-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EpuHz9fdxQTwNU/z8Tj+Q959GtewZ2Rkra+cleCGLCLEWPZ5qTbYtWbph6UQRROZ l0ogdFuS7gTR8SO8/bA9Kg== 0000950144-00-006782.txt : 20000516 0000950144-00-006782.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950144-00-006782 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED DOMINION INDUSTRIES LIMITED CENTRAL INDEX KEY: 0000029590 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] IRS NUMBER: 980125322 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 001-08585 FILM NUMBER: 634051 BUSINESS ADDRESS: STREET 1: 2300 ONE FIRST UNION CENTER STREET 2: 301 SOUTH COLLEGE STREET CITY: CHARLOTTE STATE: NC ZIP: 28202-6039 BUSINESS PHONE: 7043476800 MAIL ADDRESS: STREET 1: 2300 ONE FIRST UNION CENTER STREET 2: 301 SOUTH COLLEGE STREET CITY: CHARLOTTE STATE: NC ZIP: 28202-6039 FORMER COMPANY: FORMER CONFORMED NAME: AMCA INTERNATIONAL LTD DATE OF NAME CHANGE: 19900802 FORMER COMPANY: FORMER CONFORMED NAME: DOMINION BRIDGE CO LTD DATE OF NAME CHANGE: 19820407 10-K405/A 1 UNITED DOMINION INDUSTRIES LIMITED AMENDMENT NO. 1 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K/A (Amendment No. 1) (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the fiscal year ended DECEMBER 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from to 1-8585 (Commission File Number) UNITED DOMINION INDUSTRIES LIMITED (Exact name of registrant as specified in its charter) CANADA 98-0125322 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 2300 ONE FIRST UNION CENTER CHARLOTTE, NORTH CAROLINA 28202-6039 (Address of principal executive offices) (Zip Code) (704) 347-6800 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- COMMON SHARES (WITHOUT PAR VALUE) THE TORONTO STOCK EXCHANGE NEW YORK STOCK EXCHANGE Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not included as it is inapplicable to the registrant, a foreign private issuer. [X] The aggregate market value of voting stock held by non-affiliates of the registrant was approximately U.S. $635,000,000 as of March 14, 2000, assuming that officers and directors are affiliates. As of the same date, 39,122,355 Common Shares were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders for the year ended December 31,1999 are incorporated by reference into Parts I and II and filed as Exhibit 13 hereto. 2 Preliminary Note The Registrant is filing this amendment on Form 10-K/A to its Annual Report on Form 10-K for the year ended December 31, 1999 to restate the financial statements included therein solely to include condensed consolidating financial information segregating the Registrant and each of United Dominion Holdings, Inc. and United Dominion Industries, Inc. (wholly owned subsidiaries of the Registrant) from other subsidiaries. On February 14, 2000 the registration statement on Form F-3 with respect to offerings of up to an aggregate of U.S. $200 million in guaranteed debt securities by United Dominion Industries, Inc. to be guaranteed by the Registrant and United Dominion Holdings, Inc. was declared effective. PART II Item 8. Financial Statements and Supplementary Data. (a) Financial Statements Auditors' Report Consolidated Statements of Income for the Years Ended December 31, 1999, 1998 and 1997 Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997 Consolidated Statements of Financial Position as of December 31, 1999 and 1998 Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 1999, 1998 and 1997 Notes to Consolidated Financial Statements (b) Supplementary Financial Information The selected quarterly financial data required by Item 302(a) of Regulation S-K appears as Note 15 to the Consolidated Financial Statements which is an unaudited summary of quarterly results and is incorporated herein by this reference. (c) Other Financial Statements and Schedules Other financial statements and schedules required under Regulation S-X are filed pursuant to Item 14 of this report. 2 3 AUDITORS' REPORT To the Shareholders of United Dominion Industries Limited We have audited the consolidated statements of financial position of United Dominion Industries Limited as at December 31, 1999 and 1998 and the related consolidated statements of income, cash flows and changes in shareholders' equity for each of the years in the three-year period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance 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. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 1999 and 1998 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1999 in accordance with Canadian generally accepted accounting principles. /s/ KPMG LLP Chartered Accountants Toronto, Canada January 28, 2000 3 4 UNITED DOMINION INDUSTRIES LIMITED Consolidated Statements of Income, Restated (note 2) Years Ended December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars, Except Per Share Data)
1999 1998 1997 ----------- ----------- ----------- Sales $ 2,148,338 $ 2,020,374 $ 1,654,679 ----------- ----------- ----------- Cost and expenses Cost of sales 1,480,866 1,401,802 1,168,654 Restructuring charges - inventory (note 3) 5,153 -- -- ----------- ----------- ----------- Total cost of sales 1,486,019 1,401,802 1,168,654 Selling, general and administrative expenses 447,583 429,591 328,271 Restructuring charges - other (note 3) 15,351 16,336 -- ----------- ----------- ----------- Total costs and expenses 1,948,953 1,847,729 1,496,925 ----------- ----------- ----------- Operating income 199,385 172,645 157,754 Other income (expense) Interest - net (note 8) (40,178) (35,750) (18,544) Gain on sale of business (note 3) -- 11,285 -- Other (note 3) (1,500) (6,852) 7,700 ----------- ----------- ----------- Income from continuing operations before income taxes and goodwill charges 157,707 141,328 146,910 Income tax provision (note 4) (47,151) (24,147) (49,528) ----------- ----------- ----------- Income from continuing operations before goodwill charges 110,556 117,181 97,382 Goodwill charges, net of applicable income tax benefit of $1,422 in 1999, $1,278 in 1998 and $690 in 1997 (note 3) (21,646) (17,493) (12,492) ----------- ----------- ----------- Income from continuing operations 88,910 99,688 84,890 ----------- ----------- ----------- Income from discontinued operations (note 3) Earnings, net of applicable income tax expense of $2,211 -- -- 3,088 Gain on disposal, net of applicable income tax expense of $36,011 -- -- 53,086 ----------- ----------- ----------- -- -- 56,174 ----------- ----------- ----------- Net income $ 88,910 $ 99,688 $ 141,064 =========== =========== =========== Earnings per common share (note 1): Continuing operations before goodwill charges $ 2.79 $ 2.88 $ 2.19 =========== =========== =========== Continuing operations $ 2.24 $ 2.45 $ 1.91 Discontinued operations -- -- 1.26 ----------- ----------- ----------- Net earnings $ 2.24 $ 2.45 $ 3.17 =========== =========== ===========
See accompanying notes to consolidated financial statements. 4 5 UNITED DOMINION INDUSTRIES LIMITED Consolidated Statements of Cash Flows Years Ended December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars)
1999 1998 1997 --------- --------- --------- Cash provided from operating activities Income from continuing operations $ 88,910 $ 99,688 $ 84,890 Add (deduct) items not affecting cash Depreciation 46,341 41,747 34,267 Amortization 28,376 23,118 16,570 Gain on sale of business -- (11,285) -- Deferred income taxes 2,839 (5,899) 15,395 Other 1,474 2,358 315 Net decrease (increase) in working capital other than cash (note 14) 11,153 (36,258) (23,334) Asset securitization 900 (6,100) (10,400) --------- --------- --------- 179,993 107,369 117,703 --------- --------- --------- Cash used by investing activities Additions to fixed assets (61,278) (51,741) (60,596) Acquisitions of businesses (155,416) (172,181) (364,148) Net proceeds from disposal of businesses -- 25,008 274,641 Proceeds from (investments in) other assets (9,952) 10,354 8,851 Other (874) (8,040) (1,545) --------- --------- --------- (227,520) (196,600) (142,797) --------- --------- --------- Cash provided from (used by) financing activities Additional borrowings 155,597 331,907 119,020 Repayments of borrowings (71,488) (92,931) (66,886) Issuance of common shares 1,537 7,302 1,780 Repurchase of common shares (38,476) (83,565) (56,954) Dividends (14,158) (14,614) (12,413) --------- --------- --------- 33,012 148,099 (15,453) --------- --------- --------- Cash used by discontinued operations (note 3) -- -- (61,135) --------- --------- --------- Net increase (decrease) in cash and short-term investments (14,515) 58,868 (101,682) Cash and short-term investments at beginning of year 123,455 64,587 166,269 --------- --------- --------- Cash and short-term investments at end of year $ 108,940 $ 123,455 $ 64,587 ========= ========= =========
See accompanying notes to consolidated financial statements. 5 6 UNITED DOMINION INDUSTRIES LIMITED Consolidated Statements of Financial Position, Restated (note 2) December 31, 1999 and 1998 (Amounts in Thousands of U.S. Dollars)
1999 1998 ----------- ----------- Assets Current assets Cash and short-term investments $ 108,940 $ 123,455 Accounts and notes receivable, less allowance for doubtful accounts of $9,645 in 1999 and $10,725 in 1998 (note 11) 334,398 335,424 Inventories (note 5) 390,654 368,842 Other current assets 61,386 81,679 ----------- ----------- Total current assets 895,378 909,400 Fixed assets (note 6) 350,901 317,853 Goodwill (notes 1 and 3) 836,497 728,350 Other intangible assets (note 1) 43,547 46,470 Other assets (note 4) 115,252 88,584 ----------- ----------- $ 2,241,575 $ 2,090,657 =========== =========== Liabilities and Shareholders' Equity Current liabilities Notes payable to banks (note 7) $ 103,544 $ 53,672 Current portion of long-term debt (note 7) 46,082 51,665 Accounts payable 169,362 158,708 Accrued liabilities 185,742 194,682 Customer advances 15,440 23,181 ----------- ----------- Total current liabilities 520,170 481,908 Long-term debt (note 7) 591,506 544,771 Other liabilities 210,654 178,148 ----------- ----------- 1,322,330 1,204,827 Shareholders' equity (note 9) Common shares - outstanding 39,047,937 shares in 1999 and 40,520,982 shares in 1998 537,355 557,574 Contributed surplus 4,283 4,057 Retained earnings 421,137 360,796 ----------- ----------- 962,775 922,427 Equity adjustment from foreign currency translation (notes 1 and 7) (43,530) (36,597) ----------- ----------- Total shareholders' equity 919,245 885,830 ----------- ----------- $ 2,241,575 $ 2,090,657 =========== ===========
See accompanying notes to consolidated financial statements. On behalf of the Board - William R. Holland, Director; R. Stuart Dickson, Director. 6 7 UNITED DOMINION INDUSTRIES LIMITED Consolidated Statements of Changes in Shareholders' Equity, Restated (note 2) Years Ended December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars)
Common Shares -------------------------- Equity Unamortized Adjustment/ Total Shares Restricted Contributed Retained Currency Shareholders' Issued Stock Surplus Earnings Translation Equity ----------- ---------- ----------- ----------- ----------- ------------- Balance, December 31, 1996 $ 621,825 $(5,287) $1,409 $ 214,935 $(26,128) $ 806,754 Repurchase of 2,067,540 shares (28,222) -- -- (28,732) -- (56,954) Stock options exercised (110,255 shares) 1,780 -- 450 -- -- 2,230 Amortization of restricted stock grants -- 1,406 -- -- -- 1,406 Net income for the year -- -- -- 141,064 -- 141,064 Cash dividends - $.28 per share -- -- -- (12,413) -- (12,413) Net effect of currency translation adjustments -- -- -- -- (13,187) (13,187) Effect of hedging transactions -- -- -- -- 3,649 3,649 --------- ------- ------ --------- -------- --------- Balance, December 31, 1997 595,383 (3,881) 1,859 314,854 (35,666) 872,549 Repurchase of 3,250,000 shares (44,433) -- -- (39,132) -- (83,565) Stock options exercised (445,422 shares) 7,302 -- 2,198 -- -- 9,500 Incentive share election (43,845 shares) 1,219 -- -- -- -- 1,219 Amortization of restricted stock grants -- 1,984 -- -- -- 1,984 Net income for the year -- -- -- 99,688 -- 99,688 Cash dividends - $.36 per share -- -- -- (14,614) -- (14,614) Net effect of currency translation adjustments -- -- -- -- (3,432) (3,432) Effect of hedging transactions -- -- -- -- 2,501 2,501 --------- ------- ------ --------- -------- --------- Balance, December 31, 1998 559,471 (1,897) 4,057 360,796 (36,597) 885,830 Repurchase of 1,745,000 shares (24,065) -- -- (14,411) -- (38,476) Stock options exercised (103,400 shares) 1,537 -- 226 -- -- 1,763 Incentive share election (55,365 shares) 1,105 -- -- -- -- 1,105 Restricted stock issued (113,190 shares) 2,263 (2,263) -- -- -- -- Amortization of restricted stock grants -- 1,204 -- -- -- 1,204 Net income for the year -- -- -- 88,910 -- 88,910 Cash dividends - $.36 per share -- -- -- (14,158) -- (14,158) Net effect of currency translation adjustments -- -- -- -- (12,688) (12,688) Effect of hedging transactions -- -- -- -- 5,755 5,755 --------- ------- ------ --------- -------- --------- Balance, December 31, 1999 $ 540,311 $(2,956) $4,283 $ 421,137 $(43,530) $ 919,245 ========= ======= ====== ========= ======== =========
See accompanying notes to consolidated financial statements. 7 8 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) 1. Summary of Significant Accounting Policies General The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada. These accounting principles are in conformity with accounting principles generally accepted in the United States except as indicated in note 14. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Consolidation All subsidiary companies are consolidated and all significant intercompany accounts and transactions have been eliminated in consolidation. Consolidated Statements of Cash Flows Cash and short-term investments include highly liquid investments with a maturity of three months or less. Inventories Inventories are stated at the lower of cost (average or first-in, first-out) or net realizable value. Fixed Assets Property, plant and equipment are recorded at cost. Major renewals and betterments are capitalized; whereas, maintenance and repairs are expensed as incurred. Cost of property sold or otherwise disposed and related accumulated depreciation are removed from the accounts at the time of disposal and any resulting gain or loss is included in income. Depreciation of plant and equipment is determined on the straight-line method over the estimated useful lives of the assets. The average annual rates of depreciation range from 4% for buildings to 10% for machinery and equipment. Goodwill Goodwill, which represents the excess of purchase price over fair value of net identifiable assets acquired, is amortized on the straight-line method over the expected periods to be benefited, generally 40 years. The company assesses the recoverability of this intangible asset based primarily upon an analysis of undiscounted future operating cash flows from the acquired operations. Accumulated amortization was $90,309 and $69,044 at December 31, 1999 and 1998, respectively. 8 9 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) Other Intangible Assets Amounts assigned to other intangible assets, primarily trademarks and patents, are based on independent appraisals and are amortized on the straight-line method over periods ranging from four to forty years. Accumulated amortization was $16,565 and $13,262 at December 31, 1999 and 1998, respectively. Foreign Currency Translation The financial statements of those operations whose functional currency is a foreign currency are translated into U.S. dollars using the current rate method. Under this method, all assets and liabilities are translated into U.S. dollars using current exchange rates and income statement items are translated using weighted average exchange rates. The translation adjustment is included as a component of shareholders' equity; whereas, gains and losses on foreign currency transactions are included in income. Foreign currency transaction losses totaled $2,768, $3,530 and $3,959 for 1999, 1998 and 1997, respectively. Derivative Financial Instruments The company is party to certain derivative financial instruments, principally forward exchange contracts used to manage foreign currency exposures. Gains and losses on forward foreign exchange contracts are recognized in revenues in the same period as the foreign currency transactions to which they relate. Fair Values The carrying values of cash and short-term investments, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the relatively short periods to maturity of the instruments. The fair value of the company's long-term debt is estimated based on the current rates available to the company for debt of the same remaining maturities. Since the company's fixed rate debt carries interest rates which are different than current market rates, the estimated fair value of the company's long-term debt was approximately $634,000 and $621,000 at December 31, 1999 and 1998, respectively. Earnings Per Common Share Earnings per common share are calculated by dividing net income by the weighted average number of common shares outstanding during the year (39,641,606 shares for 1999, 40,755,170 shares for 1998 and 44,439,004 shares for 1997). The assumed exercise of outstanding stock options would not have a materially dilutive effect on reported earnings per common share. Reclassifications Certain prior year amounts have been reclassified to conform with current year presentation. 9 10 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) 2. Restatement Related to Adoption of New Accounting Pronouncements Effective January 1, 1999, the company adopted the Canadian Institute of Chartered Accountants (CICA) Handbook Section 3465, Income Taxes. This adoption has been retroactively applied to all years presented in the accompanying consolidated financial statements. The adoption of this pronouncement did not have a material effect on the Consolidated Statement of Income for the year ended December 31, 1998 and it has not been restated. For the year ended December 31, 1997, the adoption of Handbook Section 3465 resulted in an increase in the gain on disposal of discontinued operations (note 3) and a related increase in net income of $3,086, or $.07 per share. For the year ended December 31, 1998, the adoption resulted in certain reclassifications related to the cost basis of various amounts in the Consolidated Statement of Financial Position. The reclassifications resulted in increases in fixed assets of $5,515 and accrued liabilities of $5,174 and decreases in inventories of $468, other current assets of $288, goodwill and other intangibles of $1,344, other assets of $33,801, other liabilities of $24,109 and retained earnings of $11,451 as of December 31, 1998. As of December 31, 1996, the adoption of Handbook Section 3465 resulted in a reduction in retained earnings and total shareholders' equity of $14,537 in the Consolidated Statement of Changes in Shareholders' Equity. In 1999, the CICA amended Handbook Section 1580, Business Combinations, to allow for the separate presentation of goodwill amortization expense and goodwill impairment charges (collectively referred to as "goodwill charges"), net of tax, in the income statement. Accordingly, the presentation of income before goodwill charges, and the related per share amount, is also allowed. The company has adopted this presentation format and has reclassified the prior years' consolidated statements of income to conform with the new presentation. This reclassification does not affect net income or net earnings per share as previously reported. 3. Acquisitions, Divestitures, Discontinued Operations and Restructuring Acquisitions In February 1999, the company acquired Riser-Bond Instruments which designs and manufactures cable fault locators principally used by the telecommunications industry. In July, the company acquired TKO Doors, a manufacturer of loading dock doors. In August, the company acquired Bran + Luebbe, a manufacturer of precision metering pumps, analyzing equipment and integrated blending systems for a broad range of process industries. In October, the company acquired S.W. Fleming Limited, a manufacturer of commercial side-hinged steel doors and frames. The cost of these and other smaller acquisitions totaled approximately $155,000 and resulted in an increase in working capital of approximately $17,000, an increase in fixed assets of approximately $24,000, an increase in goodwill of approximately $129,000 and an increase in other liabilities of approximately $15,000. 10 11 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) In February 1998, the company acquired Radiodetection which designs and manufactures portable pipe and cable locators and related equipment used in the utility and telecommunication industries. In March, the company acquired Tex-Steel Corporation, a manufacturer of custom steel doors and frames for commercial and detention markets. In April, the company acquired APV Ice Cream, a manufacturer of industrial ice cream production equipment. In May, the company acquired Leading Edge, Inc. which manufactures ceiling fans, air curtains and air circulators supplied to the industrial and electrical distributor markets. In July, the company acquired C&M, Inc., a manufacturer of powered roller conveyor systems primarily servicing the corrugated and solid fiber carton industry. In August, the company acquired Ling Dynamic Systems Limited which designs and builds vibration test systems and related equipment. The cost of these and other smaller acquisitions totaled approximately $172,000 and resulted in an increase in working capital of approximately $27,000, an increase in fixed assets of approximately $14,000, an increase in other assets of approximately $1,000 and an increase in goodwill of approximately $130,000. In 1997, the company completed the purchase of the common stock of Core Industries Inc (Core). Core was a manufacturer of valves, strainers and backflow prevention products, agricultural equipment, electrical test and measurement equipment and integrated assembly systems used in automobile and other manufacturing applications. The total cost of the acquisition was approximately $302,000. If the acquisition of Core had occurred at the beginning of 1997, unaudited proforma consolidated sales, net income and net earnings per share in 1997 would have been $1,826,273, $144,422 and $3.25, respectively. In 1997, the company also made several smaller product line acquisitions. In January, the company acquired Lee Engineering which produces vertical lifting equipment used in various industrial applications. In March, the company acquired Trussbilt, a manufacturer of doors, frames and related products for the security and detention markets. In April, the company acquired Dominion Door, which produces steel doors, frames and pre-hung windows for metal buildings. In September, the company acquired TIF Instruments, a manufacturer of electronic test instruments used primarily by the HVAC market. In September, the company also acquired Process Machinery & Supply Company and Alliance Food Equipment Corp. Both companies manufacture and recondition equipment for the ice cream industry. In November, the company acquired Stow Manufacturing, a manufacturer of light construction equipment. The cost of these and other smaller acquisitions totaled approximately $68,000. The above mentioned acquisitions have been accounted for by the purchase method and earnings have been included in the results of operations from the dates of the acquisitions. In 1997, the company initiated a tender offer for the shares of Imo Industries Inc. (Imo). Imo's Board of Directors ultimately terminated the merger agreement and, pursuant to the terms of the agreement, the company received a $7,700 termination fee, net of expenses. This amount is included in "Other income (expense)" in the Consolidated Statements of Income. Divestitures (other than Discontinued Operations) In January 1998, the company sold its Little Falls Tank division of Waukesha Cherry-Burrell for approximately $4,000 which equaled its book value. In December 1998, the company sold the assets of its Marley Pump motor product line and entered into various consulting and supply arrangements for total proceeds of $17,500. The company recognized a pre-tax gain on the sale of $11,285 which is included in "Other income (expense)" in the Consolidated Statements of Income. 11 12 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) Discontinued Operations In 1997, the company sold Varco-Pruden, Centria and Windsor Door. These units were part of the company's Building Products segment. The company received approximately $240,000 in cash and recorded a net-of-tax gain of $53,086 on the sale of these businesses. The results of operations of these units and the related gain on sale have been separately classified as "Income from discontinued operations" in the Consolidated Statements of Income. The operating cash flows from these businesses have also been separately classified in the Consolidated Statements of Cash Flows. The "Cash used by discontinued operations" in the Consolidated Statement of Cash Flows for 1997 also includes approximately $44,000 in income tax payments which were directly related to the gain on the sale of discontinued operations. In 1999 and 1998, the company incurred charges of $1,500 and $6,852, respectively, related primarily to the settlement of legal claims and the write-down of assets to be realized from prior years' divestiture activities to their estimated net realizable value. These charges are included in "Other income (expense)" in the Consolidated Statements of Income. Restructuring Charges In 1998, the company announced a company-wide cost reduction plan. The plan included the net reduction of its global workforce by over 500 positions, principally administrative personnel, rationalizations involving 12 facilities and reduced discretionary spending. The company recorded a pre-tax charge to earnings in 1998 of $16,336 related to the plan. The company expanded the restructuring program in 1999 to include the rationalization of 11 additional facilities including the shutdown of four manufacturing and one administrative facility, the transition of the manufacturing of several product lines to different sites and the discontinuation of several unprofitable product lines. Additional workforce reductions of approximately 500 positions were announced of which approximately 130 had actually been terminated by December 31, 1999. The company reported a pre-tax charge to earnings of $22,198 related to these new initiatives. Selected financial information relating to the two years' restructuring charges is as follows:
Accrual at Accrual at Expensed Incurred December 31, Expensed Incurred December 31, in 1998 in 1998 1998 in 1999 in 1999 1999 -------- -------- ------------ -------- -------- ------------ Severance and other employee costs $13,474 $(5,499) $7,975 $ 5,785 $ (6,990) $6,770 Facilities costs 1,930 (1,513) 417 5,791 (5,918) 290 Write-down of assets to net realizable value -- -- -- 8,693 (8,693) -- Other costs 932 -- 932 1,929 (2,522) 339 ------- ------- ------ ------- -------- ------ Total $16,336 $(7,012) $9,324 $22,198 $(24,123) $7,399 ======= ======= ====== ======= ======== ======
12 13 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) All costs are included in "Restructuring charges" in the Consolidated Statements of Income with the exception of $1,694 of goodwill impairment charges which were recorded in 1999 and are included in "Goodwill charges". Of the total charges, $7,399 remains accrued at December 31, 1999. The majority of the remaining restructuring activities should be completed during the first half of 2000. 4. Income Taxes The provision for income taxes on income from continuing operations before goodwill charges is comprised of the following:
1999 1998 1997 ------- ------- ------- Current Canada $ (954) $ 3,264 $ 2,961 United States 10,386 24,094 10,161 Other countries 30,226 2,688 21,011 ------- ------- ------- 39,658 30,046 34,133 ------- ------- ------- Deferred Canada (5,148) (7,241) (3,886) United States 15,199 9,686 26,257 Other countries (2,558) (8,344) (6,976) ------- ------- ------- 7,493 (5,899) 15,395 ------- ------- ------- $47,151 $24,147 $49,528 ======= ======= =======
The related income (loss) from continuing operations before income taxes and goodwill charges is as follows:
1999 1998 1997 -------- -------- -------- Canada $ (8,835) $(13,491) $ (5,455) United States 62,240 78,440 87,413 Other countries 104,302 76,379 64,952 -------- -------- -------- $157,707 $141,328 $146,910 ======== ======== ========
13 14 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 31, 1999 and 1998 are as follows:
1999 1998 --------- --------- Deferred tax assets: Net operating loss carryforwards $ 22,909 $ 10,805 Difference between tax on distributed and undistributed earnings 4,580 2,451 Accrued expenses not currently deductible 81,683 90,058 Other 2,975 4,240 --------- --------- 112,147 107,554 Less: valuation allowance (4,080) -- --------- --------- Total deferred tax assets 108,067 107,554 --------- --------- Deferred tax liabilities: Plant and equipment, principally due to differences in basis and depreciation (35,081) (28,298) Intangible assets, principally due to differences in basis and amortization (13,601) (12,341) Inventory, principally due to differences in basis (6,427) (8,501) Other (15,954) (13,078) --------- --------- Total deferred tax liabilities (71,063) (62,218) --------- --------- Net deferred tax asset $ 37,004 $ 45,336 ========= =========
Subsequently recognized tax benefits relating to the valuation allowance for deferred tax assets as of December 31, 1999 will be allocated to goodwill. Based on the company's historical and current earnings, management believes it is more likely than not that the company will realize the benefit of the remaining deferred tax assets that are not subject to the valuation allowance. The difference between the company's effective income tax rate and the statutory rate on income from continuing operations is reconciled below.
1999 1998 1997 -------- -------- -------- Income tax expense at U.S. statutory rate of 35 $ 55,197 $ 49,465 $ 51,419 State income taxes 2,792 3,563 3,618 Canadian and foreign tax refunds and tax settlements $ (4,984) (23,838) -- Canadian and foreign income taxes at less than U.S. statutory rate (6,962) (7,806) (7,714) Other 1,108 2,763 2,205 -------- -------- -------- $ 47,151 $ 24,147 $ 49,528 ======== ======== ========
14 15 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) The company has Canadian net operating loss carryforwards for income tax purposes of approximately $43,000 which expire in 2003 through 2006. "Other Assets" in the Consolidated Statements of Financial Position include $4,580 and $2,451 at December 31, 1999 and 1998, respectively, primarily representing German taxes refundable to the company when German earnings are repatriated. Income taxes paid totaled $2,224, $53,085 and $71,240 for 1999, 1998 and 1997, respectively. 5. Inventories Inventories at December 31, 1999 and 1998 are summarized as follows:
1999 1998 -------- -------- Raw materials $131,444 $111,994 Work-in-process 101,122 99,402 Finished products 158,088 157,446 -------- -------- $390,654 $368,842 ======== ========
6. Fixed Assets Fixed assets are summarized as follows:
Accumulated Cost Depreciation Net -------- ------------ -------- December 31, 1999: Land $ 12,385 $ -- $ 12,385 Plant 143,508 50,479 93,029 Machinery and equipment 431,743 216,112 215,631 Construction in progress 29,856 -- 29,856 -------- -------- -------- $617,492 $266,591 $350,901 ======== ======== ======== December 31, 1998: Land $ 11,215 $ -- $ 11,215 Plant 129,267 46,485 82,782 Machinery and equipment 394,222 184,320 209,902 Construction in progress 13,954 -- 13,954 -------- -------- -------- $548,658 $230,805 $317,853 ======== ======== ========
15 16 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) 7. Debt Short-term At December 31, 1999 and 1998, the company's notes payable to banks totaled $103,544 and $53,672, respectively, with weighted average interest rates of 6.7% and 4.9%, respectively. At December 31, 1999, the company had available approximately $105,000 of unused short-term borrowing facilities. Long-term The company's long-term debt at December 31, 1999 and 1998 is summarized as follows:
1999 1998 -------- -------- Revolving credit bank notes $101,192 $ 35,958 Senior notes due 2002 - 6.80% 70,200 93,600 Senior notes due 2002 - 8.25% 37,500 50,000 Senior notes due 2007 - 7.67% 50,000 50,000 Senior notes due 2008 - 6.64% 110,000 110,000 Commercial paper 172,470 162,556 Multi-currency revolving notes 36,375 39,718 Other notes payable in installments through 2020 at interest rates varying from 2.9% to 10.0% 59,851 54,604 -------- -------- 637,588 596,436 Less current portion of long-term debt 46,082 51,665 -------- -------- $591,506 $544,771 ======== ========
The company has a revolving credit agreement (revolver) with a group of banks. This agreement gives the company the ability to borrow up to $450,000 through July 2002. Borrowings under the revolver are available in U.S. dollars and Deutsche Marks (DM) at the U.S. prime interest rate or LIBOR plus a margin. The margin ranges from 0.170% to 0.325% and is determined by a leverage ratio and the amount of utilization under the credit facility. The weighted average interest rates on the borrowings under this agreement were 4.6% and 4.9% during 1999 and 1998, respectively. At December 31, 1999, $41,192 of the revolver borrowings were denominated in DM. The DM borrowings are designated as a hedge of the company's net investment in German subsidiaries and foreign exchange gains and losses on these borrowings are reflected in "Equity adjustment from foreign currency translation" in the Consolidated Statements of Financial Position. The company also pays an annual facility fee on the amount of this facility ranging from 0.080% to 0.125%, depending upon a leverage ratio. The company further pays an annual utilization fee on the amount of loans outstanding of up to 0.05%, depending on leverage and amount of utilization. At December 31, 1999, the margin, facility fee and utilization fee were 0.25%, 0.1% and 0%, respectively. The 6.80% senior notes are currently payable in annual installments of $23,400. The 8.25% senior notes are currently payable in annual installments of $12,500. The 7.67% senior notes are payable in annual installments of $10,000 beginning in 2003. The 6.64% senior notes are payable in full in 2008. 16 17 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) During 1998, the company entered into an open-ended program whereby up to Cdn $250,000 of commercial paper can be issued. While the commercial paper is typically due in 30 - 60 days, with a maximum maturity of one year, it is the company's intention to continually refinance these borrowings. The company maintains unutilized long-term committed credit facilities sufficient to refinance the commercial paper outstanding. Therefore, the amounts outstanding at December 31, 1999 (U.S. $172,470) are included in long-term debt in the Consolidated Statements of Financial Position. Interest rates on the commercial paper ranged from 5.1% to 5.7% with a weighted average of 5.3% in 1999. The company has a $40,000 multi-currency revolving credit agreement with a bank which expires in June 2000. The agreement allows the company to designate subsidiaries to borrow under the facility at LIBOR interest rates plus margin and facility fees in total ranging from 0.7% to 1.0%. At December 31, 1999, $36,375 had been borrowed under this facility. This amount is included in long-term debt since the company has the capacity and intention to refinance this facility and extend its term prior to the expiration of the agreement. At December 31, 1999, the company had available approximately $150,000 of unused long-term revolving credit commitments. Various loan agreements contain covenants with respect to net worth, indebtedness and other items. The company has complied with all provisions of these agreements at December 31, 1999. Future principal payments on long-term debt are as follows: 2000 $ 46,082 2001 87,061 2002 315,375 2003 14,636 2004 10,927 Thereafter 163,507 -------- $637,588 ========
8. Interest Expense - Net Net interest expense is composed of the following:
1999 1998 1997 -------- -------- -------- Interest on long-term debt $ 38,217 $ 35,749 $ 22,441 Other interest expense 5,319 3,117 3,757 Interest income (3,358) (3,116) (7,654) -------- -------- -------- $ 40,178 $ 35,750 $ 18,544 ======== ======== ========
Net interest paid totaled $43,018, $33,082, and $20,104 for 1999, 1998 and 1997, respectively. 17 18 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) 9. Capital Stock The company is incorporated under the Canada Business Corporations Act and is authorized to issue an unlimited number of common and preferred shares of no par value. The company has a stock option and restricted stock plan under which options for a term not exceeding 10 years may be granted to key employees and directors to purchase common shares of the company at a price not less than 100% of their fair market value at the date of grant. Common shares reserved for exercise of these options or the issuance of restricted stock may not at any time exceed 10% of the number of common shares then outstanding. Transactions involving the plan are summarized below.
Options --------------------------------- Weighted- Available for Option Price Average Future Grant Granted Per Share Exercise Price ----------------- ------------ ------------------- ------------------- (Cdn.) (Cdn.) Outstanding at December 31, 1996 1,546,622 1,776,575 $ 9.375 - $ 33.125 $25.34 Exercised -- (110,255) $ 9.375 - $ 33.00 $21.98 Granted (463,400) 463,400 $36.65 - $ 38.87 $36.83 --------- --------- Outstanding at December 31, 1997 1,083,222 2,129,720 $ 9.375 - $ 38.87 $28.02 Exercised -- (445,422) $ 9.375 - $ 36.65 $23.60 Granted (435,250) 435,250 $28.95 - $ 40.00 $35.26 Expired 21,100 (21,100) $26.375 - $ 36.65 $29.76 --------- --------- Outstanding at December 31, 1998 669,072 2,098,448 $ 9.375 - $ 40.00 $30.44 Exercised -- (103,400) $ 12.75 - $ 26.625 $22.26 Granted (589,625) 589,625 $ 29.80 - $ 32.775 $30.03 Restricted stock issued (113,190) -- Additional shares authorized 1,196,993 -- --------- --------- Outstanding at December 31, 1999 1,163,250 2,584,673 $ 9.375 -$ 40.00 $30.67 ========= ========= Exercisable at December 31, 1999 1,736,724 $ 9.375 - $ 40.00 $29.97 =========
The following table provides certain information with respect to stock options outstanding at December 31, 1999.
Weighted- average Weighted- remaining Stock options average contractual Range of exercise price outstanding exercise price life ---------------- ------------------ ---------------- (Cdn.) (years) Under $28.00 (Cdn.) 802,011 $24.31 4.3 Over $28.00 (Cdn.) 1,782,662 33.54 7.9 ---------------- ------------------ ---------------- 2,584,673 $30.67 6.8 ================ ================== ================
18 19 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) The following table provides certain information with respect to stock options exercisable at December 31, 1999.
Weighted- Stock options average Range of exercise price exercisable exercise price ------------------ ---------------- (Cdn.) Under $28.00 (Cdn.) 802,011 $ 24.31 Over $28.00 (Cdn.) 934,713 34.84 ------------------ ---------------- 1,736,724 $ 29.97 ================== ================
The restricted stock issued during 1999 had a fair value at the date of grant of $2,263 or U.S. $19.99 per share. The sale of this stock is restricted for six years from the date of grant. Restricted stock was also issued during 1996 which is restricted for periods up to five years from the date of the grant. Compensation expense related to all restricted shares is recorded over the restriction period and amounted to $1,204, $1,984 and $1,406 in 1999, 1998 and 1997, respectively. The company's management incentive plans contain a feature that allows participants the opportunity to elect to receive restricted common shares in lieu of a portion of their cash bonuses. The number of shares issued is increased by a multiple in order to provide participants an incentive to elect to receive shares. A total of 55,365 and 43,845 shares were issued in 1999 and 1998, respectively, to participants who made such share elections. 10. Benefit Plans The company and its subsidiaries have defined benefit pension plans covering approximately one half of all employees. Plans covering eligible salaried employees call for benefits to be paid at retirement based primarily upon years of service and their compensation rates near retirement. Plans covering hourly employees generally provide benefits of stated amounts for each year of service. Contributions to the plans reflect benefits attributed to employees' services to date and also for benefits expected to be earned in the future. Assets of the plans consist primarily of cash and cash equivalents, common and preferred stocks, government bonds, investment-grade corporate bonds and other fixed income investments. The company also provides, through non-qualified plans, supplemental pension payments in excess of the qualified plan limits imposed by income tax regulations. These non-qualified plans are unfunded. 19 20 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) The following tables set forth the change in projected benefit obligation, change in plan assets and the funded status of the company's North American benefit plans as of December 31, 1999 and 1998.
Pension Benefits Other Benefits 1999 1998 1999 1998 ------- ------- ------ ------ Change in benefit obligation Benefit obligation at beginning of year $ 178,733 $ 167,993 $ 33,659 $ 26,883 Service cost 3,988 3,917 690 729 Interest cost 14,947 14,162 2,617 2,216 Plan participants' contributions 5 17 -- -- Plan amendment -- -- 799 1,446 Actuarial (gain) loss (1,750) 2,403 1,045 3,588 Benefits paid (10,550) (9,759) (1,256) (1,203) ------- ------- ------ ------ Benefit obligation at end of year 185,373 178,733 37,554 33,659 ------- ------- ------ ------ Change in plan assets Fair value of plan assets at beginning of year 212,175 205,953 Return on plan assets 27,541 12,894 Employer contribution 1,754 3,070 Plan participants' contributions 5 17 Benefits paid (10,550) (9,759) ------- ------- Fair value of plan assets at end of year 230,925 212,175 ------- ------- Funded status 45,552 33,442 (37,554) (33,659) Unrecognized net actuarial (gain) loss (33,668) (23,933) 9,617 7,551 Unrecognized prior service cost 3,220 3,327 3,733 5,476 Unrecognized net transition obligation 18 27 1,335 1,502 ------- ------- ------ ------ Prepaid (accrued) benefit cost $ 15,122 $ 12,863 $(22,869) $(19,130) ======= ======= ====== ======
The weighted-average discount rate used to measure the projected benefit obligation is 8.5%, the average rate of increase in future compensation levels is approximately 5% and the expected long-term rate of return on assets is 8.5%. The company amortizes prior service cost and unrecognized gains and losses using the straight-line method over the average future service life of active participants. 20 21 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) The components of net periodic benefit cost are as follows:
Pension Benefits Other Benefits ---------------------------------- ---------------------------------- 1999 1998 1997 1999 1998 1997 -------- -------- -------- ------ ------ ------ Service cost $ 3,988 $ 3,917 $ 4,557 $ 690 $ 729 $ 738 Interest cost 14,947 14,162 13,233 2,617 2,216 1,777 Expected return on assets (17,416) (16,067) (13,858) -- -- -- Amortization (1,543) (879) (682) 1,688 1,680 1,509 -------- -------- -------- ------ ------ ------ Net periodic benefit cost $ (24) $ 1,133 $ 3,250 $4,995 $4,625 $4,024 ======== ========= ======== ====== ====== ======
A number of the company's operating units have defined contribution plans pursuant to Section 401(k) of the U.S. Internal Revenue Code. The total expense of these plans was $5,522, $5,475 and $3,893 for the years ended December 31, 1999, 1998 and 1997, respectively. The company's German operations have pension plans, which in accordance with applicable laws, are unfunded. The weighted average discount rate used to measure the projected benefit obligation of the German plans is 6% - 7% and the rate of increase in future compensation levels is 3% - 3.5% for 1999 and 1998. The status of the German plans at December 31, 1999 and 1998 as reflected in the Consolidated Statements of Financial Position is as follows:
1999 1998 -------- -------- Benefit obligation at beginning of year $ 17,992 $ 16,421 Service cost 433 376 Interest cost 1,291 1,126 Actuarial loss 1,138 265 Acquisition 7,330 -- Settlements (56) -- Benefits paid (687) (726) Foreign exchange rate changes (2,475) 530 -------- -------- Benefit obligation at end of year $ 24,966 $ 17,992 ======== ========
The components of net periodic benefit cost are as follows:
1999 1998 1997 ------ ------ ------ Service cost $ 433 $ 376 $ 875 Interest cost 1,291 1,126 1,089 Amortization of prior service cost 128 134 136 ------ ------ ------ Net periodic benefit cost $1,852 $1,636 $2,100 ====== ====== ======
21 22 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) The company provides certain postretirement health care and life insurance benefits to a limited number of employees. The costs associated with these benefits are not significant and are recorded on a "pay-as-you-go" or cash basis. 11. Commitments and Contingencies A number of claims and lawsuits seeking unspecified damages and other relief are pending against the company. It is impossible at this time for the company to predict with any certainty the outcome of such litigation. However, management is of the opinion, based upon information presently available, that it is unlikely that any liability, to the extent not provided for through insurance or otherwise, would be material in relation to the company's consolidated financial position. The company has been named along with several other parties in a number of administrative proceedings maintained by federal and state agencies arising out of alleged releases or contributions of hazardous substances into the environment. None of the proceedings is, in the opinion of management, either individually or viewed in connection with all the proceedings, material to the company's liquidity, consolidated operating results, or consolidated financial position. While the company has participated and in the future will participate in the funding of clean up costs in connection with certain of the proceedings, it does not believe that material monetary sanctions will be imposed against it as a result of any of the proceedings. The company has an agreement to sell certain qualifying accounts receivable to a financial institution on a revolving basis. The amount sold as of December 31, 1999 and 1998 was $62,900 and $62,000, respectively. The amount sold at any time must be supported by available credit under the revolver. Certain of the company's operations have entered into agreements with third party finance companies to provide wholesale financing of their product to distributors. The company is responsible for the repurchase of new product in the event it is acquired by the finance companies through repossession. At December 31, 1999, the total amount of new product financed under these agreements is approximately $12,000. At December 31, 1999, the company also has sold approximately $8,000 of receivables under recourse agreements. Reserves have been provided for any anticipated losses under these agreements. In the normal course of business, letters of credit and bank guarantees are issued by banks for account of the company, which in the opinion of management, have no material effect on the company's financial position. At December 31, 1999, the company was contingently liable for $84,000 under these arrangements. The company does not trade in financial instruments and does not engage in speculation. However, it does enter into a limited range and number of derivative financial instrument contracts. The company also has a program in place to manage foreign currency risk. As part of that program, the company has entered into a limited number of foreign currency forward exchange contracts to hedge foreign currency transactions or intercompany loan payments. The company's foreign exchange contracts do not subject the company to risk due to exchange rate movements because gains and losses on these contracts offset losses and gains on the transactions being hedged. As of December 31, 1999, the company's German operations had approximately DM 183 million ($93,000) of forward exchange contracts outstanding which are designed to convert the receipt of foreign currencies from sales outside of Germany into DM. The forward exchange contracts generally have maturities which do not exceed one year and exchange rates are agreed to at the inception of the contracts. 22 23 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) The company has operating leases covering machinery, equipment, office, warehouse and manufacturing facilities. Future minimum lease payments under operating leases at December 31, 1999 are as follows: 2000 $ 14,505 2001 13,025 2002 8,633 2003 5,003 2004 3,648 Thereafter 7,091 ----------- $ 51,905 ===========
12. Business Segments The company operates in the following industry segments: Flow Technology - air dehydration and filtration equipment and related parts and services for compressed air systems; valves, strainers and back flow prevention products; water system and submersible petroleum pumps; leak detection equipment; rotary positive displacement pumps and related fluid handling equipment for sanitary and industrial markets; ice cream equipment; high precision metering pumps, analyzing equipment and integrated blending systems for process industries; water cooling towers and related components; fiberglass panels and pultruded products and cast-iron boilers. Machinery - light and heavy duty soil, sanitary landfill and asphalt compaction equipment; asphalt recyclers and pavers; light construction equipment; tillage equipment; foraging wagons; and grain drills and augers. Specialty Engineered Products - steel doors and frames; electric resistance heating products; air circulation equipment; machined critical parts for aerospace markets; metal forming equipment; loading dock equipment; powered roller conveyor systems; and vertical lifting equipment. Test Instrumentation - air supply houses; heat process and environmental conditioning equipment; electrical test and measurement equipment; refrigerant leak detection and recovery systems; vibration test systems; portable pipe and cable locators; and integrated assembly systems used in automobile and other manufacturing applications. The significant accounting policies of the above segments are the same as those described in note 1. Intersegment sales are recorded at current market prices. The company does not include income taxes or net interest expense in the determination of segment profit. Information about the company's segments, certain geographic information and a reconciliation of segment profit to net income is shown below. 23 24 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars)
Year ended December 31, 1999 ---------------------------------------------------------------------------------------------- (3) Sales (2) (3) Depreciation (1) -------------------------------------- Segment Capital and Assets Gross Intersegment Net Profit Expenditures Amortization ---------- ---------- ----------- ---------- -------- ------------ ------------- Industry Segment Flow Technology $1,041,831 $ 992,466 $ -- $ 992,466 $ 94,016 $22,404 $42,499 Machinery 274,544 456,348 -- 456,348 50,685 13,952 8,802 Specialty Engineered Products 322,892 387,748 -- 387,748 42,000 14,988 12,814 Test Instrumentation 319,978 311,776 -- 311,776 18,344 9,618 9,269 ---------- ---------- ---------- ---------- -------- ------- ------- $1,959,245 $2,148,338 $ -- $2,148,338 $205,045 $60,962 $73,384 ========== ========== ========== ========== ======== ======= ======= (4) (6) Long-lived (5) Segment Assets Net Sales Profit ---------- ---------- -------- Geographic Information United States $ 948,198 $1,441,068 $132,299 Europe 241,577 424,559 49,051 Other Countries 41,170 282,711 23,695 ---------- ---------- -------- $1,230,945 $2,148,338 $205,045 ========== ========== ========
Reconciliation of segment profit to net income Segment profit $ 205,045 Corporate expenses (23,673) Interest - net (40,178) Other expenses - net (6,555) --------- Income before income taxes (7) 134,639 Income tax provision (7) (45,729) --------- Net income $ 88,910 =========
(1) Assets exclude $282,330 of corporate amounts. (2) Includes restructuring costs of $7,712, $5,402, and $9,084 for the Flow Technology, Specialty Engineered Products and Test Instrumentation segments, respectively (note 3). (3) Capital expenditures and depreciation and amortization exclude $316 and $1,333, respectively, of corporate amounts. (4) Long-lived assets consist of fixed assets, goodwill and other intangible assets. (5) Attributed to countries based on location of customer. (6) Attributed to countries based on location of customer. Includes restructuring costs of $21,661, $273 and $264 in the United States, Europe and other countries, respectively (note 3). (7) In the Consolidated Statements of Income, goodwill charges, net of tax, are shown separately while for segment reporting purposes the goodwill charges are included in segment profit and the related tax benefit is included in the income tax provision. 24 25 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars)
Year ended December 31, 1998 -------------------------------------------------------------------------------------------------- (3) (1) Sales (2) (3) Depreciation -------------------------------------- Segment Capital and Assets Gross Intersegment Net Profit Expenditures Amortization ---------- ---------- ------------- ---------- -------- ------------ ------------ Industry Segment Flow Technology $ 943,703 $ 945,828 $ 16 $ 945,812 $ 96,594 $21,145 $38,161 Machinery 272,115 454,460 -- 454,460 51,000 12,270 7,287 Specialty Engineered Products 259,387 349,070 30 349,040 38,887 10,537 10,595 Test Instrumentation 305,383 271,062 -- 271,062 20,893 4,482 7,691 ---------- ---------- ---------- ---------- -------- ------- ------- $1,780,588 $2,020,420 $ 46 $2,020,374 $207,374 $48,434 $63,734 ========== ========== ========== ========== ======== ======= ======= (4) (6) Long-lived (5) Segment Assets Net Sales Profit ---------- ---------- -------- Geographic Information United States $ 930,577 $1,380,155 $154,122 Europe 151,292 371,469 29,596 Other Countries 10,804 268,750 23,656 ---------- ---------- -------- $1,092,673 $2,020,374 $207,374 ========== ========== ========
Reconciliation of segment profit to net income Segment profit $ 207,374 Corporate expenses (30,231) Corporate restructuring charges (6,788) Interest - net (35,750) Other expense - net (12,048) --------- Income before income taxes (7) 122,557 Income tax provision (7) (22,869) --------- Net income $ 99,688 =========
(1) Assets exclude $310,069 of corporate amounts. (2) Includes restructuring costs of $7,786, $275, $443, and $1,044 for the Flow Technology, Machinery, Specialty Engineered Products and Test Instrumentation segments, respectively. Flow Technology also includes an $11,285 gain on sale of business (note 3) while Specialty Enginneered Products includes a $6,000 charge related to settlement of litigation. (3) Capital expenditures and depreciation and amortization exclude $3,307 and $1,131, respectively, of corporate amounts. (4) Long-lived assets consist of fixed assets, goodwill and other intangible assets. (5) Attributed to countries based on location of customer. (6) Attributed to countries based on location of customer. Includes restructuring costs of $6,614, $2,346 and $588 in the United States, Europe and other countries, respectively (note 3). (7) In the Consolidated Statements of Income, goodwill charges, net of tax, are shown separately while for segment reporting purposes the goodwill charges are included in segment profit and the related tax benefit is included in the income tax provision. 25 26 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars)
Year ended December 31, 1997 -------------------------------------------------------------------------------------------------- (2) Sales (2) Depreciation (1) -------------------------------------- Segment Capital and Assets Gross Intersegment Net Profit Expenditures Amortization ---------- ---------- ------------ ---------- -------- ------------ ------------ Industry Segment Flow Technology $ 904,442 $ 845,716 $ -- $ 845,716 $ 79,443 $26,383 $32,573 Machinery 234,249 363,690 -- 363,690 42,460 8,200 5,246 Specialty Engineered Products 183,184 310,340 -- 310,340 41,618 10,202 9,034 Test Instrumentation 183,842 123,508 -- 123,508 11,509 1,708 2,700 ---------- ---------- ---------- ---------- -------- ------- ------- 1,505,717 1,643,254 -- 1,643,254 175,030 46,493 49,553 Divested businesses 4,536 11,425 -- 11,425 (353) 203 307 ---------- ---------- ---------- ---------- -------- ------- ------- $1,510,253 $1,654,679 $ -- $1,654,679 $174,677 $46,696 $49,860 ========== ========== ========== ========== ======== ======= =======
(3) (4) Long-lived (4) Segment Assets Net Sales Profit ------------ ---------- ------------ Geographic Information United States $ 880,844 $ 1,125,060 $ 133,427 Europe 75,315 266,086 21,219 Other Countries 9,279 252,108 20,384 Divested businesses 4,536 11,425 (353) ------------ ---------- ------------ $ 969,974 $ 1,654,679 $ 174,677 ============ ========== ============
Reconciliation of segment profit to net income Segment profit $ 174,677 Corporate expenses (29,485) Interest - net (18,544) Other income - net 7,080 --------- Income from continuing operations before income taxes (5) 133,7285) Income tax provision (5) (48,838) --------- Income continuing operations 84,890 Income from discontinued operations 56,174 --------- Net income $ 141,064 =========
(1) Assets exclude $238,568 of corporate amounts. (2) Capital expenditures and depreciation and amortization exclude $13,900 and $977, respectively, of corporate amounts. (3) Long-lived assets consist of fixed assets, goodwill and other intangible assets. (4) Attributed to countries based on location of customer. (5) In the Consolidated Statements of Income, goodwill charges, net of tax, are shown separately while for segment reporting purposes the goodwill charges are included in segment profit and the related tax benefit is included in the income tax provision. 26 27 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) 13. Year 2000 The Year 2000 Issue arises because many computerized systems use two digits rather than four to identify a year. Date-sensitive systems may recognize the year 2000 as 1900 or some other date, resulting in errors when information using year 2000 dates is processed. Although the change in date has occurred, it is not possible to conclude that all aspects of the Year 2000 Issue that may affect the company, including those related to customers, suppliers, or other third parties, have been fully resolved. 14. Differences Between Canadian and United States Accounting Principles United States Accounting Differences Generally accepted accounting principles (GAAP) in Canada allow for the reduction of stated capital of outstanding common shares with a corresponding offset to deficit. This reclassification, which the company made in 1990, is not permitted by United States GAAP and would result in an increase in capital stock and a reduction in retained earnings at December 31, 1999 and 1998 of $128,093. Canadian GAAP also permits expenses related to the issue of capital stock, net of income taxes, to be deducted from retained earnings while United States GAAP requires such expenses to be deducted from the proceeds of stock issuances credited to capital stock. This reclassification would reduce capital stock and increase retained earnings by $20,905 at December 31, 1999 and 1998. The CICA recently adopted a new standard for recognizing the cost of pensions and other postretirement benefits (Handbook Section 3461). The new standard, effective for fiscal years beginning after January 1, 2000, essentially harmonizes Canadian rules with United States GAAP and requires accruing the cost of providing postretirement health care benefits during the years that the employee renders the necessary service. The company currently records health care benefits on a "pay-as-you-go" basis for benefits paid on behalf of active and retired employees. The healthcare benefit obligations not recorded by the company for active and retired employees due to use of the "pay-as-you-go" basis versus accrual accounting totaled approximately $12,000 at December 31, 1999. Additionally, CICA Handbook Section 3461 requires that for purposes of determining the pension liability, the discount rate must be based on current bond market yields rather than management's best estimate of the plan's long-term returns. This change in the discount rate will increase the volatility of pension expense in the future and create an additional pension liability of approximately $16,000 which will need to be recorded upon adoption of this new accounting standard. The company intends to retroactively adopt CICA Handbook Section 3461 in the first quarter of 2000. After tax effecting the above amounts, these changes will result in increases to other assets of approximately $3,000 and accrued liabilities of approximately $7,000 and decreases to other (non-current) assets of approximately $16,000, other (non-current) liabilities of approximately $3,000 and retained earnings of approximately $17,000. Canadian GAAP allows for the capitalization and subsequent amortization of start-up costs for new facilities and joint ventures. Effective January 1, 1999, United States GAAP requires the expensing of these costs as incurred as well as the expensing of any previously capitalized costs. As of December 31, 1999, United States GAAP would require the company to expense approximately $729, net of tax, of unamortized costs that had been capitalized in prior years. 27 28 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) The income statement format adopted in 1999 by the company as permitted by CICA Handbook Section 1580, Business Combinations (note 2) is not allowed under United States GAAP. Presentation under United States GAAP requires that the gross goodwill charges be included as a component of operating income and the associated income tax benefit be included as a component of the income tax provision. This reclassification does not affect reported net income. United States GAAP requires the dual presentation of basic and diluted earnings per share. Diluted earnings per share reflects the assumed exercise of dilutive securities such as the company's stock options. The following table reflects the impact on net income, weighted average shares outstanding and net earnings per share of complying with United States GAAP as it pertains to the items noted above.
1999 1998 1997 --------- --------- --------- Net income under Canadian GAAP $ 88,910 $ 99,688 $ 141,064 Increased (decreased) by: Pension expense (1,990) (1,483) (1,470) Postretirement benefits (594) (588) (753) Start-up costs (729) -- -- Other 31 (321) 76 --------- --------- --------- Net income under United States GAAP $ 85,628 $ 97,296 $ 138,917 ========= ========= ========= Weighted average shares outstanding (000's) Canadian GAAP 39,642 40,755 44,439 Less restricted stock outstanding (177) (123) (269) --------- --------- --------- United States GAAP - Basic 39,465 40,632 44,170 Effect of dilutive securities: Restricted stock 177 123 269 Employee stock options 176 281 303 --------- --------- --------- United States GAAP - Diluted 39,818 41,036 44,742 ========= ========= ========= Net earnings per share Canadian GAAP Continuing operations $ 2.24 $ 2.45 $ 1.91 Discontinued operations -- -- 1.26 --------- --------- --------- Net earnings $ 2.24 $ 2.45 $ 3.17 ========= ========= ========= United States GAAP - Basic Continuing operations $ 2.17 $ 2.39 $ 1.87 Discontinued operations -- -- 1.28 --------- --------- --------- Net earnings $ 2.17 $ 2.39 $ 3.15 ========= ========= ========= United States GAAP - Diluted Continuing operations $ 2.15 $ 2.37 $ 1.84 Discontinued operations -- -- 1.26 --------- --------- --------- Net earnings $ 2.15 $ 2.37 $ 3.10 ========= ========= =========
28 29 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) United States GAAP requires reporting on comprehensive income. For the years ended December 31, 1999, 1998 and 1997, comprehensive income, as defined under United States GAAP, is as follows.
1999 1998 1997 --------- --------- --------- Net income under United States GAAP $ 85,628 $ 97,296 $ 138,917 Foreign currency translation adjustments, net of tax (4,298) (576) (6,055) --------- --------- --------- Comprehensive income under United States GAAP $ 81,330 $ 96,720 $ 132,862 ========= ========= =========
The application of United States GAAP previously discussed would result in increases in other (non-current) liabilities of approximately $5,000 and common shares of approximately $107,000 and decreases in goodwill of approximately $2,000, other (non-current) assets of approximately $6,000, accrued liabilities of approximately $1000, and retained earnings of approximately $119,000 as of December 31, 1999. At December 31, 1998, the application of United States GAAP would result in increases in accrued liabilities of approximately $2,000, other (non-current) liabilities of approximately $5,000 and common shares of approximately $107,000 and decreases in goodwill of approximately $2,000 and retained earnings of approximately $116,000. Additional United States Disclosure Requirements The company's accounting for stock options is essentially the same as the intrinsic value method prescribed by existing accounting pronouncements effective in the United States. United States GAAP encourages, but does not require companies to record compensation cost for stock option plans at fair value and requires the disclosure of proforma net income and earnings per share information as if the company had accounted for its employee stock options issued beginning in 1995 under the fair value method. Accordingly, the fair value of the options issued have been estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions for 1999, 1998 and 1997, respectively: risk-free interest rates of 5.2%, 5.1% and 6.2%; dividend yields of 1.8%, 1.6% and 1.0%; volatility factors of the expected market price of the company's common stock of .37, .39 and .33; and a weighted-average expected life of the options of eight years. The weighted-average grant-date fair values of options issued in 1999, 1998 and 1997 was $8.28, $12.60 and $12.43, respectively. For purposes of proforma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period that ranges from six months to three years. Retroactive application of the fair value method to prior years is not permitted, therefore the full effect of the fair value method will not be reflected in the proforma disclosures until it has been applied to all nonvested options. Assuming the company had accounted for its stock options issued under the fair value method, United States GAAP proforma net income and basic and diluted earnings per share for the years ended December 31, 1999, 1998 and 1997 would have been $82,556, $2.09 and $2.07; $94,134, $2.32 and $2.29; and $136,508, $3.09 and $3.05, respectively. 29 30 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) United States GAAP requires disclosure of changes during the year in non-cash working capital balances pertaining to operating activities. The following table reflects such changes for the years ended December 31, 1999, 1998 and 1997.
1999 1998 1997 --------- --------- --------- Decrease (increase) in current assets Accounts and notes receivable $ 19,677 $ (39,063) $ (7,582) Inventories (16,677) (21,184) (15,124) Other current assets 23,249 (9,359) (4,937) Increase (decrease) in current liabilities Accounts payable and accrued liabilities (6,267) 27,148 5,140 Customer advances (8,829) 6,200 (831) --------- --------- --------- $ 11,153 $ (36,258) $ (23,334) ========= ========= =========
United States GAAP requires disclosure of the effect of a one-percentage point increase or decrease in the assumed health care cost trend rates on the aggregate of the service and interest cost components of net periodic postretirement health care benefit cost and the accumulated postretirement benefit obligation for health care benefits. The following table reflects such effects. Since the company is on a pay-as-you-go basis, this disclosure relates to the proforma disclosures contained in the reconciliation of net income previously discussed.
1-Percentage 1-Percentage Point Increase Point Decrease ------------------ ------------------- Effect on total of service and interest cost components $ 84 $ (76) Effect on postretirement benefit obligation 916 (848)
15. Quarterly Financial Information (Unaudited)
Net Net Earnings Sales Gross Profit * Income Per Share -------------------------- ------------------------- ------------------------- ---------------- 1999 1998 1999 1998 1999 1998 1999 1998 ------ ------ ------ ------ ------ ------ ------ ------ First Quarter $ 478,404 $ 444,135 $ 141,667 $ 129,872 $ 13,986 $ 14,327 $0.35 $0.35 Second Quarter 549,272 523,692 166,518 161,329 27,348 26,608 0.69 0.65 Third Quarter 546,998 524,755 170,946 159,691 27,956 21,378 0.71 0.52 Fourth Quarter 573,664 527,792 183,188 167,680 19,620 37,375 0.50 0.92 ---------- ---------- ---------- ---------- ---------- ---------- Total $2,148,338 $2,020,374 $ 662,319 $ 618,572 $ 88,910 $ 99,688 $2.24 $2.45 ========== ========== ========== ========== ========== ========== ===== =====
*Represents sales less cost of sales 30 31 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) 16. Supplemental Condensed Consolidating Financial Information United Dominion Industries Limited and its wholly owned subsidiary, United Dominion Holdings, Inc., are guarantors of certain senior debt issued by United Dominion Industries, Inc. The following is summarized condensed consolidating financial information segregating the parent and guarantor subsidiaries from nonguarantor subsidiaries. The guarantor subsidiaries are wholly owned subsidiaries of the company and guarantees are full, unconditional and joint and several. Separate financial statements and other disclosures of the guarantor subsidiaries are not presented because management believes these financial statements would not provide relevant material additional information to users. 31 32 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) CONSOLIDATING STATEMENTS OF INCOME AND CASH FLOWS
Year ended December 31, 1999 ------------------------------------------------------------------------------ United United United Dominion Dominion Dominion Non- Industries Holdings, Industries, Guarantor Limited Inc. Inc. Subsidiaries Eliminations Consolidated ---------- -------- ----------- ------------ ------------ ------------ RESULTS OF OPERATIONS Sales $ 26,101 $ -- $ 416,810 $1,731,848 $ (26,421) $2,148,338 Costs and expenses Cost of sales 20,603 -- 294,851 1,196,986 (26,421) 1,486,019 Selling, general and administrative expenses 6,256 -- 72,364 368,963 -- 447,583 Restructuring charges -- -- 3,881 11,470 -- 15,351 --------------------------------------------------------------------------- Total costs and expenses 26,859 -- 371,096 1,577,419 (26,421) 1,948,953 --------------------------------------------------------------------------- Operating income (loss) (758) -- 45,714 154,429 -- 199,385 Other income (expense) Equity in earnings of subsidiaries 93,563 52,130 58,615 -- (204,308) -- Interest - net (10,890) -- (54,553) 25,265 -- (40,178) Other -- -- 4,449 (1,373) (4,576) (1,500) --------------------------------------------------------------------------- Income before income taxes and goodwill charges 81,915 52,130 54,225 178,321 (208,884) 157,707 Income tax provision 7,077 -- 3,098 (59,156) 1,830 (47,151) --------------------------------------------------------------------------- Income before goodwill charges 88,992 52,130 57,323 119,165 (207,054) 110,556 Goodwill charges, net of income tax benefit (82) -- (2,826) (18,738) -- (21,646) --------------------------------------------------------------------------- Net income $ 88,910 $ 52,130 $ 54,497 $ 100,427 $(207,054) $ 88,910 =========================================================================== CASH FLOWS Cash provided by (used in) operating activities $ (14,990) $ -- $ (35,626) $ 230,609 $ -- $ 179,993 --------------------------------------------------------------------------- Cash used by investing activities Additions to fixed assets (593) -- (15,332) (45,353) -- (61,278) Acquisition of businesses (22,339) -- (22,031) (111,046) -- (155,416) Other, net (724) -- 2,036 (12,138) -- (10,826) --------------------------------------------------------------------------- (23,656) -- (35,327) (168,537) -- (227,520) --------------------------------------------------------------------------- Cash provided from (used by) financing activities Additional borrowings (repayments) (3,600) -- 105,079 (17,370) -- 84,109 Repurchase of common shares (38,476) -- -- -- -- (38,476) Increase (decrease) in net payable to affiliates 15,259 -- (39,344) 24,085 -- -- Dividends (to) from affiliates 79,486 -- -- (79,486) -- -- Other, net (12,621) -- -- -- -- (12,621) --------------------------------------------------------------------------- 40,048 -- 65,735 (72,771) -- 33,012 --------------------------------------------------------------------------- Net increase (decrease) in cash during the year 1,402 -- (5,218) (10,699) -- (14,515) Cash at beginning of year 107 97 12,958 110,293 123,455 --------------------------------------------------------------------------- Cash at end of year $ 1,509 $ 97 $ 7,740 $ 99,594 $ -- $ 108,940 ===========================================================================
32 33 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) CONSOLIDATING STATEMENTS OF INCOME AND CASH FLOWS
Year ended December 31, 1998 ----------------------------------------------------------------------------- United United United Dominion Dominion Dominion Non- Industries Holdings, Industries, Guarantor Limited Inc. Inc. Subsidiaries Eliminations Consolidated ---------- -------- ----------- ------------ ------------ ------------ RESULTS OF OPERATIONS Sales $ -- $ -- $ 392,154 $1,638,545 $ (10,325) $2,020,374 Costs and expenses Cost of sales -- -- 275,332 1,136,795 (10,325) 1,401,802 Selling, general and administrative expenses 2,975 -- 70,474 354,014 2,128 429,591 Restructuring charges -- -- 8,637 7,699 -- 16,336 --------------------------------------------------------------------------- Total costs and expenses 2,975 -- 354,443 1,498,508 (8,197) 1,847,729 --------------------------------------------------------------------------- Operating income (loss) (2,975) -- 37,711 140,037 (2,128) 172,645 Other income (expense) Equity in earnings of subsidiaries 111,474 72,440 75,406 -- (259,320) -- Interest - net (9,071) -- (53,065) 26,386 -- (35,750) Gain on sale of business -- -- -- 11,285 -- 11,285 Other (5,000) -- 5,583 1,680 (9,115) (6,852) --------------------------------------------------------------------------- Income before income taxes and goodwill charges 94,428 72,440 65,635 179,388 (270,563) 141,328 Income tax provision 5,262 54 3,383 (36,492) 3,646 (24,147) --------------------------------------------------------------------------- Income before goodwill charges 99,690 72,494 69,018 142,896 (266,917) 117,181 Goodwill charges, net of income tax benefit (2) -- (2,082) (15,409) -- (17,493) --------------------------------------------------------------------------- Net income $ 99,688 $ 72,494 $ 66,936 $ 127,487 $(266,917) $ 99,688 =========================================================================== CASH FLOWS Cash provided by (used by) operating activities $ 987 $ -- $ (32,144) $ 138,526 $ -- $ 107,369 --------------------------------------------------------------------------- Cash used by investing activities Additions to fixed assets -- -- (18,479) (33,262) -- (51,741) Acquisition of businesses (53,661) -- (56,284) (62,236) -- (172,181) Net proceeds from disposal of businesses -- -- 3,434 21,574 -- 25,008 Other, net -- -- 11,636 (9,322) -- 2,314 --------------------------------------------------------------------------- (53,661) -- (59,693) (83,246) -- (196,600) --------------------------------------------------------------------------- Cash provided from financing activities Additional borrowings (repayments) 174,812 -- 64,343 (179) -- 238,976 Repurchase of common shares (83,565) -- -- -- -- (83,565) Increase (decrease) in net payable to affiliates (51,989) -- 25,573 26,416 -- -- Dividends (to) from affiliates 40,900 -- -- (40,900) -- -- Contibution of capital (to) from affiliates (19,723) -- -- 19,723 -- -- Other, net (7,312) -- -- -- -- (7,312) --------------------------------------------------------------------------- 53,123 -- 89,916 5,060 -- 148,099 --------------------------------------------------------------------------- Net increase (decrease) in cash during the year 449 -- (1,921) 60,340 -- 58,868 Cash at beginning of year (342) 97 14,879 49,953 64,587 --------------------------------------------------------------------------- Cash at end of year $ 107 $ 97 $ 12,958 $ 110,293 $ -- $ 123,455 ===========================================================================
33 34 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) CONSOLIDATING STATEMENTS OF INCOME AND CASH FLOWS
Year ended December 31, 1997 ------------------------------------------------------------------------------ United United United Dominion Dominion Dominion Non- Industries Holdings, Industries, Guarantor Limited Inc. Inc. Subsidiaries Eliminations Consolidated ---------- -------- ----------- ------------ ------------ ------------ RESULTS OF OPERATIONS Sales $ -- $ -- $ 354,151 $ 1,303,876 $ (3,348) $ 1,654,679 Costs and expenses Cost of sales -- -- 254,800 917,202 (3,348) 1,168,654 Selling, general and administrative expenses 3,561 -- 82,583 242,127 -- 328,271 ----------------------------------------------------------------------------- Total costs and expenses 3,561 -- 337,383 1,159,329 -- 1,496,925 ----------------------------------------------------------------------------- Operating income (loss) (3,561) -- 16,768 144,547 -- 157,754 Other income (expense) Equity in earnings of subsidiaries 144,063 111,219 61,451 -- (316,733) -- Interest - net (4,103) 76 (45,788) 31,271 -- (18,544) Other -- -- 12,343 133 (4,776) 7,700 ----------------------------------------------------------------------------- Income from continuing operations before income taxes and goodwill charges 136,399 111,295 44,774 175,951 (321,509) 146,910 Income tax provision 1,579 (1,483) 7,004 (58,538) 1,910 (49,528) ----------------------------------------------------------------------------- Income from continuing operations before goodwill charges 137,978 109,812 51,778 117,413 (319,599) 97,382 Goodwill charges, net of income tax benefit -- -- (1,741) (10,751) -- (12,492) ----------------------------------------------------------------------------- Income from continuing operations 137,978 109,812 50,037 106,662 (319,599) 84,890 ----------------------------------------------------------------------------- Income from discontinued operations Earnings, net of applicable income tax expense -- -- 5,728 (2,640) -- 3,088 Gain on disposal, net of applicable income tax expense -- -- 53,086 -- -- 53,086 ----------------------------------------------------------------------------- -- -- 58,814 (2,640) -- 56,174 ----------------------------------------------------------------------------- Net income $ 137,978 $ 109,812 $ 108,851 $ 104,022 $(319,599) $ 141,064 ============================================================================= CASH FLOWS Cash provided from (used by) operating activities $ (586) $ -- $ (26,910) $ 145,199 $ -- $ 117,703 ----------------------------------------------------------------------------- Cash provided from (used by) investing activities Additions to fixed assets -- -- (14,831) (45,765) -- (60,596) Acquisition of businesses (3,025) -- (50,822) (310,301) -- (364,148) Net proceeds from disposal of businesses 22,039 -- 251,402 1,200 -- 274,641 Other, net -- -- 8,770 (1,464) -- 7,306 ----------------------------------------------------------------------------- 19,014 -- 194,519 (356,330) -- (142,797) ----------------------------------------------------------------------------- Cash provided from (used by) financing activities Additional borrowings (repayments) (42,357) -- 87,293 7,198 -- 52,134 Repurchase of common shares (56,954) -- -- -- -- (56,954) Increase (decrease) in net payable to affiliates 11,575 70 30,180 (41,825) -- -- Dividends (to) from affiliates 468,825 27 (335,859) (132,993) -- -- Contibution of capital (to) from affiliates (389,450) -- -- 389,450 -- -- Other, net (10,633) -- -- -- -- (10,633) ----------------------------------------------------------------------------- (18,994) 97 (218,386) 221,830 -- (15,453) ----------------------------------------------------------------------------- Cash used by discontinued operations -- -- (60,553) (582) -- (61,135) ----------------------------------------------------------------------------- Net increase (decrease) in cash during the year (566) 97 (111,330) 10,117 -- (101,682) Cash at beginning of year 224 -- 126,209 39,836 -- 166,269 ----------------------------------------------------------------------------- Cash at end of year $ (342) $ 97 $ 14,879 $ 49,953 $ -- $ 64,587 =============================================================================
34 35 UNITED DOMINION INDUSTRIES LIMITED Notes to Consolidated Financial Statements, Restated (note 2) December 31, 1999, 1998 and 1997 (Amounts in Thousands of U.S. Dollars) CONSOLIDATING STATEMENTS OF FINANCIAL POSITION
As of December 31, 1999 ----------------------------------------------------------------------------- United United United Dominion Dominion Dominion Non- Industries Holdings, Industries, Guarantor Limited Inc. Inc. Subsidiaries Eliminations Consolidated ---------- -------- ----------- ------------ ------------ ------------ ASSETS Inventories $ 3,583 $ -- $ 49,161 $ 326,600 $ 11,310 $ 390,654 Other current assets 12,862 97 102,755 431,916 (42,906) 504,724 ----------------------------------------------------------------------------- Total current assets 16,445 97 151,916 758,516 (31,596) 895,378 Fixed assets - net 2,926 -- 108,533 239,442 -- 350,901 Goodwill 18,535 -- 132,292 685,670 -- 836,497 Intercompany notes receivable -- -- 126,300 355,460 (481,760) -- Other assets 1,112,408 382,026 1,300,503 529,971 (3,166,109) 158,799 ----------------------------------------------------------------------------- $1,150,314 $ 382,123 1,819,544 2,569,059 (3,679,465) 2,241,575 ============================================================================= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities $ 9,767 $ 11,416 $ 180,473 $ 357,469 $ (38,955) $ 520,170 Long-term debt 205,364 -- 346,852 39,290 -- 591,506 Intercompany notes payable -- -- 355,460 126,300 (481,760) -- Other liabilities 15,938 -- 571,924 76,333 (453,541) 210,654 231,069 11,416 1,454,709 599,392 (974,256) 1,322,330 ----------------------------------------------------------------------------- Shareholders' equity 919,245 370,707 364,835 1,969,667 (2,705,209) 919,245 ----------------------------------------------------------------------------- $1,150,314 $ 382,123 1,819,544 2,569,059 (3,679,465) 2,241,575 =============================================================================
As of December 31, 1998 ----------------------------------------------------------------------------- United United United Dominion Dominion Dominion Non- Industries Holdings, Industries, Guarantor Limited Inc. Inc. Subsidiaries Eliminations Consolidated ---------- -------- ----------- ------------ ------------ ------------ ASSETS Inventories $ 1,539 $ -- $ 51,624 $ 302,858 $ 12,821 $ 368,842 Other current assets 18,874 97 84,588 491,949 (54,950) 540,558 ----------------------------------------------------------------------------- Total current assets 20,413 97 136,212 794,807 (42,129) 909,400 Fixed assets - net 930 -- 106,693 210,230 -- 317,853 Goodwill 355 -- 120,385 607,610 -- 728,350 Intercompany notes receivable -- -- 117,958 336,560 (454,518) -- Other assets 1,074,535 312,369 1,197,833 572,114 (3,021,797) 135,054 ----------------------------------------------------------------------------- $1,096,233 $ 312,466 $1,679,081 $ 2,521,321 $(3,518,444) $ 2,090,657 ============================================================================= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities $ 8,090 $ 1,538 $ 139,932 $ 381,534 $ (49,186) $ 481,908 Long-term debt 198,780 -- 313,544 32,447 -- 544,771 Intercompany notes payable -- -- 336,560 117,958 (454,518) -- Other liabilities 3,533 -- 572,750 113,864 (511,999) 178,148 ----------------------------------------------------------------------------- 210,403 1,538 1,362,786 645,803 (1,015,703) 1,204,827 ----------------------------------------------------------------------------- Shareholders' equity 885,830 310,928 316,295 1,875,518 (2,502,741) 885,830 ----------------------------------------------------------------------------- $1,096,233 $ 312,466 $1,679,081 $ 2,521,321 $(3,518,444) $ 2,090,657 =============================================================================
35 36 PART III Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K. (a) Financial Statements Auditors' Report Consolidated Statements of Income for the Years Ended December 31, 1999, 1998 and 1997 Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997 Consolidated Statements of Financial Position as of December 31, 1999 and 1998 Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 1999, 1998 and 1997 Notes to Consolidated Financial Statements (b) Reports on Form 8-K. None (c) Exhibits.
Exhibit Number Exhibit ------- ------- 3.1 - The Company's Charter as amended (incorporated by reference to Exhibit 3.1 to Registrant's Form 10-K filed March 29, 1991) 3.2 - The Company's Bylaws as amended (incorporated by reference to Exhibit 3.2 to Registrant's Form 10-K filed March 29, 1995) 4.1 - Description of Registrant's Securities (incorporated by reference to Registrant's Form 8-K filed May 9, 1996) 10.1 - Amended and Restated United Dominion Industries, Inc. Corporate Annual Incentive Compensation Plan, as approved by shareholders on April 27, 1999 (incorporated by reference to Exhibit 10.1 to Registrant's Form 10-K filed March 30, 2000)
36 37 10.1(a) - Amended and Restated United Dominion Industries, Inc. Operating Unit Annual Incentive Compensation Plan (incorporated by reference to Exhibit 10.1(a) to Registrant's Form 10-K filed March 30, 2000) 10.2 - $450,000,000 Second Amendment and Restatement of the Credit Agreement and Guaranty dated as of July 28, 1997 among United Dominion Industries Limited, United Dominion Industries, Inc. and United Dominion Holdings, Inc., as obligors, Royal Bank of Canada, as agent bank, and the bank group named therein (incorporated by reference to Exhibit 10.2 to Registrant's Form 10-K filed March 26, 1998) 10.3 - United Dominion Industries, Inc. Compass Plan (Incorporated by reference to Exhibit 4 to Registrant's Form S-8 filed October 3, 1995) 10.4 - United Dominion Industries, Inc. Supplemental Executive Retirement Plan (as amended and restated effective January 1, 1999) (incorporated by reference to Exhibit 10.4 to Registrant's Form 10-K filed March 30, 2000) 10.5 - Form of United Dominion 1999 Change of Control Agreement with certain executive officers dated on or about March 1, 1999 (incorporated by reference to Exhibit 10.5 to Registrant's Form 10-K filed March 30, 2000) 10.6 - United Dominion Industries Limited 1999 Stock Option and Restricted Stock Plan, as approved by shareholders on April 27, 1999 (incorporated by reference to Exhibit 10.6 to Registrant's Form 10-K filed March 30, 2000) 10.7 - Amended and Restated United Dominion Industries, Inc. Long-Term Performance Incentive Plan as approved by shareholders on April 27, 1999 (incorporated by reference to Exhibit 10.7 to Registrant's Form 10-K filed March 30, 2000) 10.7(a) - Amended and Restated United Dominion Industries, Inc. Operating Unit Long-Term Performance Incentive Plan (incorporated by reference to Exhibit 10.7 to Registrant's Form 10-K filed March 30, 2000) 10.8 - United Dominion Industries Restoration Plan for the Salaried Defined Benefit Retirement Plans of United Dominion
37 38 Industries, Inc. (incorporated by reference to Exhibit 10.8 to Registrant's Form 10-K filed March 29, 1996) 10.9 - Form of Executive Life Insurance Agreement for executive officers of United Dominion Industries, Inc. (incorporated by reference to Exhibit 10.9 to Registrant's Form 10-K filed March 29, 1996) 10.10 - Statements of Policy Cost and Benefit Information for split dollar life insurance policies on the life of W. R. Holland (incorporated by reference to Exhibit 10.10 to Registrant's Form 10-K filed March 29, 1996) 10.11 - Note Agreement dated September 21, 1992 between the Company, as Issuer, United Dominion Industries, Inc., as Guarantor, and the several United States insurance companies party thereto, in connection with the Company's issuance of U.S. $75 million 8.25% Senior Notes due 2002 (incorporated by reference to Exhibit 10.9 to Registrant's Form 10-K filed March 27, 1993) 10.12 - Note Agreement dated December 21, 1993 between United Dominion Industries, Inc., as Issuer, the Registrant, as Guarantor, and the several United States insurance companies party thereto, in connection with the issuance by United Dominion Industries, Inc. of U.S. $117 million 6.80% Senior Notes due 2002 (incorporated by reference to Exhibit 10.15 to Registrant's Form 10-K filed March 28, 1994) 10.13 - Note Purchase and Private Shelf Facility dated June 25, 1995 between United Dominion Industries, Inc., as Issuer, the Registrant, as Guarantor, and the Prudential Insurance Company of America in connection with the issuance by United Dominion Industries, Inc. of U.S. $50 million 7.67% Senior Series A Notes due 2007 and the possible issuance of up to U.S. $50 million of additional Senior Notes (incorporated by reference to Exhibit 10.13 to Registrant's Form 10-K filed March 29, 1996) 10.14 - Amended and Restated Receivables Sale Agreement dated as of January 31, 1995 among United Dominion Industries, Inc., as Seller and Collection Agent, Asset Securitization Cooperative Corporation, as Purchaser, and Canadian Imperial Bank of Commerce, as Servicing Agent, in connection with United Dominion Industries, Inc.'s $115 million facility for the on-
38 39 going sale and collection of trade receivables of certain of its business units (incorporated by reference to Exhibit 10.10 to Registrant's Form 10-K filed March 29, 1995) 10.16 - Summary of Terms relating to the consulting arrangements between William W. Stinson and the Registrant (incorporated by reference to Exhibit 10.16 to Registrant's Form 10-K filed March 26, 1998) 10.17 - Letter Agreement dated February 16, 1996 between William R. Holland and the Registrant granting Mr. Holland restricted common shares (incorporated by reference to Exhibit 10.17 to Registrant's Form 10-K filed March 26, 1998) 10.18 - Letter Agreement dated April 28, 1999 between William R. Holland and the Registrant relating to the application to Mr. Holland of the Registrant's Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.18 to Registrant's Form 10-K filed March 30, 2000) 10.18(a) - Letter Agreement dated November 30, 1999 between William R. Holland and the Registrant relating to the application to Mr. Holland of the Registrant's Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.18(a) to Registrant's Form 10-K filed March 30, 2000) 10.19 - Note Purchase Agreement dated as of May 1, 1998 among United Dominion Industries, Inc., as Issuer, United Dominion Holdings, Inc. and the Registrant, as Guarantors, and the several United States insurance companies party thereto, in connection with the Company's issuance of U.S. $110 million 6.64% Senior Notes, Series 1998-A due 2008 (incorporated by reference to Exhibit 10.19 to Registrant's Form 10-K filed March 26, 1999) 13 - Portions of the Company's Annual Report to Shareholders for the year ended December 31, 1999 that are expressly incorporated by reference into this Form 10-K (incorporated by reference to Exhibit 13 to Registrant's Form 10-K filed March 30, 2000) 21 - Subsidiaries of United Dominion Industries Limited (incorporated by reference to Exhibit 21 to Registrant's Form 10-K filed March 30, 2000)
39 40 *23.1 - Consent of KPMG LLP 24(a) - Power of Attorney of D. N. Boyce dated February 11, 2000 (incorporated by reference to Exhibit 24(a) to Registrant's Form 10-K filed March 30, 2000) 24(b) - Power of Attorney of H. Buerger dated February 11, 2000 (incorporated by reference to Exhibit 24(b) to Registrant's Form 10-K filed March 30, 2000) 24(c) - Power of Attorney of J. E. Courtney dated February 11, 2000 (incorporated by reference to Exhibit 24(c) to Registrant's Form 10-K filed March 30, 2000) 24(d) - Power of Attorney of P. A. Crossgrove dated February 11, 2000 (incorporated by reference to Exhibit 24(d) to Registrant's Form 10-K filed March 30, 2000) 24(e) - Power of Attorney of R. S. Dickson dated February 11, 2000 (incorporated by reference to Exhibit 24(e) to Registrant's Form 10-K filed March 30, 2000) 24(f) - Power of Attorney of J. A. Drummond dated February 11, 2000 (incorporated by reference to Exhibit 24(f) to Registrant's Form 10-K filed March 30, 2000) 24(g) - Power of Attorney of J. A. Grant dated February 11, 2000 (incorporated by reference to Exhibit 24(g) to Registrant's Form 10-K filed March 30, 2000) 24(h) - Power of Attorney of R. C. King, Jr. dated February 11, 2000 (incorporated by reference to Exhibit 24(h) to Registrant's Form 10-K filed March 30, 2000) 24(i) - Power of Attorney of J. T. Mayberry dated February 11, 2000 (incorporated by reference to Exhibit 24(i) to Registrant's Form 10-K filed March 30, 2000) 24(j) - Power of Attorney of H. A. Nurkin dated February 11, 2000 (incorporated by reference to Exhibit 24(j) to Registrant's Form 10-K filed March 30, 2000) 24(k) - Power of Attorney of D. D. Ruffin dated February 11, 2000 (incorporated by reference to Exhibit 24(k) to Registrant's Form 10-K filed March 30, 2000)
40 41 24(l) - Power of Attorney of W. W. Stinson dated February 11, 2000 (incorporated by reference to Exhibit 24(l) to Registrant's Form 10-K filed March 30, 2000) 24(m) - Power of Attorney of G. S. Taylor dated February 11, 2000 (incorporated by reference to Exhibit 24(m) to Registrant's Form 10-K filed March 30, 2000) 99 - Management Proxy Circular/Proxy Statement dated March 22, 2000 in connection with the Annual and Special Meeting of Shareholders of United Dominion Industries Limited to be held on April 25, 2000 (incorporated by reference to Exhibit 99 to Registrant's Form 10-K filed March 30, 2000)
*Included herewith. The exhibits not so included are incorporated herein by reference to the exhibits to the prior filings indicated in parentheses. Each included exhibit is to be deemed "filed" herewith except Exhibit 99, the Company's Management Proxy Circular/Proxy Statement dated March 22, 2000, which is furnished herewith for information purposes and not deemed "filed". **The Registrant is a foreign private issuer and accordingly has not included financial data schedules. EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS - - Amended and Restated United Dominion Industries, Inc. Corporate Annual Incentive Compensation Plan, as approved by shareholders on April 27, 1999 (Exhibit 10.1 to this Form 10-K/A) - - Amended and Restated United Dominion Industries, Inc. Operating Unit Annual Incentive Compensation Plan (Exhibit 10.1(a) to this Form 10-K/A) - - United Dominion Industries, Inc. Compass Plan effective January 1, 1995 (Exhibit 4 to Registrant's Form S-8 filed October 3, 1995) - - United Dominion Industries, Inc. Supplemental Executive Retirement Plan as amended and restated effective January 1, 1999 (Exhibit 10.4 to this Form 10-K/A) - - Form of United Dominion 1999 Change in Control Agreement effective March 1, 1999 (Exhibit 10.5 to this Form 10-K/A) 41 42 - - United Dominion Industries Limited Stock Option and Restricted Stock Plan (Revised and Restated), as approved by shareholders on April 27, 1999 (Exhibit 10.6 to this Form 10-K/A) - - Amended and Restated United Dominion Industries, Inc. Long-Term Performance Incentive Plan, as approved by shareholders on April 27, 1999 (Exhibit 10.7 to this Form 10-K/A) - - Amended and Restated United Dominion Industries, Inc. Operating Unit Long-Term Performance Incentive Plan (Exhibit 10.7(a) to this Form 10-K/A) - - United Dominion Industries Restoration Plan for the Salaried Defined Benefit Retirement Plans of United Dominion Industries, Inc. effective January 1, 1995 (Exhibit 10.8 to Registrant's Form 10-K filed March 29, 1996) - - Form of Executive Life Insurance Agreement for executive officers of United Dominion Industries, Inc. (Exhibit 10.9 to Registrant's Form 10-K filed March 29, 1996) - - Statements of Policy Cost and Benefit Information for split dollar life insurance policies on the life of W. R. Holland (Exhibit 10.10 to Registrant's Form 10-K filed March 29, 1996) - - Letter Agreement dated February 16, 1996 between William R. Holland and the Registrant (Exhibit 10.17 to Registrant's Form 10-K filed March 26, 1998) - - Letter Agreement dated April 28, 1999 between William R. Holland and the Registrant relating to the application to Mr. Holland of the Registrant's Supplemental Executive Retirement Plan (Exhibit 10.18 to this Form 10-K/A) - - Letter Agreement dated November 30, 1999 between William R. Holland and the Registrant relating to the application to Mr. Holland of the Registrant's Supplemental Executive Retirement Plan (Exhibit 10.18(a) to this Form 10-K/A) (d) Financial Statement Schedules. Schedule II - Allowance for Doubtful Accounts Schedules not included have been omitted because the required information is not present in amounts sufficient to require submission of the schedules, or because the information required is included in the Consolidated Financial Statements or the Notes thereto. 42 43 INDEPENDENT AUDITORS' REPORT The Shareholders United Dominion Industries Limited: Under date of January 28, 2000, we reported on the consolidated statements of financial position of United Dominion Industries Limited as at December 31, 1999 and 1998, and the related consolidated statements of income, cash flows and changes in shareholders' equity for each of the years in the three-year period ended December 31, 1999, as contained in the 1999 annual report to shareholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1999. In connection with our audits of the aforementioned consolidated financial statements, we have audited the related financial statement schedule in the accompanying Index to Consolidated Financial Statements and Schedule as of and for the years ended December 31, 1999, 1998 and 1997. The financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG LLP Chartered Accountants Toronto, Canada January 28, 2000 43 44 UNITED DOMINION INDUSTRIES LIMITED SCHEDULE II - ALLOWANCE FOR DOUBTFUL ACCOUNTS Years Ended December 31, 1999, 1998 and 1997 (in thousands)
Balance, Additions Balance, beginning charged to Write-off of end of Description of year income receivables Other (1) year - ----------- --------- ---------- ------------ --------- -------- 1999: Reserve deducted from assets: Allowance for doubtful accounts ....................... $10,725 $2,306 $(2,450) $(935) $ 9,646 ======= ====== ======= ===== ======= 1998: Reserve deducted from assets: Allowance for doubtful accounts ....................... $10,114 $1,991 $(1,358) $ 22 $10,725 ======= ====== ======= ===== ======= 1997: Reserve deducted from assets: Allowance for doubtful accounts ....................... $ 9,919 $4,104 $(3,156) $(753) $10,114 ======= ====== ======= ===== =======
(1) In 1997, relates primarily to the sale of Varco-Pruden, Windsor Door and Centria partially offset by the acquisition of Core Industries. 44 45 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: May 12, 2000 UNITED DOMINION INDUSTRIES LIMITED By: /s/ William Dries ---------------------------------- William Dries Senior Vice President and Chief Financial Officer By: /s/ Richard L. Magee ---------------------------------- Richard L. Magee Vice President and Secretary 45 46 EXHIBIT INDEX
Exhibit No. Exhibit - ----------- ------- 23.1 Consent of KPMG LLP
46 EX-23.1 2 CONSENT OF KPMG LLP 1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT The Shareholders United Dominion Industries Limited: We consent to incorporation by reference in Registration Statements Nos. 33-46701, 2-92247, 33-65044, 33-97696, 333-1824 and 333-8230 of United Dominion Industries Limited on Forms S-8 and Registration Statement No. 333-94847 of United Dominion Industries Limited, United Dominion Holdings, Inc. and United Dominion Industries, Inc. on Form F-3 of our reports dated January 28, 2000, relating to the consolidated statements of financial position of United Dominion Industries Limited as at December 31, 1999 and 1998 and the related consolidated statements of income, cash flows and changes in shareholders' equity and the related financial statement schedule for each of the years in the three-year period ended December 31, 1999, which reports appear in the December 31, 1999 annual report on Form 10-K/A of United Dominion Industries Limited. /s/ KPMG LLP Chartered Accountants Toronto, Canada May 12, 2000 -----END PRIVACY-ENHANCED MESSAGE-----