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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________ TO _______________
COMMISSION FILE NO. 1-12641
RDO EQUIPMENT CO.
(Exact name of registrant as specified in its charter)
DELAWARE 45-0306084
(State of incorporation) (I.R.S. Employer Identification No.)
2829 SOUTH UNIVERSITY DRIVE
FARGO, NORTH DAKOTA 58103
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (701) 297-4288
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 ___.
The number of shares outstanding of the registrant as of November 30,
2000:
Class A Common Stock 5,731,008
Class B Common Stock 7,450,492
----------
Total 13,181,500
==========
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1
<PAGE>
CAUTIONARY STATEMENT REGARDING
FUTURE RESULTS AND FORWARD-LOOKING STATEMENTS
The future results of RDO Equipment Co. (the "Company"), including
results reflected in any forward-looking statement made by or on behalf of the
Company, will be impacted by a number of important factors. The factors
identified below in Item 2 under the subsection entitled "Safe Harbor Statement"
are important factors (but not necessarily all important factors) that could
cause the Company's actual future results to differ materially from those
expressed in any forward-looking statement made by or on behalf of the Company.
Words such as "may," "will," "expect," "believe," "anticipate," "estimate,"
"continue," or comparable terminology are intended to identify forward-looking
statements. Forward-looking statements, by their nature, involve substantial
risks and uncertainties.
PART I - FINANCIAL INFORMATON
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
RDO EQUIPMENT CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
October 31, October 31,
------------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues
Equipment & truck sales $ 123,301 $ 108,644 $ 393,750 $ 361,154
Parts and service 48,977 46,393 141,047 131,646
Rental 2,586 8,817 6,381 24,990
Financial services 1,560 1,668 4,633 5,485
---------- ---------- ---------- ----------
Total revenues 176,424 165,522 545,811 523,275
Cost of revenues 152,364 133,318 464,828 427,145
---------- ---------- ---------- ----------
Gross profit 24,060 32,204 80,983 96,130
Selling, general and
administrative expenses 28,146 24,762 79,739 71,963
---------- ---------- ---------- ----------
Operating income (loss) (4,086) 7,442 1,244 24,167
Interest expense (3,184) (3,606) (9,582) (10,724)
Interest income 260 175 606 573
---------- ---------- ---------- ----------
Income (loss) before income taxes
and minority interest (7,010) 4,011 (7,732) 14,016
Income tax benefit (provision) 2,853 (1,633) 3,147 (5,705)
---------- ---------- ---------- ----------
Income (loss) before minority interest (4,157) 2,378 (4,585) 8,311
Minority interest (14) (65) (12) (26)
---------- ---------- ---------- ----------
Net income (loss) $ (4,171) $ 2,313 $ (4,597) $ 8,285
========== ========== ========== ==========
Net income (loss) per share -
Basic and diluted $ (0.32) $ 0.18 $ (0.35) $ 0.63
========== ========== ========== ==========
Weighted average shares outstanding-basic 13,182 13,182 13,182 13,182
========== ========== ========== ==========
Weighted average shares outstanding-diluted 13,182 13,182 13,182 13,184
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
2
<PAGE>
RDO EQUIPMENT CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, January 31,
(IN THOUSANDS) 2000 2000
-------------------------------------------------------------------------------------------------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,524 $ 4,207
Accounts receivable (less allowance for doubtful accounts) 60,902 75,536
Receivables from affiliates 60 31
Inventories 208,017 217,556
Prepaid expenses 887 573
Deferred income tax benefit 4,915 4,910
------------ ------------
Total current assets 277,305 302,813
Property and equipment, net 22,685 21,944
Other assets:
Goodwill and other, net of accumulated amortization 35,586 36,205
Deposits 1,239 1,035
------------ ------------
Total assets $ 336,815 $ 361,997
============ ============
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE>
RDO EQUIPMENT CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
October 31, January 31,
(IN THOUSANDS) 2000 2000
-----------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
Current liabilities:
Floor plan payables $177,568 $190,242
Notes payable 15,803 12,330
Current maturities of long-term debt 2,822 2,791
Accounts payable 6,296 6,169
Accrued liabilities 16,659 23,490
Customer advance deposits 2,491 2,824
Dividends payable 731 742
-------- --------
Total current liabilities 222,370 238,588
Long-term debt, net of current maturities 7,204 11,483
Deferred income taxes 1,975 1,460
-------- --------
Total liabilities 231,549 251,531
Minority interest 588 1,191
Stockholders' equity:
Preferred stock -- --
Common stocks-
Class A 57 57
Class B 75 75
Additional paid-in-capital 84,471 84,471
Retained earnings 20,075 24,672
-------- --------
Total stockholders' equity 104,678 109,275
-------- --------
Total liabilities and stockholders' equity $336,815 $361,997
======== ========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE>
RDO EQUIPMENT CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended October 31,
(IN THOUSANDS) (UNAUDITED) 2000 1999
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities:
Net income (loss) $ (4,597) $ 8,285
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 5,577 9,960
Deferred taxes 510 4,470
Minority interest 12 26
Change in operating assets and liabilities:
Accounts receivable (1,828) (5,876)
Inventories 9,539 (5,891)
Prepaid expenses (314) 396
Deposits (204) 99
Floor plan payables 1,749 1,074
Accounts payable and accrued liabilities (6,715) 553
Customer advance deposits (333) (1,077)
-------- --------
Net cash provided by operating activities 3,396 12,019
Investing activities:
Net purchases of rental equipment (3,194) 347
Net purchase of property and equipment (2,000) (2,241)
Net assets of acquisitions (1,167) (4,404)
Retained investment and service fee on securitized receivables -- (1,028)
Other, net 47 (3,524)
-------- --------
Net cash used for investing activities (6,314) (10,850)
Financing activities:
Proceeds from issuance of long-term debt 89 6,419
Payments on long-term debt (2,327) (11,271)
Net proceeds of bank lines and short-term notes payable 3,473 7,340
-------- --------
Net cash provided by financing activities 1,235 2,488
-------- --------
Increase (decrease) in cash (1,683) 3,657
Cash and cash equivalents, beginning of period 4,207 51
-------- --------
Cash and cash equivalents, end of period $ 2,524 $ 3,708
======== ========
Supplemental disclosures:
Cash payments for interest $ 9,206 $ 11,342
======== ========
Cash payments for income taxes $ 4,657 $ 2,444
======== ========
Noncash investing and financing activities:
Increase in assets related to acquisitions of dealerships
through issuance and assumption of debt $ -- $ 20,843
======== ========
Increase in long-term debt related to refinancing of short-term debt $ -- $ 5,000
======== ========
Sale of rental assets for purchaser's assumption of debt $ -- $ 2,526
======== ========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
<PAGE>
RDO EQUIPMENT CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PREPARATION:
The condensed consolidated financial statements for the three and nine
months ended October 31, 2000 and October 31, 1999 are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The condensed
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto, contained in the Company's
Annual Report to Stockholders incorporated by reference in the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 2000. The results of
operations for the three and nine months ended October 31, 2000 are not
necessarily indicative of the results to be expected for the full year.
2. BUSINESS COMBINATIONS:
The Company's acquisitions have been accounted for using the purchase
method of accounting and, accordingly, the assets acquired and liabilities
assumed have been recorded at their estimated fair values as of the dates of
acquisition. The excess purchase price over the fair value of the assets
acquired and liabilities assumed has been recorded as goodwill which is
amortized over 30 years.
During the first nine months of fiscal 2001, the Company purchased the
remaining 15% minority interest in Hall GMC, Inc. and Hall Truck Center, Inc.
for a total purchase price of approximately $1.2 million. In the same period of
the prior fiscal year, the Company had two acquisitions, the first acquisition
was two heavy-duty truck dealerships in Dallas and Fort Worth, Texas with a cash
purchase price of approximately $1.8 million. The total assets acquired and
liabilities assumed in this acquisition were approximately $13.7 million and
$11.9 million, respectively. The second acquisition was of two heavy-duty truck
dealerships in Riverside and Long Beach, California and a used truck outlet in
Fontana, California. The total assets acquired and liabilities assumed in this
acquisition were approximately $11.6 million and $9.0 million, respectively,
with a cash purchase price of approximately $2.6 million.
Results of operations for the acquisitions made prior to October 31,
2000 have been included in the accompanying condensed consolidated financial
statements since their respective acquisition dates. The following unaudited
consolidated pro forma results of operations give effect to these acquisitions
as if they were completed at the beginning of fiscal 2000. The unaudited pro
forma financial information does not purport to represent what the Company's
results of operations would actually have been if such transactions in fact had
occurred at such a date or to project the Company's results of future operations
(in thousands, except for per share data):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
------------------------ -----------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 176,424 $ 168,608 $ 545,811 $ 551,488
========== ========== ========= =========
Net income (loss) $ (4,171) $ 2,159 $ (4,597) $ 8,060
========== ========== ========= =========
Weighted average shares
outstanding-basic 13,182 13,182 13,182 13,182
========== ========== ========= =========
Weighted average shares
outstanding-diluted 13,182 13,182 13,182 13,184
========== ========== ========= =========
Net income (loss) per share -
basic and diluted $ (0.32) $ 0.16 $ (0.35) $ 0.61
========== ========== ========= =========
</TABLE>
6
<PAGE>
3. INVENTORIES:
All inventories are valued at the lower of cost or market. Cost is
determined using the first-in, first-out method for new equipment, trucks and
parts inventory. The specific identification method is used to determine cost
for used equipment and trucks.
Inventories consisted of the following at (in thousands):
October 31, January 31,
2000 2000
---- -----
New equipment & trucks $143,124 $149,018
Used equipment & trucks 33,469 39,159
Parts and other 31,424 29,379
-------- --------
$208,017 $217,556
======== ========
4. FLOOR PLAN PAYABLES:
Floor plan payables include both interest and noninterest-bearing
financing arrangements for inventory. The terms of certain arrangements may
include an interest-free term followed by a term during which interest is
charged. Floor plan payables consisted of the following at (in thousands):
October 31, January 31,
2000 2000
---- -----
Interest-bearing $146,167 $157,404
Noninterest-bearing 31,401 32,838
-------- --------
$177,568 $190,242
======== ========
During the quarter, the scheduled maturity date of the Deere Credit
Services, Inc. (Deere Credit) credit facility was extended for one year maturing
at the end of the Company's third fiscal quarter of fiscal 2002. During the
second fiscal quarter, Banc of America Leasing & Capital, LLC (Bank of America)
informed the Company that it was exiting the business of lending to equipment
distributors and therefore would not be renewing its commitment at the November
20, 2000 expiration date. Subsequent to the end of the third quarter, the
Company has requested and received a 45 day extension of this credit facility
and has voluntarily reduced the commitment by Bank of America from $20 million
to $14 million. The Company has capacity and is prepared to repay this facility
on or before its maturity date of January 5, 2001 by using other existing floor
plan financing and credit agreements. The Company has also extended its credit
facilities with Ag Capital for an additional year with a maturity date of
December 1, 2001.
The Company's financing agreements contain various restrictive
covenants which, among other matters, require the Company to maintain minimum
financial ratios, as defined, and place limits on certain activities. The
Company was in compliance with or obtained waiver letters for all debt covenants
as of October 31, 2000. In addition, the Company is in arbitration with John
Deere Construction Equipment Company (JDCEC) regarding JDCEC's contention that
the Company violated of two of the Company's dealership agreements giving JDCEC
the right to terminate the agreements. The alleged violations of the Company's
dealership agreements are listed as an event which if true would constitute a
default under the credit facility with Deere Credit. The Company has received
written confirmation from Deere Credit that these alleged violations will not
constitute a default unless the arbitration panel determines that the Company
violated the dealer agreements.
7
<PAGE>
5. EARNINGS PER SHARE:
The following summarizes the computation of weighted average shares
outstanding and net income per share for the periods indicated (in thousands,
except per share data):
Three Months Ended Nine Months Ended
October 31, October 31,
--------------------- ---------------------
2000 1999 2000 1999
---- ---- ---- ----
Net income (loss) available to
common shareholders $ (4,171) $ 2,313 $ (4,597) $ 8,285
======== ======== ======== ========
Weighted average number
of shares outstanding - basic 13,182 13,182 13,182 13,182
Dilutive effect of stock
options outstanding -- -- -- 2
-------- -------- -------- --------
Common and potential common
shares outstanding - diluted 13,182 13,182 13,182 13,184
======== ======== ======== ========
Basic and dilutive
net income (loss) per share $ (0.32) $ 0.18 $ (0.35) $ 0.63
======== ======== ======== ========
6. LEGAL PROCEEDINGS:
The Company is party to litigation outside of the normal course of
business. For a description of these legal proceedings, see Part II - Other
Information, Item 1. Legal Proceedings of this quarterly report.
7. SEGMENT INFORMATION:
The Company's operations are currently classified into four business
segments: construction, truck, agricultural and financial services and
corporate. In past reporting, a fifth business segment, rental, was designated
which included both construction equipment rental operations and agricultural
equipment rental operations. At the end of fiscal 2000, the construction
equipment rental operations were sold. To coincide with how management currently
views the Company's operations, current and future segment reporting will
include the agricultural equipment rental operations in the agricultural
segment. For historical comparisons only, the construction equipment rental
operations are included in the rental segment. Construction operations include
the sale, service and rental of construction and material handling equipment to
customers primarily in the construction, manufacturing, warehousing and utility
industries and to units of government. Truck operations include the sale and
service of heavy-duty and medium-duty trucks to customers primarily in the
transportation and construction industries and to units of government.
Agricultural operations include the sale, service and rental of agricultural
equipment primarily to customers in the agricultural industry. The financial
services operations primarily provide financing arrangements to customers of the
Company's other business segments, and these operations are therefore combined
with corporate activities.
Identifiable assets are those used exclusively in the operations of
each business segment or which are allocated when used jointly. Corporate assets
are principally comprised of cash, certain property and equipment, and deferred
income taxes. Interest income and interest expense are included in revenues and
cost of revenues, respectively, for the financial services segment.
8
<PAGE>
The following tables show the Company's business segments and related
financial information for the three and nine months ended October 31, 2000 and
1999 (in thousands):
<TABLE>
<CAPTION>
Financial
Services and
Three Months Ended Oct. 31, Construction Truck Agricultural Rental Corporate Total
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2000:
Revenues from
external customers $ 81,268 $ 49,063 $ 44,533 $ -- $ 1,560 $ 176,424
Interest income 45 50 165 -- -- 260
Interest expense 1,691 1,001 492 -- -- 3,184
Depreciation and
amortization 683 308 742 -- 274 2,007
Income (loss) before income
taxes and minority interest (3,692) (4,367) 718 -- 331 (7,010)
Capital expenditures, net 185 48 (252) -- 600 581
1999:
Revenues from
external customers $ 83,134 $ 42,373 $ 30,626 $ 7,721 $ 1,668 $ 165,522
Interest income (20) 55 133 7 -- 175
Interest expense 1,625 732 895 354 -- 3,606
Depreciation and
amortization 537 262 873 1,279 254 3,205
Income (loss) before income
taxes and minority interest 3,014 (456) 603 399 451 4,011
Capital expenditures, net (2,828) 350 444 (341) 390 (1,985)
Financial
Services and
Nine Months Ended Oct. 31, Construction Truck Agricultural Rental Corporate Total
------------------------------------------------------------------------------------------------------------------
2000:
Revenues from
external customers $ 251,310 $ 150,786 $ 139,082 $ -- $ 4,633 $ 545,811
Interest income 5 137 464 -- -- 606
Interest expense 4,755 3,135 1,692 -- -- 9,582
Depreciation and
amortization 1,927 914 2,015 -- 721 5,577
Income (loss) before income
taxes and minority interest (3,463) (8,081) 2,695 -- 1,117 (7,732)
Identifiable assets 166,998 74,298 69,211 -- 26,308 336,815
Capital expenditures, net 1,278 72 1,884 -- 1,960 5,194
1999:
Revenues from
external customers $ 259,579 $ 127,862 $ 109,234 $ 21,115 $ 5,485 $ 523,275
Interest income 22 162 373 16 -- 573
Interest expense 5,094 1,581 2,320 1,729 -- 10,724
Depreciation and
amortization 1,926 644 2,672 3,800 918 9,960
Income (loss) before income
taxes and minority interest 10,401 467 2,133 (810) 1,825 14,016
Identifiable assets 168,910 81,716 85,297 40,211 35,103 411,237
Capital expenditures, net (1,208) 805 154 1,364 779 1,894
</TABLE>
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
During the first nine months of fiscal 2001, the Company made the
decision and received approval to consolidate the Volvo dealership location in
Long Beach, CA into the Company's Riverside, CA location. The Long Beach market
is continuing to be serviced through the Company's Riverside truck center. Also
during the first nine months of fiscal 2001, the Company purchased the remaining
15% minority interest in Hall GMC, Inc. and Hall Truck Center, Inc. for a total
purchase price of approximately $1.2 million. The Barnesville, MN agricultural
retail store was also closed during the first nine months of fiscal 2001, and
will be consolidated with the Fargo, ND agricultural operations in a new
combined location.
10
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
financial data:
Three Months Ended Nine Months Ended
October 31, October 31,
------------------- -------------------
2000 1999 2000 1999
---- ---- ---- ----
REVENUE DATA (IN MILLIONS):
Total revenues $ 176.4 $ 165.5 $ 545.8 $ 523.3
Construction 46.1% 50.2% 46.0% 49.6%
Truck 27.8% 25.6% 27.6% 24.5%
Agricultural 25.2% 18.5% 25.5% 20.9%
Rental --- % 4.7% --- % 4.0%
Financial services 0.9% 1.0% 0.9% 1.0%
Construction revenues $ 81.3 $ 83.1 $ 251.3 $ 259.6
Equipment sales 67.4% 69.2% 69.6% 71.0%
Parts and service 31.3% 29.5% 29.3% 27.9%
Rental 1.3% 1.3% 1.1% 1.1%
Truck revenues $ 49.1 $ 42.4 $ 150.8 $ 127.9
Truck sales 78.0% 76.6% 79.0% 79.9%
Parts and service 22.0% 23.4% 21.0% 20.1%
Agricultural revenues $ 44.5 $ 30.6 $ 139.1 $ 109.2
Equipment sales 68.0% 57.6% 71.7% 66.4%
Parts and service 28.6% 38.2% 25.7% 30.1%
Rental 3.4% 4.2% 2.6% 3.5%
Rental revenues $ --- $ 7.7 $ --- $ 21.1
Equipment sales --- % 13.2% --- % 10.2%
Parts and service --- % 3.6% --- % 3.5%
Rental --- % 83.2% --- % 86.3%
STATEMENT OF OPERATIONS DATA (AS A PERCENTAGE OF TOTAL REVENUES):
Revenues
Equipment and truck sales 69.9% 65.7% 72.1% 69.0%
Parts and service 27.7 28.0 25.8 25.2
Rental 1.5 5.3 1.2 4.8
Financial services 0.9 1.0 0.9 1.0
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
Gross profit 13.6% 19.5% 14.8% 18.4%
Selling, general and
administrative expenses 16.0 15.0 14.6 13.8
----- ----- ----- -----
Operating income (loss) (2.4) 4.5 0.2 4.6
Interest expense, net 1.7 2.1 1.6 1.9
Provision for (benefit from) taxes (1.7) 1.0 (0.6) 1.1
----- ----- ----- -----
Net income (loss) (2.4)% 1.4% (0.8)% 1.6%
===== ===== ===== =====
11
<PAGE>
THREE MONTHS ENDED OCTOBER 31, 2000 COMPARED TO THREE MONTHS ENDED OCTOBER 31,
1999
REVENUES
Total revenues increased approximately $10.9 million, or 6.6%, from
$165.5 million for the third quarter of fiscal 2000 to $176.4 million for the
third quarter of fiscal 2001. Truck operations contributed approximately $6.7
million of this increase, with revenues increasing 15.8% from $42.4 million to
$49.1 million. Agricultural operations contributed approximately $13.9 million
of the overall increase in revenues, with revenues increasing 45.4% to $44.5
million in the third quarter of fiscal 2001. Agricultural revenues are
increasing in all areas primarily attributable to the Company's gains in market
share and a stabilizing agricultural economy particularly in the Midwest. These
increases were partially offset by a decrease in construction revenues and by
the sale of the Company's construction equipment rental operations at the end of
fiscal 2000. Construction revenues decreased approximately $1.8 million, or
2.2%, from $83.1 million to $81.3 million. The decrease is due to continuing
competitive pressures and a current decline in unit market potential, offset to
some extent by the Company's gains in market share. Construction equipment
rental operations had revenues of $7.7 million during the third quarter of
fiscal 2000. Financial services revenues decreased approximately 11.8% to $1.5
million. Fewer loan and lease originations due to lower construction revenues,
along with increased interest rates and a tightening credit environment
contributed to the change.
Equipment and truck sales increased approximately $14.7 million, or
13.5%, from $108.6 million for the third quarter of fiscal 2000 to $123.3
million for the third quarter of fiscal 2001. Truck sales increased
approximately $5.8 million, or 17.9%, from $32.5 million to $38.3 million.
Agricultural equipment sales increased approximately $12.7 million, or 72.2%,
from $17.6 million to $30.3 million. Construction equipment sales decreased
approximately $2.8 million, or 4.9% to $54.7 million. In addition, equipment
sales decreased approximately $1.0 million as a result of the sale of the
Company's construction equipment rental operations at the end of fiscal 2000.
Parts and service revenues increased approximately $2.6 million, or
5.6%, from $46.4 million for the third quarter of fiscal 2000 to $49.0 million
for the third quarter of fiscal 2001. Truck operations contributed approximately
$900,000 of the increase as revenues grew 9.1% to $10.8 million. Agricultural
operations contributed an increase of $1.0 million, or 8.6%, as revenues
increased to $12.7 million. Parts and service revenues from construction
operations increased approximately $1.0 million, or 4.1%, to $25.5 million. The
sale of the Company's construction equipment rental operations at the end of
fiscal 2000 reduced parts and service revenues by approximately $300,000.
Rental revenues were $2.6 million in the third quarter of fiscal 2001
compared to $8.8 million for the third quarter of fiscal 2000, a decrease of
$6.2 million, or 70.5%, primarily attributable to the sale of the Company's
construction equipment rental operations at the end of fiscal 2000.
GROSS PROFIT
Gross profit for the third quarter of fiscal 2001 was $24.1 million, or
13.6% of total revenues, compared to $32.2 million, or 19.5% of total revenues,
for the third quarter of fiscal 2000, a decrease of $8.1 million, or 25.2%.
Gross profit is affected by the contribution of revenues by business segment, by
the mix of revenues within each business segment and by competition. Revenues
from construction, rental and financial services operations generally provide
the Company with higher gross margins than do agricultural and truck operations.
The Company's highest gross margins are generally derived from its parts and
service, rental and financial services revenues. As truck revenues expand as a
percentage of the total revenues, gross margins tend to decline as a percentage
of sales. Construction margins continue to decline due to competitive pressures
as the Company, along with our competitors, attempt to capture a share of a
declining market potential. Truck margins continue to experience pressures due
to high used truck inventory levels throughout the industry and declining demand
primarily attributable to higher fuel
12
<PAGE>
prices and interest rates. Both construction and truck margins also were
affected by wholesale sales to reduce inventory levels to correlate to the
current market environments. Financial services also experienced margin
tightening due to increased interest rates and a tightening credit environment.
Another contributing factor to the decrease in gross profit was that
construction equipment rental operations, which generally provided higher gross
margins, were sold at the end of fiscal 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative (SG&A) expenses as a percent of
total revenues for the third quarter of fiscal 2001 and 2000 were 16.0% and
15.0%, respectively. SG&A expenses increased approximately $3.3 million, from
$24.8 million for the third quarter of fiscal 2000 to $28.1 million for the
third quarter of fiscal 2001. SG&A expenses are affected by the contribution of
revenues by business segment and by the mix of revenues within each business
segment. As a percentage of revenues, SG&A expenses are generally higher for
construction and financial services operations than for agricultural, truck and
rental operations, and lower for equipment and truck sales than for parts and
service and rental revenues. However, the Company has been experiencing higher
than normal levels of SG&A expenses related to the consolidation and integration
of the Company's acquired truck dealerships.
INTEREST EXPENSE
Interest expense as a percent of total revenues decreased from 2.2% for
the third quarter of fiscal 2000 to 1.8% for the third quarter of fiscal 2001.
Interest expense decreased approximately $400,000, or 11.1%, from $3.6 million
for the third quarter of fiscal 1999 to $3.2 million for the third quarter of
fiscal 2001. Interest expense as a percentage of total revenues decreased,
despite rising interest rates, primarily due to a decrease in the level of
interest-bearing floorplan payables along with a lower level of long-term debt.
This debt reduction resulted from the sale of the Company's construction
equipment rental operations.
INCOME TAXES
The estimated provision for (benefit from) income taxes as a percentage
of pretax income (loss) for the third quarter of fiscal 2001 and 2000 was 40.7%.
NET INCOME
The Company reported a net loss of $(4.2) million, or $(0.32) per
share, for the third quarter of fiscal 2001, compared to net income of $2.3
million, or $0.18 per share, for the third quarter of fiscal 2000.
NINE MONTHS ENDED OCTOBER 31, 2000 COMPARED TO NINE MONTHS ENDED OCTOBER 31,
1999
REVENUES
Total revenues increased approximately $22.5 million, or 4.3%, from
$523.3 million for the first nine months of fiscal 2000 to $545.8 million for
the same period of fiscal 2001. Truck operations contributed approximately $22.9
million of this increase, with revenues increasing 17.9% to $150.8 million.
Agricultural operations contributed approximately $29.9 million of the overall
increase in revenues, with revenues increasing 27.4% to $139.1 million in the
first nine months of fiscal 2001. Agricultural revenues are increasing in all
areas primarily attributable to the Company's gains in market share and an
improving agricultural economy particularly in the Midwest. These increases were
partially offset by a decrease in construction revenues and by the sale of the
Company's construction equipment rental operations at the end of fiscal 2000.
Construction revenues decreased approximately $8.3 million, or 3.2%, from $259.6
million to $251.3 million due to continuing competitive pressures and overall
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declining unit market potential which have been offset to some extent by the
Company's gains in market share. The construction equipment rental operations
had revenues of $21.1 million during the first nine months of fiscal 2000.
Financial services revenues decreased approximately 16.4% to $4.6 million. Lower
loan and lease originations due to lower construction and material handling
revenues, along with increased interest rates and a tightening credit
environment contributed to the decrease.
Equipment and truck sales increased approximately $32.6 million, or
9.0%, from $361.2 million for the first nine months of fiscal 2000 to $393.8
million for the first nine months of fiscal 2001. Truck sales increased
approximately $17.0 million, or 16.6%, to $119.2 million. Agricultural
operations contributed approximately $27.3 million of increased equipment sales,
increasing 37.7% to $99.7 million. Construction equipment sales decreased
approximately $9.5 million, or 5.2% to $174.9 million. In addition, equipment
sales decreased approximately $2.2 million as a result of the sale of the
Company's construction equipment rental operations.
Parts and service revenues increased approximately $9.4 million, or
7.1%, from $131.6 million for the first nine months of fiscal 2000 to $141.0
million for the first nine months of fiscal 2001. Truck operations contributed
approximately $5.9 million of the increase as revenues grew 23.0% from $25.7
million to $31.6 million. Agricultural operations contributed an increase of
$2.9 million, or 8.8%, as revenues increased to $35.8 million. Parts and service
revenues from construction operations increased 1.8%, or $1.3 million, to $73.6
million. Offsetting these increases, parts and service revenues decreased
approximately $700,000 for the first nine months of fiscal 2001 as a result of
the sale of the Company's construction equipment rental operations.
Rental revenues were $6.4 million for the first nine months of fiscal
2001 compared to $25.0 million for the first nine months of fiscal 2000, a
decrease of $18.6 million, or 74.4%, primarily attributable to the sale of the
Company's construction equipment rental operations.
GROSS PROFIT
Gross profit for the first nine months of fiscal 2001 was $81.0
million, or 14.8% of total revenues, compared to $96.1 million, or 18.4% of
total revenues, for the first nine months of fiscal 2000, a decrease of $15.1
million, or 15.7%. Gross profit is affected by the contribution of revenues by
business segment, by the mix of revenues within each business segment and by
competition. Revenues from construction, rental and financial services
operations generally provide the Company with higher gross margins than do
agricultural and truck operations. The Company's highest gross margins are
generally derived from its parts and service, rental and financial services
revenues. As truck revenues expand as a percentage of the total revenues, gross
margins tend to decline as a percentage of sales. Construction margins continue
to experience pressures due to competitive pressures as the Company, along with
our competitors, attempt to capture a share of a declining market potential.
Truck margins continue to experience competitive pressures due to high used
truck inventory levels throughout the industry and declining demand primarily
attributable to higher fuel prices and interest rates. Both construction and
truck margins were affected by wholesale sales to reduce inventory levels to
correlate to the current market environments. Financial services also
experienced margin declines due to interest rate increases and a tightening
credit environment. Another contributing factor to the decrease in gross profit
was the sale of the construction equipment rental operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative (SG&A) expenses as a percent of
total revenues for the first nine months of fiscal 2001 and 2000 were 14.6% and
13.8%, respectively. Total SG&A expenses increased approximately $7.7 million,
from $72.0 million for the first nine months of fiscal 2000 to $79.7 million for
the first nine months of fiscal 2001. SG&A expenses are affected by the
contribution of revenues by business segment and by the mix of revenues within
each business segment. As a percentage of revenues, SG&A expenses are generally
higher for construction and financial services operations than
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for agricultural, truck and rental operations, and lower for equipment and truck
sales than for parts and service and rental revenues. However, the Company has
been experiencing higher than normal levels of SG&A expenses related to the
consolidation and integration of the Company's acquired truck dealerships.
INTEREST EXPENSE
Interest expense as a percentage of total revenues decreased from 2.0%
for the first nine months of fiscal 2000 to 1.8% for the first nine months of
fiscal 2001. Interest expense decreased approximately $1.1 million, or 10.3%, to
$9.6 million for the first nine months of fiscal 2001. Interest expense as a
percentage of total revenues decreased, despite rising interest rates, primarily
due to a decrease in the level of interest-bearing floorplan payables along with
a lower level of long-term debt. This debt reduction resulted from the sale of
the Company's construction equipment rental operations.
INCOME TAXES
The estimated provision for (benefit from) income taxes as a percentage
of pretax income (loss) for the first nine months of fiscal 2001 and 2000 was
40.7%.
NET INCOME
The Company reported a net loss of $(4.6) million, or $(0.35) per
share, for the first nine months of fiscal 2001, compared to net income of $8.3
million, or $0.63 per share, for the first nine months of fiscal 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires cash primarily for financing its inventories of
equipment, trucks and replacement parts, acquisitions and openings of additional
retail locations, rental equipment and capital expenditures. Historically, the
Company has met these liquidity requirements primarily through cash flow
generated from operating activities, floor plan financing, and borrowings under
credit agreements with Deere & Company (Deere), Deere Credit Services, Inc.
(Deere Credit), Ag Capital Company (Ag Capital), Banc of America Leasing &
Capital, LLC (Bank of America), Deutsche Financial Services Corporation
(Deutsche), Associates Commercial Corporation (Associates), General Motors
Acceptance Corporation (GMAC), Volvo Commercial Finance LLC (Volvo) and
commercial banks.
During the quarter, the scheduled maturity date of the Deere Credit
facility was extended for one year maturing at the end of the Company's third
fiscal quarter of fiscal 2002. During the second fiscal quarter, Bank of America
informed the Company that it was exiting the business of lending to equipment
distributors and therefore would not be renewing its commitment at the November
20, 2000 expiration date. Subsequent to the end of the third quarter, the
Company has requested and received a 45 day extension of this credit facility
and has voluntarily reduced the commitment by Bank of America from $20 million
to $14 million. The Company has capacity and is prepared to repay this facility
on or before its maturity date of January 5, 2001 by using other existing floor
plan financing and credit agreements. As of the date of this filing, the balance
outstanding under the Bank of America credit facility totaled $9.5 million. The
Company has also extended its credit facilities with Ag Capital for an
additional year with a maturity date of December 1, 2001.
Floor plan financing from Deere, Deere Credit and Bank of America
represents the primary source of financing for equipment inventories,
particularly for equipment supplied by Deere. Floor plan financing of truck
inventories is primarily supplied by Associates, GMAC and Volvo. On- and
off-balance sheet financing of rental equipment is primarily provided by
Deutsche and Deere Credit. Most lenders receive a security interest in the
inventory financed.
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Deere and Deere Credit offer floor plan financing to Deere dealers for
extended periods and with varying interest-free periods, depending on the type
of equipment, to enable dealers to carry representative inventories of equipment
and to encourage the purchase of goods by dealers in advance of seasonal retail
demand. Down payments are not required and interest may not be charged for a
substantial part of the period for which inventories are financed. Occasionally,
additional discounts may be available in lieu of interest-free periods. Variable
market rates of interest based on the prime rate are charged on balances
outstanding after any interest-free periods, which are currently five to twelve
months for agricultural equipment and one to four months for construction
equipment. Deere also provides financing to dealers on used equipment accepted
in trade and approved equipment from other suppliers. Deere Credit and Bank of
America provide equipment floor plan financing with variable market rates of
interest based on the prime rate and LIBOR, respectively. Associates, GMAC and
Volvo provide truck floor plan financing with variable market rates of interest
based on the prime rate.
The Company has available lines of credit totaling $25.0 million with
varying maturity dates through December 1, 2001 and with variable interest rates
based on LIBOR and the prime rate. The Company had approximately $9.2 million of
unused availability relating to these lines of credit at October 31, 2000. In
addition to floor plan financing supplied by manufacturers, the Company had
unused credit commitments related to floor plan financing and on- and
off-balance sheet financing of rental equipment of approximately $47.9 million
at October 31, 2000. Excluding the Bank of America credit facility which will
mature on January 5, 2001, the Company's unused credit commitments would have
been $27.9 million. Although the Company's credit availability is lower than
past levels, the Company has sufficient credit availability from its
manufacturers. The Company generally has not utilized manufacturer financing,
except for the interest-free terms, as financing from manufacturers is generally
at a higher cost of funds than the Company's current credit commitments.
The Company periodically reviews the terms of its financing with its
lenders, including the interest rate. For the first nine months of fiscal 2001
and 2000 the average interest rate under interest-bearing floor plan financing
was approximately 8.61% and 7.43%, respectively. As of October 31, 2000 the
Company had outstanding floor plan payables of approximately $177.6 million, of
which $146.2 million was then interest-bearing. The average interest rates on
the Company's lines of credit during the nine months ended October 31, 2000 and
1999 were 9.01% and 7.99%, respectively. The Company will experience higher
average interest rates in future periods as a result of interest rate increases
over the last year, as well as, increased pricing on the Company's extended
credit facilities.
The Company's financing agreements contain various restrictive
covenants which, among other matters, require the Company to maintain minimum
financial ratios, as defined, and place limits on certain activities. The
Company was in compliance with or obtained waiver letters for all debt covenants
as of October 31, 2000. In addition, the Company is in arbitration with John
Deere Construction Equipment Company (JDCEC) regarding JDCEC's contention that
the Company violated of two of the Company's dealership agreements giving JDCEC
the right to terminate the agreements. The alleged violations of the Company's
dealership agreements are listed as an event which if true would constitute a
default under the credit facility with Deere Credit. The Company has received
written confirmation from Deere Credit that these alleged violations will not
constitute a default unless the arbitration panel determines that the Company
violated the dealer agreements.
Cash provided by operating activities during the first nine months of
fiscal 2001 was $3.4 million. The cash generated by operating activities
primarily resulted from depreciation and amortization, and reduced inventory
levels partially offset by increases in trade receivables and reduced levels of
payables. Cash provided by operating activities for the first nine months of
fiscal 2000 was $12.0 million, that primarily resulted from net income,
depreciation and amortization, and increases in floor plan financing which was
partially offset by increases in trade receivables and inventories.
Cash used for investing activities during the first nine months of
fiscal 2001 was $6.3 million, which was primarily related to purchases of
agricultural rental equipment, purchases of property and
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equipment and the purchase of the remaining 15% minority interest in Hall GMC,
Inc. and Hall Truck Center, Inc. Cash used for investing activities during the
first nine months of fiscal 2000 was $10.9 million, which was primarily related
to acquisitions and the purchase of property and equipment.
Cash provided by financing activities during the first nine months of
fiscal 2001 was $1.2 million. The primary source of cash from financing
activities was increases in the Company's operating lines, partially offset by
net payments of long-term debt. During the first nine months of fiscal 2000,
cash provided by financing activities was $2.5 million, primarily resulting from
proceeds from issuance of long-term debt and increases in operating lines and
short-term payables used to fund increased accounts receivable.
The Company believes cash from operations, available cash and borrowing
capacity will be sufficient to fund its planned internal capital expenditures
for fiscal 2001.
CYCLICALITY
Sales of equipment and trucks, particularly new units, historically
have been cyclical, fluctuating with general economic cycles. During economic
downturns, equipment and truck retailers tend to experience similar periods of
decline and recession as the general economy. The impact of an economic downturn
on retailers is generally less than the impact on manufacturers due to the sale
of parts and service by retailers to maintain used equipment and trucks. The
Company believes that its businesses are influenced by worldwide and local
economic conditions (see "Safe Harbor Statement" below) and that its geographic
and business diversification will generally reduce the overall impact of
economic cycles on the Company's operations.
SEASONALITY
The Company's agricultural operations, particularly in the Midwest,
generally experience a higher volume of equipment sales in the second and third
fiscal quarters due to the crop growing season. Typically, farmers purchase
equipment prior to planting or harvesting crops. Winter weather conditions in
the Midwest limit equipment purchases during the Company's first and fourth
fiscal quarters. This seasonal effect is diminished during periods of
significant and sustained weakness in the agricultural economy during which
farmers generally purchase less equipment.
The Company's construction operations also generally experience a
higher volume of equipment sales in the second and third fiscal quarters due to
favorable weather patterns, particularly in the Midwest. The general slowdown in
construction activity at the end of the calendar year influences the fourth
fiscal quarter. Further, winter weather conditions in parts of the Southwest and
South Central also limit construction activity to some degree, typically
resulting in lower sales and rentals of construction equipment.
Since the Company's truck operations are not generally affected by any
significant seasonality, the overall impact of seasonality has tended to decline
as truck revenues have become a greater percentage of total revenues. If the
Company acquires businesses in geographic areas other than where it currently
has operations, it may be affected by other seasonal or equipment buying trends.
SAFE HARBOR STATEMENT
This statement is made under the Private Securities Litigation Reform
Act of 1995. The future results of the Company, including results related to
forward-looking statements in this Report, involve a number of risks and
uncertainties. Important factors that will affect future results of the Company,
including factors that could cause actual results to differ materially from
those indicated by forward-looking statements, include, but may not be limited
to, those set forth under the caption "Certain Important Factors" in Item 1 of
the Company's Form 10-K dated April 21, 2000, in the Company's Form
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8-K dated April 21, 2000, in the Company's Form 8-K dated July 18, 2000, and in
other filings with the Securities and Exchange Commission. These factors, which
are subject to change, include: general economic conditions worldwide and
locally; interest rates; housing starts; fuel prices; the many interrelated
factors that affect farmers' confidence, including farm cash income, farmer debt
levels, credit availability, worldwide demand for agricultural products, world
grain stocks, commodity prices, weather, animal and plant diseases, crop pests,
harvest yields, real estate values and government farm programs; legislation,
primarily legislation relating to agriculture, the environment, commerce,
transportation and government spending on infrastructure; climatic phenomena
such as La Nina and El Nino; pricing, product initiatives and other actions of
competitors in the various industries in which the Company competes, including
manufacturers and retailers; the levels of new and used inventories in these
industries; the Company's relationships with its suppliers; production
difficulties, including capacity and supply constraints experienced by the
Company's suppliers; practices by the Company's suppliers; changes in
governmental regulations; labor shortages; employee relations; currency exchange
rates; availability, sufficiency and cost of insurance; financing arrangements
relating to the Company's financial services operations, including credit
availability and customer credit risks; dependence upon the Company's suppliers;
termination rights and other provisions which the Company's suppliers have under
dealer and other agreements; risks associated with growth, expansion and
acquisitions; the positions of the Company's suppliers and other manufacturers
with respect to publicly-traded dealers, dealer consolidation and specific
acquisition opportunities; the Company's acquisition strategies and the
integration and successful operation of acquired businesses; capital needs and
capital market conditions; operating and financial systems to manage rapidly
growing operations; dependence upon key personnel; accounting standards;
technological difficulties, especially involving the Company's suppliers and
other third parties which could cause the Company to be unable to process
customer orders, deliver products or services, or perform other essential
functions; and other risks and uncertainties. The Company's forward-looking
statements are based upon assumptions relating to these factors. These
assumptions are sometimes based upon estimates, data, communications and other
information from suppliers, government agencies and other sources which are
often revised. The Company makes no commitment to revise forward-looking
statements, or to disclose subsequent facts, events or circumstances that may
bear upon forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There has been no material change in the information set forth in Item
7A of the Company's Annual Report on Form 10-K for the fiscal year ended January
31, 2000.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In late June 2000, the Company received written notice from John Deere
Construction Equipment Company that, effective June 21, 2001, John Deere
Construction would terminate the Company's dealership agreements for the
Burnsville, Minnesota and Phoenix, Arizona areas of responsibility for the sale
and warranty servicing of Deere construction, utility and forestry equipment. In
the termination notice, John Deere Construction cited its view that the Company
was in violation of certain market penetration requirements in the dealership
agreements. On the same date, John Deere Construction also filed an arbitration
demand with the American Arbitration Association in Chicago that seeks
confirmation of its allegations that the Company's construction equipment
dealerships can be terminated because the Company allegedly violated these
agreements. Such a termination would result in the Company losing its John Deere
Construction dealership agreements for the Southwest and most of the Midwest
regions. The termination would not affect the Company's Montana or Texas
construction dealerships or its John Deere agricultural dealerships. The Company
denies John Deere Construction's contention that it can terminate its dealership
agreements and has filed a counterclaim in the arbitration, asserting a number
of statutory, contract and tort claims. The Company intends to vigorously defend
its right to remain a John Deere construction equipment dealer under all means
available. The counterclaim incorporates all of the
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allegations and seeks all of the remedies set forth in the complaint filed by
the Company in the Minnesota trial court action as described below.
On July 18, 2000, the Company and several affiliates filed suit in the
Fourth Judicial District Court, State of Minnesota against John Deere
Construction Equipment Company, Credit Suisse First Boston Equity Partners, L.P.
and Nortrax, L.L.C. alleging that those companies have violated the Minnesota
Heavy and Utility Equipment Manufacturers and Dealers Act and have intentionally
and inappropriately interfered and conspired to interfere with the Company's
John Deere construction equipment dealership agreements. On August 1, 2000, the
parties were ordered by the Minnesota trial court judge to arbitrate these
claims.
The Company and its construction equipment division filed suit on
October 23, 2000, in United States District Court, District of North Dakota,
against Credit Suisse First Boston Corporation and Credit Suisse First Boston
Equity Partners, L.P. (individually and collectively "CSFB") alleging that CSFB
violated Section 1 of the Sherman Act by conspiring with John Deere Construction
Equipment Company and Nortrax, L.L.C. to unreasonably restrain trade in the
purchase of John Deere Construction Equipment dealerships. The suit also alleged
CSFB breached its fiduciary duty as lead underwriter and financial advisor to
RDO, intentionally and improperly interfered and conspired to interfere with
RDO's prospective business relationships, conspired with John Deere Construction
Equipment Company and Nortrax, L.L.C. to commit unfair competition, and has
engaged in a civil conspiracy with these same parties to commit unlawful acts or
lawful acts by unlawful means, thereby injuring RDO. The suit seeks unspecified
damages. On November 30, 2000, CSFB filed a motion to stay the proceedings
pending arbitration or, alternatively, to dismiss the complaint. CSFB has also
filed a request for oral arguments relating to its motion to stay and/or dismiss
the complaint.
The Company's construction equipment division is its largest division.
With 31 total retail locations, the division accounted for almost one-half of
the Company's total revenues for the twelve months ended January 31, 2000. The
areas of responsibility covered under the termination notice accounted for
approximately two-thirds of the Division's total revenue. Termination of certain
or all of the Company's dealership agreements with John Deere Construction as
requested in the arbitration demand could have a significant negative impact on
the results of operations, liquidity, profitability and financial condition of
the Company.
The Company is also the subject of a demand for arbitration that was
filed by John Deere Company, a division of Deere & Company ("Deere") in Chicago,
Illinois under the Commercial Rules of the American Arbitration Association. The
arbitration demand was originally served in February 2000, and the Company
obtained an extension of time to respond to the demand through May 3, 2000, when
the Company filed its response. The demand for arbitration concerns the proper
interpretation of the Company's agricultural dealership agreements with Deere,
under which the Company's dealerships sell and lease Deere agricultural
equipment. In the arbitration, Deere has alleged that the Company breached its
dealership agreements when it acquired a majority interest in Salinas Equipment
Distributors, Inc. ("SED"), an agricultural equipment rental company located in
Salinas, California, which transaction closed in August 1998. SED, both before
and after the acquisition by the Company, rented a variety of agricultural
equipment, including Deere equipment. Deere is taking the position that when SED
rents Deere equipment, such activity is a violation of the authorization
location clauses contained in the agricultural dealership agreements, which sets
forth the authorized locations in which the Company is authorized to sell and
lease Deere equipment. It is the Company's position that SED is not a Deere
dealership and its activities do not fall within the scope of the Deere
dealership agreements. The demand for arbitration, which does not request money
damages, requests a declaration that sales, rentals and leases of Deere
equipment from SED constitute a breach of the authorized location clauses in the
Company's dealership agreements and an order enjoining the Company from selling,
renting, or leasing Deere equipment from SED. The Company denies that it has
breached any such agreements and believes that these allegations do not have
merit. The Company intends to vigorously defend the arbitration demand. No
hearing or other scheduling matters have yet been set.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
Exhibits filed with this report are listed in the Exhibit
Index on page 20.
(b) REPORTS ON FORM 8-K.
None.
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.
RDO EQUIPMENT CO.
(Registrant)
Date: December 11, 2000 By: /s/ Thomas K. Espel
-----------------------------
Thomas K. Espel
Chief Financial Officer
(principal financial officer)
EXHIBIT INDEX
ITEM NO. ITEM PAGE OF THIS REPORT
-------- ---- -------------------
10.1 RDO Agriculture Equipment Co. and 21
RDO Construction Equipment Co.
Addendum to Amended and Restated Loan
Agreement with John Deere Construction
Equipment Company, Deere Credit, Inc.,
and John Deere Company
10.2 RDO Equipment Co. Credit Agreement with 23
Ag Capital Company
10.3 RDO Material Handling Co. Credit Agreement 51
with Ag Capital Company
10.4 RDO Financial Services Co. Credit Agreement 71
with Norwest Bank North Dakota, N.A. and Ag
Capital Company
20.1 Letter to the Shareholders Third Quarter 105
Report Fiscal 2001
27.1 Financial Data Schedule 107
20
