4
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(dollars in thousands)
Unrealized
Appreciation Amount
(Depreciation) Notes Paid in
on Receivable Excess of
Additional Investments from Checker's
Common Paid-In Retained in Equity Share- Net Assets
Stock Capital Earnings Securities holders (Note A)
------ ---------- -------- ---------- ---------- ----------
Balances at January 1, 1991 $ 90 $14,910 $ 10,418 $(1,790) $(625) $(127,748)
Unrealized appreciation on
investment in equity
securities -- --- --- 2,189 --- ---
Net income -- --- 4,182 --- --- ---
---- ------- --------- -------- ------ ----------
Balances at December 31, 1991 90 14,910 14,600 399 (625) (127,748)
Unrealized depreciation on
investment in equity
securities -- --- --- (367) --- ---
Net loss -- --- (7,555) --- --- ---
---- ------- --------- -------- ------ ----------
Balances at December 31, 1992 90 14,910 7,045 32 (625) (127,748)
Unrealized appreciation on
investment in equity
securities -- --- --- 41 --- ---
Net loss -- --- (43,262) --- --- ---
---- ------- --------- -------- ------ ----------
Balances at December 31, 1993 $ 90 $14,910 $(36,217) $ 73 $(625) $(127,748)
==== ======= ========= ======== ====== ==========
See notes to consolidated financial statements.
F-5
CONSOLIDATED STATEMENTS OF OPERATIONS
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(in thousands, except per share amounts)
Year Ended December 31,
1993 1992 1991
-------- -------- --------
Revenues:
Trailer manufacturing and distribution $ 711,862 $ 536,336 $ 400,196
Automotive products manufacturing 127,925 112,631 84,401
Vehicular operations including rental
income of $38,360 (1992--$37,382;
1991--$39,946) 42,103 40,580 43,527
Insurance premiums earned 27,436 27,186 27,142
---------- ---------- ----------
909,326 716,733 555,266
Cost of revenues:
Cost of sales (728,471) (561,546) (428,949)
Cost of vehicular operations (30,916) (30,120) (30,801)
Cost of insurance operations (19,418) (19,204) (20,793)
---------- ---------- ----------
(778,805) (610,870) (480,543)
---------- ---------- ----------
Gross profit 130,521 105,863 74,723
Operating expenses:
Selling, general and administrative
expense (83,176) (76,877) (72,032)
Interest expense (41,614) (42,726) (47,425)
Interest income 7,396 8,895 11,634
Other income (expense), net 3,494 (2,023) (1,078)
Special charge--Note H (7,500) --- ---
---------- ---------- ----------
Income (loss) before minority equity,
income taxes, extraordinary items and
accounting changes 9,121 (6,868) (34,178)
Minority equity (Note J) --- --- 1,931
---------- ---------- ----------
Income (loss) before income taxes,
extraordinary items and
accounting changes 9,121 (6,868) (32,247)
Income tax benefit (expense) (Note K) (5,757) (687) 5,241
---------- ---------- ----------
Income (loss) before extraordinary items
and accounting changes 3,364 (7,555) (27,006)
Extraordinary items (Note L) --- --- 31,188
---------- ---------- ----------
Income (loss) before accounting changes 3,364 (7,555) 4,182
Accounting changes (Notes I and K) (46,626) --- ---
---------- ---------- ----------
Net income (loss) $ (43,262) $ (7,555) $ 4,182
========== ========== ==========
F-6
CONSOLIDATED STATEMENTS OF OPERATIONS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(in thousands, except per share amounts)
Year Ended December 31,
1993 1992 1991
-------- -------- --------
Weighted average number of shares
used in per share computations 9,037 9,037 9,037
========== ========== ==========
Income (loss) per share:
Loss before extraordinary items
and accounting changes $ 0.37 $ (0.84) $ (2.99)
Extraordinary items (Note L) --- --- 3.45
Accounting changes (Notes I and K) (5.16) --- ---
---------- ---------- ----------
Net income (loss) per share $ (4.79) $ (0.84) $ 0.46
========== ========== ==========
See notes to consolidated financial statements.
F-7
CONSOLIDATED STATEMENTS OF CASH FLOWS
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(dollars in thousands)
Year Ended December 31,
1993 1992 1991
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (43,262) $ (7,555) $ 4,182
Adjustment to reconcile net income
(loss) to net cash provided by
operating activities:
Accounting changes 46,626 --- ---
Extraordinary items --- --- (31,188)
Depreciation and amortization 23,295 21,054 20,931
Deferred income tax expense (benefit) (8,512) (4,311) 3,288
Amortization of cost in excess of net
assets acquired 1,250 1,250 1,250
Amortization of debt discount 1,372 1,181 1,045
Net loss on sale of property, plant
and equipment 207 217 275
Investment losses (gains) (1,079) (690) 1,646
Decrease in minority equity --- --- (1,992)
Other noncash charges 7,562 6,386 3,980
Changes in operating assets and
liabilities:
Accounts receivable (11,970) (12,788) 7,647
Finance lease receivables 4,408 5,131 7,213
Inventories (22,251) (7,820) (784)
Insurance Subsidiary's reinsurance
receivable 5,988 (5,634) 11,731
Unbilled tooling charges --- --- 35,181
Other assets (5,309) --- 536
Accounts payable 21,193 8,281 (1,129)
Income taxes 824 4,489 (17,398)
Unpaid losses and loss adjustment
expenses (4,601) 5,046 2,204
Unearned insurance premiums (917) 4,673 (347)
Postretirement benefits other than
pension 4,497 --- ---
Other liabilities 11,359 6,288 (10,460)
---------- ---------- ----------
NET CASH FLOW PROVIDED BY OPERATING
ACTIVITIES 30,680 25,198 37,811
F-8
CONSOLIDATED STATEMENTS OF CASH FLOWS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(dollars in thousands)
Year Ended December 31,
1993 1992 1991
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment $ (20,006) $(17,549) $ (16,457)
Proceeds from disposal of property,
plant and equipment and other
productive assets 2,599 2,783 2,685
Purchase of investments (64,052) (32,190) (19,228)
Proceeds from sale of investments 65,019 31,617 18,732
---------- ---------- ----------
NET CASH FLOW USED IN INVESTING
ACTIVITIES (16,440) (15,339) (14,268)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 2,500 32,090 20,530
Repayments of borrowings (17,967) (39,772) (43,610)
Return of limited partner's capital (894) (1,035) (821)
---------- ---------- ----------
NET CASH FLOW USED IN FINANCING
ACTIVITIES (16,361) (8,717) (23,901)
---------- ---------- ----------
Increase (decrease) in cash and cash
equivalents (2,121) 1,142 (358)
Beginning cash and cash equivalents 42,199 41,057 41,415
---------- ---------- ----------
ENDING CASH AND CASH EQUIVALENTS $ 40,078 $ 42,199 $ 41,057
========== ========== ==========
See notes to consolidated financial statements.
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
December 31, 1993
NOTE A--ORGANIZATION
The Company has two operating subsidiaries, Great Dane Trailers, Inc.
("Great Dane") and Checker Motors Corporation ("Checker"). During 1989,
the Company purchased all of the common stock of Checker, the general
partner of Checker Motors Co., L.P. (the "Partnership), a Delaware limited
partnership (the "Checker acquisition").
Immediately after the Checker acquisition, substantially all of Checker's
former shareholders purchased, through Checker Holding Corp. ("Holding"),
all of the outstanding common stock of the Company (the "Holding buyout").
Holding was created solely for the purpose of acquiring the stock of the
Company and was subsequently merged into the Company. The Holding buyout
has been accounted for as if Checker acquired the Company (a "reverse
acquisition"), since there was no significant change in control of Checker.
Under generally accepted accounting principles for reverse acquisitions,
the net assets of Checker acquired in the Checker acquisition cannot be
revalued to estimated fair value. Accordingly, the $127.7 million excess
of the amount paid over the historical book value of Checker's net assets
has been accounted for as a separate component reducing shareholders'
equity and is not subject to amortization. The fair value of Checker's net
assets, as estimated by management, is significantly greater than
historical book value, but no appraisal of fair value is available.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of International Controls Corp. and its subsidiaries,
including a wholly-owned trailer leasing company, other greater than 50%
owned companies, the Partnership and the Partnership's wholly-owned
subsidiaries, including American Country Insurance Company ("Insurance
Subsidiary"). All significant intercompany accounts and transactions have
been eliminated.
CASH EQUIVALENTS: The Company considers all highly liquid investments,
other than Insurance Subsidiary investments, with a maturity of three
months or less when purchased to be cash equivalents.
INVENTORIES: Inventories are stated at the lower of cost or market. The
cost of inventories is determined principally on the last-in, first-out
("LIFO") method.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at
cost. Depreciation is provided based on the assets' estimated useful
lives, principally by the straight-line method.
Estimated depreciable lives are as follows:
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued. . .
Buildings 10-40 years
Transportation equipment 2-6 years
Machinery, equipment, furniture and fixtures 3-12 years
INTANGIBLE ASSETS: Intangible assets, principally cost in excess of net
assets acquired, noncompete agreements and a trademark, are being amortized
on the straight-line basis over periods of 4 to 40 years.
MINORITY INTEREST: Minority interest represents the limited partner's
allocable share of the Partnership's net assets (see Notes H and J) and the
limited partner's allocable share of net assets of South Charleston
Stamping & Manufacturing Company ("SCSM").
REVENUE RECOGNITION: Revenues from sales of trailers that are manufactured
in response to customers' orders are recorded when such products are
completed and invoiced. Finance income is recognized as other income over
the term of the finance leases by applying the simple interest method to
scheduled monthly collections. Rental income from vehicle leases is
recognized as earned. Vehicles are generally leased on a daily or weekly
basis to unaffiliated operators. Insurance Subsidiary premiums are
recognized as income ratably over the period covered by the policies.
Unearned premium reserves are calculated on the monthly pro-rata basis.
Realized gains and losses on investments are determined on a specific
identification basis and are included in the determination of net income.
DEBT ISSUE EXPENSE: Expenses incurred in connection with the issuance of
debt are capitalized and amortized as interest expense over the life of the
debt.
LOSSES AND LOSS ADJUSTMENT EXPENSES: The Insurance Subsidiary's liability
for unpaid losses and loss adjustment expenses represents an estimate of
the ultimate net costs of all losses which are unpaid at the balance sheet
dates, and is determined using case-basis evaluations and statistical
analysis. These estimates are continually reviewed and any adjustments
which become necessary are included in current operations. Since the
liability is based on estimates, the ultimate settlement of losses and the
related loss adjustment expenses may vary from the amounts included in the
consolidated financial statements.
INSURANCE SUBSIDIARY REINSURANCE: During 1993, the Company adopted the
provisions of SFAS No. 113, "Accounting and Reporting for Reinsurance of
Short Duration and Long Duration Contracts" ("SFAS No. 113"). Because of
the type of insurance contracts the Company's Insurance Subsidiary
provides, the adoption of this statement had no impact on earnings;
however, it requires the disaggregation of various balance sheet accounts.
For financial reporting purposes, the 1992 balance sheet and the 1992 and
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued. . .
1991 statements of cash flows have been restated as if this statement were
adopted as of the beginning of the earliest period presented.
RECLASSIFICATION: Certain 1992 and 1991 amounts have been reclassified to
conform to the 1993 presentation.
NOTE C--TRAILER LEASING OPERATIONS
Great Dane, through a wholly-owned leasing subsidiary, leases trailers
under operating and sales-type leases ("finance lease receivables"). The
following is a summary of the components of the subsidiary's net investment
in finance lease receivables (dollars in thousands):
December 31,
1993 1992
-------- --------
Minimum lease payments receivable $ 1,678 $ 6,563
Less: Unearned income (180) (669)
Allowance for doubtful accounts (159) (679)
---------- ----------
1,339 5,215
Less amounts reflected as current (764) (2,352)
---------- ----------
Noncurrent portion $ 575 $ 2,863
========== ==========
Minimum lease payments are receivable as follows: $1.0 million in 1994,
$0.3 million in 1995 and $0.4 million in 1996.
Trailers subject to operating leases are included in transportation
equipment in the accompanying consolidated balance sheets. The cost and
accumulated depreciation of such trailers were $0.5 million and $0.2
million, respectively, at December 31, 1993, and $1.5 million and $0.6
million, respectively, at December 31, 1992.
NOTE D--INVENTORIES
Inventories are summarized below (dollars in thousands):
December 31,
1993 1992
-------- --------
Raw materials $ 53,105 $ 44,005
Work-in-process 10,956 8,803
Finished goods 30,051 19,053
---------- ----------
$ 94,112 $ 71,861
========== ==========
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE D--INVENTORIES--Continued. . .
Inventories would not differ materially if the first-in, first-out costing
method were used for inventories costed by the LIFO method.
NOTE E--PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are summarized below (dollars in thousands):
December 31,
1993 1992
-------- --------
Land and buildings $ 54,167 $ 46,131
Transportation equipment 32,830 37,392
Machinery, equipment, furniture and fixtures 125,067 106,261
---------- ----------
212,064 189,784
Less accumulated depreciation and amortization (89,709) (70,292)
---------- ----------
$ 122,355 $ 119,492
========== ==========
NOTE F--INVESTMENTS
Insurance Subsidiary investments, which are generally reserved for
Insurance Subsidiary operations, are as follows (dollars in thousands):
December 31,
1993 1992
-------- --------
Fixed maturities (bonds and notes)--at cost,
adjusted for amortization of premium or
discount and other than temporary declines
in market value $ 77,229 $ 75,950
Equity securities (common and non-redeemable
preferred stocks)--at current market value
(cost $13,536 in 1993 and $8,634 in 1992) 13,609 8,666
---------- ----------
$ 90,838 $ 84,616
========== ==========
The amortized cost, gross unrealized gains and losses and estimated market
values of fixed-maturity investments held by the Insurance Subsidiary as of
December 31, 1993, are as follows (dollars in thousands):
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE F--INVESTMENTS--Continued. . .
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
U.S. Treasury securities
and obligations of U.S.
Government corporation
and agencies $ 7,276 $ 283 $ --- $ 7,559
Obligations of states and
political subdivisions 21,984 561 --- 22,545
Mortgage-backed securities 2,873 156 --- 3,029
Corporate and other debt
securities 45,096 3,119 103 48,112
-------- -------- -------- --------
$ 77,229 $ 4,119 $ 103 $ 81,245
======== ======== ======== ========
The amortized cost and estimated market value of fixed-maturity investments
at December 31, 1993, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
Estimated
Amortized Market
Cost Value
--------- ---------
Due in one year or less $ 11,998 $ 12,209
Due after one year through five years 24,918 25,880
Due after five years through ten years 21,989 23,313
Due after ten years 15,451 16,814
---------- ----------
74,356 78,216
Mortgage-backed securities 2,873 3,029
---------- ----------
$ 77,229 $ 81,245
========== ==========
Proceeds from sales of fixed-maturity investments were $57.2 million for
1993 and $21.7 million for 1992. Gross gains of $1.2 million and gross
losses of $0.2 million were realized during 1993 and gross gains of $0.6
million and no gross losses were realized on those sales during 1992.
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE F--INVESTMENTS--Continued. . .
Bonds with an amortized cost of $2.2 million at December 31, 1993, were on
deposit to meet certain regulatory requirements.
Realized gains (losses) for 1993, 1992 and 1991, including other than
temporary declines in market value and unrealized appreciation
(depreciation) on fixed maturities and equity security investments of the
Insurance Subsidiary, are summarized as follows (dollars in thousands):
Fixed Equity
Maturities Securities Total
---------- ---------- ----------
1993
Realized gains $ 983 $ 95 $ 1,078
Unrealized appreciation --- 41 41
---------- ---------- ----------
$ 983 $ 136 $ 1,119
========== ========== ==========
1992
Realized gains $ 34 $ 656 $ 690
Unrealized depreciation --- (367) (367)
---------- ---------- ----------
$ 34 $ 289 $ 323
========== ========== ==========
1991
Realized losses $ (897) $ (730) $ (1,627)
Unrealized appreciation --- 1,847 1,847
---------- ---------- ----------
$ (897) $ 1,117 $ 220
========== ========== ==========
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE G--BORROWINGS
Long-term debt is summarized below (dollars in thousands):
December 31,
1993 1992
-------- --------
12-3/4% Senior Subordinated Debentures less
debt discount of $11,124 (1992--$12,330) $ 120,916 $ 119,710
14-1/2% Subordinated Discount Debentures less
debt discount of $6,531 (1992--$6,697) 54,816 54,650
Notes payable to shareholders 30,000 30,000
Great Dane term loan payable 21,511 26,167
Great Dane Revolving credit line 17,132 17,620
Partnership term loan payable 22,500 28,500
Equipment term loan 5,500 7,300
Economic Development term loan 10,909 11,389
Installment notes 979 5,079
Other debt 7,010 4,953
---------- ----------
291,273 305,368
Less current portion (14,321) (15,752)
---------- ----------
$ 276,952 $ 289,616
========== ==========
Interest on the $132 million face value of 12-3/4% Senior Subordinated
Debentures is payable semiannually at the stated rate. The recorded debt
discount is being amortized as interest expense over the expected life of
the debentures using an imputed interest rate of approximately 15%
compounded semiannually. Under the terms of the debentures, the Company's
payment of dividends is limited to, among other things, 50% of consolidated
net income subsequent to June 30, 1986, plus $12 million. At December 31,
1993, the Company was restricted from paying a dividend. The debentures
are redeemable at the option of the Company in whole or in part at a
decreasing premium. The debentures are subject to redemptions through a
sinking fund whereby the Company is required to make five annual sinking
fund payments of $18 million commencing August 1, 1996, with the final
payment due August 1, 2001.
Interest on the $61 million face value of 14-1/2% Subordinated Discount
Debentures is payable semiannually at the stated rate. The recorded debt
discount is being amortized as interest expense over the expected life of
the debentures using an imputed interest rate of approximately 16.7%
compounded semiannually. The 14-1/2% debentures are subject to redemption
through a sinking fund whereby the Company is required to redeem, at their
face value, on January 1 in each of the years 1997 through 2005, 7-1/2% of
the principal amount of the debentures outstanding on January 1, 1997. The
balance of debentures are due January 1, 2006. The debentures are callable
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE G--BORROWINGS--Continued. . .
any time at their face value and are subordinated to all present or future
indebtedness of the Company not expressly subordinated to, or on a parity
with, the debentures.
The notes payable to shareholders are due September 30, 1997, or upon the
earlier payment in full of obligations under both the 1992 Partnership Loan
and Guaranty Agreement and the 1990 Great Dane loan and security agreement
and bear interest payable quarterly in arrears at an annual rate equal to
the prime rate of a New York bank (5.5% at December 31, 1993) plus 3-1/2%.
In March 1990, Great Dane entered into a five year loan and security
agreement ("Agreement") with certain banks. The Agreement made available
to Great Dane a $33 million five-year term loan and a $47 million revolving
credit line. In 1993, the maximum revolving credit line was increased to
$65 million. The amount available under the revolving credit line is based
upon the amount of Great Dane's eligible trade accounts receivable and
inventory as defined in the Agreement. The additional amount available
under the revolving credit line under the borrowing base terms of the
Agreement totaled $32.3 million at December 31, 1993. The term loan is
payable in equal monthly installments of $0.34 million plus interest at the
bank's prime interest rate (6% at December 31, 1993) plus 1-1/2%, with the
balance due in March 1995. The revolving credit line is due in 1995 and
requires interest payments at the bank's prime rate (6% at December 31,
1993) plus 1-1/2%.
All borrowings under the Agreement are fully secured by substantially all
of the Great Dane assets not pledged elsewhere. The Agreement requires
Great Dane to, among other things, comply with certain financial covenants,
and limits additional loans to the Company, limits additions to and sales
of Great Dane's fixed assets and limits additional Great Dane borrowings.
Under the most restrictive covenant, no additional transfers of funds to
the Company are available until after December 31, 1993.
During 1992, the Partnership entered into a Loan and Guaranty Agreement
with a bank pursuant to which the bank provided a $30 million term loan to
the Partnership. The term loan requires twenty quarterly principal
payments of $1.5 million, plus interest at the bank's prime rate (6% at
December 31, 1993) plus 1-1/4%, which payments commenced December 31, 1992.
The term loan is secured by substantially all of the Partnership's assets,
excluding the stock of the Insurance Subsidiary. The term loan agreement,
which is guaranteed by Checker, requires Checker to, among other things,
comply with certain financial covenants and limits additional loans to
Checker.
The equipment term loan requires quarterly payments of $0.5 million plus
interest at the bank's prime rate (6% at December 31, 1993) plus 1-1/4%.
The obligation is secured by certain machinery and equipment with a net
carrying amount of $6.5 million at December 31, 1993.
In connection with the Partnership term loan and the equipment term loan,
Checker is required to comply with certain financial covenants.
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE G--BORROWINGS--Continued. . .
The economic development term loan, which is guaranteed by Checker, is
payable by SCSM to the West Virginia Economic Development Authority, and
requires monthly payments of $0.1 million, including interest at 5% with
the unpaid balance due 2008. The interest rate will be adjusted in April
1998 and 2003, so as to remain equal to 75% of the base rate, as defined,
plus 1/2%. The loan is secured by certain machinery and equipment with a
net carrying amount of $25.1 million at December 31, 1993.
The installment notes are secured by the Company's finance lease
receivables and by the Company's rights under certain operating leases.
The notes bear interest at various fixed rates averaging approximately
10.9% and are payable in varying monthly installments through 1995.
Maturities of long-term debt for the four years subsequent to 1994 are as
follows: $44.4 million in 1995, $9.1 million in 1996, $54.1 million in
1997 and $19.6 million in 1998.
Interest paid totaled $39.8 million in 1993, $42.4 million in 1992 and
$43.3 million in 1991.
SCSM has a line of credit with a bank totaling $7.5 million at December 31,
1993. Borrowing under the line ($5.0 million at December 31, 1993) bears
interest at the bank's prime rate (6% at December 31, 1993) plus 1%.
The Partnership has a $5.0 million line of credit with a bank. Borrowings
under the line ($0 at December 31, 1993) bear interest at the bank's prime
rate (6% at December 31, 1993) plus 1%.
In February 1994, the Company filed a Registration Statement on Form S-1
with the Securities and Exchange Commission in connection with an overall
refinancing of the Company's outstanding indebtedness. The proposed
refinancing, as described in the registration statement, involves the
Company entering into a credit facility consisting of a $60 million term
loan and a revolving credit facility which would provide up to $115
million, subject to the Company's ability to meet certain financial tests
(the term loan and the revolving credit facility being known as the "New
Credit Facility"). Additionally, the Company is proposing to offer $265
million (adjusted from $225 million) of new Senior Secured Notes (the
"Senior Notes"). If the refinancing is successfully completed, the
proceeds from the new Credit Facility would be utilized to redeem
substantially all of the currently outstanding indebtedness of the
Company's subsidiaries and the proceeds from the offering of the Senior
Notes would be used to redeem parent company indebtedness and to redeem the
Minority Interest held by ELIC, in each case together with any accrued
interest and transaction fees and expenses. A successful completion of the
refinancing, the terms of which are still subject to change, is expected to
help the Company achieve increased liquidity from reduced principal debt
amortization requirements, the removal of certain restrictions on the use
of cash from the Company's subsidiaries and more flexible and efficient
cash management at the holding company level.
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE H--COMMITMENTS AND CONTINGENCIES
On February 8, 1989, the Boeing Company ("Boeing") filed a lawsuit naming
the Company, together with three prior subsidiaries of the Company, as
defendants in Case No. CV89-119MA, United States District Court for the
District of Oregon. In that lawsuit, Boeing sought damages and declaratory
relief for past and future costs resulting from alleged groundwater
contamination at a location in Gresham, Oregon, where the three prior
subsidiaries of the Company formerly conducted business operations. On
December 22, 1993, the Company entered into a settlement with Boeing,
settling all claims asserted by Boeing in the lawsuit. Pursuant to the
settlement terms, the Company will pay Boeing $12.5 million over the course
of five years, $5 million of which has been committed by certain insurance
companies in the form of cash or irrevocable letters of credit.
Accordingly, no further adjustment is necessary to the $7.5 million special
charge which was recorded in the quarter ended June 30, 1993, to provide
for the cost associated with this legal proceeding. In accordance with the
settlement agreement, Boeing will move to dismiss its claims against the
Company and the three former subsidiaries and will release and indemnify
the Company with respect to certain claims.
On March 4, 1992, Checker received notice that the Insurance Commissioner
of the State of California, as Conservator and Rehabilitator of ELIC, a
limited partner of the Partnership, had filed an Amendment to the
Application for Order of Conservation filed in Superior Court of the State
of California for the County of Los Angeles. The amendment seeks to add to
the Order, dated April 11, 1991, Checker, the Partnership and Checker
Holding Corp. III, a limited partner of the Partnership. The amendment
alleges that the action by Checker invoking provisions of the Partnership
Agreement that alter ELIC's rights in the Partnership upon the occurrence
of certain events is improper and constitutes an impermissible forfeiture
of ELIC's interest in the Partnership and a breach of fiduciary duty to
ELIC. The amendment seeks (a) a declaration of the rights of the parties
in the Partnership and (b) damages in an unspecified amount. The
Partnership believes that it has meritorious defenses to the claims of
ELIC. The Partnership has been in litigation on these issues for almost
three years with each party seeking, among other things, a declaration of
its rights under the Partnership Agreement. The Company has offered to
redeem ELIC's minority interest in the Partnership and SCSM for $32
million. If ELIC's rights under the Partnership Agreement had not been
altered, net income for 1993, 1992 and 1991 would have been reported at
$0.6 million, $0.7 million and $3.3 million less, respectively, than the
amounts reported (see Note J).
In 1988, Great Dane entered into an operating agreement with the purchaser
of a previously wholly-owned finance company ("Finance"). Under the terms
of the agreement, the purchaser is given the opportunity to finance certain
sales of Great Dane. The 1988 operating agreement requires that Great
Dane, among other things, (i) not finance the sale of its products for the
first eight years and (ii) maintain a minimum net worth as defined in the
agreement. In addition, under this operating agreement, Great Dane is
liable to the purchaser for 50% of losses incurred in connection with the
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE H--COMMITMENTS AND CONTINGENCIES--Continued. . .
realization of certain new receivables financed by the purchaser subsequent
to the sale of Finance subject to certain maximums. Failure to comply with
these requirements of the agreement would result in Great Dane having to
repay the purchaser varying amounts reducing to $5 million during the year
ending September 8, 1996. At December 31, 1993, Great Dane was in
compliance with the provisions of the operating agreement.
In addition, the Company's installment notes are payable to Finance. At
December 31, 1993, the Company was directly liable for the installment
notes and has guaranteed the realization of receivables of approximately
$4.8 million in connection with the sale of Finance and is partially
responsible for the realization of new receivables of approximately $121.3
million financed by the purchaser under the operating agreement subject to
certain maximums. In addition to Great Dane's guarantee, these receivables
are also collateralized by a security interest in the respective trailers
originally sold by Great Dane. A loss reserve of $3.1 million, for
potential losses that may be incurred on the ultimate realization of these
receivables, is included in other accrued liabilities in the December 31,
1993, consolidated balance sheet.
To secure certain obligations, the Company and its subsidiaries had
outstanding letters of credit aggregating approximately $3.4 million at
December 31, 1993, and $9.3 million at December 31, 1992, which letters of
credit were fully secured by cash deposits included in other assets in the
consolidated balance sheets. In addition, Great Dane has standby letters
of credit aggregating approximately $7.5 million outstanding at December
31, 1993.
The Company and its subsidiaries lease real estate and equipment. Certain
leases are renewable and provide for monthly rentals, real estate taxes and
other operating expenses. The Company believes that, in the normal course
of business, leases that expire will be renewed or replaced by other
leases. Rental expense under operating leases was approximately $4.8
million in 1993, $3.8 million in 1992 and $3.6 million in 1991. Minimum
rental obligations for all noncancelable operating leases at December 31,
1993 are as follows: $2.9 million in 1994, $2.7 million in 1995, $2.6
million in 1996, $2.5 million in 1997, $2.4 million in 1998 and $16.5
million thereafter.
Management believes that none of the above legal actions, guarantees or
commitments will have a material adverse effect on the Company's
consolidated financial position.
NOTE I--RETIREMENT PLANS
The Company and its subsidiaries have defined benefit pension plans
applicable to substantially all employees. The contributions to these
plans are based on computations by independent actuarial consultants. The
Company's general funding policy is to contribute amounts required to
maintain funding standards in accordance with the Employee Retirement
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE I--RETIREMENT PLANS--Continued. . .
Income Security Act. Employees' benefits are based on years of service and
the employees' final average earnings, as defined by the plans.
Net periodic pension cost includes the following components (dollars in
thousands):
Year Ended December 31,
1993 1992 1991
-------- -------- --------
Service cost--benefits earned
(normal cost) $ 1,752 $ 1,473 $ 1,527
Interest on projected benefit
obligation 3,972 3,565 3,404
Return on investments (2,867) (2,718) (2,761)
Net amortization and deferral 328 129 322
Curtailment loss --- --- 456
---------- ---------- ----------
Net periodic pension cost
charged to expense $ 3,185 $ 2,449 $ 2,948
========== ========== ==========
During 1991, as a result of the effect of the continued economic recession
on the automotive industry, the number of active pension plan participants
in one of the subsidiaries' defined benefit plans was substantially reduced
during 1991, resulting in a $0.5 million curtailment loss.
Gains and losses and prior service cost are amortized over periods ranging
from seven to fifteen years. Other assumptions used in the calculation of
the actuarial present value of the projected benefit obligation were as
follows:
1993 1992 and 1991
---------- -------------
Discount rate 7-1/2% 8-1/4%
Rate of increase in compensation
levels 4% - 4-1/4% 4% - 5%
Long-term rate of return on assets 5% - 9-1/2% 5% - 9-1/2%
The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated balance sheets (dollars in
thousands):
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE I--RETIREMENT PLANS--Continued. . .
December 31,
1993 1992
-------- --------
Actuarial present value of benefit obligations:
Vested benefit obligations $ 41,846 $ 37,181
========== ==========
Accumulated benefit obligation $ 44,731 $ 39,503
========== ==========
Plan assets (principally guaranteed investment
contracts with insurance companies) $ 37,174 $ 33,191
Projected benefit obligation 54,568 46,771
---------- ----------
Projected benefit obligation in excess of
plan assets (17,394) (13,580)
Unrecognized prior service cost 1,115 963
Unrecognized net loss 6,177 1,046
Minimum liability (1,450) (1,722)
Unrecognized net obligation at transition 1,819 2,048
---------- ----------
Pension liability recognized in the balance
sheets (9,733) (11,245)
Less Noncurrent liability 6,442 6,857
---------- ----------
Current pension liability $ (3,291) $ (4,388)
========== ==========
Relative positions and undertakings in multiemployer pension plans covering
certain of the Partnership's employees are not presently determinable.
Expense related to defined contribution plans, which is based on a
stipulated contribution for hours worked or employee contributions,
approximated $0.7 million in 1993, $0.5 million in 1992 and $0.4 million in
1991.
The Company and its subsidiaries provide postretirement health care and
life insurance benefits to eligible retired employees. The Company's
policy is to fund the cost of medical benefits as paid. Prior to 1993, the
Company recognized expense in the year the benefits were provided. The
amount charged to expense for these benefits was approximately $2.5 million
in 1992 and $2.0 million in 1991. Effective January 1, 1993, the Company
adopted SFAS No. 106, "Employers Accounting for Postretirement Benefits
Other Than Pensions." This statement requires the accrual of the cost of
providing postretirement benefits, including medical and life insurance
coverage, during the active service period of the employee. The Company
recorded a charge of $29.7 million (net of taxes of $16.5 million), or
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE I--RETIREMENT PLANS--Continued. . .
$3.29 per share, during 1993 to reflect the cumulative effect of this
change in accounting principle.
The following table sets forth the plan's funded status reconciled with
amounts recognized in the Company's consolidated balance sheet at December
31, 1993 (in thousands):
Accumulated post retirement obligation:
Retirees $ (34,040)
Fully eligible active plan participants (4,319)
Other active plan participants (11,218)
----------
(49,577)
Unrecognized net loss 1,119
Unrecognized prior service cost (3,432)
----------
Accrued postretirement benefit liability recorded in
balance sheet (51,890)
Less Noncurrent portion 49,609
----------
Current portion of postretirement benefit liability $ (2,281)
==========
Net periodic postretirement benefit cost for the year ended December 31,
1993, includes the following components (in thousands):
Service cost $ 634
Interest cost 3,888
-------
$ 4,522
=======
The health care cost trend rate ranges from 13.6% down to 5.0% over the
next 14 years and remains level thereafter. The health care cost trend
rate assumption has a significant effect on the amounts reported. For
example, increasing the assumed health care cost trend rates by one
percentage point in each year would increase the accumulated postretirement
benefit obligation as of December 31, 1993, by $4.0 million. The weighted-
average discount rate used in determining the accumulated postretirement
benefit obligation was 7.5% at December 31, 1993.
The effect of adopting SFAS No. 106 decreased 1993 pre-tax income by $2.0
million as compared to 1992.
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE J--MINORITY EQUITY
On April 11, 1991, ELIC was placed in conservatorship. In accordance with
the provisions of the Partnership Agreement, the Partnership continues, but
ELIC's interest in the Partnership and rights under the Partnership
Agreement are limited to the right to receive the balance of its capital
account as calculated and on the terms set forth in the Partnership
Agreement. For financial reporting purposes, partnership earnings had
previously been allocated to ELIC's capital account based on book income
and the minority equity amount was calculated accordingly (the "GAAP
Capital Account Amount"). The Partnership Agreement, however, provides for
allocations of the partnership earnings to ELIC's capital account on a
basis that differs from book income and calculation of the minority equity
amount thereunder is to be made accordingly (the "Partnership Agreement
Capital Account Amount"). Because the provisions of the Partnership
Agreement require that ELIC's capital account be fixed and calculated as of
April 11, 1991, minority equity for the year ended December 31, 1991,
includes a $2.3 million credit representing the adjustment of ELIC's
capital account from the GAAP Capital Account Amount as of April 11, 1991,
to the Partnership Agreement Capital Account Amount as of the same date
(the "Final Capital Account"). The Final Capital Account, which totaled
$40.1 million at December 31, 1993, is being paid out in level quarterly
installments of $0.9 million, including interest at 7% per annum, through
the year 2013.
NOTE K--INCOME TAXES
Effective January 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standard No. 109, "Accounting for Income Taxes."
As permitted under the new rules, prior years financial statements have not
been restated. The Company recorded a charge of $16.9 million, or $1.87
per share, during 1993 to reflect the cumulative effect of this change in
accounting principle. Application of FAS 109 decreased 1993 pre-tax income
by approximately $1.5 million primarily because of FAS 109's requirement to
record assets acquired in prior business combinations at pre-tax amounts.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
as of December 31, 1993 are as follows (dollars in thousands):
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE K--INCOME TAXES--Continued. . .
Deferred tax liabilities:
Property, plant and equipment $ 31,646
Finance lease receivables 517
Debenture discount 4,647
Intangible assets 5,249
Inventory 3,624
Other 645
----------
46,328
Deferred tax assets:
Other postretirement benefits 18,961
Pension 3,377
Reserves 10,986
Bad debt reserve 1,601
Other 5,555
----------
40,480
Valuation allowance (1,000)
----------
39,480
----------
Net Deferred Tax Liabilities $ 6,848
==========
The components of income tax benefit (expense) before extraordinary items
are as follows (dollars in thousands):
Year Ended December 31,
----------------------------------
Liability
Method Deferred Method
---------- ----------------------
1993 1992 1991
---------- ---------- ---------
Current taxes:
Federal $(10,244) $ (3,296) $ 9,261
State (4,025) (1,702) (732)
--------- --------- ---------
(14,269) (4,998) 8,529
Deferred taxes 8,512 4,311 (3,288)
--------- --------- ---------
Income tax benefit (expense) $ (5,757) $ (687) $ 5,241
========= ========= =========
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE K--INCOME TAXES--Continued. . .
The components of the deferred tax benefit (expense) are as follows
(dollars in thousands):
Year Ended December 31,
-----------------------
1992 1991
-------- --------
Tax depreciation less than (in excess of)
book depreciation $ 1,742 $(2,215)
Finance leases (37) (17)
Deferred compensation (1) (4)
Inventory reserves 505 15
Financing costs (75) (22)
Warranty reserves 22 17
Other reserves 602 (660)
Partnership allocation 1,469 1,485
Alternative minimum tax --- (2,223)
Other 84 336
-------- --------
Deferred tax benefit (expense) $ 4,311 $(3,288)
======== ========
Income tax benefit (expense) differs from the amount computed by applying
the statutory federal income tax rate to income (loss) before income taxes
and extraordinary items. The reasons for these differences are as follows
(dollars in thousands):
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE K--INCOME TAXES--Continued. . .
Year Ended December 31,
----------------------------------
Liability
Method Deferred Method
---------- ----------------------
1993 1992 1991
-------- -------- --------
Computed expected tax benefit (expense) $(3,192) $ 2,335 $10,964
(Increase) decrease in taxes
resulting from:
State income taxes, net of
federal income tax benefit (2,616) (1,123) (483)
Appraisal depreciation --- (1,024) (1,033)
Amortization of goodwill and
other items (643) (530) (530)
Nontaxable Partnership income 446 574 1,400
Increase in tax accruals --- (319) (4,527)
Other (248) (600) (550)
-------- -------- --------
Actual tax benefit (expense) $(5,757) $ (687) $ 5,241
======== ======== ========
Income taxes paid totaled $13.4 million in 1993, $3.9 million in 1992 and
$8.6 million in 1991.
NOTE L--EXTRAORDINARY ITEMS
During 1991, the Company repurchased $66.2 million face value ($58.7
million net carrying value) of the 14-1/2% Subordinated Discount Debentures
at an average cost of 36% of face value. Additionally, the Company
repurchased $7.6 million face value ($6.8 million net carrying value) of
the 12-3/4% Senior Subordinated Debentures at an average cost of 40% of
face value. The resulting gain of $23.2 million on these repurchases, net
of taxes of $14.8 million, has been classified as an extraordinary item.
Upon the completion of the Corporation's 1990 federal income tax return,
management elected to treat certain extraordinary gains under an
alternative election available under the Internal Revenue Code, which
resulted in these gains, on which deferred income taxes had been provided
in prior periods, not being subject to tax. This change in estimate had the
effect of increasing the extraordinary gain and net income by $8 million in
the year ended December 31, 1991 resulting in a total gain of $31.2
million.
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE M--RELATED PARTY TRANSACTIONS
An officer of Checker is the owner of a taxicab association established in
1988 in the City of Chicago to which both Company affiliated and
independent taxi drivers may belong for a fee, and through which the
members may obtain automobile liability insurance from the Insurance
Subsidiary and other maintenance and rental services. The association
purchases services from various Checker operations and reimburses the
operations for certain management, general and administrative costs.
Amounts received from the association totaled $4.4 million in 1993, $3.3
million in 1992 and $2.6 million in 1991. At December 31, 1993, Checker
has guaranteed certain of the association's obligations totaling $0.7
million.
The Company leases an airplane owned by a corporation of which a director
is the sole shareholder. Lease expenses totaled $0.7 million each year in
1993, 1992 and 1991.
Each of the Company's directors provides consulting services. Annual
expenses incurred relating to these consulting services totaled $1.4
million each year in 1993, 1992 and 1991.
NOTE N--INDUSTRY SEGMENT INFORMATION
The Company operates in four principal segments:
TRAILER MANUFACTURING SEGMENT--Manufacturing and distribution of highway
truck trailers.
AUTOMOTIVE PRODUCTS SEGMENT--Manufacturing metal stampings and assemblies
and coordination of related tooling production for motor vehicle
manufacturers.
VEHICULAR OPERATIONS SEGMENT--Leasing taxicabs.
INSURANCE OPERATIONS SEGMENT--Providing property and casualty insurance
coverage to the Partnership and to outside parties.
Trailer Manufacturing segment sales to J. B. Hunt totaled approximately
$92.3 million in 1993, $50.0 million in 1992 and $1.2 million in 1991.
Automotive product net sales to General Motors Corporation totaled
approximately $121.5 million in 1993, $109.1 million in 1992 and $80.3
million in 1991 (includes accounts receivable and unbilled tooling charges
of $8.9 million, $8.9 million and $5.7 million at December 31, 1993, 1992
and 1991, respectively).
Industry segment data is summarized as follows (dollars in thousands):
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE N--INDUSTRY SEGMENT INFORMATION--Continued. . .
Trailer Automotive Vehicular Insurance
Manufacturing Products Operations Operations Eliminations Consolidated
------------- -------- ---------- ---------- ------------ ------------
1993
Revenues:
Outside customers $ 711,862 $ 127,925 $ 42,103 $ 27,436 $ --- $ 909,326
Intersegment sales --- --- 4,346 13,400 (17,746) ---
---------- ---------- ---------- ---------- ---------- ----------
$ 711,862 $ 127,925 $ 46,449 $ 40,836 $ (17,746) $ 909,326
========== ========== ========== ========== ========== ==========
Operating profit (loss) $ 32,381 $ 15,306 $ 6,251 $ (1,947) $ --- $ 51,991
Corporate expense (4,646)
Interest income:
Segment 428 5,877 6,305
Corporate 1,091
Interest expense:
Segment (4,811) (4,811)
Corporate (36,803)
Special charge (7,500)
Other income, net 3,494
----------
Income before income taxes and
extraordinary items $ 9,121
==========
Identifiable assets $ 259,837 $ 67,937 $ 20,493 $ 116,692 $ 464,959
Partnership assets 37,701
Corporate assets 14,676
----------
Total assets at December 31, 1993 $ 517,336
==========
Depreciation and amortization $ 8,280 $ 4,991 $ 9,530 $ 494 $ 23,295
Capital expenditures 7,265 4,728 7,913 100 20,006
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE N--INDUSTRY SEGMENT INFORMATION--Continued. . .
Trailer Automotive Vehicular Insurance
Manufacturing Products Operations Operations Eliminations Consolidated
------------- -------- ---------- ---------- ------------ ------------
1992
Revenues:
Outside customers $ 536,336 $ 112,631 $ 40,580 $ 27,186 $ --- $ 716,733
Intersegment sales --- 1 4,043 13,161 (17,205) ---
---------- ---------- ---------- ---------- ---------- ----------
$ 536,336 $ 112,632 $ 44,623 $ 40,347 $ (17,205) $ 716,733
========== ========== ========== ========== ========== ==========
Operating profit (loss) $ 17,590 $ 11,622 $ 5,727 $ (1,557) $ 33,382
Corporate expenses (4,396)
Interest income:
Segment 1,168 6,321 7,489
Corporate 1,406
Interest expense:
Segment (5,852) (5,852)
Corporate (36,874)
Other expenses, net (2,023)
----------
Loss before income taxes and
extraordinary items $ (6,868)
==========
Identifiable assets $ 230,465 $ 66,561 $ 25,516 $ 117,960 $ 440,502
Partnership assets 38,712
Corporate assets 14,549
----------
Total assets at December 31, 1992 $ 493,763
==========
Depreciation and amortization:
Segment $ 6,303 $ 4,148 $ 10,099 $ 462 $ 21,012
Other 42
Capital expenditures 4,996 1,889 10,412 252 17,549
F-30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE N--INDUSTRY SEGMENT INFORMATION--Continued. . .
Trailer Automotive Vehicular Insurance
Manufacturing Products Operations Operations Eliminations Consolidated
------------- -------- ---------- ---------- ------------ ------------
1991
Revenues:
Outside customers $ 400,196 $ 84,401 $ 43,527 $ 27,142 $ --- $ 555,266
Intersegment sales --- 5 3,635 12,735 (16,375) ---
---------- ---------- ---------- ---------- ---------- ----------
$ 400,196 $ 84,406 $ 47,162 $ 39,877 $ (16,375) $ 555,266
========== ========== ========== ========== ========== ==========
Operating profit (loss) $ 7,059 $ (4,237) $ 7,139 $ (2,872) $ 7,089
Corporate expenses (4,398)
Interest income:
Segment 2,255 6,917 9,172
Corporate 2,462
Interest expense:
Segment (8,061) (8,061)
Corporate (39,364)
Other expenses, net (1,078)
Minority equity 1,931
----------
Loss before income taxes and
extraordinary items $ (32,247)
==========
Identifiable assets $ 227,551 $ 67,258 $ 28,357 $ 112,016 $ 435,182
Partnership assets 31,531
Corporate assets 14,592
----------
Total assets at December 31, 1991 $ 481,305
==========
Depreciation and amortization:
Segment $ 5,910 $ 4,237 $ 10,369 $ 367 $ 20,883
Other 48
Capital expenditures 3,208 1,190 10,181 1,878 16,457
Intersegment sales are accounted for at prices comparable to normal unaffiliated customer sales. Corporate and Partnership assets
consist of short-term investments, savings deposits and certain other assets.
Insurance Operations identifiable assets for 1992 and 1991 have been restated to reflect the adoption of SFAS No. 113.
F-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE O--FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating the fair value of financial instruments:
CASH AND CASH EQUIVALENTS: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
FINANCE LEASE RECEIVABLES: The fair values of the Company's finance lease
receivables are estimated using discounted cash flow analyses based on
current market rates for similar types of financing.
INDEBTEDNESS: The carrying amounts of the Company's notes payable to
shareholders, Great Dane term loan payable, Great Dane revolving credit
line, Partnership term loan payable, equipment term loan, economic
development term loan and line of credit approximate their fair value. The
fair values of the Company's 12-3/4% Senior Subordinated Debentures and 14-
1/2% Subordinated Discount Debentures are based on quoted market prices.
The fair values of the Company's other indebtedness is estimated using
discounted cash flow analyses based on current market rates.
The carrying amounts and fair values of the Company's finance lease
receivables and indebtedness at December 31, 1993, are as follows (dollars
in thousands):
Carrying Amount Fair Value
--------------- ----------
Finance lease receivables $ 1,339 $ 1,339
Long-term debt and notes payable $ 296,273 $ 300,940
F-32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
NOTE P--SELECTED QUARTERLY DATA (UNAUDITED)
(dollars in thousands, except per share amounts)
1993 QUARTER ENDED 1992 QUARTER ENDED
----------------------------------------------- -----------------------------------------------
March 31 June 30 September 30 December 31 March 31 June 30 September 30 December 31
-------- ------- ------------ ----------- -------- ------- ------------ -----------
Revenues $ 204,933 $ 225,407 $ 230,655 $ 248,331 $ 166,079 $ 185,070 $ 177,453 $188,131
Gross profit 29,302 33,808 31,126 36,285 24,437 27,551 26,115 27,760
Income (loss) before
accounting changes (744) 1,350 (536) 3,294 (2,885) 105 (4,307) (468)
Accounting changes (46,626) --- --- --- --- --- --- ---
Net income (loss) (47,370) 1,350 (536) 3,294 (2,885) 105 (4,307) (468)
Income (loss) per share:
Income (loss) before
accounting changes $ (0.08) $ 0.15 $ (0.06) $ 0.36 $ (0.32) $ 0.01 $ (0.48) $ (0.05)
Accounting changes (5.16) --- --- --- --- --- --- ---
Net income (loss) (5.24) 0.15 (0.06) 0.36 (0.32) 0.01 (0.48) (0.05)
S-1
SCHEDULE I--MARKETABLE SECURITIES--OTHER INVESTMENTS
INTERNATIONAL CONTROLS CORP.
December 31, 1993
(dollars in thousands)
- ------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------------------------------
Amount at Which
Number of Market Each Portfolio
Shares or Value of of Equity Security
Name of Issuer and Units--Principal Cost of Each Issue Issues and Each
Title of Each Issue Amount of Each Issue at Balance Other Security
Bonds and Notes Sheet Date Issue Carried in
the Balance Sheet
- -------------------------------------------------------------------------------------------------------
FIXED MATURITIES:
U. S. Government obligations $ 7,320 $ 7,267 $ 7,559 $ 7,276
Obligations of various state and
territorial possessions 1,920 1,911 1,959 1,920
Obligations of political
subdivisions of states 10,745 10,748 11,064 10,760
Special revenue obligations of
political subdivisions of states 9,290 9,313 9,522 9,304
Public utility obligations:
American Telephone & Telegraph 850 835 907 837
Bell South Telecom, Inc. 1,000 1,004 1,050 1,003
Chesapeake & Potomac Telephone
& Telegraph 532 450 543 455
Citizen Utilities 500 499 550 499
Consolidated Edison 550 547 563 548
Illinois Bell Telephone Company 300 287 306 288
National Rural Utilities 400 403 400 400
New England Telephone & Telegraph 400 419 404 419
New York Telephone Company 400 382 412 383
Northern Telecom, Ltd. 350 357 340 356
Oklahoma Gas & Electric 525 514 560 519
S-2
SCHEDULE I--MARKETABLE SECURITIES--OTHER INVESTMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP.
December 31, 1993
(dollars in thousands)
- ------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------------------------------
Amount at Which
Number of Market Each Portfolio
Shares or Value of of Equity Security
Name of Issuer and Units--Principal Cost of Each Issue Issues and Each
Title of Each Issue Amount of Each Issue at Balance Other Security
Bonds and Notes Sheet Date Issue Carried in
the Balance Sheet
- -------------------------------------------------------------------------------------------------------
FIXED MATURITIES--Continued. . .
Public utility obligations--continued. . .
Pacific Bell $ 500 $ 491 $ 500 $ 492
Pacific Gas & Electric 700 696 728 696
Potomac Electric Power Company 350 343 396 345
Southwestern Bell Telephone Company 550 550 528 550
Miscellaneous other public
utility obligations 2,036 1,931 2,128 1,956
-------- -------- --------
Total public utility obligations 9,708 10,315 9,746
Industrial and miscellaneous corporate obligations:
Anheuser Busch Company, Inc. 350 366 403 363
Associates Corporation of
North America 755 770 762 759
Banc One Corporation 340 343 412 342
Bank America Corporation 850 881 917 878
Bankers Trust of New York 500 496 531 497
B. P. America 550 566 629 562
Cargill Inc. 300 302 366 301
Chevron Capital USA, Inc. 350 339 382 344
Citicorp 400 400 405 400
S-3
SCHEDULE I--MARKETABLE SECURITIES--OTHER INVESTMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP.
December 31, 1993
(dollars in thousands)
- ------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------------------------------
Amount at Which
Number of Market Each Portfolio
Shares or Value of of Equity Security
Name of Issuer and Units--Principal Cost of Each Issue Issues and Each
Title of Each Issue Amount of Each Issue at Balance Other Security
Bonds and Notes Sheet Date Issue Carried in
the Balance Sheet
- -------------------------------------------------------------------------------------------------------
FIXED MATURITIES--Continued. . .
Industrial and miscellaneous corporate obligations--
Continued. . .
Coca Cola Enterprises $ 500 $ 497 $ 523 $ 498
Comerica Bank - Detroit 500 500 509 500
Commercial Credit Group, Inc. 450 442 466 449
Corestate Capital Corp. 300 298 303 298
Dow Capital Corporation 350 350 357 350
Dow Chemical Company 400 399 480 399
E. I. DuPont DeNemours & Company 700 658 751 666
Eastman Kodak Company 450 451 494 451
Enhance Financial Services 900 900 900 900
European Investment Bank 300 303 303 303
Ford Motor Credit Corporation 750 749 779 751
Gannett Inc. Notes 500 500 490 500
General Electric Capital
Corporation 1,350 1,454 1,395 1,350
General Electric Credit Corp. 500 500 500 500
General Motors Acceptance
Corporation 500 496 575 497
General Motors Corporation 300 300 306 300
S-4
SCHEDULE I--MARKETABLE SECURITIES--OTHER INVESTMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP.
December 31, 1993
(dollars in thousands)
- ------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------------------------------
Amount at Which
Number of Market Each Portfolio
Shares or Value of of Equity Security
Name of Issuer and Units--Principal Cost of Each Issue Issues and Each
Title of Each Issue Amount of Each Issue at Balance Other Security
Bonds and Notes Sheet Date Issue Carried in
the Balance Sheet
- -------------------------------------------------------------------------------------------------------
FIXED MATURITIES--Continued. . .
Industrial and miscellaneous corporate obligations--
Continued. . .
H. J. Heinz Company $ 500 $ 499 $ 510 $ 499
Hertz Corporation 300 300 315 300
IBM Credit Corporation 300 304 301 304
IBM Corporation 500 496 525 497
ICI Wilmington, Inc. 300 309 321 306
ITT Financial Corporation 400 404 416 400
J. P. Morgan & Co. 700 721 770 712
The Limited Corporation 650 652 748 652
Marathon Oil Company 600 602 606 600
Matsushita Electric Inc., Ltd. 400 400 424 400
MBIA Inc. 450 443 495 443
Merrill Lynch & Co. 300 296 309 299
Motorola, Inc. 300 300 357 300
Natwest Capital Corporation 300 320 363 318
Pepsico, Inc. 950 944 1,034 945
Phillip Morris & Co., Inc. 1,450 1,450 1,548 1,450
Pitney Bowes Credit Corporation 377 379 420 373
Ralston Purina Company 500 501 540 500
Republic National Bank, New York 500 499 505 499
S-5
SCHEDULE I--MARKETABLE SECURITIES--OTHER INVESTMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP.
December 31, 1993
(dollars in thousands)
- ------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------------------------------
Amount at Which
Number of Market Each Portfolio
Shares or Value of of Equity Security
Name of Issuer and Units--Principal Cost of Each Issue Issues and Each
Title of Each Issue Amount of Each Issue at Balance Other Security
Bonds and Notes Sheet Date Issue Carried in
the Balance Sheet
- -------------------------------------------------------------------------------------------------------
FIXED MATURITIES--Continued. . .
Industrial and miscellaneous corporate obligations--
Continued. . .
Salomon, Inc. $ 500 $ 502 $ 554 $ 501
Seagram, Joseph E., & Sons 750 768 815 757
Sears Roebuck & Co. 500 530 500 500
Shearson Lehman Bros. Bldgs. Inc. 350 350 350 350
Suntrust Bank, Inc. 300 304 309 301
Texaco Capital, Inc. 450 451 495 450
The Funding Corporation 400 409 424 403
United States Banknote Corp. 300 300 300 300
United Technologies 300 304 327 302
USX Corporation 400 405 372 405
Wal Mart Stores, Inc. 1,150 1,154 1,250 1,155
Witco Corporation 500 489 575 489
Xerox Credit Corporation 439 422 469 427
S-6
SCHEDULE I--MARKETABLE SECURITIES--OTHER INVESTMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP.
December 31, 1993
(dollars in thousands)
- ------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------------------------------
Amount at Which
Number of Market Each Portfolio
Shares or Value of of Equity Security
Name of Issuer and Units--Principal Cost of Each Issue Issues and Each
Title of Each Issue Amount of Each Issue at Balance Other Security
Bonds and Notes Sheet Date Issue Carried in
the Balance Sheet
- -------------------------------------------------------------------------------------------------------
FIXED MATURITIES--Continued. . .
Industrial and miscellaneous corporate obligations--
Miscellaneous other industrial
and miscellaneous corporate
obligations $ 8,913 $ 9,068 $ 9,641 $ 8,928
-------- -------- --------
Total industrial and miscellaneous
corporate obligations 38,535 40,826 38,223
-------- -------- --------
Total Fixed Maturities $ 77,482 $ 81,245 $ 77,229
EQUITY SECURITIES:
Banks, trusts and insurance
companies preferred stock 85,000 shares 2,136 2,221 2,221
Public utilities preferred stock 45,340 shares 1,545 1,637 1,637
Industrial and miscellaneous
preferred stock 127,314 shares 3,559 3,601 3,601
Public utilities common stock 534,400 shares 1,401 1,536 1,536
Banks, Trusts and Insurance
Companies Common Stocks 24,547 shares 599 537 537
S-7
SCHEDULE I--MARKETABLE SECURITIES--OTHER INVESTMENTS--CONTINUED
INTERNATIONAL CONTROLS CORP.
December 31, 1993
(dollars in thousands)
- ------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------------------------------
Amount at Which
Number of Market Each Portfolio
Shares or Value of of Equity Security
Name of Issuer and Units--Principal Cost of Each Issue Issues and Each
Title of Each Issue Amount of Each Issue at Balance Other Security
Bonds and Notes Sheet Date Issue Carried in
the Balance Sheet
- -------------------------------------------------------------------------------------------------------
Equity Securities--Continued. . .
Industrial and miscellaneous
common stock 133,951 shares $ 4,296 $ 4,077 $ 4,077
-------- -------- --------
Total Equity Securities 13,536 13,609 13,609
-------- -------- --------
TOTAL INVESTMENTS $ 92,062 $ 94,853 $ 90,838
======== ======== ========
S-8
SCHEDULE II
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS,
AND EMPLOYEES OTHER THAN RELATED PARTIES
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(dollars in thousands)
- ------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
BALANCE AT END
DEDUCTIONS OF PERIOD
Balance at ---------------------- ----------------------
NAME OF DEBTOR Beginning Additions <F1>Amounts <F2>Amounts <F1> <F2>Not
of Period Collected Written Off Current Current
- ------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993
David R. Markin(1) $ 124 $ 0 $ 0 $ 0 $ 0 $ 124
Allan R. Tessler(1) 167 0 0 0 0 167
Wilmer J. Thomas, Jr.(1) 167 0 0 0 0 167
Martin L. Solomon(1) 167 0 0 0 0 167
King Cars, Inc.(2) 398 24 0 0 422 0
------- ----- --- --- ----- -----
$ 1,023 $ 24 $ 0 $ 0 $ 422 $ 625
======= ===== === === ===== =====
YEAR ENDED DECEMBER 31, 1992
David R. Markin(1) $ 124 $ 0 $ 0 $ 0 $ 0 $ 124
Allan R. Tessler(1) 167 0 0 0 0 167
Wilmer J. Thomas, Jr.(1) 167 0 0 0 0 167
Martin L. Solomon(1) 167 0 0 0 0 167
King Cars, Inc.(2) 0 398 0 0 398 0
----- ----- --- --- ----- -----
$ 625 $ 398 $ 0 $ 0 $ 398 $ 625
===== ===== === === ===== =====
YEAR ENDED DECEMBER 31, 1991
David R. Markin(1) $ 124 $ 0 $ 0 $ 0 $ 124
Allan R. Tessler(1) 167 0 0 0 167
Wilmer J. Thomas, Jr.(1) 167 0 0 0 167
Martin L. Solomon(1) 167 0 0 0 167
----- ----- --- --- -----
$ 625 $ 0 $ 0 $ 0 $ 625
===== ===== === === =====
<FN>
<F1> Obligation is non-interest bearing demand obligation.
<F2> Obligation is a promissory note due on December 31, 1994, bearing a 6.5% interest rate.
S-9
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
INTERNATIONAL CONTROLS CORP.
CONDENSED BALANCE SHEET
(dollars in thousands)
December 31,
1993 1992
---------- ----------
ASSETS:
Cash and cash equivalents $ 1,468 $ 4,930
Accounts receivable 566 107
Other current assets 4,345 3,734
---------- ----------
Total Current Assets 6,379 8,771
Intercompany accounts with subsidiaries --- 9,657
Investments in subsidiaries 91,388 110,308
Other assets 16,331 12,430
---------- ----------
TOTAL ASSETS $ 114,098 $ 141,166
========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIT:
Accounts payable $ 34 $ 143
Income taxes payable (recoverable) (1,702) 8,442
Accrued compensation 256 256
Accrued interest 11,468 11,467
Other accrued liabilities 9,565 3,340
---------- ----------
Total Current Liabilities 19,621 23,648
Long-term debt 205,732 204,360
Other noncurrent liabilities 31,713 19,486
Intercompany accounts with subsidiaries 6,622 ---
Shareholders' deficit:
Common stock 90 90
Paid-in capital 14,910 14,910
Retained earnings (deficit) (36,217) 7,045
Amount paid in excess of Checker's
net assets (127,748) (127,748)
Notes receivable from shareholders (625) (625)
---------- ----------
Total Shareholders' Deficit (149,590) (106,328)
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 114,098 $ 141,166
========== ==========
S-10
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF REGISTRANT--CONTINUED
INTERNATIONAL CONTROLS CORP.
CONDENSED STATEMENTS OF OPERATIONS
(dollars in thousands)
Year Ended December 31,
1993 1992 1991
---------- ---------- ----------
Selling, general and
administrative expenses $ (4,646) $ (4,396) $ (4,398)
Interest expense (30,216) (30,138) (32,018)
Equity in earnings of
subsidiaries 29,376 14,959 166
Other income (expense) 211 (99) 857
Special charge (7,500) --- ---
Intercompany income:
Corporate charges 1,008 1,008 1,008
Interest --- 305 394
---------- ---------- ----------
Loss before income taxes,
extraordinary items and
accounting changes (11,767) (18,361) (33,991)
Income tax benefit 15,131 10,806 6,985
---------- ---------- ----------
Income (loss) before extraordinary
items and accounting changes 3,364 (7,555) (27,006)
Extraordinary items, net of
income taxes --- --- 31,188
---------- ---------- ----------
Income (loss) before accounting
changes 3,364 (7,555) 4,182
Accounting changes (46,626) --- ---
---------- ---------- ----------
NET INCOME (LOSS) $ (43,262) $ (7,555) $ 4,182
========== ========== ==========
S-11
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF REGISTRANT--CONTINUED
INTERNATIONAL CONTROLS CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Year Ended December 31,
1993 1992 1991
---------- ---------- ----------
NET CASH FLOW USED IN OPERATING
ACTIVITIES $ (47,640) $ (20,973) $ (25,202)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Other 5,900 (334) (1,456)
---------- ---------- ----------
NET CASH FLOW PROVIDED BY
(USED IN) INVESTING
ACTIVITIES 5,900 (334) (1,456)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Repayments of debt --- --- (27,187)
Advances from subsidiaries 38,278 21,284 52,630
---------- ---------- ----------
NET CASH FLOW PROVIDED BY
FINANCING ACTIVITIES 38,278 21,284 25,443
---------- ---------- ----------
DECREASE IN CASH AND CASH
EQUIVALENTS (3,462) (23) (1,215)
Beginning cash and cash
equivalents 4,930 4,953 6,168
---------- ---------- ----------
ENDING CASH AND CASH
EQUIVALENTS $ 1,468 $ 4,930 $ 4,953
========== ========== ==========
The Registrant's subsidiaries declared dividends totaling $22 million in
1993, $120.9 million in 1992 and $13.1 million in 1991. These dividends were
declared to offset certain intercompany account balances at the respective
dates.
S-12
SCHEDULE IV--INDEBTEDNESS OF AND TO RELATED PARTIES--NOT CURRENT
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(dollars in thousands)
- ----------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E COL. F COL. G COL. H COL. I
- ----------------------------------------------------------------------------------------------------
--Indebtedness of-- --Indebtedness to--
------------------------------------- -------------------------------------
Name Balance Balance Balance Balance
of at at at at
Person Beginning AdditionsDeductions End Beginning AdditionsDeductions End
- ----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993
David R. Markin $ --- $ --- $ --- $ --- $ 7,500 $ --- $ --- $ 7,500
Martin L. Solomon --- --- --- --- 7,500 --- --- 7,500
Allan R. Tessler --- --- --- --- 7,500 --- --- 7,500
Wilmer J. Thomas, Jr. --- --- --- --- 7,500 --- --- 7,500
----- ----- ----- ----- ------- ----- ----- -------
$ --- $ --- $ --- $ --- $30,000 $ --- $ --- $30,000
===== ===== ===== ===== ======= ===== ===== =======
YEAR ENDED DECEMBER 31, 1992
David R. Markin $ --- $ --- $ --- $ --- $ 7,500 $ --- $ --- $ 7,500
Martin L. Solomon --- --- --- --- 7,500 --- --- 7,500
Allan R. Tessler --- --- --- --- 7,500 --- --- 7,500
Wilmer J. Thomas, Jr. --- --- --- --- 7,500 --- --- 7,500
----- ----- ----- ----- ------- ----- ----- -------
$ --- $ --- $ --- $ --- $30,000 $ --- $ --- $30,000
===== ===== ===== ===== ======= ===== ===== =======
YEAR ENDED DECEMBER 31, 1991
David R. Markin $ --- $ --- $ --- $ --- $ 7,500 $ --- $ --- $ 7,500
Martin L. Solomon --- --- --- --- 7,500 --- --- 7,500
Allan R. Tessler --- --- --- --- 7,500 --- --- 7,500
Wilmer J. Thomas, Jr. --- --- --- --- 7,500 --- --- 7,500
----- ----- ----- ----- ------- ----- ----- -------
$ --- $ --- $ --- $ --- $30,000 $ --- $ --- $30,000
===== ===== ===== ===== ======= ===== ===== =======
NOTE: The above amounts relate to amounts loaned to the Company to complete the Holding buyout
as described in Note A of the notes to consolidated financial statements.
S-13
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(dollars in thousands)
- -----------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- -----------------------------------------------------------------------------------------------------
Additions Charged to:
Balance at --------------------- Balance at
Description Beginning Cost and Other Deductions<F1> End of
of Period Expenses Accounts Period
- -----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993:
Deducted from assets:
Allowance for doubtful accounts
--trade $ 623 $ 234 $ --- $ (109) $ 748
======== ======== ======== ======== ========
Allowance for doubtful accounts
--finance lease receivables $ 679 $ 52 $ --- $ (572) $ 159
======== ======== ======== ======== ========
Contract & warranty reserves $ 8,375 $ 5,439 $ --- $(3,429) $10,385
======== ======== ======== ======== ========
Workers' compensation $ 1,841 $ 1,200 $ --- $(1,927) $ 1,114
======== ======== ======== ======== ========
Claims $ 3,332 $ 1,103 $ --- $(1,106) $ 3,329
======== ======== ======== ======== ========
YEAR ENDED DECEMBER 31, 1992:
Deducted from assets:
Allowance for doubtful accounts
--trade $ 606 $ 183 $ --- $ (166) $ 623
======== ======== ======== ======== ========
Allowance for doubtful accounts
--finance lease receivables $ 944 $ 52 $ --- $ (317) $ 679
======== ======== ======== ======== ========
Contract & warranty reserves $ 8,263 $ 3,564 $ --- $(3,452) $ 8,375
======== ======== ======== ======== ========
Workers' compensation $ 265 $ 4,584 $ --- $(3,008) $ 1,841
======== ======== ======== ======== ========
Claims $ 2,717 $ 783 $ --- $ (168) $ 3,332
======== ======== ======== ======== ========
S-14
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS--CONTINUED
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(dollars in thousands)
- -----------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- -----------------------------------------------------------------------------------------------------
Additions Charged to:
Balance at --------------------- Balance at
Description Beginning Cost and Other Deductions<F1> End of
of Period Expenses Accounts Period
- -----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1991:
Deducted from assets:
Allowance for doubtful accounts
--trade $ 808 $ 210 $ --- $ (412) $ 606
======== ======== ======== ======== ========
Allowance for doubtful accounts
--finance lease receivables $ 842 $ (7) $ 292 $ (183) $ 944
======== ======== ======== ======== ========
Contract & warranty reserves $10,796 $ 1,274 $ --- $(3,807) $ 8,263
======== ======== ======== ======== ========
Workers' compensation $ 242 $ 836 $ --- $ (813) $ 265
======== ======== ======== ======== ========
Claims $ 2,500 $ 1,047 $ --- $ (830) $ 2,717
======== ======== ======== ======== ========
- ---------------
<FN>
<F1> Reclassification to other reserves and utilization of reserves.
S-15
SCHEDULE IX--SHORT-TERM BORROWINGS
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(dollars in thousands)
- ----------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E COL. F
- ----------------------------------------------------------------------------
Maximum Average Weighted
Amount Amount Average
Out- Out- Interest
Category of Balance Weighted standing standing Rate
Aggregate at End Average During During During
Short-Term of Interest the the the
Borrowings Period Rate Period Period<F1> Period<F2>
- ----------------------------------------------------------------------------
BANK BORROWINGS:
Year ended
December 31,
1993 $5,000 7.25% $5,000 $4,998 7.25%
Year ended
December 31,
1992 5,000 7.00% 5,000 4,350 6.71%
Year ended
December 31,
1991 4,000 7.00% 4,000 2,053 8.38%
- ---------------
<FN>
<F1> Amount of loan divided by number of days in year, times the number of
days outstanding during the year.
<F2> Total interest expense during the period divided by the average amount
outstanding during the period.
S-16
SCHEDULE X--SUPPLEMENTAL INCOME STATEMENT INFORMATION
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(dollars in thousands)
- ----------------------------------------------------------------------------
COLUMN A COLUMN B
- ----------------------------------------------------------------------------
Charged to Continuing Operations' Cost and
Expenses
--------------------------------------------
December 31, December 31, December 31,
1993 1992 1991
- ----------------------------------------------------------------------------
Maintenance and repairs $ 15,663 $ 9,646 $ 9,543
======== ======== ========
Depreciation and amortization
of intangible assets, pre-
operating costs and similar
deferrals <F1> $ --- $ --- $ ---
======== ======== ========
Taxes other than payroll and
income taxes <F1> $ --- $ --- $ ---
======== ======== ========
Royalties <F1> $ --- $ --- $ ---
======== ======== ========
Advertising costs <F1> $ --- $ --- $ ---
======== ======== ========
- ---------------
<FN>
<F1> Amounts for these expenses are not presented as such amounts are less
than 1% of total revenues in the year indicated.
S-17
SCHEDULE XIV
SUPPLEMENTAL INFORMATION CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS
INTERNATIONAL CONTROLS CORP. AND SUBSIDIARIES
(dollars in thousands)
- ----------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E COL. F COL. G COL. H COL. I COL. J COL. K
- ----------------------------------------------------------------------------------------------------------------------------------
Reserves Claims and
for Claim
Unpaid Adjustment Amortiza-
Claims Expenses tion Paid
and Discount, Incurred or Claims
Deferred Claim if any, Related to: Deferred and
Policy Adjust- Deducted Net ------------------ Policy Claim
Affiliation Acquisi- ment in Unearned Earned Invest- (1) (2) Acquisi- Adjust-
with tion Expense Column Premiums Premiums ment Current Prior tion ment Premium
Registrant Costs <F1> C <F2> <F3> Income Year Years Costs Expenses Written
- ----------------------------------------------------------------------------------------------------------------------------------
WHOLLY-OWNED INSURANCE SUBSIDIARY:
- ----------------------------------
Year Ended:
December 31, 1993 $ 1,893 $ 71,179 $ --- $ 9,547 $ 40,836 $ 7,838 $ 33,193 $ (454) $ 61 $ 30,832 $ 40,732
======== ======== ======== ======== ======== ======== ======== ======== ======== ======== ========
December 31, 1992 $ 1,832 $ 75,780 $ --- $ 10,463 $ 40,347 $ 8,227 $ 30,322 $ 2,043 $ (241) $ 27,319 $ 39,238
======== ======== ======== ======== ======== ======== ======== ======== ======== ======== ========
December 31, 1991 $ 2,073 $ 64,952 $ --- $ 11,619 $ 39,877 $ 7,061 $ 31,852 $ 1,676 $ (341) $ 26,208 $ 39,530
======== ======== ======== ======== ======== ======== ======== ======== ======== ======== ========
- ---------------
<FN>
<F1> Includes reinsurance recoverable on unpaid claims and claims adjustment expense of $7,380, $13,888 and $8,106 in 1993, 1992
and 1991, respectively, in connection with the restatement of the balance sheet loss reserve amounts as reported in
accordance with SFAS No. 113.
<F2> Includes net ceded premiums of $(526), $286 and $333 in 1993, 1992 and 1991, respectively, in connection with the restatement
of the balance sheet unearned premium amounts as reported in accordance with SFAS No. 113.
<F3> Includes premiums earned of $13,400, $13,161 and $12,735 in 1993, 1992 and 1991, respectively, in connection with
coverage provided to other entities in the consolidated group which have been eliminated in consolidation.
E-1
INDEX TO EXHIBITS
The following Exhibits required by Item 601 of Regulation S-K (and
numbered in conformity therewith) are filed herewith or incorporated by
reference herein:
3.1 - Restated Articles of Incorporation of Registrant (incorporated
herein by reference to Exhibit 3.1 to Registration Statement No.
033-52255 filed with the Securities and Exchange Commission on
February 14, 1994 (the "1994 S-1")).
3.2 - Bylaws of Registrant as effective May 13, 1991 (incorporated herein
by reference to Exhibit 3.3 to the 1992 10-K).
4.1 - Form of Indenture between Registrant and First Fidelity Bank,
National Association, New Jersey, as trustee, relating to the 12-
3/4% Senior Subordinated Debentures due August 1, 2001 of
Registrant (incorporated herein by reference to Exhibit 4.1 to
Registration Statement No. 33-7212 filed with the Securities and
Exchange Commission on July 15, 1986).
4.2 - Form of Indenture between Registrant and Midlantic National Bank,
as trustee, relating to the 14-1/2% Subordinated Discount
Debentures due January 1, 2006 of Registrant (incorporated herein
by reference to Exhibit 4.1 to Registration Statement No. 33-1788
filed with the Securities and Exchange Commission on November 26,
1985).
4.3 - Agreement to furnish additional documents upon request by the
Securities and Exchange Commission (incorporated herein by
reference to Exhibit 4.3 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1989 (the "1989 10-K")).
10.1 - Amended and Restated Agreement of Limited Partnership of the
Partnership (incorporated herein by reference to Exhibit 10.17 to
the 1989 10-K).
10.2 - Amendment, dated July 28, 1989, to Amended and Restated Agreement
of Limited Partnership of the Partnership (incorporated herein by
reference to Exhibit 19.1 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1991 (the "1991 10-K")).
10.3 - Amendment, dated June 25, 1991, to Amended and Restated Agreement
of Limited Partnership of the Partnership (incorporated herein by
reference to Exhibit 19.2 to the 1991 10-K).
10.4 - Amended and Restated Employment Agreement, dated as of November 1,
1985, between Checker and David R. Markin ("Markin Employment
Agreement") (incorporated herein by reference to Exhibit 10.17 to
the 1989 10-K).
10.5 - Amendment, dated as of March 4, 1992, to Markin Employment
Agreement (incorporated herein by reference to Exhibit 10.3 to the
1991 10-K).
E-2
10.6 - Extension, dated July 12, 1993, of Amended and Restated Employment
Agreement between Checker and David R. Markin*
10.7 - Amended and Restated Employment Agreement, dated as of June 1,
1992, between Yellow Cab and Jeffrey Feldman (incorporated herein
by reference to Exhibit 28.2 of the Registrant's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1992 (the "June 1992
10-Q").
10.8 - Form of Stated Benefit Salary Continuation Agreement (incorporated
herein by reference to Exhibit 10.17 to the 1989 10-K).
10.9 - Employment Agreement, dated as of July 1, 1992, between Registrant
and Jay H. Harris (incorporated herein by reference to Exhibit 28.1
to the June 1992 10-Q).
10.10 - Loan and Guaranty Agreement, dated September 17, 1992, by and among
the Partnership, Checker, SCSM and NBD Bank, N.A. (the "Loan and
Guaranty Agreement") (incorporated herein by reference to Exhibit
28.1 to Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1992 (the "September 1992 10-Q").
10.11 - First Amendment dated as of November 1, 1993, to the Loan and
Guaranty Agreement (incorporated herein by reference to Exhibit
10.11 of the 1994 S-1).
10.12 - Credit and Guaranty Agreement, dated as of August 1, 1989, by and
among SCSM, Checker, the Partnership and NBD Bank, N.A. (the
"Credit Agreement") (incorporated herein by reference to Exhibit
10.10 to the 1992 10-K).
10.13 - First Amendment, dated as of June 1, 1990, to the Credit Agreement
(incorporated herein by reference to Exhibit 10.11 to the 1992
10-K).
10.14 - Second Amendment, dated as of January 2, 1991, to the Credit
Agreement (incorporated herein by reference to Exhibit 10.12 to the
1992 10-K).
10.15 - Third Amendment, dated as of November 1, 1993, to the Credit
Agreement (incorporated herein by reference to Exhibit 10.15 to the
1994 S-1).
10.16 - Supplemental Agreement, dated as of April 20, 1992, among SCSM,
Checker, the Partnership and NBD Bank, N.A. (incorporated herein by
reference to Exhibit 10.13 to the 1992 10-K).
10.17 - Second Supplemental Agreement, dated as of September 17, 1992,
among SCSM, Checker, the Partnership and NBD Bank, N.A.
(incorporated herein by reference to Exhibit 28.2 of the September
1992 10-Q).
10.18 - Lease dated December 1, 1988, between SCSM and Park Corporation
(incorporated herein by reference to Exhibit 10.17 to the 1989
10-K).
E-3
10.19 - Loan and Security Agreement dated as of March 21, 1990, by and
among Great Dane, Great Dane Trailers Indiana, Inc., Great Dane
Trailers Nebraska, Inc., Great Dane Trailers Tennessee, Inc.,
certain lending institutions and Security Pacific Business Credit
Inc., as Agent (the "Security Pacific Agreement") (incorporated
herein by reference to Exhibit 10.17 to the 1989 10-K).
10.20 - First Amendment, dated as of March 30, 1990, to the Security
Pacific Agreement (incorporated herein by reference to Exhibit 19.3
to the 1991 10-K).
10.21 - Second Amendment, dated as of April 30, 1990, to the Security
Pacific Agreement (incorporated herein by reference to Exhibit 19.4
to the 1991 10-K).
10.22 - Third Amendment, dated as of August 14, 1990, to the Security
Pacific Agreement (incorporated herein by reference to Exhibit 19.5
to the 1991 10-K).
10.23 - Fourth Amendment, dated as of February 28, 1991, to the Security
Pacific Agreement (incorporated herein by reference to Exhibit 19.6
to the 1991 10-K).
10.24 - Waiver and Fifth Amendment, dated as of September 3, 1991, to the
Security Pacific Agreement (incorporated herein by reference to
Exhibit 19.7 to the 1991 10-K).
10.25 - Waiver, Consent and Sixth Amendment, dated April 30, 1992, to the
Security Pacific Agreement (incorporated herein by reference to
Exhibit 28 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1992).
10.26 - Seventh Amendment, dated as of July 10, 1992, to the Security
Pacific Agreement (incorporated herein by reference to the June
1992 10-Q).
10.27 - Eighth Amendment, dated as of February 19, 1993, to the Security
Pacific Agreement (incorporated herein by reference to Exhibit
10.24 to the 1992 10-K).
10.28 - Waiver, Consent and Ninth Amendment, dated March 26, 1993, to the
Security Pacific Agreement (incorporated herein by reference to
Exhibit 10.29 to the 1992 10-K).
10.29 - Tenth Amendment, dated as of November 1, 1993, to the Security
Pacific Agreement (incorporated herein by reference to Exhibit
10.29 of the 1994 S-1).
10.30 - Assumption Agreement dated as of August 1, 1989, by and between
Checker and the West Virginia Economic Development Authority
(incorporated herein by reference to Exhibit 10.12 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1990).
10.31 - Agreement, dated as of September 1, 1991, between the Partnership
and Jerry E. Feldman (incorporated herein by reference to Exhibit
10.12 to the 1991 10-K).
E-4
10.32 - Form of Checker Motors Corporation Excess Benefit Retirement Plan,
effective January 1, 1983 (incorporated herein by reference to
Exhibit 19.9 to the 1991 10-K).
10.33 - Amended and Restated License Agreement, dated December 30, 1992,
between Checker Motors Corporation and Checker Taxi Association,
Inc. (incorporated herein by reference to Exhibit 10.28 to the 1992
10-K).
10.34 - Employment Agreement, dated as of January 1, 1994 between
Registrant and David R. Markin (incorporated herein by reference to
Exhibit 10.34 to the 1994 S-1).
21.1 - Subsidiaries of Registrant.*
- ----------------
[FN]
*Filed herewith.