10-Q 1 tokheim.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 31, 2002. Commission File Number 1-6018 TOKHEIM CORPORATION (Exact Name of Registrant as Specified in its Charter) INDIANA 35-0712500 (State or Other Jurisdiction (I.R.S Employer of Incorporation or Organization) Identification No.) 1600 WABASH AVENUE, FORT WAYNE, IN 46801-0360 (Address of Principal Executive Offices) (Zip Code) (Registrant's Telephone Number Including Area Code): (260) 470-4600 10501 CORPORATE DRIVE, FORT WAYNE, IN 46845 (Former Name, Former Address, and Former Fiscal Year if Changed Since Last Report) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] Indicate by check mark whether the Registrant has filed all reports required to be filed by Section 12, 13 or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [x] As of May 31, 2002, 4,171,372 shares of voting common stock were outstanding. The exhibit index is located on page 15. Certain statements contained in this Report, including, without limitation, statements containing the words "will," "may," "should," "continue," "intends," "believes," "anticipates," "expects" and words of similar import, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "PSLRA"). Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: increases in interest rates or the Company's cost of borrowing or a default under any material debt agreement; inability of the Company to successfully make and integrate acquisitions; inability to achieve anticipated cost savings or revenue growth; dependence on the retail petroleum industry; inability to forecast or achieve future sales levels or other operating results; fluctuations in exchange rates among various foreign currencies, principally among the dollar, the Euro, and the British pound; competition; inability to protect proprietary technology or to integrate new technologies quickly into new products; changes in business strategy or development plans; business disruptions; changes in general economic conditions or in economic conditions of particular markets in which the Company competes; unavailability of funds for capital expenditures or research and development; changes in customer spending levels and demand for new products; changes in governmental, environmental or other regulations, especially as they may affect the capital expenditures of the Company's customers; failure of the Company to comply with governmental regulations; loss of key members of management; adverse publicity; contingent liabilities and other claims asserted against the Company; loss of significant customers or suppliers; and other factors referenced in this Report. Certain of these factors are discussed in more detail elsewhere in this Report, including, without limitation, under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in the consolidated financial statements and related notes. Given these uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to announce publicly the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments. PART 1. Financial Information Item 1. Financial Statements

TOKHEIM CORPORATION & SUBSIDIARIES -------------------------------------------------------------------------------------------------------------------------- Consolidated Condensed Statement of Earnings (Amounts in thousands except data per share ~~data~~) Unaudited -------------------------------------------------------------------- Three months ended ~~February~~Six 28months ended May 31, May 31, 2002 2001 2002 2001 --------------------------------- -------------------------------- Net sales $ ~~119~~112,~~633~~747 $ 121,~~239~~786 $ 232,380 $ 243,026 Cost of sales, 93exclusive of items listed below 89,~~546~~933 9594,~~759~~157 183,478 189,916 Selling, general, and administrative expenses 21,208 20,~~088~~132 1941,~~829~~297 39,961 Depreciation and amortization 4,~~415~~401 79,~~909~~044 8,817 16,953 Merger and acquisition costs and other unusual items ~~845~~3,545 ~~732~~2,218 4,389 2,950 --------------- ---------------- ---------------- ---------------- Operating ~~income~~loss (~~loss~~6,340) ~~739~~(3,765) (25,~~990~~601) (6,754) Interest expense, net 9,058 8,~~552~~835 917,~~222~~610 18,057 Foreign currency (gain) loss ~~194~~(274) 762 (~~255~~81) 507 Minority interest in subsidiaries 14(33) 9173 (19) 182 Other (income) expense, net ~~119~~94 (940) 213 (1,~~053~~992) --------------- ---------------- ---------------- ---------------- Loss before income taxes (815,~~140~~185) (1012,~~913~~595) (23,324) (23,508) Income tax expense ~~307~~391 ~~462~~431 699 893 --------------- ---------------- ---------------- ---------------- Net loss (815,~~447~~576) (1113,~~375~~026) (24,023) (24,401) Preferred stock dividends (~~382~~375) (~~383~~368) (757) (750) --------------- ---------------- ---------------- ---------------- ~~Net~~Loss ~~loss~~ applicable to common stock $ (815,~~829~~951) $ (1113,~~758~~394) $ (24,780) $ (25,151) =============== ================ ================ ================ ~~Net~~Loss ~~loss~~ per common share: Basic Net loss $ (13.9757) $ (2.6198) $ (5.54) $ (5.59) =============== ================ ================ ================ Weighted average shares outstanding* 4,474 4,500 4,474 4,500 =============== ================ ================ ================ Diluted Net loss $ (13.9757) $ (2.6198) $ (5.54) $ (5.59) =============== ================ ================ ================ Weighted average shares outstanding* 4,474 4,500 4,474 4,500 =============== ================ ================ ================ *Total shares to be issued pursuant to Plan of Reorganization. The accompanying notes are an integral part of the financial statements.

TOKHEIM CORPORATION & SUBSIDIARIES --------------------------------------------------------------------------------------------------------------------- Consolidated Condensed Balance Sheet (Amounts in thousands except data per share ~~data~~) Unaudited ~~February~~May 2831, 2002 November 30, 2001 ------------------ ------------------ Assets Current assets: Cash and cash equivalents $ 1320,~~494~~309 $ 14,132 Accounts receivable, net ~~109~~100,~~508~~314 121,195 Inventories: Raw materials, service parts and supplies 5249,~~503~~840 55,577 Work in process 10,~~244~~338 5,591 Finished goods 1415,~~628~~329 15,918 --------------- --------------- 7775,~~375~~507 77,086 Other current assets 1311,~~680~~487 13,862 --------------- --------------- Total current assets ~~214~~207,~~057~~617 226,275 Property, plant and equipment: Land and land improvements 5,211 ~~net~~5,166 59Buildings and building improvements 23,~~414~~389 22,631 Machinery and equipment 47,901 45,611 Construction in progress 2,183 1,940 --------------- -------------- 78,684 75,348 Less: Accumulated Depreciation 20,057 13,281 --------------- -------------- 58,627 62,067 Reorganization value in excess of amounts ~~145,125 145,125~~ allocable to identifiable assets, net ~~Other~~145,125 ~~intangible~~145,125 Intangible assets, net 1718,~~227~~154 17,367 Other ~~non-current~~ assets 76,~~499~~703 7,235 --------------- --------------- Total assets $ ~~443~~436,~~322~~226 $ 458,069 =============== =============== Liabilities and Shareholders' Equity ~~(Deficit)~~ Current ~~Liabilities: Current~~ maturities of other long term debt $ 21,~~008~~433 $ 2,984 Cash overdrafts 1510,~~575~~646 17,543 Accounts payable 5754,~~867~~885 68,697 Accrued expenses 7981,~~286~~309 78,424 Current maturities of notes payable, bank credit agreement ~~280~~291,~~890~~316 273,766 --------------- --------------- Total current liabilities ~~435~~439,~~626~~589 441,414 Other long term debt, less current maturities 2,~~804~~980 2,925 Post-retirement benefit liability 18,~~382~~817 18,271 Other long-term liabilities 2,~~058~~036 2,049 --------------- --------------- ~~458~~463,~~870~~422 464,659 Redeemable convertible preferred stock, (liquidation value of $25 per share), 1,700 shares authorized, 960 shares issued 18,~~446~~571 18,320 ~~Treasury stock, at cost (4,496) (4,974)~~ New preferred stock, liquidation preference of $101 per share, 10100 ~~shares~~ authorized and issued 100 100 Treasury stock, at cost (4,841) (4,974) --------------- --------------- Total preferred equity 1413,~~050~~830 13,446 New common stock, no par value; 30,000 shares authorized,* 4,~~128 issued 4,~~500 4,500 ~~New~~Common ~~common~~ stock warrants 8,199 8,199 Accumulated comprehensive ~~loss~~income (~~2,719~~loss) 1,804 (1,986) Retained earnings (accumulated deficit) (6682,~~654~~605) (57,825) Additional paid in capital 27,076 27,076 --------------- --------------- Total common shareholders' equity (2941,~~598~~026) (20,036) --------------- --------------- Total liabilities and shareholders' equity ~~(deficit)~~ $ ~~443~~436,~~322~~226 $ 458,069 =============== =============== *Total shares to be issued pursuant to Plan of Reorganization. The accompanying notes are an integral part of the financial statements.

TOKHEIM CORPORATION & SUBSIDIARIES ------------------------------------------------------------------------------------------------------------------------- Consolidated Condensed Statement of Cash Flows (Amounts in thousands except data per share) Unaudited -------------------------------------------- ~~Three~~Six months ended ~~February~~Six 28months ended May 31, 2002 May 31, 2001 ------------------ --- -----------------~~---~~ Cash flows from operating activities: Net loss...............................~~...........................~~ $ (824,~~447~~023) $ (1124,~~375~~401) Adjustments to reconcile net loss to net cash provided from (used in) operating activities: Payment in kind interest............... 9,851 8,403 Amortization of debt issuance costs....~~.................~~ ~~4,775~~699 ~~4,073~~699 Depreciation and amortization..........~~.....................~~ 48,~~415~~817 716,~~909~~953 (Gain) ~~loss~~ on sale of fixed assets...........~~..............~~ (2686) 4(635) Deferred income taxes..................~~.....................~~ 4 73551 Changes in assets and liabilities: Receivables, net.......................~~.....................~~ 823,~~674~~763 2(1,~~895~~086) Inventories............................~~.....................~~ (13,~~875)~~561 (3,~~263~~940) Other current assets...................~~.....................~~ ~~(75)~~2,671 (24,~~372~~706) Accounts payable.......................~~.....................~~ (915,~~446~~150) ~~102~~1,146 Accrued expenses.......................~~.....................~~ 21,~~472~~455 (25,~~679)~~593 Other..................................~~.....................~~ ~~929~~(98) 1,~~487~~544 --------------~~----~~ -----------~~------------~~ Net cash provided from ~~(used in) operating activities~~operations.......................... 111,~~400~~464 ~~(3,146)~~121 --------------~~----~~ -----------~~------------~~ Cash flows from investing activities: Property, plant, and equipment additions...........~~...~~ (12,~~503~~640) (15,~~594~~172) Proceeds from the sale of property, plant, and equipment.... 33122 53716 Other...................................~~....................~~ ~~(407)~~434 (~~288~~253) --------------~~----~~ -------------~~----------~~ Net cash used in investing activities.......................~~...........~~ (12,~~877~~084) (14,~~829~~709) --------------~~----~~ -------------~~----------~~ Cash flows from financing activities: Decrease in other debt...................~~...................~~ (~~924~~1,721) (~~196~~971) Net increase in notes payable, banks.....~~...................~~ 27,~~350~~000 710,~~085~~585 Net increase (decrease) in cash overdraft.........~~..........~~ (17,~~453~~578) 1,~~901~~405 Other....................................~~...................~~ ~~595~~376 65(593) Preferred stock dividends................~~...................~~ (~~382~~757) (~~383~~750) --------------~~----~~ -------------~~----------~~ Net cash provided from (used in) financing activities........~~....................~~ ~~186~~(2,680) 89,~~472~~676 --------------~~----~~ -------------~~----------~~ Effect of translation adjustments on cash....................~~..........~~ (~~347~~523) (~~135~~374) Increase ~~(decrease)~~ in cash and cash equivalents....~~........~~ ~~(638)~~6,177 34,~~362~~714 Cash and cash equivalents: Beginning of period......................~~...................~~ 14,132 8,946 --------------~~----~~ -------------~~----------~~ End of period............................~~...................~~ $ 1320,~~494~~309 $ 1213,~~308~~660 ==============~~====~~ =============~~==========~~ The accompanying notes are an integral part of the financial statements.

Notes to the Consolidated Condensed Financial Statements 1. Basis of Presentation All dollar amounts presented are in thousands, except for per share data. The consolidated condensed financial statements are unaudited for the periods indicated herein, except for the November 30, 2001 balance sheet. In accordance with the rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosures have been condensed or omitted; therefore, such financial statements should be read in conjunction with the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended November 30, 2001. The consolidated financial statements include the accounts of Tokheim Corporation and its wholly and majority-owned subsidiaries ("Tokheim" or the "Company"). The consolidated condensed financial statements in this Report reflect all adjustments and accruals that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented; all such adjustments were of a normal recurring nature. The results of operations for the three and six month periods ended May 31, 2002 are not necessarily indicative of the results of operations for the year ending November 30, 2002. Tokheim filed a Joint Prepackaged Plan of Reorganization (the "Plan") for the Company and its U.S. subsidiaries pursuant to Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the District of Delaware on August 28, 2000. The Bankruptcy Court confirmed the Company's Plan on October 4, 2000, and the Plan became effective as of October 20, 2000 (the "Effective Date"). All financial statements prepared subsequent to the Effective Date reflect accounting principles and practices set forth in American Institute of Certified Public Accountants Statement of Position ("SOP") 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code, which provides guidance for financial reporting by entities that have filed voluntary petitions for relief under, and have reorganized in accordance with, the Bankruptcy Code. As such, the Company adopted "fresh start accounting" as of October 31, 2000. The Company's emergence from Chapter 11 proceedings resulted in a new reporting entity. 2. Capital Funding and Liquidity The Company exited from bankruptcy in October 2000. The debt and equity structure of the Company was based upon a strategic plan. A major assumption of this strategic plan was that the depressed United States market in which the Company had been operating in recent years would return to prior growth levels. This assumption in the plan has not been realized. In fact, the United States has continued to experience declines in the overall market. The results of the Company have demonstrated that a restructuring of its capital structure is necessary. Toward this end, the Company initiated discussions with its lenders regarding potential restructuring options. Though these discussions have not yet resulted in an arrangement, the Company and its lenders have entered into an amendment and waiver to the Company's credit facility (more fully discussed in Note 3 "Notes Payable, Bank Credit Agreement" to the consolidated condensed financial statements) in which a timetable has been established to retain an investment banking firm to develop a plan to explore all strategic options available to the Company, including, without limitation, asset dispositions, refinancings, and equity investments. The Company does not believe that this process will impact its day-to-day operations. While the Company believes that a transaction may be possible, there can be no assurance that a transaction will be achieved. As more fully discussed in Note 3 to the consolidated condensed financial statements, "Notes Payable, Bank Credit Agreement," the Company entered into an amendment and waiver with its lenders that permanently waived certain financial convenants for the computation period ended February 28, 2002 through the computation period ending August 31, 2002. The Company's financial statements for the quarter ended May 31, 2002 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Net sales have declined for three consecutive years and the Company incurred net losses for the year ended November 30, 2001 and for the six months ended May 31, 2002 of $56,754 and $24,023, respectively. In addition, the Company had negative working capital as of May 31, 2002 and November 30, 2001 of $231,972 and $215,139, respectively, as a result of the classification of the outstanding bank debt as a current liability. Further, the Company expects to incur additional net losses in the next two quarters of fiscal 2002. Without restructuring of the credit facility or other changes in the Company's operations, estimated cash availability will not be sufficient to fund the scheduled principal and interest payment on the Special Loan due November 30, 2002. Also, as a result of the Company's recent history of declining sales and operating losses and forecasted future losses, the Company may not be able to attract equity capital to strengthen its financial condition. Given these conditions, there can also be no assurances that the Company will meet its financial loan covenants in the future or that the bank group will not exercise its rights within the loan agreement to accelerate maturities on substantially all of the Company's debt. These matters raise substantial doubt about the Company's ability to continue as a going concern. 3. Notes Payable, Bank Credit Agreement In connection with the Chapter 11 proceedings discussed above, the Company entered into a post-confirmation credit agreement (the "New Credit Agreement") as of the Effective Date, which replaced all then-existing credit agreements. The New Credit Agreement is comprised of a four-year, eleven month revolving credit facility and three four-year, eleven month term facilities: the Tranche A Term Loan, the Tranche B Term Loan and the Special Loan. At May 31, 2002, the aggregate amount outstanding under the revolving facility was $33,000. The Company also had outstanding letters of credit at May 31, 2002 of $2,502. Any balances on the revolving facility are repayable in full on September 20, 2005. The Sixth Amendment and Waiver dated as of June 7, 2002 ("the Sixth Amendment") terminated the ability of the Company to borrow under the revolving credit facility and to request the issuance of letters of credit (other than renewals or replacements of existing letters of credit). As of November 30, 2001, February 28, 2002 and at May 31, 2002, the Company was in violation of certain covenants under the New Credit Agreement, as amended. Effective February 28, 2002, the Company entered into a Fifth Amendment Waiver and Consent. The bank group waived the November 30, 2001 violations and waived through April 15, 2002 the minimum EBITDA requirements for the quarter ended February 28, 2002. In addition, a change in the distribution of mandatory prepayments among the Revolving Loans, the Tranche A and Tranche B Term Loans was included. The April 15, 2002 deadline was subsequently extended to June 15, 2002, as part of a new waiver entered into with the bank group. As part of this new waiver, the Company was required to execute with the bank group by June 7, 2002, a binding term sheet setting forth the material terms of a plan of recapitalization and restructuring of the Company's balance sheet. The binding term sheet was not executed by June 7, 2002 and therefore a Sixth Amendment and Waiver was entered into as of June 7, 2002. The Sixth Amendment and Waiver did the following: 1) permanently waived compliance with certain financial covenants for the computation period ended February 28, 2002 through the computation period ending August 31, 2002; 2) terminated the ability of the Company to borrow under the revolving credit facility and to request the issuance of letters of credit (other than renewals or replacements of existing letters of credit); and 3) added a timetable which required the Company to retain an investment banking firm to develop a plan to explore all strategic options available to the Company, including, without limitation, asset dispositions, refinancings and equity investments and complete the solicitation of final binding proposals from all interested parties by no later than September 30, 2002. The Tranche A Term Loan and the Tranche B Term Loan were adjusted in the First Amendment to $36,509 and $100,668, respectively, from the original amounts of $36,540 and $100,637, respectively. These loans bear interest based upon (at the Company's option) (i) the Base Rate (defined as the higher of (a) the prime rate and (b) the federal funds rate plus 0.5%) plus 3.5% in the case of US dollar denominated loans or (ii) the Eurodollar Rate (Reserve Adjusted) as defined in the New Credit Agreement plus 5% in the case of Euro dollar denominated loans. The Revolving Loans bear interest based upon (at the Company's option) (i) the Base Rate (as defined above) plus 2.5% in the case of US dollar denominated loans or the Eurodollar Rate (Reserve Adjusted) (as defined in the New Credit Agreement) plus 5% in the case of Eurodollar denominated loans. The Special Loan is in the amount of $100,000 and bears interest at the rate of 16%, compounded quarterly, which is capitalized as part of the principal balance in lieu of being paid in cash. The loan is repayable in four annual installments of $25,000 plus capitalized interest thereon, commencing November 30, 2002. Any time an event of default (as defined in the New Credit Agreement) exists, the interest rates on the loans may be increased by 3% upon notice from the requisite lenders. As consideration for establishing the New Credit Agreement, the Company paid certain fees and expenses to the bank group and issued them Series A Warrants to purchase 678,334 shares of New Common Stock of the Company at an exercise price of $0.01 per share. The Company also issued to the bank group New Preferred Stock with an aggregate liquidation preference of $100 and quarterly dividends at an annual rate of 16%. The holders of the New Preferred Stock are entitled to appoint two directors to the board of directors of the Company. In the event of a default under the New Credit Agreement, the holders of the New Preferred Stock, voting as a separate class, would be entitled to elect a majority of the directors to the board of directors of the Company. Indebtedness of the Company under the New Credit Agreement is secured by (i) a first perfected security interest in and lien on substantially all of the real and personal property assets of the Company's direct and indirect material majority-owned U.S. subsidiaries, (ii) a pledge of 100% of the stock of the Company's direct and indirect material majority-owned U.S. subsidiaries, and (iii) a pledge of 65% of the capital stock of the Company's first-tier material foreign subsidiaries, and the indebtedness is guaranteed by all of the Company's direct and indirect material majority-owned U.S. subsidiaries. The Company may voluntarily prepay the loans, in whole or in part, without penalty except for the Special Loan, which carries a prepayment penalty until August 2002. The Company is also required to apply against the loans (i) all net cash proceeds from sales of assets, (ii) all insurance proceeds (with certain exceptions), (iii) all net proceeds from the sale or issuance of debt or equity (with certain exceptions), (iv) a percentage of excess cash flow (as defined in the New Credit Agreement) for each fiscal year commencing with the year ending November 30, 2002 and (v) all net proceeds received by the Company relating to the Schlumberger litigation. The New Credit Agreement, as amended, requires the Company to meet certain consolidated financial tests, including minimum levels of EBITDA and fixed charge coverage ratio (both as defined in the New Credit Agreement) and maximum levels of capital expenditure. The New Credit Agreement also contains covenants which, among other things, limit the incurrence of additional indebtedness, payment of dividends, transactions with affiliates, asset sales, acquisitions, investments, mergers and consolidations, prepayments and amendments of other indebtedness, liens and encumbrances and other matters customarily restricted in such agreements. As previously mentioned, certain of these covenants have been permanently waived for the period ended February 28, 2002 through the period ended August 31, 2002. All outstanding debt under the New Credit Agreement was classified as a current liability at May 31, 2002 and November 30, 2001 to reflect that there is a greater than remote possibility that this debt will become due in the next twelve months. 4. New Accounting Pronouncements The Financial Accounting Standards Board issued the following recent statements: Statement of Financial Accounting Standards Board ("SFAS"), No. 141 "Business Combinations," SFAS No. 142, "Goodwill and Other Intangible Assets," SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," and SFAS No. 145 "Recission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 and includes guidance on the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination that is completed after June 30, 2001. The Company adopted this statement during the year ended November 30, 2001, with no impact on the Company's consolidated financial statements. SFAS No. 142 no longer permits the amortization of goodwill and indefinite-lived intangible assets. Instead, these assets must be reviewed annually (or more frequently under certain conditions) for impairment in accordance with this statement. The impairment test uses a fair value approach rather than the undiscounted cash flows approach previously used. Intangible assets that do not have indefinite lives will continue to be amortized over their useful lives and reviewed for impairment in accordance with SFAS No. 121. While this statement is effective for fiscal years beginning after December 15, 2001, early adoption is permitted. The Company adopted this standard as of December 1, 2001. Application of the nonamortization provisions of SFAS No. 142 resulted in an increase to income of $4,069 ($0.90 per common share) per quarter during the first and second quarters of 2002. Pro forma impact on the first and second quarters of 2001 resulted in an increase in net income of approximately $4,069 or ($0.90 per common share) for each quarter. Set forth below is the pro forma SFAS No. 142 effect on results of operations for the three and six month periods ended May 31, 2002 and 2001;

Unaudited --------------------------------------------------------------------------------- Three months ended ~~February~~Six 28months ended May 31, May 31, 2002 2001 2002 2001 ---------------------------------- ------------------------------------------- Net loss $ (815,~~447~~576) $ (1113,~~375~~026) $ (24,023) $ (24,401) Add back: Amortization of reorganization value ~~- 4,069~~ in excess of amount allocable to identifiable assets - 4,069 - 8,138 -------------- ---------------- ---------------- -------------------- Adjusted net loss (15,576) (8,~~447~~957) (724,~~306~~023) (16,263) Preferred stock dividends (~~382~~375) (~~383~~368) (757) (750) -------------- ---------------- ---------------- -------------------- Loss applicable to common stock $ (815,~~829~~951) $ (79,~~689~~325) $ (24,780) $ (17,013) ============== ================ ================ ==================== Loss per common share: Basic Net loss $ (13.9757) $ (2.6198) $ (5.54) $ (5.59) Amortization of reorganization value in excess of amount allocable to identifiable assets - 0.90 - 1.81 -------------- ---------------- ---------------- -------------------- Adjusted loss per common share $ (13.9757) $ (12.7108) $ (5.54) $ (3.78) ============== ================ ================ ==================== Weighted average shares outstanding* 4,474 4,500 4,474 4,500 ============== ================ ================ ==================== Diluted Net loss $ (13.9757) $ (2.6198) $ (5.54) $ (5.59) Amortization of reorganization value in excess of amount allocable to identifiable assets - 0.90 - 1.81 -------------- ---------------- ---------------- -------------------- Adjusted loss per common share $ (13.9757) $ (12.7108) $ (5.54) $ (3.78) ============== ================ ================ ==================== Weighted average shares outstanding* 4,474 4,500 4,474 4,500 ============== ================ ================ ==================== *Total shares to be issued pursuant to Plan of Reorganization.

The Company is testing reorganization value in excess of amounts allocable to identifiable assets using the two-step process prescribed in SFAS No. 142. The first step is to screen for potential impairment, while the second step measures the amount of the impairment, if any. The Company has completed the first of the required impairment tests for indefinite lived intangible assets as of December 1, 2001. The Company concluded that it has two reporting units, North America and Europe/Africa. The first step test resulted in the carrying value exceeding the fair value for both reporting units. Any impairment that is required to be recognized when adopting SFAS No. 142 will be reflected as the cumulative effect of a change in accounting principle effective December 1, 2001 and the first and second quarter results will be restated upon adoption, as required by SFAS No. 142. The Company has not yet determined the magnitude of the potential impairment loss. The Company intends to complete the measurement of the impairment loss before the end of fiscal 2002. SFAS No. 144, which supersedes SFAS No. 121, retains many of the provisions of SFAS No. 121, while significantly changing the criteria that must be met to classify an asset as held for disposal. Long-lived assets to be disposed of other than by sales are considered held and used until the disposal occurs. In addition, SFAS No. 144 retains the basic provisions of Accounting Principles Board Opinion ("APBO") No. 30 for presentation of discontinued operations in the statement of operations but broadens that presentation to reflect a component of an entity. Also, future operating losses are no longer recognized before they occur. Companies are required to adopt SFAS No. 144 in their fiscal year beginning after December 15, 2001, fiscal 2003 for Tokheim. Management has not yet quantified the effect, if any, of the new standard on the Company's financial statements. For most companies, SFAS No. 145 will require gains and losses on extinguishment of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under SFAS No. 4. Extraordinary treatment will be required for certain extinguishments as provided in APBO No. 30. The provisions of SFAS No. 145 related to the SFAS No. 4 revision are effective for financial statements issued for fiscal years beginning after May 15, 2002, however, early adoption is encouraged. Once adopted, any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in APBO No. 30 for classification as an extraordinary item should be reclassified. Management has not yet determined the effect, if any, of this statement on the Company's financial statements. 5. Segment Reporting For the three and six month periods ended May 31, 2002 and 2001, the Company had only one reportable industry segment-the design, manufacture and servicing of petroleum dispensing systems. The Company has two reportable operating segments: North America and Europe/Africa. The accounting policies of these segments are as described in the summary of significant accounting policies in the Company's Form 10-K for the year ended November 30, 2001. The Company evaluates the performance of each operating segment based upon income from operations before merger and acquisition costs and other unusual items. The Company's selling, general, and administrative expenses are charged to each segment based upon the operating segment where the costs are incurred. Segment results for the three and six month periods ended May 31, 2002 and 2001 are summarized in the tables below.

~~Unaudited~~SEGMENT REPORTING Three months ended North ~~February~~May 2831, 2002 America (1) Europe/Africa Eliminations Consolidated --------------- ---------------- -------------- ------------------- Customer sales $ 3335,~~408~~962 $ 8676,~~225~~785 $ - $ ~~119~~112,~~633~~747 Intercompany sales ~~418~~711 21818 (~~439~~1,529) - Depreciation and amortization 2,~~183~~138 1,~~953~~985 ~~279~~278 4,~~415~~401 Operating ~~income~~profit (loss), before merger and acquisition costs and other unusual items (67,~~664~~722) 85,~~544~~211 (~~296~~284) 1(2,~~584~~795) Total assets $ ~~501~~502,~~276~~864 $ ~~252~~249,~~562~~709 $ (~~310~~316,~~516~~347) $ ~~443~~436,~~322~~226 Three months ended North ~~February~~May 2831, 2001 America (1) Europe/Africa Eliminations Consolidated --------------- --------------- -------------- -------------------- Customer sales $ 4445,~~146~~218 $ 7776,~~093~~568 $ - $ 121,~~239~~786 Intercompany sales ~~598~~583 ~~615~~4 (~~1,213~~587) - Depreciation and amortization 25,~~021~~302 24,~~722~~996 3(1,~~166~~254) 79,~~909~~044 Operating ~~income~~profit (loss), before merger and acquisition costs and other unusual items (26,~~251~~456) 3,~~134~~776 (31,~~141)~~133 (21,~~258~~547) Total assets $ ~~565~~534,~~555~~589 $ ~~336~~239,~~286~~452 $ (~~431~~315,~~541~~362) $ ~~470~~458,~~300~~679 ~~(1)~~Six ~~Includes~~months ~~corporate~~ended ~~headquarters~~North ~~Reconciliation~~May ~~from~~31, ~~segment~~2002 ~~information~~America to(1) ~~consolidated~~Europe/Africa ~~statement~~Eliminations ofConsolidated ~~earnings: Three months ended February 28,~~ --------------------------------- ~~2002 2001~~ ---------------- ---------------- ~~Segment~~Customer ~~operating~~sales ~~income~~$ ~~(loss)~~69,370 $ 1163,~~584~~010 $ - $ 232,380 Intercompany sales 1,129 838 (21,~~258~~967) ~~Merger~~- Depreciation and amortization 4,320 3,938 559 8,817 Operating profit (loss), before merger and acquisition costs and other unusual items (~~845~~14,386) 13,755 (~~732~~581) (1,212) Total assets $ 502,864 $ 249,709 $ (316,347) $ 436,226 Six months ended North May 31, 2001 America (1) Europe/Africa Eliminations Consolidated ---------------- ------------------------------------------------ ~~Consolidated~~Customer ~~operating~~sales ~~income~~$ 89,365 $ 153,661 $ - $ 243,026 Intercompany sales 1,181 619 (1,800) - Depreciation and amortization 7,323 7,717 1,913 16,953 Operating profit (loss), before merger and acquisition costs and other unusual items (8,707) 6,910 (2,007) (3,804) Total assets $ ~~739~~534,589 $ 239,452 $ (2315,~~990~~362) $ 458,679 (1) Includes corporate headquarters

Reconciliation from segment information to consolidated statement of earnings:

Three months ended Six months ended May 31, May 31, ----------------------------------------- ~~Three~~----------------------------------------- ~~months~~2002 ~~ended~~2001 ~~February 28,~~ 2002 2001 ------------------- ------------------- ~~Net~~------------------- ------------------- Segment operating loss $ (82,~~447~~795) $ (111,~~375~~547) ~~Other~~$ ~~comprehensive~~(1,212) $ (~~income~~3,804) ~~loss:~~Merger ~~Foreign~~and ~~currency~~acquisition ~~translation~~costs ~~adjustments~~and other unusual items (~~733~~3,545) 5(2,~~041~~218) (4,389) (2,950) ------------------- ------------------- ~~Comprehensive~~------------------- ------------------- Consolidated operating loss $ (96,~~180~~340) $ (63,~~334~~765) ~~=================~~$ ~~================~~(5,601) $ (6,754)

6. Comprehensive Loss

Three months ended ~~February~~Six 28months ended May 31, May 31, 2002 2001 2002 2001 ---------------------------------- ---------------------------------- ~~Involuntary~~Net ~~employee~~loss ~~termination~~$ ~~and~~(15,576) ~~related~~$ ~~costs.........~~(13,026) $ ~~683~~(24,023) $ ~~373~~(24,401) ~~Lease~~Other ~~cancellation~~comprehensive ~~and~~income ~~other~~(loss): ~~facility~~Foreign ~~costs................~~currency 45translation 46adjustments ~~Legal~~4,523 ~~and~~(6,677) ~~professional~~3,790 ~~fees................................~~(1,636) 25---------------- ~~14 Reorganization............................................. 92 297 Other......................................................~~ ---------------- 2 ---------------- ---------------- ~~Total~~Comprehensive loss $ ~~845~~(11,053) $ ~~732~~(19,703) $ (20,233) $ (26,037) ================ ================ ================ ================

7. Earnings per Share The Company presents two earnings per share ("EPS") amounts, basic and diluted. Basic EPS is calculated based on earnings available to common shareholders and the weighted-average number of common shares outstanding during the reported period. Diluted EPS includes additional dilution from common stock equivalents, such as stock issuable pursuant to conversion of preferred stock or the exercise of stock options and warrants outstanding. The incremental shares from the conversion of preferred stock and exercise of stock options and warrants were not included in computing diluted EPS for the three and six month periods ended May 31, 2002 and 2001, since the effect of such inclusion would be antidilutive during periods when a loss from continuing operations is reported. For the three and six month periods ended May 31, 2002, the weighted-average number of potentially issuable common shares included 667,567 and 672,993 shares, respectively, related to warrants issued to the Company's bank group. For the three and six month periods ended May 31, 2001, the weighted-average number of potentially issuable common shares included 676,977 and 676,760 shares, respectively, related to warrants issued to the Company's bank group. Pursuant to the Plan, the holders of the Company's old senior and junior subordinated notes were required to exchange the notes for New Common Stock within a one-year period, commencing at the Effective Date. Due to the failure of some of these holders to exchange their notes within the one-year period, the Company reduced the total number of shares outstanding by approximately 26,000 beginning November 30, 2001. 8. Merger and Acquisition Costs and Other Unusual Items The components of merger and acquisition costs and other unusual items for the three and six month periods ended May 31, 2002 and 2001 are as follows:

During the second quarter of 2002, it was determined that closure of the Company's software development facility in Chesapeake, Virginia would be necessary. As a result, approximately $460 for employee severance costs due to elimination of positions was accrued for in May of 2002. The Company also accrued approximately $935 for the remaining lease payments for the building for the period beginning at the time the building is vacated in August of 2002 through the expiration of the lease in April 2005. The second quarter also includes charges of approximately $850 for severance costs related to personnel reductions at the Company's Grentheville, France manufacturing facility and Le Plessis, France service facility. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General Tokheim Corporation, including its subsidiaries ("Tokheim" or the "Company"), is one of the world's largest manufacturers and servicers of electronic and mechanical petroleum dispensing systems. These systems include petroleum dispensers and pumps, retail automation systems (including point-of-sale ("POS") systems), dispenser payment or "pay-at-the-pump" terminals, replacement parts and upgrade kits. The Company provides products and services to customers in more than 80 countries. The Company is the largest supplier and servicer of petroleum dispensing systems in Europe, Africa, Canada, the Middle East, Eastern Europe and Mexico, and one of the largest in the United States. The Company also has established operations in Asia and Latin America. In addition to its products and services, the Company constructs, on a contractual basis, petrol stations. Results of Operations Consolidated net sales for the three month period ended May 31, 2002 were $112,747 compared to $121,786 for the comparable 2001 three month period. Customer sales for North America for the period decreased by 20.5% to $35,962 in 2002 from $45,218 in 2001. This decrease is attributable to the overall decline in the North American market. While the Company believes that its market share in this region is remaining constant, the overall market decline is adversely affecting sales. European and African customer sales for the period remained steady at $76,785 in 2002 compared to $76,568 in 2001. Consolidated net sales for the six month period ended May 31, 2002 were $232,380 compared to $243,026 for the comparable 2001 period. Sales for North America decreased by 22.4% for the period to $69,370 in 2002 from $89,365 in 2001. This decrease is primarily attributable to the overall decline in the North American market. European and African sales increased by 6.1% to $163,010 in 2002 from $153,661 in 2001. This increase is primarily attributable to the continued effort to upgrade products to enable customers to operate using the Euro, as well as the strengthening of foreign currency rates relative to the U.S. dollar. Gross margin as a percent of sales (defined as net sales less cost of sales, divided by net sales) decreased to 20.2% in the three month period ended May 31, 2002 from 22.7% in the same period in 2001. As the North American sales have continued to decline, the Company has been unable to reduce fixed manufacturing costs at a comparable rate. Management is continually trying to implement a strategy to reduce these costs. Also, certain sales were made in Latin America at lower margins during the three month period ended May 31, 2002. For further discussion, refer to the section "Liquidity and Capital Resources" below. For the six month period ended May 31, gross margin decreased to 21.0% in 2002 from 21.9% in 2001. Selling, general, and administrative ("SG&A") expenses expressed as a percentage of sales for the three and six month periods ended May 31, 2002 were 18.8% and 17.8%, respectively, compared to 16.5% and 16.4% in the same periods of 2001. SG&A expenses have increased from $20,132 in the three month period ended May 31, 2001 to $21,208 in the same period in 2002. SG&A expenses have increased in the six month period ended May 31, 2002 to $41,297 from $39,961 in the six month period ended May 31, 2001. This increase, both in amount and percentage, is attributable to the substantial legal and professional service costs associated with the ongoing effort to plan, modify, and adjust the Company's financial structure. Depreciation and amortization expense for the three and six month periods ended May 31, 2002 was $4,401 and $8,817, respectively, in contrast with $9,044 and $16,953 in the comparable 2001 periods. This decrease was primarily attributable to the cessation of amortization of reorganization value in excess of amount allocable to identifiable assets pursuant to the Company's adoption of Statement of Financial Accounting Standards ("SFAS") No. 142. This was partially offset by the increased depreciation resulting from the capitalization of leases related to service vehicles in France during 2001. See Note 4 to the consolidated condensed financial statements, "New Accounting Pronouncements," for more information. Merger and acquisition costs and other unusual items were $3,545 and $4,389 for the three and six month periods ended May 31, 2002, respectively, compared to $2,218 and $2,950 for the same periods in 2001. This increase is due to increased severance and lease cancellation costs due to facility closures in the 2002 period related to ongoing cost reduction efforts. Net interest expense for the three month period ended May 31, 2002 was $9,058 compared to $8,835 for the three month period ended May 31, 2001. This increase is primarily attributable to increased borrowings under the revolving credit facility partially offset by significant decreases in market interest rates. Net interest expense for the six month period ended May 31, 2002 was $17,610 compared to $18,057 in the six month period ended May 31, 2001. This decrease is primarily attributable to a significant decrease in market interest rates, which reduced interest expense related to the variable portion of the New Credit Agreement. Foreign currency gain for the three and six month periods ended May 31, 2002 was $274 and $81, respectively, in contrast with foreign currency loss of $762 and $507 in the same periods of 2001. These gains are attributable to fluctuations in the value of various foreign currencies, predominantly the Euro and the British pound, against the U.S. dollar. Other expense, net for the three and six month periods ended May 31, 2002 was $94 and $213, compared to $940 and $1,992 of income in the same periods of 2001. This decrease was due to proceeds received from life insurance policies and the reduction in estimates of certain liabilities, such as foreign Value Added Tax, in the 2001 period that did not recur in the 2002 period. Income tax for the three and six month periods ended May 31, 2002 and 2001 was an expense of $391 and $699, respectively, compared to $431 and $893 in the three and six month periods ended May 31, 2001. This decline is due to decreases in state and local taxes. As a result of the above mentioned items, loss applicable to common stock was $15,951 or $3.57 per diluted common share for the three months ended May 31, 2002, compared to a loss applicable to common stock of $13,394 or $2.98 per diluted common share for the same period in 2001. Loss applicable to common stock was $24,780 or $5.54 per diluted common share for the six months ended May 31, 2002, compared to a loss applicable to common stock of $25,151 or $5.59 per diluted common share for the same period in 2001. Liquidity and Capital Resources The Company exited from bankruptcy in October 2000. The debt and equity structure of the Company was based upon a strategic plan. A major assumption of this strategic plan was that the depressed United States market in which the Company had been operating in recent years would return to prior growth levels. This assumption in the plan has not been realized. In fact, the United States has continued to experience declines in the overall market. The results of the Company have demonstrated that a restructuring of its capital structure is necessary. Toward this end, the Company initiated discussions with its lenders regarding potential restructuring options. Though these discussions have not yet resulted in an arrangement, the Company and its lenders have entered into an amendment and waiver to the Company's credit facility (more fully discussed in Note 3 "Notes Payable, Bank Credit Agreement" to the consolidated condensed financial statements) in which a timetable has been established to retain an investment banking firm to develop a plan to explore all strategic options available to the Company, including, without limitation, asset dispositions, refinancings, and equity investments. The Company does not believe that this process will impact its day-to-day operations. While the Company believes that a transaction may be possible, there can be no assurance that a transaction will be achieved. As more fully discussed in Note 3 to the consolidated condensed financial statements, "Notes Payable, Bank Credit Agreement," the Company entered into an amendment and waiver with its lenders that permanently waived certain financial convenants for the computation period ended February 28, 2002 through the computation period ending August 31, 2002. The Company's financial statements for the quarter ended May 31, 2002 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Net sales have declined for three consecutive years and the Company incurred net losses for the year ended November 30, 2001 and for the six months ended May 31, 2002 of $56,754 and $24,023, respectively. In addition, the Company had negative working capital as of May 31, 2002 and November 30, 2001 of $231,972 and $215,139, respectively, as a result of the classification of the outstanding bank debt as a current liability. Further, the Company expects to incur additional net losses in the next two quarters of fiscal 2002. Without restructuring of the credit facility or other changes in the Company's operations, estimated cash availability will not be sufficient to fund the scheduled principal and interest payment on the Special Loan due November 30, 2002. Also, as a result of the Company's recent history of declining sales and operating losses and forecasted future losses, the Company may not be able to attract equity capital to strengthen its financial condition. Given these conditions, there can also be no assurances that the Company will meet its financial loan covenants in the future or that the bank group will not exercise its rights within the loan agreement to accelerate maturities on substantially all of the Company's debt. These matters raise substantial doubt about the Company's ability to continue as a going concern. Since joining the Company in September 2001, the new Chief Executive Officer, along with the rest of the Company's management team, has developed a broad strategic and operational plan that is expected to improve operating results for fiscal 2002 and beyond. The plan refocuses Tokheim's sales efforts on growth through different channels and geographic segments, use of recent technology developments for creation of successful products, global integration of engineering and software development activities to reduce redundancy and reduction of excess physical capacity. The plan includes the following major initiatives: o Aggressively seek to penetrate new high growth geographical markets, specifically Asia and Latin America; o Increase market share from major oil companies by attracting business through new customers (such as the acceptance by Shell Oil Company of the Company's tender offer in January 2002); o Increase market share of sales to hypermarkets; and o Reduce costs through standardization of product offerings worldwide and globalization of purchasing. To achieve these goals, the plan encompasses a shift from a geographical focus to a product line focus. The new focus divides the Company's worldwide product portfolio into three distinct business units: the Sales and Service Unit, the Forecourt Products Business Unit and the Systems Business Unit. Each business unit will focus on a specific product line on a global scale allowing use of technologies and components across marketplaces and elimination of redundant designs. The Sales and Service Unit will allow the Company to allocate the necessary resources to improving customer service and selling processes, which is expected to increase market share. The Forecourt Products Business unit will focus on reducing costs through the creation of global components and continuous improvement in the production area. The Systems Business Unit will focus on maximizing research and development efforts for dispensers and software by eliminating duplication of work. The Company believes that these operating improvements will facilitate the Company's ability to achieve a significant portion of planned cost savings, while ultimately increasing revenues. The Company began to implement this plan in the first six months of 2002, as evidenced by acceptance of Tokheim's tender offer by Shell Oil Company, United States and the announcement of the closure of certain of the Company's facilities. The Company believes that it is strategically positioned through its international hypermarket experience to offer products for this emerging market in the United States. Cash provided from operations for the six month period ended May 31, 2002 was $11,464 versus $121 in the same period of 2001. This increase was caused by a large decrease in net receivables, partially offset by a decrease in accounts payable. Cash used in investing activities for the six month period ended May 31, 2002 was $2,084 compared to $4,709 in the same period of 2001. This decline is principally attributable to decreased levels of capital expenditures in the first half of 2002. Cash used in financing activities for the six month period ended May 31, 2002 was $2,680 compared to cash provided from financing activities of $9,676 in the same 2001 period. This decline in cash provided is primarily attributable to a decrease in cash overdrafts in the first six months of 2002. The Reorganization The Company's Chapter 11 reorganization became effective as of October 20, 2000. Under the Plan, among other things: - the holders of approximately $190,438 of senior subordinated notes and other unsecured creditors were entitled to receive, assuming a full exchange, 4,410,000 shares of New Common Stock representing approximately 85% of the equity value of the reorganized Company subject to dilution for warrants to existing shareholders and management options; - the holders of approximately $49,194 of junior subordinated notes were entitled to receive, assuming a full exchange, 90,000 shares of New Common Stock representing approximately 2% of the equity value of the reorganized Company, as well as Series B Warrants to acquire 555,556 shares of New Common Stock at an exercise price of $30.00 per share; - the holders of the Company's 12,669,000 shares of previously outstanding common stock (the "old Common Stock") were entitled to receive, assuming a full exchange, "out of the money" Series C warrants with a six year term giving them the right to acquire an aggregate of 549,451 shares of New Common Stock of the reorganized Company at an exercise price of approximately $49.46 per share (each Series C Warrant entitles the holder to purchase 0.04326865 of a share of New Common Stock at a price of $2.14, thereby requiring a holder to exercise approximately 23.11 Series C Warrants at an aggregate exercise price of approximately $49.46 to purchase one share to New Common Stock.) - members of the bank group received Series A Warrants to acquire 678,334 of New Common Stock at an exercise price of $0.01 per share; and - members of the bank group received Series A Senior Preferred Stock with an aggregate liquidation preference of $100 and dividends with an annual rate of 16%. The Company also entered into a post-confirmation credit agreement (the "New Credit Agreement") as of the Effective Date. A portion of the proceeds from these facilities was used to repay all outstanding borrowings under the Company's then-existing bank loans. The New Credit Agreement, with amounts outstanding of $295,978 and $279,127 at May 31, 2002 and November 30, 2001, respectively, consists of: - Tranche A Term Loan in the amount of $33,087, adjusted from an original amount of $36,540 at the Effective Date, due in September 2005; - Tranche B Term Loan in the amount of $100,668, adjusted from an original amount of $100,637 at the Effective Date, due in September 2005; - Special Loan in the amounts of $129,223 and $119,372 at May 31, 2002 and November 30, 2001, respectively, including payment-in-kind interest, payable in four annual installments of $25,000 plus accrued interest thereon, commencing in November 2002; and - Revolving credit facility in an amended maximum amount of $35,502 from a maximum amount of $47,765 at the Effective Date, due in September 2005, of which $33,000 and $26,000 was outstanding at May 31, 2002 and November 30, 2001, respectively. The Company also has outstanding letters of credit at May 31, 2002 and November 30, 2001 of $2,502 and $2,002, respectively. Interest rates on the new credit facilities are as follows: - the Tranche A and Tranche B Term Loans bear interest based upon (at the Company's option) (i) the Base Rate (defined as the higher of (a) the prime rate and (b) the federal funds rate plus 0.5%) plus 3.5% in the case of US dollar denominated loans or (ii) the Eurodollar Rate (Reserve Adjusted) as defined in the New Credit Agreement plus 5% in the case of Euro dollar denominated loans; - the Special Loan bears interest at the rate of 16%, which is capitalized as part of the principal balance in lieu of being paid in cash; and - the revolving credit facility bears interest based upon (at the Company's option) (i) the Base Rate (defined as the higher of (a) the prime rate and (b) the federal funds rate plus 0.5%) plus 2.5% in the case of US dollar denominated loans or (ii) the Eurodollar Rate (Reserve Adjusted) as defined in the New Credit Agreement plus 4% in the case of Euro dollar denominated loans. Critical Accounting Policies Tokheim's discussion and analysis of its financial condition and results of operations are based upon the Company's consolidated condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires Tokheim to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, Tokheim evaluates its estimates, including those related to allowances for doubtful accounts, inventories, recoverability of long-lived assets, intangible assets, income taxes, warranty obligation, pensions and other postretirement benefits, and contingencies in litigation. As more fully described in Management's Discussion and Analysis in the Company's Form 10-K for the year ended November 30, 2001, Tokheim bases its estimates on historical experiences and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Future The New Credit Agreement, as amended, requires the Company to meet certain consolidated financial tests, including minimum levels of EBITDA and fixed charge coverage ratio (both as defined in the New Credit Agreement) and maximum levels of capital expenditure. The New Credit Agreement also contains covenants which, among other things, limit the incurrence of additional indebtedness, payment of dividends, transactions with affiliates, asset sales, acquisitions, investments, mergers and consolidations, prepayments and amendments of other indebtedness, liens and encumbrances and other matters customarily restricted in such agreements. As more fully discussed in Note 3 to the consolidated condensed financial statements, "Notes Payable, Bank Credit Agreement," certain of these covenants have been permanently waived for the period ending February 28, 2002 through the period ending August 31, 2002. The Company's ability to meet financial ratios and tests in the future may be affected by events beyond its control. There can be no guarantee that the Company will meet such financial ratios and tests or that it will be able to obtain future amendments to the New Credit Agreement, if so needed, to avoid a default. In the event of a default, the lenders could elect to declare all amounts borrowed under the New Credit Agreement to be due and payable immediately. Since joining the Company in September 2001, the new Chief Executive Officer, along with the rest of the Company's management team, has developed a broad strategic and operational plan that is expected to improve operating results for fiscal 2002 and beyond. The plan refocuses Tokheim's sales efforts on growth through different channels and geographic segments, use of recent technology developments for creation of successful products, global integration of engineering and software development activities to reduce redundancy and reduction of excess physical capacity. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to various market risks, including fluctuations in interest rates, mismatches in funding obligations and receipts and variability in currency exchange rates. The Company has established policies, procedures and internal processes governing its management of market risks and the limited use of financial instruments to manage its exposure to such risks. The Company is subject to variability in foreign exchange rates primarily in its European and African operations. Exposure to this variability is managed primarily through the use of natural hedges, whereby funding obligations and assets are both managed in the local currency. The Company, from time to time, enters into currency exchange agreements to manage its exposure arising from fluctuating exchange rates related to specific transactions. Tokheim's subsidiary, Tokheim-Italia s.r.l., has entered into interest rate swap agreements to protect exposures to interest rate fluctuations. The Company had no other material outstanding agreements of this nature at May 31, 2002. The sensitivity of earnings and cash flows to variations in exchange rates is assessed by applying an appropriate range of potential rate fluctuations to the Company's assets, obligations and projected results of operations denominated in foreign currencies. Based on the Company's overall currency rate exposure at May 31, 2002, movements in currency rates could materially impact the results of operations and financial position of the Company. A significant portion of the Company's debt has been borrowed under variable rate arrangements. A 1% change in interest rates on this debt as of May 31, 2002 would impact quarterly interest expense by approximately $400. PART II. OTHER INFORMATION Item 1. Legal Proceedings In September 1998, the Company acquired the RPS Division of Schlumberger. One of Tokheim's primary competitors, Gilbarco, formerly known as Marconi Commerce Systems, filed suit, claiming that a fuel dispenser manufactured by RPS violates its electronics design patent for fuel dispensers and its programmable multiple blender patent. Tokheim denied liability for any infringement of the patents and believed that this infringement breached Schlumberger's warranty regarding ownership of the technology. Gilbarco filed suit in federal court in North Carolina. Gilbarco named Schlumberger as a Defendant in this lawsuit and Schlumberger failed to answer. Gilbarco moved for a summary judgement against Schlumberger. A settlement agreement was entered into by and between Tokheim, Schlumberger and Gilbarco on or about October 18, 2001, regarding this matter. As part of the settlement, the Company entered into a technology license agreement providing for payment by the Company of royalties to Gilbarco and Gilbarco received shares of New Common Stock in accordance with the Plan. On October 18, 2000, Schlumberger filed a claim with the Bankruptcy Court with respect to the Company's acquisition of RPS. The claim, which was subsequently modified on January 12, 2001, is for various sums allegedly due to Schlumberger, totaling $10,000. The Company believed that $6,507 of the claim was valid and made a provision for that amount. Pursuant to the Plan, this provision was discharged as an impaired claim and included in the calculation of extraordinary gain for the eleven months ended October 31, 2000. If the remaining amount of the claim were to be upheld, it would be treated similarly to the claims of other impaired unsecured creditors. The Company has not paid this claim as it has a counter-claim against Schlumberger for amounts due and alleged to be due to the Company on account of Schlumberger's alleged material breach of various representations and warranties and breaches of other provisions of the agreement entered in connection with the acquisition of RPS. The amount of the Company's counter-claim is substantially higher than the amount of Schlumberger's claim. The Company has commenced arbitration proceedings and has filed its Statement of Claim in the International Court of Arbitration to resolve the matter. Since the filing of the Statement of Claim by the Company, both parties have had numerous settlement discussions. However, no settlement has yet been reached. The Company has received a subpoena from the SEC requiring submission of documentation related to the RPS acquisition that occurred in 1998 and the subsequent treatment of goodwill related to that acquisition by the Company on certain of its financial statements through the time of the Company's Chapter 11 bankruptcy during the fiscal year 2000. The Company is cooperating fully with the SEC in its response to that subpoena. As more fully described in Note 21 to the consolidated financial statements, "Contingent Liabilities," in the Company's Form 10-K for the year ended November 30, 2001, the Company is defending various claims and legal actions, including claims relating to the U.S. Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and other environmental laws, product liability and various contract and employee matters, some of which may be impaired in the aforementioned bankruptcy proceeding. These legal actions primarily involve claims for damages arising out of the Company's manufacturing operations, product liability and various contractual and employment issues. Management believes that the outcome of such pending claims will not, individually or in the aggregate, have a material adverse effect on the Company's financial position, results of operations, or cash flows. Item 6. Exhibits and Reports on Form 8-K a. Exhibits Exhibit No. Document ------- -------- 2.1 Filing of a Joint Prepackaged Plan of Reorganization for the Company and its U.S. subsidiaries pursuant to chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court for the District of Delaware (incorporated herein by reference to the Company's Current Report on Form 8-K/A dated September 11, 2000). 2.2 Confirmation of the Joint Prepackaged Plan of Reorganization for the Company and its U.S. subsidiaries pursuant to chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court for the District of Delaware (incorporated herein by reference to the Company's Current Report on Form 8-K dated October 16, 2000). 3.1 Amended and Restated Articles of Incorporation of Tokheim Corporation, as filed with the Indiana Secretary of State as of October 20, 2000 (incorporated herein by reference to the Company's Quarterly Report on Form 10-Q, for the quarter ended August 31, 2000). 3.2 Amended and Restated Bylaws of Tokheim Corporation, as amended and restated as of October 20, 2000 (incorporated herein by reference to the Company's Quarterly Report on Form 10-Q, for the quarter ended August 31, 2000). 4.1 Post-Confirmation Credit Agreement, dated as of October 20, 2000, among Tokheim Corporation, various subsidiaries thereof as Borrowers, various financial institutions, AmSouth Bank, as Documentation Agent, and ABN AMRO Bank N.V., as Administrative Agent (incorporated herein by reference to the Company's Quarterly Report on Form 10-Q, for the quarter ended August 31, 2000). 4.2 Series A Warrant Agreement, dated as of October 20, 2000, among Tokheim Corporation and the holders of Series A Warrant Certificates (incorporated herein by reference to the Company's Quarterly Report on Form 10-Q, for the quarter ended August 31, 2000). 4.3 Series B Warrant Agreement, dated as of October 20, 2000, among Tokheim Corporation and Computershare Investor Services, LLC, as Warrant Agent (incorporated herein by reference to the Company's Quarterly Report on Form 10-Q, for the quarter ended August 31, 2000). 4.4 Series C Warrant Agreement, dated as of October 20, 2000, among Tokheim Corporation and Computershare Investor Services, LLC, as Warrant Agent (incorporated herein by reference to the Company's Quarterly Report on Form 10-Q, for the quarter ended August 31, 2000). 4.5 Registration Rights Agreement, dated as of October 20, 2000, among Tokheim Corporation and the Holders of Stock to be listed on Schedule 1 (incorporated herein by reference to the Company's Quarterly Report on Form 10-Q, for the quarter ended August 31, 2000). 4.6 First Amendment to the Credit Agreement, dated as of March 14, 2001, among Tokheim Corporation, various subsidiaries thereof as Borrowers, various financial institutions, AmSouth Bank, as Documentation Agent, and ABN AMRO Bank N.V., as Administrative Agent (incorporated herein by reference to the Company's Quarterly Report on Form 10-Q, for the quarter ended February 28, 2001). 4.7 Second Amendment to the Credit Agreement, dated as of July 23, 2001, among Tokheim Corporation, various subsidiaries thereof as Borrowers, various financial institutions, AmSouth Bank, as Documentation Agent, and ABN AMRO Bank N.V., as a Lender and as Administrative Agent (incorporated herein by reference to the Company's Quarterly Report on Form 10-Q, for the quarter ended May 31, 2001). 4.8 Third Amendment to the Credit Agreement, dated as of October 31, 2001, among Tokheim Corporation, various subsidiaries thereof as Borrowers, various financial institutions, AmSouth Bank, as Documentation Agent, and ABN AMRO Bank N.V., as a Lender and as Administrative Agent (incorporated herein by reference to the Company's Annual Report on Form 10-K, for the year ended November 30, 2001). 4.9 Fourth Amendment to the Credit Agreement, dated as of February 8, 2002, among Tokheim Corporation, various subsidiaries thereof as Borrowers, various financial institutions, AmSouth Bank, as Documentation Agent, and ABN AMRO Bank N.V., as a Lender and as Administrative Agent (incorporated herein by reference to the Company's Annual Report on Form 10-K, for the year ended November 30, 2001). 4.10 Fifth Amendment to the Credit Agreement, dated as of February 28, 2002, among Tokheim Corporation, various subsidiaries thereof as Borrowers, various financial institutions, AmSouth Bank, as Documentation Agent, and ABN AMRO Bank N.V., as a Lender and as Administrative Agent (incorporated herein by reference to the Company's Annual Report on Form 10-K, for the year ended November 30, 2001). 4.11 Waiver and Consent, dated as of April 15, 2002, among Tokheim Corporation, various subsidiaries thereof as Borrowers, various financial institutions as lenders, AmSouth Bank, as a Lender and as Documentation Agent, and ABN AMRO Bank N.V., as a Lender, as issuing lender and as Administrative Agent (incorporated herein by reference to the Company's Annual Report on Form 10-K, for the year ended November 30, 2001). 4.12 Amendment No. 1 to Waiver and Consent, dated as of April 30, 2002, among Tokheim Corporation, various subsidiaries thereof as borrowers, various financial institutions as lenders, AmSouth Bank, as a Lender and as documentation agent for the Lenders, and ABN AMRO Bank N.V., as a Lender, as issuing lender and as administrative agent for the Lenders (incorporated herein by reference to the Company's Annual Report on Form 10-Q, for the quarter ended February 28, 2002). 4.13 Amendment No. 2 to Waiver and Consent, dated as of May 8, 2002, among Tokheim Corporation, various subsidiaries thereof as borrowers, various financial institutions as lenders, AmSouth Bank, as a Lender and as documentation agent for the Lenders and ABN AMRO Bank N.V., as a Lender, as issuing lender and as administrative agent for the Lenders (incorporated herein by reference to the Company's Annual Report on Form 10-Q, for the quarter ended February 28, 2002). 4.14 Amendment No. 3 to Waiver and Consent, dated as of May 22, 2002, among Tokheim Corporation, various subsidiaries thereof as borrowers, various financial institutions as lenders, AmSouth Bank as a Lender and as documentation agent for the Lenders and ABN AMRO Bank N.V., as a Lender, as issuing lender and as administrative agent for the Lenders (incorporated herein by reference to the Company's Annual Report on Form 10-Q, for the quarter ended February 28, 2002). 4.15 Amendment No. 4 to Waiver and Consent, dated as of May 31, 2002, among Tokheim Corporation, various subsidiaries thereof as borrowers, various financial institutions as lenders, AmSouth Bank, as a Lender and as documentation agent for the Lenders and ABN AMRO Bank N.V., as a Lender, as issuing lender and as administrative agent for the Lenders (incorporated herein by reference to the Company's Annual Report on Form 10-Q, for the quarter ended February 28, 2002). 4.16 Sixth Amendment and Waiver to the Credit Agreement, dated as of June 7, 2002, among Tokheim Corporation, various subsidiaries thereof as Borrowers, various financial institutions as lenders, AmSouth Bank, as a Lender and as documentation agent for the Lenders and ABN AMRO Bank N.V., as a Lender, as issuing lender and as administrative agent for the Lenders (incorporated herein by reference to the Company's Current Report on Form 8-K, filed June 11, 2002). 10.1 Tokheim Corporation Supplemental Executive Retirement Plan (incorporated herein by reference to the Company's Report on Form 10- Q, for the quarter ended August 31, 1999). 10.2 Employment Agreement, dated July 15, 1999, between Tokheim Corporation and Douglas K. Pinner (incorporated herein by reference to the Company's Report on Form 10-Q, for the quarter ended August 31, 1999). 10.3 Employment Agreement, dated May 15, 2000, between Tokheim Corporation and Robert L. Macdonald (incorporated herein by reference to the Company's Quarterly Report on Form 10-Q/A, for the quarter ended May 31, 2000). 10.4 Employment Agreement, dated July 15, 1999, between Tokheim Corporation and Jacques St-Denis (incorporated herein by reference to the Company's Report on Form 10-Q, for the quarter ended August 31, 1999). 10.5 Employment Agreement, dated July 15, 1999, between Tokheim Corporation and Norman L. Roelke (incorporated herein by reference to the Company's Report on Form 10-Q, for the quarter ended August 31, 1999). 10.6 Employment Agreement, dated July 15, 1999, between Tokheim Corporation and Scott A. Swogger (incorporated herein by reference to the Company's Report on Form 10-Q, for the quarter ended August 31, 1999). 10.7 Employment Agreement, dated September 4, 2001, between Tokheim Corporation and John S. Hamilton (incorporated herein by reference to the Company's Annual Report on Form 10-K, for the year ended November 30, 2001). 10.8 Technology License Agreement, effective as of December 1, 1997, between Tokheim Corporation and Gilbarco, Inc. (incorporated herein by reference to the Company's Annual Report on Form 10-K, for the year ended November 30, 1997). 10.9 Tokheim Corporation Management Option Plan (incorporated herein by reference to the Company's Quarterly Report on Form 10-Q, for the quarter ended August 31, 2000). 10.10 Form of Incentive Stock Option Agreement under Tokheim Corporation Management Option Plan (incorporated herein by reference to the Company's Quarterly Report on Form 10-Q, for the quarter ended August 31, 2000). 10.11 Incentive Stock Option Agreement under Tokheim Corporation Management Option Plan, dated as of October 20, 2000, among Tokheim Corporation and Douglas K. Pinner (incorporated herein by reference to the Company's Quarterly Report on Form 10-Q, for the quarter ended August 31, 2000). 21.1 Subsidiaries of Tokheim Corporation (incorporated herein by reference to the Company's Annual Report on Form 10-K, for the year ended November 30, 2001). b. Reports on Form 8-K A Current Report on Form 8-K was filed on June 11, 2002 with respect to the Sixth Amendment and Waiver to the Company's Credit Agreement. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TOKHEIM CORPORATION Date: July 15, 2002 /s/ John S. Hamilton ------------------------------------- President and Chief Executive Officer /s/ Scott L. Bennett ------------------------------------- Vice President, Finance

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