SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) December 1, 1997
OMNIQUIP INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-21461 43-1721419
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
222 East Main Street 53074
Port Washington, Wisconsin (Zip Code)
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (414) 268-8965
<PAGE>
On December 1, 1997, OmniQuip International, Inc. (the "Company") filed a
Current Report on Form 8-K (the "Current Report") pertaining to the release of
its audited consolidated financial statements for the fiscal year ended
September 30, 1997 (the "Financial Statements"). The Company hereby amends Item
7 of the Current Report for the purpose of (i) correcting certain typographical
errors in the Financial Statements and (ii) providing the financial statements
of TRAK International, Inc., a wholly-owned subsidiary of the Company, for the
period from October 1, 1994 to August 16, 1995.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements
(i) OmniQuip International, Inc.
(1) Report of independent accountants.
(2) Consolidated balance sheet at September 30, 1997 and
September 30, 1996.
(3) Consolidated statement of income for the fiscal years
ended September 30, 1997 and September 30, 1996 and the period from August 17,
1995 to September 30, 1995.
(4) Consolidated statement of changes in stockholders'
equity at September 30, 1997, September 30, 1996 and September 30, 1995.
(5) Consolidated statement of cash flows for the fiscal
years ended September 30, 1997 and September 30, 1996 and for the period from
August 17, 1995 to September 30, 1995.
(6) Notes to consolidated financial statements.
(ii) TRAK International, Inc.
(1) Report of independent accountants.
(2) Balance sheet at September 30, 1994.
(3) Statement of income for the period from October 1, 1994
to August 16, 1995 and the fiscal year ended September 30, 1994.
(4) Statement of changes in stockholders' equity at August
16, 1995 and September 30, 1994.
<PAGE>
(5) Statement of cash flows for the period from October 1,
1994 to August 16, 1995 and the fiscal year ended September 30, 1994.
(6) Notes to financial statements.
(b) Exhibits
23 Consents of Independent Accountants.
27 Financial Data Schedule.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Omniquip International, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Omniquip International, Inc. and its wholly-owned subsidiaries at September 30,
1997 and 1996 and the results of their operations and their cash flows for the
period from August 17, 1995 (date of inception) through September 30, 1995 and
for each of the two fiscal years in the period ended September 30, 1997, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
St. Louis, Missouri
November 3, 1997, except
for Note 18 which is as of
November 18, 1997
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Consolidated Balance Sheet
September 30, 1997
(Dollars in thousands, except per share data)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30,
1997 1996
<S> <C> <C>
Assets
Current assets:
Cash $ 5 $ 53
Accounts receivable, net 22,689 21,678
Inventories 30,956 27,540
Prepaid expenses and other current assets 6,640 5,534
-------------- --------------
Total current assets 60,290 54,805
Property, plant and equipment, net 17,130 16,490
Goodwill 65,359 65,571
Other assets, net 1,519 2,714
--------------- ---------------
$ 144,298 $ 139,580
--------------- ---------------
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $ 8,625 $ 3,875
Accounts payable 20,433 20,895
Accrued liabilities 16,830 16,642
--------------- ---------------
Total current liabilities 45,888 41,412
--------------- ---------------
Long-term debt 25,609 84,566
Other noncurrent liabilities, net 422 422
Deferred income taxes 1,981 755
--------------- ---------------
28,012 85,743
--------------- ---------------
Commitments and contingencies (Notes 3, 6, 7, 13, 15 and 18)
Stockholders' equity:
Preferred stock, $.01 par value, 1,500,000 shares
authorized; no shares issued and outstanding
Common stock, $.01 par value, 100,000,000
shares authorized; 14,250,000 and 11,250,000
shares issued and outstanding, respectively 143 113
Additional paid-in capital 43,726 6,240
Notes receivable from stockholders (352) (352)
Retained earnings 26,881 6,424
--------------- ---------------
Total stockholders' equity 70,398 12,425
--------------- ---------------
$ 144,298 $ 139,580
--------------- ---------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Consolidated Statement of Income
September 30, 1997
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
For the fiscal from August 17, 1995
year ended (date of inception) to
September 30, September 30,
1997 1996 1995
<S> <C> <C> <C>
Net sales $ 264,213 $ 124,861 $ 12,723
Cost of sales 192,270 92,688 9,787
------------- -------------- -------------
Gross profit 71,943 32,173 2,936
Selling, general and administrative expenses 27,717 16,311 1,670
------------- -------------- -------------
Operating income 44,226 15,862 1,266
------------- -------------- -------------
Other expenses:
Interest on indebtedness 5,578 2,384 226
Interest on indebtedness - related parties 528 1,050 127
Other finance charges 2,259 1,981 240
Other, net (77) 31 29
------------- -------------- -------------
8,288 5,446 622
------------- -------------- -------------
Income before income taxes and
extraordinary item 35,938 10,416 644
Provision for income taxes 14,556 4,060 262
------------- -------------- -------------
Income before extraordinary item 21,382 6,356 382
Extraordinary item - loss on refinancing of
long-term debt, net of income tax benefit of
$521 and $200 in 1997 and 1996, respectively (782) (314) -
------------- -------------- -------------
Net income $ 20,600 $ 6,042 $ 382
------------- -------------- -------------
Earnings per share:
Income before extraordinary item $ 1.66 $ 0.56 $ 0.03
Extraordinary item (0.06) (0.03) -
------------- -------------- -------------
Net income $ 1.60 $ 0.53 $ 0.03
------------- -------------- -------------
Weighted average number of common and
common equivalent shares outstanding 12,845 11,250 11,250
------------- -------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Consolidated Statement of Changes in Stockholders' Equity
September 30, 1997
(Dollars in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Notes
Additional receivable
Common paid-in from Retained
stock capital stockholders earnings Total
<S> <C> <C> <C> <C> <C>
Balance, August 17, 1995 $ 113 $ 6,240 $ (352) $ - $ 6,001
Net income - - - 382 382
------------- ------------- -------------- ------------- -------------
Balance, September 30, 1995 113 6,240 (352) 382 6,383
Net income - - - 6,042 6,042
------------- ------------- -------------- ------------- -------------
Balance, September 30, 1996 113 6,240 (352) 6,424 12,425
Common stock issued 30 37,486 37,516
Net income 20,600 20,600
Dividends paid - - - (143) (143)
------------- ------------- -------------- ------------- -------------
Balance, September 30, 1997 $ 143 $ 43,726 $ (352) $ 26,881 $ 70,398
------------- ------------- -------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Consolidated Statement of Cash Flows
September 30, 1997
(Dollars in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the fiscal For the period
year ended from August 17, 1995
September 30, (date of inception) to
1997 1996 September 30, 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 20,600 $ 6,042 $ 382
Adjustments to reconcile net income to net cash
provided by operating activities, excluding the
effect of an acquisition:
Depreciation 2,022 1,175 80
Amortization 1,996 571 45
Deferred income tax provision (benefit) 804 (712) 42
Loss on refinancing of long-term debt 1,303 514
(Increase) decrease in current assets:
Accounts receivable, net (1,011) (1,264) (1,063)
Inventories (3,416) (3,628) 949
Prepaid expenses and other current assets (670) (39) 90
Increase (decrease) in current liabilities:
Accounts payable (462) 2,397 (162)
Other current liabilities 188 3,946 (42)
Other 241 (433) (16)
-------------- -------------- --------------
Net cash provided by operating activities 21,595 8,569 305
-------------- -------------- --------------
Cash flows from investing activities:
Acquisition of net assets of Lull Industries, Inc. (69,007)
Capital expenditures, net (3,021) (1,404) (188)
Payments to former TRAK shareholders for
ATLAS program (1,025) (446)
Other 247 (133) -
-------------- -------------- --------------
Net cash used in investing activities (3,799) (70,990) (188)
-------------- -------------- --------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 74,000
Proceeds from initial public offering 37,516
Net payments on revolver (4,332) (3,542) (117)
Payments on long-term debt (50,885) (6,500)
Payments of dividends (143)
Financing costs incurred - (1,485) -
-------------- -------------- --------------
Net cash (used in) provided by financing activities (17,844) 62,473 (117)
-------------- -------------- --------------
Net change in cash (48) 52 -
Cash at beginning of period 53 1 1
-------------- -------------- --------------
Cash at end of period $ 5 $ 53 $ 1
-------------- -------------- --------------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest on indebtedness $ 5,622 $ 2,619 $ 278
-------------- -------------- --------------
Income taxes $ 14,543 $ 3,672 $ -
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Financial Statements
September 30, 1997
(Dollars in thousands)
- --------------------------------------------------------------------------------
1. Organization
Omniquip owns 100% of the outstanding common stock of its subsidiaries,
TRAK International, Inc. (TRAK) and Lull International, Inc. (Lull). The
consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany transactions
have been eliminated.
On September 30, 1996, Omniquip's Board of Directors authorized Omniquip to
split its shares of common stock at a rate of 10 to 1, thereby increasing
issued and outstanding shares from 1,000,000 to 10,000,000. On February 19,
1997, Omniquip's Board of Directors authorized Omniquip to further split
its shares at a rate of 1.125 to 1, thereby increasing issued and
outstanding shares from 10,000,000 to 11,250,000. All shares and per share
amounts in the accompanying consolidated financial statements and notes
have been adjusted to give retroactive effect to the stock splits.
2. Initial public offering
On March 21, 1997, an initial public offering (Offering) of common stock of
Omniquip International, Inc. (Omniquip or the Company) was completed. The
Company sold 3,000,000 newly issued shares at an offering price of $14.00
per share, less underwriting discounts and commissions. The net proceeds to
the Company of $37,516 were used to repay a portion of the Company's
outstanding indebtedness. Pursuant to the Offering, Harbour Group
Investments III, L.P. (HGI III, L.P.), a significant stockholder of the
Company, and an affiliate of HGI III, L.P. sold an additional 5,524,200 and
675,800 shares, respectively, (including a total of 1,200,000 shares
related to an over-allotment option) at $14.00 per share, less underwriting
discounts and commissions. The net proceeds of approximately $72,312 and
$8,846, respectively, therefrom were paid directly to HGI III, L.P. and an
affiliate of HGI III, L.P.
3. Acquisitions
On August 16, 1995, Omniquip acquired the issued and outstanding stock of
TRAK. The transaction was accounted for under the purchase method of
accounting.
The aggregate merger consideration (purchase price) paid by Omniquip
totaled approximately $30,400, including assumed liabilities of $17,800.
The acquisition was financed through a $6,000 equity contribution by HGI
III, L.P., a $2,000 subordinated note payable to HGI III, L.P., a $5,000
senior subordinated note payable to an insurance company, and approximately
$17,400 under credit agreements with certain financial institutions.
All preacquisition debt outstanding, preferred stock, stock warrants, and
stock options of TRAK at August 16, 1995 were settled or paid in connection
with the merger transaction.
The purchase price was assigned to the net assets acquired based on their
estimated fair market value at the acquisition date. Based upon the
allocation, the purchase price exceeded the estimated value of net assets
acquired by approximately $10,000. Such excess purchase price,
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 2
- --------------------------------------------------------------------------------
which may be increased as described further below, (goodwill) is being
amortized over forty years.
The purchase price for TRAK was allocated as follows:
Accounts receivable, net $ 11,800
Inventories 13,600
Prepaid expenses and other current assets 2,400
Property, plant and equipment 9,100
Other assets 1,700
Goodwill 10,046
Accounts payable (11,300)
Accrued liabilities (5,500)
Other liabilities (600)
Deferred income taxes (400)
---------
$ 30,846
=========
The purchase price under the TRAK acquisition agreement will be increased,
up to a maximum of $2,000, together with interest, for orders received from
the U.S. Army under contracts for the delivery of rough terrain fork lifts
(the ATLAS Program) for a period of five years from August 17, 1995.
Amounts paid to TRAK's former owners will be reflected as additional
goodwill. As of September 30, 1997, 436 ATLAS Program sales orders have
been received, in addition to the original five prototypes, and,
accordingly, $1,471 in additional purchase price has been reflected as
goodwill in the accompanying financial statements.
On August 15, 1996, Omniquip acquired certain net assets and assumed
certain liabilities of Lull Industries, Inc. (Lull) through its subsidiary,
Lull. The transaction was accounted for under the purchase method of
accounting. Results of operations for Lull are included in Omniquip's
consolidated financial statements from the date of acquisition.
The aggregate merger consideration (purchase price) paid by Omniquip
totaled approximately $69,007, plus assumed liabilities of $14,625. The
acquisition was financed with additional borrowings under the Company's
amended credit facilities with lending institutions, including $14,000 of
subordinated debt guaranteed by HGI III, L.P.
The purchase price has been assigned to the net assets acquired based on
their estimated fair market value at the acquisition date. Based upon the
allocation, the purchase price exceeded the estimated value of net assets
acquired by approximately $56,000. Such excess purchase price (goodwill) is
being amortized over forty years.
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 3
- --------------------------------------------------------------------------------
The purchase price for Lull was allocated as follows:
Accounts receivable, net $ 7,572
Inventories 11,232
Prepaid expenses and other current assets 1,937
Property, plant and equipment 7,050
Goodwill 55,841
Accounts payable (7,392)
Accrued liabilities (7,233)
---------
$ 69,007
=========
The following table sets forth the pro forma information for Omniquip as if
the acquisition of Lull had occurred on October 1, 1995. This information
is unaudited and does not purport to represent actual net sales or net
income had the acquisition actually occurred on October 1, 1995.
Pro forma information (unaudited)
For the fiscal year ended
September 30, 1997
Net sales $ 207,239
Net income 6,217
Primary earnings per share 0.55
See Note 18 for discussion of the acquisition of certain assets of the
Snorkel Division of Figgie International, Inc. on November 17, 1997.
4. Summary of significant accounting policies
The accounting policies utilized by Omniquip require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
amounts could differ from those estimates. The significant accounting
policies followed by Omniquip are described below and are in conformity
with generally accepted accounting principles.
Business
The Company is principally engaged in the manufacture and sale of rough
terrain telescopic material handlers and skid steer loaders to commercial
customers, national rental fleets and the U.S. Government.
Principles of consolidation
The consolidated financial statements include the accounts of Omniquip and
its wholly-owned subsidiaries. All significant intercompany transactions
and balances have been eliminated.
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 4
- --------------------------------------------------------------------------------
U.S. Army contract
The Company was awarded a contract to serve as the sole supplier of ATLAS,
a telescopic material handler, for the U.S. Army and related entities. The
Company shipments under the contract commenced in fiscal 1997. As discussed
in Note 3, the purchase price for TRAK will be adjusted for orders received
under the contract for a period of five years from August 17, 1995.
Revenue recognition
Revenue is recognized upon shipment to the customer. Costs and related
expenses to manufacture the products are recorded as costs of sales when
the related revenue is recognized.
Cash and cash equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with an original maturity of three months or less
to be cash equivalents.
Relationships with suppliers
The Company purchases several of its key component parts primarily from
specific suppliers. The Company believes that the supply of these
components and the number of alternative suppliers are adequate.
Inventories
Inventories are stated at the lower of cost, determined using the first-in,
first-out (FIFO) method, or market. Obsolete or unsalable inventories are
reflected at their estimated realizable values.
Inventories relating to the U.S. Army contract are stated at actual
production costs, including manufacturing overhead and direct engineering
and tooling costs. The contract costs reimbursed by the U.S. Army are
considered progress payments and have been offset against inventories.
Title to all inventories related to the U.S. Army contract for which
progress payments have been received vests with the U.S. Army. General and
administrative expenses allocated to the U.S. Army contract for the fiscal
years ended September 30, 1997, 1996 and 1995 were $659, $109 and $0,
respectively.
Property, plant and equipment
Property, plant and equipment was recorded at estimated fair market value
under the purchase method of accounting as of the acquisition dates for
TRAK and Lull as described in Note 3. Additions to property, plant and
equipment subsequent to the acquisition dates are recorded at cost.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets which range from three to thirty-nine years.
Expenditures for repairs, maintenance and minor renewals are charged to
income as incurred. Expenditures which improve an asset or extend its
estimated useful life are capitalized. When properties are retired or
otherwise disposed of, the related cost and accumulated depreciation are
removed from the accounts and any gain or loss is included in income.
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 5
- --------------------------------------------------------------------------------
Goodwill
Goodwill resulting from the acquisitions described in Note 3 is stated at
cost and is being amortized on a straight-line basis over 40 years.
Accumulated amortization totaled $1,686 and $442 at September 30, 1997 and
1996, respectively. The Company assesses the carrying value of goodwill for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable based on an analysis of future
expected cash flows from the underlying operations of the Company.
Management believes that there has been no impairment at September 30,
1997.
Other noncurrent assets
Expenses associated with the issuance of debt instruments are capitalized
by the Company and amortized over the respective terms of the debt
instruments. Net deferred financing costs included in other assets at
September 30, 1997 and 1996 were $941 and $1,454, respectively.
Research and development costs
Research and development costs are expensed as incurred and included in
selling, general and administrative expenses in the accompanying
consolidated statement of income. Such costs incurred in the development of
new products or significant improvements to existing products totaled
approximately $1,996, $1,572 and $72 for the periods ended September 1997,
1996 and 1995, respectively.
Warranty costs
The Company provides, by a current charge to income, an amount it estimates
will be necessary to cover future warranty obligations for products sold
during the year. The Company also provides for specific warranty
obligations as necessary and appropriate.
Income taxes
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes," requiring the use of the liability method of accounting for income
taxes. The current or deferred tax consequences of a transaction are
measured by applying the provisions of enacted tax laws to determine the
amount of taxes payable currently or in future years. Deferred income taxes
are provided for temporary differences between the income tax bases of
assets and liabilities, and their carrying amounts for financial reporting
purposes.
Earnings per share
The computation of primary earnings per share is based on the weighted
average number of outstanding common shares during the period plus, when
the effect is dilutive, common stock equivalents consisting of certain
shares subject to stock options. The common equivalent shares arising from
the effect of outstanding stock options is computed using the treasury
stock method, if dilutive. The difference between primary and fully diluted
earnings per share at September 30, 1997, 1996 and 1995 was not material.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share,"
which will be effective for the
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 6
- --------------------------------------------------------------------------------
Company in the first quarter of fiscal 1998. SFAS 128 requires presentation
in the income statement of basic and diluted earnings per share, calculated
as defined by SFAS 128, rather than primary and fully diluted earnings per
share as defined in APB 15 "Earnings per Share." Earnings per share
calculated in accordance with SFAS 128 would not have had a material impact
on 1997 reported earnings per share and is not expected to differ
materially from earnings per share calculated under APB 15.
Fair value of financial instruments
The Company records all financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable, other accruals and
notes payable, at cost which approximates fair value.
Employee stock-based compensation
The Company accounts for employee stock options in accordance with
Accounting Principles Board No. 25, "Accounting for Stock Issued to
Employees" (APB 25). Under APB 25, the Company applies the intrinsic value
method of accounting. For employee stock options accounted for using the
intrinsic value method, no compensation expense is recognized because the
options are granted with an exercise price equal to the market value of the
stock on the date of grant.
During fiscal 1997, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123), became effective for
the Company. SFAS 123 prescribed the recognition of compensation expense
based on the fair value of options or stock awards determined on the date
of grant. However, SFAS 123 allows companies to continue to apply the
valuation methods set forth in APB 25. For companies that continue to apply
the valuation methods set forth in APB 25, SFAS 123 mandates certain pro
forma disclosures as if the fair value method had been utilized. See Note
10 for additional discussion.
5. Financing
Long-term debt consists of the following:
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 7
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30,
1997 1996
<S> <C> <C>
Unsubordinated debt:
Revolving line of credit - principal due August 16,
2003; interest due monthly at either LIBOR plus
2.25% or the bank's corporate base rate plus 1.0%;
secured by substantially all assets of the Company $ 3,109 $ 7,441
Term loan - principal due in installments with the final
payment due August 16, 2003; interest due monthly
at either LIBOR plus 2.50% or the bank's corporate
base rate plus 1.25%; secured by substantially all
all assets of the Company; $15,000 repaid in 1997
with proceeds from the Offering 31,125 60,000
Subordinated debt:
Note payable to an insurance company - principal due
in installments commencing August 31, 2001, with the
final payment due August 31, 2003; interest due at 15%
per annum; paid in 1997 with proceeds from the Offering 5,000
Note payable to a financial institution - principal
payment due in a lump-sum payment on
February 28, 2004; interest due at 10% per annum;
paid in 1997 with proceeds from the Offering 14,000
Note payable to HGI III, L.P. - principal payment
due in a lump-sum payment on August 31, 2003;
interest due semi-annually at 15% per annum;
paid in 1997 with proceeds from the Offering 2,000
--------------- ---------------
34,234 88,441
Less - Current portion of long-term debt 8,625 3,875
--------------- ---------------
$ 25,609 $ 84,566
--------------- ---------------
</TABLE>
The Loan and Security Agreement provides for a revolving line of credit
facility and two term loans. The new revolving line of credit facility
provides for borrowings of up to the lesser of $25,000 or a borrowing base
calculated based on percentages of eligible receivables and inventories.
Borrowings under this line of credit are due August 16, 2003 and bear
interest either at the bank's corporate base rate plus 1.00% (9.50% at
September 30, 1997) or LIBOR plus 2.25% (7.91% at September 30, 1997). The
Company may elect to convert outstanding line of credit balances between
interest types at its discretion. Amounts outstanding under this new
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 8
- --------------------------------------------------------------------------------
revolving line of credit facility totaled $3,109 at September 30, 1997. In
addition, the Company had $307 in outstanding letters of credit under this
revolving line of credit facility. At September 30, 1997, the Company had
unused borrowing capacity of $21,584 under this facility.
Borrowings under the term loan provided by the Loan and Security Agreement
are due in quarterly installments ranging from $500 to $3,125, which
commenced in October 1996 with a final payment in August 2003. The term
loan bears interest either at the bank's corporate base rate plus 1.25%
(9.75% at September 30, 1997) or LIBOR plus 2.50% (8.16% at September 30,
1997). The Company may elect to convert outstanding term loan balances
between interest types at its discretion.
Interest expense on the subordinated debt payable to related parties (the
insurance company and HGI III, L.P.) approximated $528 and $1,050 for the
fiscal years ended September 30, 1997 and 1996, respectively.
In connection with the repayment of certain debt with proceeds of the
Offering described in Note 2, the Company recognized a $782 after-tax
extraordinary loss resulting from prepayment fees paid to the above-noted
insurance company and financial institution and the write-off of applicable
capitalized deferred financing costs.
The Company has entered into two interest rate swap agreements to reduce
the impact of changes in interest rates on its floating rate debt. At
September 30, 1997, the interest rate swap agreements had a total notional
principal amount of $10,000. These agreements fix the Company's interest
rate on $6,000 and $4,000 of its unsubordinated debt at 6.00% and 6.21%,
respectively. These agreements mature in October 1998.
The Company's borrowing agreements contain restrictions and requirements,
including limitations on dividends, lease rentals, capital expenditures and
investments, new indebtedness, achievement of certain earnings levels, and
maintenance of a minimum tangible net worth and specified working capital
amounts, among others. At September 30, 1997, the Company was in compliance
with such covenants.
Maturities of long-term debt for subsequent fiscal years are as follows:
1998 8,625
1999 10,000
2000 9,825
2001 1,175
2002 1,500
Thereafter 3,109
--------
$ 34,234
========
See Note 18 for discussion of refinancing of the Company's debt in November
1997.
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 9
- --------------------------------------------------------------------------------
6. Boom warranty program
During 1995, prior to its acquisition by the Company, Lull had determined
that a specific warranty obligation had been incurred on certain
manufactured boom units. At the acquisition date, the estimated cost to
complete the boom warranty program amounted to $2,000. A reserve for this
amount was recorded in purchase accounting by the Company. At September 30,
1997, substantially all costs associated with the program have been paid by
the Company.
7. Lease commitments
The Company leases certain of its equipment and automobiles under
noncancelable lease agreements. These leases have been accounted for as
operating leases.
Minimum lease payments for subsequent fiscal years under long-term
operating leases in effect at September 30, 1997 are as follows:
1998 $ 846
1999 503
2000 227
2001 25
2002 20
------
Total minimum lease payments $ 1,621
======
Rent expense under all operating leases for the periods ended September 30,
1997, 1996 and 1995 was approximately $753, $513 and $52, respectively.
8. Income taxes
The provision for income taxes, including tax benefits associated with
extraordinary charges in 1997 and 1996, is summarized as follows:
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 10
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the fiscal For the period
year ended from August 17, 1995
September 30, (date of inception) to
1997 1996 September 30, 1995
<S> <C> <C> <C>
Current:
Federal $ 11,206 $ 3,890 $ 184
State 2,025 682 36
----------- ---------- --------
Total current 13,231 4,572 220
----------- ---------- --------
Deferred:
Federal 655 (661) 35
State 149 (51) 7
----------- ---------- --------
Total deferred 804 (712) 42
----------- ---------- --------
Provision for income taxes $ 14,035 $ 3,860 $ 262
=========== ========== ========
</TABLE>
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 11
- --------------------------------------------------------------------------------
Deferred taxes are comprised of the following:
<TABLE>
September 30,
1997 1996
<S> <C> <C>
Deferred tax assets:
Accruals and other reserves $ 3,959 $ 4,376
Inventories 1,799 1,078
Other 69 70
---------- ----------
Gross deferred tax assets 5,827 5,524
---------- ----------
Deferred tax liabilities:
Property, plant and equipment (1,121) (890)
Goodwill amortization (1,125)
Other (292) (541)
---------- ----------
(2,538) (1,431)
---------- ----------
Net deferred tax asset $ 3,289 $ 4,093
========== ==========
Current deferred tax asset $ 5,270 $ 4,848
Long-term deferred tax liability (1,981) (755)
---------- ----------
Net deferred tax asset $ 3,289 $ 4,093
========== ==========
</TABLE>
The income tax provision differs from the amount of expense determined by
applying the applicable U.S. statutory federal income tax rate to pre-tax
results as a result of the following differences for the periods ended:
<TABLE>
<CAPTION>
For the fiscal For the period
year ended from August 17, 1995
September 30, (date of inception) to
1997 1996 September 30, 1995
<S> <C> <C> <C>
Statutory rate $ 12,122 $ 3,445 219
Non-temporary differences:
State tax provision, net 1,342 169 24
Other 571 246 19
-------- -------- ------
Total provision $ 14,035 $ 3,860 $ 262
======== ======== ======
</TABLE>
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 12
- --------------------------------------------------------------------------------
9. Retirement plans and related matters
The Company offers all full-time non-union employees who have completed six
months of service a retirement savings plan under Section 401(k) of the
Internal Revenue Code. The Company also offers all union employees who have
completed 30 days of service a retirement savings plan under Section 401(k)
of the Internal Revenue Code. For the periods ended September 30, 1997,
1996 and 1995, Company contributions totaled $666, $310 and $154,
respectively.
The Company offers an incentive program to all salaried employees based
upon a formula related to the Company's operating results and an incentive
program to union employees based upon a formula related to productivity
improvements. Prior to October 1996, certain participants in the salaried
program were allowed to defer a portion of their award. At September 30,
1997 and 1996, the Company had accrued liabilities of $1,759 and $1,029,
respectively, relative to such incentive programs. For the periods ended
September 30, 1997, 1996 and 1995, expenses relating to these plans were
$1,785, $875 and $67, respectively.
10. Stock option plans
The Company has three stock option plans: the Long-Term Incentive Plan, the
Directors Non-Qualified Stock Option Plan and the Executive Stock Option
Plan.
A summary of the status of the Company's 1996 Long-Term Incentive Plan and
Directors Non-Qualified Stock Option Plan as of September 30, 1997 and the
changes during the year is presented below:
Weighted average
Shares exercise price
Outstanding at beginning of year - -
Granted 448,752 13.87
Exercised - -
Forfeited (10,000) 14.00
---------
Outstanding at September 30, 1997 438,752 13.98
=========
Exercisable at September 30, 1997 - -
No options were granted as of September 30, 1995 and September 30, 1996.
The 1996 Long-Term Incentive Plan provides for the granting of four types
of awards on a stand-alone, combination or tandem basis, including
incentive stock options, non-qualified stock options, restricted shares and
performance stock awards, to the Company's executive officers and key
employees. The incentive stock option plan allows such employees to
purchase shares
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 13
- --------------------------------------------------------------------------------
of common stock at prices equal to the fair market value of the stock on
the date of grant. Options to purchase up to 1,600,000 shares of common
stock may be granted under the incentive stock option plan. Options
outstanding at September 30, 1997 totaling 353,752 entitle the holders to
purchase common stock at prices ranging between $12.13 and $14.00. Options
become exercisable with respect to one-fourth of the shares covered thereby
on each anniversary of the date of grant, commencing on the second
anniversary of the date granted. The right to exercise the options expires
10 years from the date of grant or earlier if an option holder ceases to be
employed by the Company. No restricted shares or performance stock awards
have been granted by the Company at September 30, 1997.
The Directors Plan provides for the granting of options to the Company's
directors, who are not employees of the Company, to purchase shares of
common stock at prices equal to the fair market value of the stock on the
date of grant. Options to purchase up to 250,000 shares of common stock may
be granted under the Directors Plan. Options outstanding at September 30,
1997 totaling 85,000 entitle the holders to purchase common stock at $14.00
per share. Options become exercisable over a five-year period from the date
of grant. All options granted under the Directors Plan expire 10 years from
the date of grant.
A summary of stock option transactions pursuant to the Incentive Plan and
Directors Plan follows:
<TABLE>
Options Outstanding Options Exercisable
------------------------------------ -------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
<C> <C> <C> <C> <C> <C>
$12-14 438,752 9 $ 13.98 - $ -
</TABLE>
In conjunction with the Offering, the Company adopted the 1996 Executive
Stock Option Plan (Executive Plan) pursuant to which non-qualified stock
options were granted to certain existing executive shareholders as of the
date the registration statement relating to the Offering became effective
to acquire an aggregate 562,500 shares of the Company's common stock,
subject to adjustment, by tendering existing common stock in payment
thereof. The options were exercised immediately after the Offering. The
exercise price of all options was the current market price on the date of
exercise and all options were exercised by exchanging shares of previously
owned common stock. The grant and exercise of options under the Executive
Plan did not result in any increase in the beneficial ownership of common
stock by the plan participants from the number of shares owned at the time
of the Offering. Under the terms of the Executive Plan, the shares of
common stock issued pursuant to the exercise of the options became freely
transferable, subject to the restriction of the Stockholder Agreements with
each of the executive shareholders, on the last day of the sixth full month
following the date of exercise of such options. The provisions of the
Stockholder Agreements, which are subject to modification or waiver by the
Company,
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 14
- --------------------------------------------------------------------------------
generally permit the sale of 25% of such shares for one year after exercise
of the options, an aggregate 50% of such shares two years after exercise of
the options, an aggregate 75% of such shares three years after exercise of
the options and 100% of such shares four years after exercise of the
options. The shares tendered in exercise of options granted under the
Executive Plan were issued under promissory notes due in August 2005
through September 2005 as discussed in Note 12.
Pro forma disclosures
The Company applies APB 25 and related interpretations in accounting for
its stock option plans. Accordingly, no compensation cost has been
recognized for the stock options because the options were granted with an
exercise price equal to the stock price on the date of grant. Had
compensation costs for the Company's stock option plans been determined
based on the fair value of the options on the grant dates consistent with
the methodology prescribed by SFAS 123, the Company's net income and
earnings per share would have been reduced to the pro forma amounts
indicated below. Due to the adoption of the methodology prescribed by SFAS
123, the pro forma results shown below only reflect the impact of stock
option awards granted in fiscal 1997. Because future stock option awards
may be granted, the pro forma impact for fiscal 1997 is not necessarily
indicative of the impact in future years.
For the fiscal
year ended
September 30,
1997
Net income:
As reported $ 20,600
Pro forma $ 20,199
Primary earnings per share:
As reported $ 1.60
Pro forma $ 1.58
The fair value of the options granted (which is amortized over the option
vesting period in determining the pro forma impact), is estimated on the
date of grant using the Black-Scholes multiple option-pricing model with
the following weighted average assumptions:
For the fiscal
year ended
September 30,
1997
Expected life of options 6 years
Risk-free interest rates 6.29 - 6.85%
Expected volatility of stock 65%
Expected dividend yield 0.1%
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 15
- --------------------------------------------------------------------------------
The weighted average fair value of options granted during the year ended
September 30, 1997 was $8.99 per share.
11. Postretirement benefits
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 106, "Employer's Accounting for Postretirement Benefits Other
Than Pensions" (OPEB or SFAS 106). This standard requires recognition of
the cost of providing postretirement benefits during an employee's period
of service.
The Company provides health care and life insurance benefits for certain
employees who retired prior to November 13, 1987 (less than 100 retirees at
September 30, 1997). Management plans to fund the premiums as incurred, net
of reimbursements received by plan participants. At September 30, 1997 and
1996, respectively, the Company had a $422 and $423 accrued postretirement
benefit obligation, which is included in "other noncurrent liabilities,
net" in the accompanying financial statements. There are no plan assets.
For measurement purposes, a 8.5% and 9.5% annual rate of increase in health
care premiums was assumed for 1997 and 1996, respectively; this rate was
assumed to decrease 1% per year to 5.5% in 2000 and remain at that level
thereafter. The weighted average discount rate used to determine the
accumulated postretirement benefit obligation was 7.5% and 8.0% at
September 30, 1997 and 1996, respectively. The obligation was calculated
utilizing the 1983 group annuity mortality tables.
The annual periodic postretirement benefit cost for the plan years
beginning July 1, 1997, July 1, 1996 and July 1, 1995 is immaterial.
12. Related parties
Under terms of a management consulting and advisory services agreement, an
affiliate of HGI III, L.P. charges the Company for direct management and
administrative services provided to the Company based on actual, direct
costs for such services. Charges of $601, $668 and $60 were recorded by the
Company during the periods ended September 30, 1997, 1996 and 1995,
respectively.
Under terms of a management consulting and advisory services agreement, the
Company has paid fees totaling $674 to affiliates of HGI III, L.P. in
consideration of services provided in identifying, negotiating and
consummating the acquisitions of TRAK and Lull (as described in Note 3);
such amount has been capitalized as acquisition costs and is included in
goodwill.
In periods prior to the Offering in March 1997, certain members of
management have purchased shares of the Company's stock at prices
determined by the Board of Directors. The purchase price of the shares has
been financed by recourse promissory notes payable to the Company with the
shares pledged as security. Such notes are included in stockholders' equity
in the accompanying consolidated financial statements.
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 16
- --------------------------------------------------------------------------------
The insurance company which formerly held $5,000 of the Company's senior
subordinated debt is a limited partner of HGI III, L.P.
13. Customer financing arrangements
TRAK has financing arrangements with certain third-party financing
institutions to facilitate dealer purchases of equipment under a floor plan
arrangement. TRAK is obligated to repurchase the outstanding loan balance
of a dealer in the event of default by the dealer which is not cured by
such dealer within a 90 day period. A security interest in the equipment
financed is maintained by the finance companies. Aggregate outstanding loan
balances under these agreements at September 30, 1997 and September 30,
1996 approximated $66,561 and $57,033, respectively. Aggregate losses under
one of the arrangements for calendar year 1996 are limited to 25% of the
outstanding loan balance at December 31, 1994. The outstanding loan balance
at December 31, 1994 under this arrangement approximated $24,841. Aggregate
losses under the same arrangement for calendar year 1997 are limited to the
greater of $1,500 or 5% of the outstanding loan balance at December 31,
1996 and 1995. The outstanding loan balance at December 31, 1996 under this
arrangement approximated $47,157.
TRAK maintains a reserve for potential repurchases of loans in default
under the floor plan arrangements described above. This reserve is included
in other current liabilities and totaled approximately $949 and $570 at
September 30, 1997 and September 30, 1996, respectively. Historically,
losses under the repurchase provisions of the floor plan arrangements have
not been material and have been within management's expectations. The
related provision charged to operations totaled approximately $379, $200
and $31 for the periods ended September 30, 1997, 1996 and 1995,
respectively.
In conjunction with these floor plan arrangements, TRAK incurs
dealer-related financing charges at varying rates for a maximum period of
six months. The financing charges incurred by TRAK for the periods ended
September 30, 1997, 1996 and 1995 for all outstanding customer financing
arrangements totaled $2,259, $1,981 and $240, respectively.
Lull is also a party to a retail finance agreement with a financing
company, which provides Lull distributors with financing for equipment
purchases from Lull. The financing company has also agreed to provide
financing for distributors' purchases of Lull produced equipment used as
rental inventory by the distributors. Such contracts are arranged on an
installment basis with a balloon payment by the distributor for the
residual balance at the end of the term (typically due 48 months from date
of shipment). In the event the distributor does not elect to pay or
refinance the balloon payment, Lull has agreed to pay the residual amount
if requested by the financing company. A secured interest in the equipment
financed is maintained by the finance company. Aggregate outstanding loan
balances under this agreement as of September 30, 1997 were approximately
$8,433. This contingency would be reduced by proceeds from the sales of
related equipment. Management believes that any such liability under this
arrangement, if incurred, would not have a material impact on the results
of operations or financial condition of the Company.
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 17
- --------------------------------------------------------------------------------
14. Concentrations of credit
The Company principally sells its products through a distribution network
and through national rental fleets. The Company performs ongoing credit
evaluations of its customers. The Company maintains reserves for potential
credit losses and historically such losses have been within management's
expectations. At September 30, 1997 and 1996, the Company's five largest
customers represented approximately 17% and 10%, respectively, of trade
receivables. In addition, sales to such customers for the periods ended
September 30, 1997 and 1996 approximated 22% and 21%, respectively, of the
Company's net sales. No individual customer accounted for more than 10% of
net sales for the periods ended September 30, 1997 and 1996.
15. Contingencies
The Company is included in various litigation consisting almost entirely of
product and general liability claims arising in the normal course of
business. The Company maintains insurance policies relative to product and
general liability claims and has provided reserves for the estimated cost
of the self-insured retention; accordingly, these actions, when ultimately
concluded, are not expected to have a material adverse effect on the
financial position or results of operations of the Company.
16. Supplemental balance sheet information
<TABLE>
<CAPTION>
September 30,
1997 1996
<S> <C> <C>
Accounts receivable:
Trade receivables $ 22,040 $ 20,631
Less allowance for doubtful accounts (504) (351)
Other receivables 1,153 1,398
--------- ---------
$ 22,689 $ 21,678
========= =========
Inventories:
Finished goods $ 6,090 $ 7,094
Work in process 3,694 4,302
Raw materials 18,313 15,614
Unbilled government contract costs 2,859 530
--------- ---------
$ 30,956 $ 27,540
========= =========
</TABLE>
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 18
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30,
1997 1996
<S> <C> <C>
Prepaid expenses and other current assets:
Deferred income taxes $ 5,270 $ 4,848
Other 1,370 686
--------- ---------
$ 6,640 $ 5,534
========= =========
Property, plant and equipment:
Machinery and equipment $ 11,265 $ 8,707
Buildings and building improvements 7,465 7,494
Land and land improvements 851 840
Construction in progress 763 704
--------- ---------
Total property, plant and equipment, at cost 20,344 17,745
Less: accumulated depreciation (3,214) (1,255)
--------- ---------
$ 17,130 $ 16,490
========= =========
Accrued liabilities:
Accrued employee compensation and benefits,
including related taxes $ 2,314 $ 2,460
Accrued customer rebates 5,043 2,634
Accrued boom warranty 1,557
Other accrued warranty 3,306 2,526
Accrued incentive compensation 1,571 906
Product liability reserves 1,118 998
Accrued income taxes 1,312
Other 3,478 4,249
--------- ---------
$ 16,830 $ 16,642
========= =========
</TABLE>
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 19
- --------------------------------------------------------------------------------
17. Quarterly financial data (unaudited)
Summarized, unaudited quarterly financial data for fiscal 1997 and 1996
appears below:
<TABLE>
<CAPTION>
For the fiscal
year ended
September 30,
1997 1996
<S> <C> <C>
Net Sales
First Quarter $ 59,166 $ 23,487
Second Quarter 63,452 27,578
Third Quarter 74,708 30,449
Fourth Quarter 66,887 43,347
--------------- ---------------
$ 264,213 $ 124,861
--------------- ---------------
Gross Profit
First Quarter $ 15,279 $ 6,156
Second Quarter 17,107 7,234
Third Quarter 20,413 7,745
Fourth Quarter 19,144 11,038
--------------- ---------------
$ 71,943 $ 32,173
--------------- ---------------
Net Income
First Quarter $ 3,978 $ 963
Second Quarter 4,015 1,352
Third Quarter 6,643 1,573
Fourth Quarter 5,964 2,154
--------------- ---------------
$ 20,600 $ 6,042
--------------- ---------------
Primary Earnings Per Share
First Quarter $ 0.35 $ 0.09
Second Quarter 0.35 0.12
Third Quarter 0.46 0.13
Fourth Quarter 0.41 0.19
</TABLE>
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 20
- --------------------------------------------------------------------------------
18. Subsequent event
On November 17, 1997, Omniquip purchased certain net assets of the Snorkel
Division of Figgie International, Inc. (Snorkel), a Midwest based
manufacturer of aerial work platforms and aerial fire apparatus, in a
transaction to be accounted for under the purchase method of accounting.
The cash purchase price of approximately $100,000 was financed by
borrowings under a new $165,000 senior credit facility which replaced the
Company's existing credit facility. The purchase price may be increased by
up to $50,000 based on Snorkel's net sales between April 1, 1998 and March
31, 1999; any such additional purchase price consideration is expected to
result in additional goodwill for financial reporting purposes. As the
transaction occurred subsequent to September 30, 1997, Snorkel's balance
sheet and results of operations are excluded from the consolidated balance
sheet and results of operations of the Company as of and for the year ended
September 30, 1997.
During November 1997 in connection with the acquisition of Snorkel, the
Company entered into a new credit facility which replaced the Loan and
Security Agreement. The new agreement provides for a $165,000 credit
facility consisting of a $40,000 revolving credit facility and a $125,000
term loan. The term loan requires quarterly principal payment ranging from
$2,500 to $6,250 commencing on February 28, 1998 with final maturity on
November 30, 2004. Borrowings under the agreement bear interest at prime or
LIBOR plus 0.75%. In conjunction with entering into the new credit
facility, the Company recognized an extraordinary loss in November 1997 of
$559 attributable to the write-off of $940 unamortized deferred financing
fees, net of a related $381 tax benefit.
The unaudited pro forma combined condensed balance sheet of the Company and
Snorkel as of September 30, 1997 after giving effect to certain pro forma
adjustments is as follows:
<TABLE>
<CAPTION>
September 30,
1997
(unaudited)
<S> <C>
Assets
Current assets $ 116,949
Property, plant and equipment, net 36,484
Goodwill and other assets 129,817
------------
$ 283,250
============
Liabilities and Shareholders' Equity
Current liabilities $ 73,234
Long-term debt 137,212
Other long-term liabilities 2,406
Shareholders' equity 70,398
------------
$ 283,250
============
</TABLE>
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1997
(Dollars in thousands, except per share data)
Page 21
- --------------------------------------------------------------------------------
The pro forma combined results of operations of the Company and Snorkel for
the fiscal year ended September 30, 1997, after giving effect to certain
pro forma adjustments and including the pro forma effects of the Offering,
is shown below. This information is unaudited and does not purport to
represent actual revenue, net income and earnings per share had the
acquisition occurred on October 1, 1996.
For the fiscal
year ended
September 30,
1997
(unaudited)
Net sales $421,345
Income before extraordinary loss $ 27,320
Primary earnings per common share
before extraordinary loss $ 1.92
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Omniquip International, Inc.
In our opinion, the accompanying balance sheet and the related statements of
income, of changes in stockholders' equity and of cash flows present fairly, in
all material respects, the financial position of TRAK International, Inc. at
September 30, 1994 and the results of its operations and its cash flows for the
fiscal year ended September 30, 1994 and for the period October 1, 1994 to
August 16, 1995, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As explained in Note 9, the Company changed its method of accounting for
postretirement benefits other than pensions in the period ended August 16, 1995.
As explained in Note 1, on August 16, 1995, Omniquip International, Inc.
acquired the issued and outstanding common stock of TRAK International, Inc.
Price Waterhouse LLP
St. Louis, Missouri
July 15, 1996
<PAGE>
TRAK INTERNATIONAL, INC.
Balance Sheet
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, 1994
(dollars in thousands,
except per share data)
<S> <C>
Assets
Current assets:
Cash $ 17
Accounts receivable, net 10,360
Inventories 8,704
Prepaid expenses and other current assets 1,343
---------------
Total current assets 20,424
Property, plant and equipment, net 6,197
Other assets, net 2,030
---------------
$ 28,651
===============
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $ 7,986
Current portion of long-term debt - related parties 1,450
Accounts payable 8,109
Accrued liabilities 2,619
---------------
Total current liabilities 20,164
Long-term debt 1,616
Long-term debt - related parties 1,350
Retiree healthcare obligation -
Accrued incentive compensation 37
Deferred income taxes 439
---------------
Total liabilities 23,606
---------------
Commitments and contingencies (Notes 4, 11 and 13)
Class B mandatorily redeemable preferred stock,
$1,000 par value, 3,000 shares authorized;
3,000 shares issued and outstanding 3,262
---------------
Stockholders' equity:
Class A preferred stock, $500 par value, 2,000 shares
authorized; 1,408 shares issued and outstanding 704
Class C preferred stock, $1,000 par value, 5,000 shares
authorized; 1,110 shares issued and outstanding 1,110
Common stock, $1 par value, 20,000 shares
authorized; 5,450 shares issued and outstanding 6
Additional paid-in capital 50
Retained earnings 346
Less treasury stock at cost, 1,595 shares (433)
---------------
Total stockholders' equity 1,783
---------------
$ 28,651
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
TRAK INTERNATIONAL, INC.
Statement of Income
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
period from
For the fiscal October 1,
year ended 1994 to
September 30, August 16,
1994 1995
(dollars in thousands)
<S> <C> <C>
Net sales $ 60,973 $ 75,401
Cost of sales 47,208 57,707
Gross profit 13,765 17,694
Selling, general and administrative expenses 9,502 10,903
------------ -----------
Operating income 4,263 6,791
Other (income) expenses:
Interest on indebtedness 994 1,121
Interest on indebtedness - related parties 369 258
Other finance charges 864 1,320
Other, net (165) (199)
------------ ------------
2,062 2,500
------------ ------------
Income before provision for income taxes and cumulative
effect of change in accounting principle 2,201 4,291
Provision for income taxes 876 1,762
------------ ------------
Income before cumulative effect of change in
accounting principle 1,325 2,529
Cumulative effect of change in accounting principles,
net of income tax benefit of $167 (Note 9) in 1995 - (241)
------------ ------------
Net income $ 1,325 $ 2,288
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
TRAK INTERNATIONAL, INC.
Statement of Changes in Stockholders' Equity
For fiscal year ended September 30, 1994 and
For the period from October 1, 1994 to August 16, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Accumulated
Class A Class C Additional deficit)/
preferred preferred Common paid-in Retained Treasury
stock stock stock capital earnings stock Total
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1993 $ 704 $ 1,110 $ 6 $ 50 $ (470) $ (380) $ 1,020
Nonmonetary exchange for Class A preferred
stock (Note 8) (50) (50)
Repurchase of Class A preferred stock (Note 8) (3)
Dividends on Class B and Class C preferred stock (247) (247)
Accretion to Class B preferred stock (262) (262)
Net income - - - - 1,325 - 1,325
------ ------- ------ ------- -------- ------- --------
Balance, September 30, 1994 $ 704 $ 1,110 $ 6 $ 50 $ 346 $ (433) $ 1,783
Dividends on Class B and Class C preferred stock (191) (191)
Redemption of convertible notes (Notes 3 and 8) 1 997 998
Accretion to Class B preferred stock (530) (530)
Net income - - - - 2,288 - 2,288
------ ------- ------ ------- -------- ------- --------
Balance, August 16, 1995 $ 704 $ 1,110 $ 7 $1,047 $ 1,913 $ (433) $ 4,348
====== ======= ====== ======= ======== ======= ========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
TRAK INTERNATIONAL, INC.
Statement of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
period from
For the fiscal October 1,
year ended 1994 to
September 30, August 16,
1994 1995
(dollars in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,325 $ 2,288
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation 666 726
Amortization 230 226
Deferred income tax provision 139 (835)
Accrued incentive compensation 37 166
Retiree healthcare obligation - 408
Other (98) 63
(Increase) decrease in current assets:
Accounts receivable, net (4,283) (1,419)
Inventories 881 (5,348)
Prepaid expenses and other current assets (140) (294)
Increase (decrease) in current liabilities:
Accounts payable 3,116 3,158
Accrued liabilities 615 1,520
(Increase) decrease in notes receivable 509 (125)
------------ ------------
Net cash provided by operating activities 2,997 534
------------ ------------
Cash flows from investing activities:
Capital expenditures, net (1,400) (3,030)
Investment in other assets (251) (437)
------------ ------------
Net cash used in investing activities (1,651) (3,467)
------------ ------------
Net proceeds from revolving line of credit 28 2,819
Proceeds from issuance of long-term debt 450 3,200
Payments on long-term debt (1,405) (2,911)
Payment of preferred stock dividends (415) (191)
------------ ------------
Net cash provided by (used in) financing activities (1,342) 2,917
------------ ------------
Net increase (decrease) in cash 4 (16)
Cash at beginning of period 13 17
------------ ------------
Cash at end of period $ 17 $ 1
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest on indebtedness $ 1,019 $ 1,487
============ ============
Income taxes $ 531 $ 2,864
============ ============
Supplemental schedule of noncash investing and
financing activities:
Redemption of convertible notes (Notes 3 and 8) $ - $ 998
============ ============
Receipt of Class A preferred stock in exchange
for accounts receivable (Note 8) $ 53 $ -
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
TRAK INTERNATIONAL, INC.
Notes to Financial Statements (Dollars in thousands, except share data)
- --------------------------------------------------------------------------------
1. Merger
On August 16, 1995, Omniquip International, Inc. (Omniquip), a Delaware
Corporation and a 92% owned investee company of Harbour Group Investments
III, L.P. (HGI III L.P.), acquired the issued and outstanding stock of TRAK
International, Inc. (the Company).
The aggregate cash consideration (purchase price) paid by Omniquip for the
Company totaled approximately $30,400, including assumed liabilities of
$17,800. The acquisition was financed through a $6,000 equity contribution
by HGI III L.P., a $2,000 subordinated note payable to HGI III L.P., a
$5,000 senior subordinated note payable to an insurance company and
approximately $17,400 under credit agreements with certain financial
institutions. All preacquisition debt outstanding, preferred stock, stock
warrants and stock options of the Company at August 16, 1995 were settled
or paid in connection with the transaction. The acquisition agreement also
provides for contingent consideration to be paid to the former common
stockholders of the Company by Omniquip should certain future requirements
be met.
The accompanying financial statements of the Company have been prepared on
a preacquisition basis of accounting and do not reflect the effects of the
acquisition by Omniquip or the related financing.
2. Summary of significant accounting policies
The accounting policies utilized by the Company require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
amounts could differ from these estimates. The significant accounting
policies followed by the Company are described below and are in conformity
with generally accepted accounting principles:
Business
The Company is principally engaged in the manufacture and sale of
telescopic material handlers and skid steer loaders to commercial customers
and the U.S. Army.
Revenue recognition
Revenue is recognized upon shipment to the customer. Costs and related
expenses to manufacture the products are recorded as costs of sales when
the related revenue is recognized.
Cash and cash equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with an original maturity of three months or less
to be cash equivalents. Overdrafts on the Company's disbursement accounts
totaling approximately $1,108 at September 30, 1994 are included in
accounts payable.
Relationship with suppliers
The Company purchases several of its key component parts primarily from
specific suppliers. The Company believes that the supply of these
components and the number of alternative suppliers are adequate.
Inventories
Inventories are stated at the lower of cost, determined using the first-in,
first-out (FIFO) method, or market. Obsolete or unsalable inventories are
reflected at their estimated realizable values.
<PAGE>
TRAK INTERNATIONAL, INC.
Notes to Financial Statements (Dollars in thousands, except share data)
Page 2
- --------------------------------------------------------------------------------
Property, plant and equipment
Property, plant and equipment is recorded at cost and is depreciated using
the straight-line method over the estimated useful lives of the assets
which range from 3 to 29 years.
Expenditures for repairs, maintenance and minor renewals are charged to
income as incurred. Expenditures which improve an asset or extend its
estimated useful life are capitalized. When properties are retired or
otherwise disposed of, the related cost and accumulated depreciation are
removed from the accounts and any gain or loss is included in income.
Other noncurrent assets
Other noncurrent assets include net notes receivable outstanding due from
related parties of $397 at September 30, 1994. These notes bear interest at
rates ranging from approximately 7.5% to 8.0%.
Other noncurrent assets include two 50% equity investments in dealers of
the Company's products. In accordance with Accounting Principles Board
Opinion (APB) No. 18, "The Equity Method of Accounting for Investments in
Common Stock," the carrying amount of the investments is adjusted to
recognize the Company's share of the earnings or losses of the investee. In
the determination of the Company's share of earnings or losses, all
significant intercompany profit in inventory on hand at these
unconsolidated subsidiaries is eliminated. The carrying value of the equity
investments totaled $711 at September 30, 1994. Equity earnings from these
investments totaled $148 and $0 for the periods ended September 30, 1994
and August 16, 1995, respectively. Such equity earnings are presented in
other non-operating income in the accompanying financial statements.
Other noncurrent assets also include intangible assets, primarily
consisting of tradename and drawings, which are stated at cost of $922 at
September 30, 1994, and which are amortized on a straight-line basis over
varying lives from five to twenty-five years.
Research and development costs
Research and development costs are expensed as incurred. Such costs
incurred in the development of new products or significant improvements to
existing products totaled approximately $364 and $416 for the periods ended
September 30, 1994 and August 16, 1995, respectively.
Warranty costs
The Company provides, by a current charge to income, an amount it estimates
will be necessary to cover future warranty obligations for products sold
during the year. The Company also provides for specific warranty
obligations as necessary and appropriate.
Income taxes
Effective October 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." The
adoption of SFAS 109 changed the Company's method of accounting for income
taxes from the deferred method (APB No. 11) to an asset and liability
approach. The asset and liability approach requires that deferred income
taxes be provided for temporary differences between the income tax bases of
assets and liabilities, and their carrying amounts for financial reporting
purposes.
Fair value of financial instruments
The Company records all financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable, other accruals and
notes payable, at cost which approximates fair value.
<PAGE>
TRAK INTERNATIONAL, INC.
Notes to Financial Statements (Dollars in thousands, except share data)
Page 3
- --------------------------------------------------------------------------------
Reporting periods
The Company's fiscal year ends on September 30 of each year. Fiscal year
1995 represents the period from October 1, 1994 through August 16, 1995
(the date immediately preceding the merger described in Note 1).
Earnings per share information
Given the historical organization and capital structure of the Company,
earnings per share information is not considered meaningful or relevant and
has not been presented in the accompanying financial statements or the
notes thereto.
Unaudited information
The quarterly income statement data (Note 15) are unaudited. However, in
the opinion of management, such information has been prepared on a
consistent basis as the audited financial statements and includes all
adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the results of operations presented. The quarterly
results are not necessarily indicative of results for any future period.
3. Financing
Long-term debt consists of the following:
September 30,
1994
Unsubordinated debt:
Revolving line of credit - demand note, interest
due monthly at the bank's prime rate plus 1.15%-
2.15% based on components of the borrowing base
(8.75% to 9.75% per annum at September 30, 1994),
secured by certain accounts receivable and
inventories $ 7,335
Instalment notes payable - principal in the
aggregate of $54, plus interest, due in monthly
instalments as defined in the notes; secured by
certain machinery, equipment, and real estate 2,267
Subordinated debt:
Convertible note payable - principal due
August 9, 1995; interest due quarterly at 15%
per annum; converted to common stock on
August 9, 1995 250
Convertible note payable - principal due
August 9, 1995; interest due quarterly at 15% per
annum; converted to common stock on August 9, 1995 750
Note payable - remainder due in 4 equal annual
instalments commencing November, 1994,
interest due quarterly at 9% per annum 1,200
<PAGE>
TRAK INTERNATIONAL, INC.
Notes to Financial Statements (Dollars in thousands, except share data)
Page 4
- --------------------------------------------------------------------------------
Note payable - remainder due in 4 equal annual
instalments commencing June, 1995, due
quarterly at 11-3/8% per annum 600
----------
12,402
Less - Current portion of long-term debt 9,436
-----------
$ 2,966
===========
The Company maintained a Loan and Security Agreement with a bank which
provided for a revolving line of credit facility and instalment notes. The
revolving line of credit facility provided for borrowings of up to the
lesser of $12,000 or a borrowing base formula defined as, 85% of eligible
receivables plus the lesser of (a) $5,500, or (b) 70% of qualified finished
goods inventory plus 50% of qualified raw materials, components and service
parts inventory as defined in the agreement. Borrowings under this line of
credit were evidenced by demand instruments and bore interest at the bank's
prime rate plus 1.15% except for advances based upon amounts due from
customers with instalment payment or consignment like terms, which bore
interest at the bank's prime rate plus 2.15% (no such advances were
outstanding at September 30, 1994). Amounts outstanding thereunder totaled
$7,335 at September 30, 1994. The Company had $187 in outstanding letters
of credit at September 30, 1994.
Effective April 4, 1995, the Company entered into three amended and
restated instalment notes payable in the amounts of $1,400, $1,530, and
$270 which replaced the existing instalment notes. With respect to the
$1,530 note described above, $600 of such note will not be funded until
certain requirements have been met related to the Company's expansion at
its facility in Port Washington, Wisconsin. The amended and restated notes
bore interest at the bank's prime rate plus 1.15% and were due in equal
monthly principal payments of $93, $64, and $11, respectively, which
commenced May 1, 1995. Effective July 10, 1995, the Company entered into a
fourth instalment note payable in the amount of $574 under the Loan and
Security Agreement. This note also bore interest at the bank's prime rate
plus 1.15% and was due in equal monthly principal payments of $10, which
commenced August 1, 1995.
The Company's borrowing agreements contained restrictions and requirements,
including limitations on capital expenditures, new indebtedness,
achievement of certain earning levels, maintenance of working capital
amounts, and limitations on dividend payments, among others.
Under the terms of the convertible notes payable agreements, such debt
effectively was converted to common stock of the Company prior to August
16, 1995. See Note 8 for further discussion. All remaining outstanding debt
was repaid on August 16, 1995 as a part of the acquisition described in
Note 1 with the proceeds of new bank borrowings.
<PAGE>
TRAK INTERNATIONAL, INC.
Notes to Financial Statements (Dollars in thousands, except share data)
Page 5
- --------------------------------------------------------------------------------
Maturities of long-term debt for each of the fiscal years subsequent to
September 30, 1994 under terms in existence at September 30, 1994 (as noted
above, all outstanding debt was repaid on August 17, 1995 in connection
with the transaction described in Note 1).
1995 $ 9,436
1996 1,101
1997 1,101
1998 764
-----------
$ 12,402
===========
4. Lease commitments
The Company leases certain of its equipment and automobiles under
noncancelable lease agreements. These leases have been accounted for as
operating leases.
Minimum lease payments under long-term operating leases in effect at August
16, 1995 are as follows:
1996 $ 298
1997 95
1998 24
----------
Total minimum lease payments $ 417
==========
Rent expense under all operating leases for the periods ended September 30,
1994 and August 16, 1995 was approximately $318 and $301, respectively.
5. Income taxes
The provision for income taxes is summarized as follows for the periods
ended:
September 30, August 16,
1994 1995
Current tax expense:
Federal $ 565 $ 2,056
State 172 374
-------- ---------
Total current 737 2,430
Deferred tax expense (benefit):
Federal 111 (703)
State 28 (132)
-------- ---------
Total deferred 139 (835)
-------- ---------
Provision for income taxes $ 876 $ 1,595
======== =========
<PAGE>
TRAK INTERNATIONAL, INC.
Notes to Financial Statements (Dollars in thousands, except share data)
Page 6
- --------------------------------------------------------------------------------
Deferred taxes are comprised of the following:
September 30,
1994
Deferred tax assets:
Accruals and other reserves $ 706
Inventories 276
Other 86
--------
Gross deferred tax assets 1,068
--------
Deferred tax liabilities:
Property, plant and equipment 552
Other 78
--------
Gross deferred tax liabilities 630
--------
Net deferred tax asset $ 438
========
Current deferred tax asset $ 877
Long-term deferred tax liability (439)
--------
Net deferred tax asset $ 438
========
The income tax provision differs from the amount of expense determined by
applying the applicable U.S. statutory federal income tax rate to pre-tax
results as a result of the following differences for the periods ended:
September 30, August 16,
1994 1995
Statutory rate 34.0% 34.0%
Non-temporary differences:
State tax provision, net 6.0 3.7
Other (0.2) 3.4
------- -------
Total provision 39.8% 41.1%
======= =======
6. Retirement plans
The Company offers all full-time non-union employees who have completed six
months of service a retirement savings plan under Section 401(k) of the
Internal Revenue Code. The Company also offers all union employees who have
completed 30 days of service a retirement savings plan under Section 401(k)
of the Internal Revenue Code. On December 13, 1994, the Board of Directors
approved a non-elective Company contribution of 1% of the compensation paid
during fiscal 1994 to each active participant (union and non-union) who was
employed by the Company as of August 31, 1994. For the periods ended
September 30, 1994 and August 16, 1995, Company contributions totaled $726
and $822, respectively.
<PAGE>
TRAK INTERNATIONAL, INC.
Notes to Financial Statements (Dollars in thousands, except share data)
Page 7
- --------------------------------------------------------------------------------
7. Class B mandatorily redeemable preferred stock
The mandatorily redeemable preferred stock carries a 6% cumulative dividend
rate, payable quarterly based upon the liquidation value of such stock.
Liquidation value is defined as $1,000 per share plus any dividends in
arrears.
Under the original terms of the Class B mandatorily redeemable preferred
stock, the Company is required to redeem all Class B preferred shares at
October 31, 1995 at a price per share equal to the liquidation value plus
twenty percent of the Company's cumulative net income divided by 3,000. The
Company is accreting these shares to their currently estimated redemption
price, using the effective interest method over the period to the date of
redemption. For the periods ended September 30, 1994 and August 16, 1995,
such accretion charged to retained earnings approximated $262 and $530,
respectively. The holder of this preferred stock is also entitled to
convert, at any time, each share into 1.829 shares of common stock. The
holder of the Class B preferred stock is entitled to one vote per common
share which would be issuable upon conversion of the preferred stock. The
Company may force conversion at the time of a public offering by the
Company of its common stock. The Class B mandatorily redeemable preferred
stock has priority over Class A preferred stock and common stock upon
liquidation of the Company, to the extent of liquidation value. In
addition, Class B mandatorily redeemable preferred stock has preference
over Class C convertible redeemable preferred stock, up to an amount equal
to 63% of the liquidation value of the outstanding Class B shares.
The Company had reserved 5,487 shares of common stock for issuance upon
conversion. The mandatorily redeemable preferred stock was settled in
connection with the transaction described in Note 1.
8. Shareholders' Equity
CLASS A PREFERRED STOCK - The holders of this preferred stock are entitled
to convert, at any time, their shares into shares of common stock on a
one-for-one basis. The Company may force conversion at the time of a public
offering by the Company of its common stock. The Class A preferred stock
has priority over common stock upon liquidation of the Company, to the
extent of liquidation value. Each share of Class A preferred stock is
entitled to one vote.
The Company had reserved 1,408 shares of common stock for issuance upon
conversion.
CLASS C CONVERTIBLE PREFERRED STOCK - The convertible preferred stock
carries a 6% cumulative dividend rate, payable quarterly based upon the
liquidation value of the stock. Liquidation value is defined as $1,000 per
share plus any dividends in arrears.
The holders of the Class C preferred stock are entitled to convert at any
time prior to September 15, 1995, each share into 1.11 shares of common
stock. The holder of this Class C preferred stock is entitled to one vote
per common share which would be issuable upon conversion of the preferred
stock. On or after September 15, 1995, the Company has the option to redeem
the Class C preferred shares, in whole or in part, at a price per share
equal to the liquidation value. The Class C convertible preferred stock has
priority over Class A preferred stock and common stock upon liquidation of
the Company, to the extent of liquidation value.
The Company had reserved 1,234 shares of common stock for issuance upon
conversion.
<PAGE>
TRAK INTERNATIONAL, INC.
Notes to Financial Statements (Dollars in thousands, except share data)
Page 8
- --------------------------------------------------------------------------------
COMMON STOCK - Each share of common stock is entitled to one vote. On
August 9, 1995, the Company's convertible notes payable were converted to
1,110 shares of Common Stock.
ADDITIONAL PAID-IN CAPITAL - On August 9, 1995, the Company's convertible
notes payable were converted, based on the terms of their respective
agreements, at $900 per share into 1,110 shares of common stock and $997 of
additional paid-in capital.
TREASURY STOCK - During the period ended September 30, 1994, the Company
repurchased 5 shares of its Class A preferred stock for cash and took
receipt of 100 shares of its Class A preferred stock in exchange for
forgiveness of outstanding past due receivable amounts from a customer.
STOCK WARRANTS - The holders of the convertible subordinated notes
outstanding at September 3, 1994 (see Note 3) also hold warrants to
purchase an aggregate total of 320 shares of the Company's common stock at
a price of $940 per share. These warrants are exercisable any time and
expire on the earlier of a) the date no further amounts remain outstanding
under the convertible subordinated notes payable or b) the closing of a
registered offering of Company common stock.
STOCK OPTIONS - Certain of the Company's officers have been granted options
to purchase an aggregate total of 600 shares of the Company's common stock
at a price between $750 and $940 per share as set forth in the respective
common stock option agreements. These options are exercisable immediately
and terminate between 2001 and 2003.
At September 30, 1994, no options were exercised.
All the above described preferred stock, stock warrants and stock options
were settled in connection with the transaction described in Note 1.
9. Postretirement benefits
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 106, "Employer's Accounting for Postretirement Benefits Other
Than Pensions" (OPEB or SFAS 106) at October 1, 1994. This standard
requires recognition of the cost of providing postretirement benefits
during an employee's period of service.
The Company provides health care and life insurance benefits for certain
employees who retired prior to November 13, 1987 (less than 100 retirees at
September 30, 1994). Management plans to fund the premiums as incurred, net
of reimbursements received by plan participants.
In the period ended August 16, 1995, the Company had recorded a $408
accrued postretirement benefit obligation, which represents a change in
accounting principle. There are no plan assets. For measurement purposes, a
10.5% annual rate of increase in health care premiums was assumed for 1995;
this rate was assumed to decrease 1% per year to 5.5% in 2000 and remain at
that level thereafter. The weighted average discount rate used to determine
the accumulated postretirement benefit obligation was 7.5% at August 16,
1995. The obligation was calculated utilizing the 1983 group annuity
mortality tables for males and females. The annual periodic postretirement
benefit cost for the plan year beginning July 1, 1995 will approximate $29.
<PAGE>
TRAK INTERNATIONAL, INC.
Notes to Financial Statements (Dollars in thousands, except share data)
Page 9
- --------------------------------------------------------------------------------
10. Related parties
Several of the Company's shareholders are dealers in the Company's
equipment. Sales of equipment to these dealers approximated $13,672 and
$17,303 for the periods ended September 30, 1994 and August 16, 1995,
respectively. One of the Company's shareholders supplies inventory to the
Company. Purchases of inventory from this shareholder amounted to $2,479
and $4,166 for the periods ended September 30, 1994 and August 16, 1995,
respectively. Management believes these transactions to be at arms-length.
The Company had trade receivables from related parties of $2,235 at
September 30, 1994. The Company also had trade payables to related parties
of $294 at September 30, 1994.
See also discussion of other noncurrent assets in Note 2.
11. Customer financing arrangements
The Company has financing arrangements with certain third-party financing
institutions to facilitate dealer purchases of equipment under a floor plan
arrangement. The Company is obligated to repurchase the outstanding loan
balance of a dealer in the event of default by the dealer which is not
cured by such dealer within a 90 day period. A security interest in the
equipment financed is maintained by the finance companies. Aggregate
outstanding loan balances under these agreements at September 30, 1994
approximated $22,390. Aggregate losses under one of the arrangements for
calendar year 1995 are limited to 25% of the outstanding loan balance at
December 31, 1994. The outstanding loan balance at December 31, 1994 under
this arrangement approximated $24,841.
The Company maintains a reserve for potential repurchases of loans in
default under the floor plan arrangements described above. This reserve is
included in other current liabilities and totaled approximately $47 and
$177 at September 30, 1994 and August 16, 1995, respectively. The related
provision charged to operations totaled approximately $148 and $151 for the
periods ended September 30, 1994 and August 16, 1995, respectively.
In conjunction with these floor plan arrangements the Company incurs
dealer-related finance charges at varying rates up to a maximum of six
months. The finance charges incurred by the Company for the periods ended
September 30, 1994 and August 16, 1995 for all outstanding customer
financing arrangements totaled $864 and $1,320, respectively.
12. Concentrations of credit
The Company principally sells its products through a distribution network
and performs ongoing credit evaluations of its dealers and distributors.
The Company maintains reserves for potential credit losses and historically
such losses have been within management's expectations. At September 30,
1994 the Company's five largest dealers and distributors represented
approximately 21% of trade receivables. In addition, sales to such dealers
and distributors for the periods ended September 30, 1994 and August 16,
1995 approximated 23% and 22%, respectively, of the Company's net sales.
13. Contingencies
The Company is included in various litigation consisting almost entirely of
product and general liability claims arising in the normal course of
business. The Company maintains insurance policies relative to product and
general liability claims and has provided reserves for the
<PAGE>
TRAK INTERNATIONAL, INC.
Notes to Financial Statements (Dollars in thousands, except share data)
Page 10
- --------------------------------------------------------------------------------
estimated cost of the self-insured retention; accordingly, these actions,
when ultimately concluded, are not expected to have a material adverse
effect on the financial position or results of operations of the Company.
14. Supplemental balance sheet information
September 30,
1994
Accounts receivable, net:
Trade receivables $ 10,385
Less allowance for doubtful accounts (162)
Other receivables 137
-----------
$ 10,360
===========
Inventories:
Finished goods $ 4,267
Work in process 1,751
Raw materials 2,686
-----------
$ 8,704
===========
Prepaid expenses and other current assets:
Deferred income taxes $ 877
Other 466
-----------
$ 1,343
===========
Property, plant and equipment, net:
Machinery and equipment $ 5,775
Buildings and building improvements 3,095
Land and land improvements 263
Construction in progress 201
------------
Total property, plant and equipment, at cost 9,334
Less: Accumulated depreciation (3,137)
------------
$ 6,197
============
<PAGE>
TRAK INTERNATIONAL, INC.
Notes to Financial Statements (Dollars in thousands, except share data)
Page 11
- --------------------------------------------------------------------------------
Accrued liabilities:
Accrued employee compensation and benefits,
including taxes $ 880
Accrued warranty 638
Accrued compensation 389
Product liability reserves 264
Other 448
----------
$ 2,619
==========
15. Quarterly financial data (unaudited)
Summarized quarterly financial data for fiscal 1994 and 1995 appears below:
<TABLE>
<CAPTION>
Net Sales Gross Profit Net Income (Loss)
1994 1995(1) 1994 1995(1) 1994 1995(1)
<S> <C> <C> <C> <C> <C> <C>
First quarter $ 10,210 $ 17,821 $ 1,692 $ 4,223 $ (888) $ 38(2)
Second quarter 15,628 22,914 3,606 5,288 876 867
Third quarter 18,676 24,229 4,599 5,671 758 850
Fourth quarter 16,459 10,437 3,868 2,512 579 533
------------ ------------ ------------ ------------ ----------- -----------
$ 60,973 $ 75,401 $ 13,765 $ 17,694 $ 1,325 $ 2,288
============ ============ ============ ============ =========== ===========
</TABLE>
(1) Amounts are for the period from October 1, 1994 through August 16,
1995, the period preceding the acquisition described in Note 1.
(2) In October 1994, TRAK adopted Statement of Financial Accounting
Standards No. 106, "Employer's Accounting for Postretirement Benefits Other
Than Pension" (SFAS 106). The cumulative effect of adopting SFAS 106 was to
record a charge of $408, less applicable income tax benefits of $167.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
OMNIQUIP INTERNATIONAL, INC.
Date: December 12, 1997 By:/s/ Philip G. Franklin
------------------------------
Philip G. Franklin
Vice President - Finance, Chief
Financial Officer, Treasurer and
Secretary
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
23 Consents of Independent Accountants
27 Financial Data Schedule
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-24777, No. 333-24811 and No. 333-24827) of
OmniQuip International, Inc. of our report dated November 3, 1997, appearing in
the Current Report on Form 8-K/A dated December 12, 1997 of OmniQuip
International, Inc., relating to the consolidated financial statements of
OmniQuip International, Inc. as of and for the fiscal year ended September 30,
1997. Such consolidated financial statements are also included in the Current
Report on Form 8-K/A of OmniQuip International, Inc. dated December 12, 1997.
PRICE WATERHOUSE LLP
St. Louis, Missouri
December 12, 1997
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-24777, No. 333-24811 and No. 333-24827) of
OmniQuip International, Inc. of our report dated July 15, 1996, appearing in the
Current Report on Form 8-K/A dated December 12, 1997 of OmniQuip International,
Inc., relating to the financial statements of TRAK International, Inc. as of
September 30, 1994 and for the fiscal year ended September 30, 1994 and the
period from October 1, 1994 to August 16, 1995. Such financial statements are
also included in the Current Report on Form 8-K/A of OmniQuip International,
Inc. dated December 12, 1997.
PRICE WATERHOUSE LLP
St. Louis, Missouri
December 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This document contains summary financial information (in thousands except per
share data) extracted from the Consolidated Balance Sheet at September 30, 1997
and the Consolidated Statement of Income for the fiscal year ended September 30,
1997 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 5
<SECURITIES> 0
<RECEIVABLES> 23,193
<ALLOWANCES> 504
<INVENTORY> 30,956
<CURRENT-ASSETS> 60,290
<PP&E> 20,344
<DEPRECIATION> 3,214
<TOTAL-ASSETS> 144,298
<CURRENT-LIABILITIES> 45,888
<BONDS> 25,609
0
0
<COMMON> 143
<OTHER-SE> 70,255
<TOTAL-LIABILITY-AND-EQUITY> 144,298
<SALES> 264,213
<TOTAL-REVENUES> 264,213
<CGS> 192,270
<TOTAL-COSTS> 219,987
<OTHER-EXPENSES> 2,182
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<INCOME-PRETAX> 35,938
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<INCOME-CONTINUING> 21,382
<DISCONTINUED> 0
<EXTRAORDINARY> 782
<CHANGES> 0
<NET-INCOME> 20,600
<EPS-PRIMARY> 1.60
<EPS-DILUTED> 1.60
</TABLE>
