FORM 10-Q/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1999
Commission File Number: 0-21461
OMNIQUIP INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 43-1721419
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
222 East Main Street, Port Washington, Wisconsin 53074
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(Address of principal executive offices)
(Zip Code)
(414) 268-8965
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant:(1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports),
and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of Common Stock, $0.01 par value, of the
registrant outstanding as of August 13, 1999 was 14,262,000.
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Index
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Page
Number
------
Part I Financial Information
Item 1. Financial Statements (Unaudited, except as noted)
Consolidated Balance Sheet at June 30, 1999
and September 30, 1998 (Audited) 3
Consolidated Statement of Income for the
three and nine months ended June 30, 1999 and
June 30, 1998 4
Consolidated Statement of Changes in
Stockholders' Equity for the nine months
ended June 30, 1999 5
Consolidated Statement of Cash Flows for the
nine months ended June 30, 1999 and
June 30, 1998 6
Notes to Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 11-18
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 18
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
2
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Item 1. Financial Statements
Consolidated Balance Sheet
(Dollars in Thousands Except Per Share Data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $ 364 $ 4,684
Accounts receivable, net 59,236 66,580
Inventories 82,107 71,065
Prepaid expenses and other current assets 11,937 10,020
============== ==============
Total current assets 153,644 152,349
Property, plant and equipment, net 59,188 41,375
Goodwill, net 146,270 120,746
Other assets, net 3,113 1,992
============== ==============
$ 362,215 $ 316,462
============== ==============
Liabilities and stockholders' equity Current liabilities:
Current portion of long-term debt $ 21,466 $ 13,750
Accounts payable 55,814 47,834
Accrued liabilities 25,021 31,873
============== ==============
Total current liabilities 102,301 93,457
============== ==============
Long-term debt 147,554 124,250
Other noncurrent liabilities, net 418 418
Deferred income taxes 3,368 3,368
============== ==============
151,340 128,036
============== ==============
Commitments and contingencies (Notes 3, 4 and 7)
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; 14,262,000 and 14,270,000 shares
Issued and outstanding, respectively 143 143
Additional paid-in capital 43,916 44,128
Other (419) (754)
Accumulated other comprehensive income (905) (1,657)
Retained earnings 65,839 53,109
============== ==============
Total stockholders' equity 108,574 94,969
============== ==============
$ 362,215 $ 316,462
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Item 1. Financial Statements
Consolidated Statement of Income (Unaudited)
(Amounts in Thousands Except Share and Per Share Data)
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<TABLE>
<CAPTION>
Three months ended June 30, Nine months ended June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 149,444 $ 119,654 $ 384,682 $ 323,607
Cost of sales 123,963 92,158 310,240 247,476
------------------------------------------------------------------
Gross profit 25,481 27,496 74,442 76,131
Selling, general and administrative expenses 15,417 12,487 40,213 34,308
Restructuring charge 1,500 - 1,500 -
------------------------------------------------------------------
Operating profit 8,564 15,009 32,729 41,823
Other expenses:
Interest on indebtedness 3,253 2,873 8,180 7,535
Other finance charges 1,282 613 2,177 1,915
Other, net 292 (139) 259 (134)
------------------------------------------------------------------
4,827 3,347 10,616 9,316
------------------------------------------------------------------
Income before income taxes and 3,737 11,662 22,113 32,507
extraordinary item
Provision for income taxes 1,513 4,723 8,955 13,129
------------------------------------------------------------------
Income before extraordinary item 2,224 6,939 13,158 19,378
Extraordinary item, net of tax - - - (545)
------------------------------------------------------------------
Net income $ 2,224 $ 6,939 $ 13,158 $ 18,833
==================================================================
Basic earnings per share:
Income before extraordinary item $ 0.16 $ 0.49 $ 0.92 $ 1.36
Extraordinary item - - - (0.04)
------------------------------------------------------------------
Net income $ 0.16 $ 0.49 $ 0.92 $ 1.32
==================================================================
Weighted average shares 14,268 14,260 14,270 14,258
==================================================================
Diluted earnings per share:
Income before extraordinary item $ 0.16 $ 0.48 $ 0.92 $ 1.34
Extraordinary item - - - (0.04)
------------------------------------------------------------------
Net income $ 0.16 $ 0.48 $ 0.92 $ 1.30
==================================================================
Weighted average shares 14,274 14,445 14,288 14,430
==================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Item 1. Financial Statements
Consolidated Statement of Changes in Stockholders' Equity (Unaudited)
(Dollars in Thousands)
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<TABLE>
<CAPTION>
Compre- Cumulative Additional
Hensive Retained Translation Common paid-in
Income Earnings adjustment stock capital Other Total
------- -------- ----------- ------ ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1998 $53,109 $(1,657) $ 143 $44,128 $ (754) $94,969
Net income (unaudited) $13,158 13,158 13,158
Other comprehensive income:
Foreign currency translation
adjustments (unaudited) 752 752 752
----------
Comprehensive income (unaudited) $13,910
==========
Restricted stock transactions (212) 264 52
(unaudited)
Partial payment of stock subscriptions
receivable (unaudited) 71 71
Dividends paid (unaudited) (428) (428)
----------- ------------ ------------ ----------- ---------- ----------
Balance, June 30, 1999 $65,839 $ (905) $ 143 $43,916 $ (419) $108,574
=========== ============ ============ =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Item 1. Financial Statements
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in Thousands)
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<TABLE>
<CAPTION>
Nine months Nine months
ended ended
June 30, June 30,
1999 1999
<S> <C> <C>
Cash flows from operating activities:
Net income $ 13,158 $ 18,833
Adjustments to reconcile net income to net cash provided
by operating activities, excluding the effects of an acquisition:
Depreciation 4,986 3,480
Amortization 2,726 2,400
Loss on disposition of assets 339
Loss on debt refinancing - 916
Other 52 3
(Increase) decrease in current assets, excluding the effect on an
acquisition:
Accounts receivable, net 7,344 (17,067)
Inventories (11,042) (11,869)
Prepaid expenses and other current assets (1,917) (708)
Increase (decrease) in current liabilities, excluding the effect on an
acquisition:
Accounts payable 7,980 15,608
Other current liabilities (6,852) (3,368)
----------------- ----------------
Net cash provided by operating activities 16,774 8,228
----------------- ----------------
Cash flows from investing activities:
Acquisition of net assets of Snorkel Division of Figgie International, Inc. (28,000) (105,439)
Capital expenditures, net (18,623) (6,057)
Investment in Libra Compact Technologies (781) -
Payments to former TRAK shareholders for ATLAS program - (527)
----------------- ----------------
Net cash used in investing activities (47,404) (112,023)
----------------- ----------------
Cash flows from financing activities:
Proceeds from financing 47,000 125,000
Net proceeds from (payments on) revolver (9,000) 21,042
Payments on long-term debt (11,495) (36,125)
Payment of dividends (428) (428)
Financing costs (590) (1,742)
Other 71 -
----------------- ----------------
Net cash provided by financing activities 25,558 107,747
----------------- ----------------
Effect of exchange rate changes on cash 752 (1,030)
----------------- ----------------
Net change in cash (4,320) 2,922
Cash beginning of period 4,684 5
----------------- ----------------
Cash at end of period $ 364 $ 2,927
================= ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in Thousands Except Per Share Data)
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1. Unaudited consolidated financial statements
The accompanying unaudited consolidated financial statements of
OmniQuip International, Inc. (OmniQuip or the Company) have been
prepared in accordance with the instructions for Form 10-Q and do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
However, in the opinion of management, such information includes all
adjustments, which consist only of normal and recurring adjustments,
necessary for a fair presentation of the results of operations for the
periods presented. Operating results for any quarter are not
necessarily indicative of the results for any other quarter or for the
full year. These statements should be read in conjunction with the
Company's consolidated financial statements and notes to the
consolidated financial statements included in the Company's September
30, 1998 Form 10-K filed with the Securities and Exchange Commission on
December 28, 1998.
2. Organization
OmniQuip owns 100% of the outstanding common stock of its subsidiaries,
TRAK International, Inc. (TRAK), Lull International, Inc. (Lull), and
Snorkel International, Inc. (Snorkel). The consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany transactions and balances
have been eliminated.
The accounts of the Company's foreign subsidiaries are maintained in
their respective local currencies. The accompanying consolidated
financial statements have been translated and adjusted to reflect U.S.
dollars on the following basis. Assets and liabilities are translated
into U.S. dollars at period-end exchange rates. Income and expense
items are translated at average exchange rates prevailing during the
period. Adjustments resulting from the process of translating the
consolidated amounts into U.S. dollars are accumulated in a separate
translation adjustment account, included in stockholders' equity.
Common stock and additional paid-in capital are translated at
historical U.S. dollar equivalents in effect at the date of
acquisition. Foreign currency transaction gains and losses are included
in earnings currently. The foreign currency transaction gains and
losses for the nine months ended June 30, 1999 and 1998 were not
material.
3. Snorkel acquisition and related financing
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 accounted for under the purchase method of
accounting. The cash purchase price of approximately $100,000 was
financed by borrowings under a $165,000 senior credit facility which
replaced the Company's existing credit facility. The purchase price was
allocated to the assets acquired and liabilities assumed based on
estimated fair values; the excess of purchase price over the estimated
fair value of net assets acquired at the date of acquisition (goodwill)
approximated $59,000. The purchase price may be increased up to $50,000
based on Snorkel's net sales between April 1, 1998 and March 31, 1999;
any such additional purchase price will result in additional goodwill
for financial reporting purposes. On April 30, 1999, the Company paid
an additional purchase price of $27,000, subject to audit confirmation.
The Company expects to pay an additional amount of approximately $1,000
(plus accrued interest from April 30, 1999) when the audit is
finalized. This additional payment of $1,000 has been accrued in the
accompanying consolidated financial statements as additional goodwill
and other current liabilities. Snorkel's results of operations are
reflected in the accompanying financial statements from the date of
acquisition.
During November 1997, in connection with the acquisition of Snorkel,
the Company entered into a senior credit facility which replaced the
existing loan agreement. The senior agreement provided for a $165,000
credit facility consisting of a $40,000 revolving credit facility and a
$125,000 term loan. The term loan required quarterly principal payments
ranging from $2,500 to $6,250 commencing on February 28, 1998
7
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in Thousands Except Per Share Data)
- --------------------------------------------------------------------------------
with final maturity on November 30, 2004. Borrowings under the
agreement bore interest at prime or LIBOR plus an additional rate
(ranging from 0.0% to 1.125%) based on the Company's leverage ratio
(debt/EBITDA). On February 26, 1999, the credit facility was amended
and restated as detailed below.
The amended and restated credit facility provided for a $211,574 credit
facility consisting of a $40,000 revolving credit facility, a $40,000
delayed draw term loan and a $131,574 term loan. The delayed draw term
loan became effective upon payment of the additional purchase price of
Snorkel, the first installment of which ($27,000) was paid on April 30,
1999. The term loans required quarterly principal payments ranging from
$3,750 to $10,000 commencing on February 28, 1999 with a final maturity
on November 30, 2004. Borrowings under the agreement bore interest at
prime plus an additional rate (ranging from 0.0% to 0.625%) based on
the Company's leverage ratio (debt/EBITDA) or LIBOR plus an additional
rate (ranging from 1.0% to 1.625%) based on the Company's leverage
ratio (debt/EBITDA).
On June 29, 1999, the first amendment was made to the amended and
restated credit facility, which adjusted the debt covenants and
interest rate and permitted the establishment of a new money credit
facility which became effective August 4, 1999. The amended facility of
$215,396 consists of a $149,574 term loan, a $40,000 revolving credit
facility and the new money revolving credit facility of $25,822. The
term loan requires quarterly principal payments ranging from $5,250 to
$10,000 commencing on August 31, 1999 with a final maturity of November
30, 2004. Borrowings are not permitted under the new money revolving
credit facility until the $40,000 revolving credit facility is fully
drawn. The new money revolving credit facility expires on November 15,
1999. Borrowings under the facilities bear interest at prime plus an
additional rate (ranging from 0.75% to 2.00%) based on the Company's
leverage ratio (debt/EBITDA) or LIBOR plus an additional rate (ranging
from 1.75% to 3.00%) based on the Company's leverage ratio
(debt/EBITDA). At June 30, 1999, the Company's borrowings were at
8.25%. Amounts outstanding under the revolving credit facility and the
term loan at June 30, 1999 were $15,000 and $149,574, respectively. In
addition, the Company had approximately $157 in outstanding letters of
credit and had unused borrowing capacity of $24,843 under this
facility. The Company also had an overline facility of $10,000 which
was canceled June 28, 1999. The Company was in compliance with all
covenants or had obtained a waiver for an event of non-compliance under
its credit facilities at June 30, 1999.
In conjunction with entering into the senior credit facility in
November 1997, the Company recognized an extraordinary loss of $545
attributable to the write-off of $916 of unamortized deferred financing
fees, net of a related $371 tax benefit. In conjunction with the
amended and restated credit facility in February 1999, the Company
recorded $590 of deferred financing costs. The Company will record
additional deferred financing costs of approximately $900 in the fourth
fiscal quarter ending September 30, 1999, related to the first
amendment and the new money credit facility.
4. Lease Commitments
In February 1999, the Company entered into a lease arrangement relating
to a building in Oakes, North Dakota. The agreement extends for a
period of 180 months and contains a purchase option. The lease
obligation and related fixed assets of $4,515 are reflected in the
consolidated financial statements as a capitalized lease in accordance
with the requirements of Statement of Financial Accounting Standards
No. 13, "Accounting for Leases."
8
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in Thousands Except Per Share Data)
- --------------------------------------------------------------------------------
5. Inventories
Inventories consist of the following:
June 30, September 30,
1999 1998
(unaudited)
Raw material and purchased components $ 51,975 $ 43,521
Work-in-process 5,952 11,751
Finished goods 24,180 15,651
Unbilled government contract costs --- 142
========= =========
$ 82,107 $ 71,065
========= =========
6. Stock options
The Company has two stock option plans: the 1996 Long-Term Incentive
Plan and the 1996 Directors Non-Qualified Stock Option Plan. A summary
of the status of the Company's stock option plans as of June 30, 1999
and the changes during the nine months then ended is presented below:
Shares Weighted average
exercise price
Outstanding at September 30, 1998 817,250 $ 14.84
Granted 420,750 $ 10.56
Exercised - -
Forfeited (155,412) $ 14.17
========== =========
Outstanding at June 30, 1999 1,082,588 $ 13.27
========== =========
Exercisable at June 30, 1999 155,576 $ 13.90
========== =========
The exercise prices of the options granted above are equivalent to the
market price of the Company's common stock on the date of grant. During
the nine months ended June 30, 1999 and 1998, 2,000 shares and 10,000
shares, respectively, of restricted stock were granted. No performance
stock awards have been granted by the Company at June 30, 1999.
7. Commitments and 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 and other amounts not
covered by insurance; accordingly, these actions, when ultimately
concluded, are not expected to have a material adverse effect on the
financial position, cash flows or results of operations of the Company.
The Company has financing arrangements with certain third-party
financing institutions to facilitate dealer purchases of equipment
under floor plan and rental fleet arrangements. The aggregate
outstanding loan balance on a consolidated basis under these agreements
was $93,363 at June 30, 1999. Under the Company's agreements, the
Company either provides a back-up guarantee of a dealer's credit or an
9
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements (Unaudited)
(Dollars in Thousands Except Per Share Data)
- --------------------------------------------------------------------------------
undertaking to repurchase equipment at a discounted price at specified
times or under specified circumstances. The Company's actual exposure
under these financing arrangements is significantly less than the
nominal amount outstanding. Aggregate losses under substantially all of
the Company's guarantee obligations to third-party lenders with respect
to the Company's dealers in each of calendar years 1997, 1998 and 1999
are limited to the greater of $1,500 or 5% of the loan balance at the
previous calendar year end (approximately $60,452 and $55,100 at
December 31, 1998 and 1997, respectively).
8. Comprehensive income
Statement of Financial Accounting Standards No. 130 (SFAS 130),
"Reporting Comprehensive Income", establishes standards for the
reporting and display of comprehensive income and its components in a
full set of general-purpose financial statements. Comprehensive income
represents net income plus certain items that are charged directly to
stockholders' equity. The only component of other comprehensive income
for the Company relates to foreign currency translation adjustments.
The Company adopted SFAS 130 for the quarter ended December 31, 1998.
9. Earnings Per Share of Common Stock
The following table represents the reconciliation of income before
extraordinary loss and weighted average shares outstanding between
basic and diluted earnings per share for the three and nine months
ended June 30, 1999 and 1998 (share data in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Numerator:
Income before extraordinary loss $ 2,224 $ 6,939 $13,158 $19,378
================================================
Denominator:
Basic weighted average shares outstanding 14,268 14,260 14,270 14,258
Effect of dilutive securities:
Stock options 6 185 18 172
------------------------------------------------
Weighted average shares and dilutive potential common shares 14,274 14,445 14,288 14,430
================================================
</TABLE>
10. Restructuring Charge
During the quarter ended June 30, 1999, the Company recorded a
restructuring charge of $1.5 million primarily related to costs
associated with reorganizing the Snorkel aerial work platform
operations, rationalizing the product offerings of certain product
lines at Snorkel, and increasing the consolidation and integration for
the Company's three business units. Such costs are expected to be paid
by September 30, 2000.
10
<PAGE>
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
Overview
The following discussion summarizes the significant factors affecting the
consolidated operating results and financial condition of OmniQuip
International, Inc. (OmniQuip or the Company) for the three and nine months
ended June 30, 1999 compared to the three and nine months ended June 30, 1998.
The discussion should be read in conjunction with the consolidated financial
statements as of September 30, 1998 and the associated notes to the consolidated
financial statements included in the Company's Form 10-K filed with the
Securities and Exchange Commission on December 28, 1998.
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 accounted for
under the purchase method of accounting. The cash purchase price of
approximately $100 million was financed by borrowing under a $165 million senior
credit facility which replaced the Company's existing facility. The purchase
price was allocated to the assets acquired and liabilities assumed based on
estimated fair values; the excess of purchase price over the estimated fair
value of net assets acquired at the date of acquisition (goodwill) approximated
$59 million. The purchase price may be increased up to $50 million based on
Snorkel's net sales between April 1, 1998 and March 31, 1999; any such
additional purchase price will result in additional goodwill for financial
reporting purposes. As of April 30, 1999, the Company estimated the additional
purchase price to be $27 million, subject to audit confirmation, which was paid
on April 30, 1999. As of July 31, 1999, the Company estimated the additional
purchase price to be approximately $28 million, subject to audit confirmation.
The estimated additional purchase price of $1 million has been accrued in the
June 30, 1999 financial statements as additional goodwill and other current
liabilities. Snorkel's results of operations are reflected in the accompanying
financial statements from the date of acquisition. The $27 million payment was
financed under an amended and restated credit agreement described below.
Certain statements included herein are forward-looking statements concerning the
Company's operations, economic performance and financial condition and are
intended to qualify for the safe harbors from liability established by the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements are subject to certain risks and uncertainties. Actual results could
differ materially from those currently anticipated due to a number of factors
including cyclical fluctuations in demand, manufacturing capacity constraints
and production inefficiencies, increased competition from larger and better
capitalized companies, the effects of restructuring efforts, the effects on
price and margin of the rapid consolidation of distributors, the inability to
achieve expected cost savings from the strategic sourcing initiatives, field
warranty campaigns for certain products, loss of, or reduced orders under the
Company's contract for the sale of ATLAS vehicles, the inability to make
complementary acquisitions, or to integrate any such acquisitions, and risks
associated with the substantial borrowings that may be necessary to finance
acquisitions.
11
<PAGE>
Results of Operations
The following table sets forth for the periods indicated the percentage of net
sales represented by certain items reflected in the Company's consolidated
statement of income:
Three months ended Nine months ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 82.9% 77.0% 80.6% 76.5%
------ ------ ------ ------
Gross profit 17.1% 23.0% 19.4% 23.5%
Selling, general and administrative
Expenses 10.3% 10.4% 10.5% 10.6%
Restructuring charge 1.0% -- 0.4% --
------ ------ ------ ------
Operating income 5.8% 12.6% 8.5% 12.9%
Interest expense 2.2% 2.4% 2.1% 2.3%
Other finance charges 1.1% 0.5% 0.7% 0.6%
------ ------ ------ ------
Income before income taxes and
Extraordinary item 2.5% 9.7% 5.7% 10.0%
Provision for income taxes 1.0% 3.9% 2.3% 4.0%
------ ------ ------ ------
Income before extraordinary item 1.5% 5.8% 3.4% 6.0%
Extraordinary item -- -- -- 0.2%
------ ------ ------ ------
Net income 1.5% 5.8% 3.4% 5.8%
====== ====== ====== ======
Three Months Ended June 30, 1999 compared to Three Months Ended June 30, 1998
Net sales for the three months ended June 30, 1999 were $149.4 million, an
increase of $29.7 million over net sales of $119.7 million for the three months
ended June 30, 1998. Net sales by product line were as follows:
($ in millions)
Three months ended
June 30,
Increase
1999 1998 (Decrease)
---- ---- ----------
Commercial Telescopic Material Handlers $ 83.2 $ 60.4 $ 22.8
Military Telescopic Material Handlers 4.2 4.7 (0.5)
Compact Products (1) 8.4 7.7 .7
Aerial Work Platforms 46.2 38.2 8.0
Parts and Other Products 7.4 8.7 (1.3)
-------- -------- --------
$ 149.4 $ 119.7 $ 29.7
======== ======== ========
- --------------
(1) Compact products includes skid steer loaders, mini-excavators, power
haulers and power lifters and articulated forklifts and loaders.
Commercial sales of telescopic material handlers for the three months ended June
30, 1999 increased approximately 37.7% over the three months ended June 30, 1998
due to continued strong market demand and the Company's
12
<PAGE>
ability to fill market demand through increased plant capacity. Military sales
under the U.S. Army ATLAS contract decreased approximately 10.4% from the three
months ended June 30, 1998. This decrease was planned and is a part of Company
management strategy to move higher levels of military sales to the calendar year
end, which has typically seen reduced demand in commercial sales of telescopic
material handlers. Sales of aerial work platforms increased 20.9% due to higher
than anticipated sales as the result of an aggressive inventory reduction
program specifically focusing on the scissors product line. Sales of compact
products and parts and other products for the three months ended June 30, 1999
were relatively flat compared to the three months ended June 30, 1998.
Gross profit for the three months ended June 30, 1999 was $25.5 million, a
decrease of $2.0 million from gross profit of $27.5 million for the three months
ended June 30, 1998. The decrease in gross profit primarily reflects costs
associated with inventory reduction programs for aerial work platforms at
Snorkel and manufacturing inefficiencies at Snorkel resulting from efforts to
reduce finished goods inventory. Also affecting gross profit was an increase in
costs associated with start-up costs related to the addition and expansion of
two telescopic material handling facilities, and with related consulting and
employee training costs. The gross margin decreased to 17.1% for the three
months ended June 30, 1999 from 23.0% for the three months ended June 30, 1998.
The decline in gross margin was due to the increase in costs discussed above.
The Company expects only a modest improvement in fourth quarter margin compared
to its third quarter of fiscal 1999.
Selling, general and administrative (SG&A) expenses for the three months ended
June 30, 1999 were $15.4 million, an increase of $2.9 million from SG&A expenses
of $12.5 million for the three months ended June 30, 1998. SG&A expenses as a
percentage of net sales decreased to 10.3% for the three months ended June 30,
1999 from 10.4% for the three months ended June 30, 1998. This increase in the
SG&A expense is due to consulting and engineering costs related to the
implementation of the strategic sourcing alliances with key suppliers for each
of the Company's major components. The potential annual cost savings from this
program is expected to be in the range of $10 to $15 million.
Restructuring charge of $1.5 million primarily relates to severance and other
costs associated with reorganizing the Company's Snorkel aerial work platform
operations, rationalizing the product offerings of certain product lines at
Snorkel, and increasing the consolidation and integration of OmniQuip's three
business units. Such costs are expected to be paid by September 30, 2000.
Operating income for the three months ended June 30, 1999 was $8.6 million, a
decrease of $6.4 million, or 42.9%, from operating income of $15.0 million for
the three months ended June 30, 1998 due to the factors discussed above.
Operating margin decreased to 5.8% for the three months ended June 30, 1999 from
12.6% for the three months ended June 30, 1998, primarily reflecting the gross
margin decline and restructuring charge discussed above.
Interest expense for the three months ended June 30, 1999 was $3.3 million, an
increase of $0.4 million, compared to interest expense of $2.9 million for the
three months ended June 30, 1998. The increase in interest expense was due
primarily to the increased borrowings related to the additional purchase price
for Snorkel.
Other finance charges, which are primarily comprised of dealer-related finance
charges, were $1.3 million for the three months ended June 30, 1999 compared to
$0.6 million for the three months ended June 30, 1998, reflecting the increased
use of financial merchandise programs for the national rental fleet customers.
Other finance charges as a percentage of net sales increased to 1.1% from 0.5%.
The increase in finance charges as a percentage of sales primarily reflected a
shift in sales to the national rental fleets that now utilize more finance
programs.
Provision for income taxes for the three months ended June 30, 1999 was $1.5
million compared to $4.7 million for the three months ended June 30, 1998. The
decrease reflected the decrease in income before income taxes of $8.0 million.
The Company's effective tax rate was 40.5% for the three months ended June 30,
1999 and 1998.
Net income for the three months ended June 30, 1999 was $2.2 million, a decrease
of $4.7 million, or 67.9%, from net income of $6.9 million for the three months
ended June 30, 1998, as a result of the factors described above.
13
<PAGE>
Basic and diluted earnings per share were $0.16 for the three months ended June
30, 1999. Basic and diluted earnings per share were $0.49 and $0.48,
respectively, for the three months ended June 30, 1998.
Nine Months Ended June 30, 1999 compared to Nine Months Ended June 30, 1998
Net sales for the nine months ended June 30, 1999 were $384.7 million, an
increase of $61.1 million over net sales of $323.6 million for the nine months
ended June 30, 1998. Of the $61.1 million increase, net sales from the Snorkel
division (acquired in November 1997) accounted for $24.4 million, while net
sales for the existing OmniQuip business increased by $36.7 million, or 15.9%.
Net sales by product line were as follows:
($ in millions)
Nine months ended
June 30,
Increase
1999 1998 (Decrease)
---- ---- ----------
Commercial Telescopic Material Handlers $ 211.9 $ 175.1 $ 36.8
Military Telescopic Material Handlers 14.0 15.5 (1.5)
Compact Products (1) 18.6 18.1 0.5
Aerial Work Platforms 115.2 92.8 22.4
Parts and Other Products 25.0 22.1 2.9
-------- -------- --------
$ 384.7 $ 323.6 $ 61.1
======== ======== ========
- -------------
(1) Compact products includes skid steer loaders, mini-excavators, power
haulers and power lifters and articulated forklifts and loaders.
Commercial sales of telescopic material handlers for the nine months ended June
30, 1999 increased approximately 21.0% over the nine months ended June 30, 1998
due to continued strong market demand and increased plant capacity to fill this
demand. Military sales under the U.S. Army ATLAS contract decreased
approximately 9.7% from the nine months ended June 30, 1998. This decrease was
planned and was a part of Company management strategy to move higher levels of
military sales to the calendar year end, which has typically seen reduced demand
in commercial sales of telescopic material handlers. Sales of aerial work
platforms were flat, on a pro forma basis. Sales of parts and other products for
the nine months ended June 30, 1999 increased approximately 13.1% from the nine
months ended June 30, 1998, due to an increasing population of machines in the
field and Snorkel part sales.
Gross profit for the nine months ended June 30, 1999 was $74.4 million, an
decrease of $1.7 million over gross profit of $76.1 million for the nine months
ended June 30, 1998. The decrease in gross profit primarily reflected the
increased manufacturing costs associated with start-up costs related to the
addition and expansion of two telescopic material handling manufacturing
facilities, consulting and employee training costs, and the above noted charges
at Snorkel related to inventory reduction programs. The gross margin decreased
to 19.4% for the nine months ended June 30, 1999 from 23.5% for the nine months
ended June 30, 1998. The decline in gross margin was due to the increase in
costs discussed above.
SG&A expenses for the nine months ended June 30, 1999 were $40.2 million, an
increase of $5.9 million from SG&A expenses of $34.3 million for the nine months
ended June 30, 1998. This increase is primarily due to the inclusion of Snorkel
for the entire nine-month period, and consulting and engineering costs related
to the implementation of the strategic sourcing alliances with key suppliers for
each of the Company's major components. The potential annual cost savings from
this program is expected to be in the range of $10 to $15 million. SG&A expenses
as a percentage of net sales decreased to 10.5% for the nine months ended June
30, 1999 from 10.6% for the nine months ended June 30, 1998.
14
<PAGE>
Restructuring charge of $1.5 million primarily relates to severance and other
costs associated with reorganizing the Company's Snorkel aerial work platform
operations, rationalizing the product offerings of certain product lines at
Snorkel, and increasing the consolidation and integration of OmniQuip's three
business units.
Operating income for the nine months ended June 30, 1999 was $32.7 million, a
decrease of $9.1 million, or 21.7%, from operating income of $41.8 million for
the nine months ended June 30, 1998 due to the factors discussed above.
Operating margin decreased to 8.5% for the nine months ended June 30, 1999 from
12.9% for the nine months ended June 30, 1998, primarily reflecting the gross
margin decline and restructuring charge discussed above.
Interest expense for the nine months ended June 30, 1999 was $8.2 million, an
increase of $0.7 million, compared to interest expense of $7.5 million for the
nine months ended June 30, 1998. The increase in interest expense was due
primarily to the increased debt level outstanding for the nine months ended June
30, 1999 compared to the nine months ended June 30, 1998, partially offset by
lower interest rates. The increased debt levels primarily relate to borrowings
to support working capital increases and to fund the additional Snorkel purchase
price.
Other finance charges, which are primarily comprised of dealer-related finance
charges, were $2.2 million for the nine months ended June 30, 1999 compared to
$1.9 million for the nine months ended June 30, 1998, reflecting an increased
proportion of financed sales for the 1999 period. Other finance charges as a
percentage of net sales increased to 0.7% from 0.6%. The increase in finance
charges as a percentage of sales primarily reflected a shift in sales to the
national rental fleets that now use various financial merchandise programs.
Provision for income taxes for the nine months ended June 30, 1999 was $9.0
million compared to $13.1 million for the nine months ended June 30, 1998. The
decrease reflected the decrease in income before income taxes and extraordinary
item of $10.4 million. The Company's effective tax rate was 40.5% for the nine
months ended June 30, 1999 compared to 40.4% for the nine months ended June 30,
1998.
Income from continuing operations for the nine months ended June 30, 1999 was
$13.2 million, a decrease of $6.2 million, or 32.1%, from income from continuing
operations for the nine months ended June 30, 1998 as a result of the factors
described above.
In November 1997, in connection with the refinancing related to the Snorkel
acquisition, the Company incurred an extraordinary $0.5 million after-tax charge
for the write-off of deferred financing charges.
Net income for the nine months ended June 30, 1999 was $13.2 million, a decrease
of $5.6 million, or 30.1%, from net income of $18.8 million for the nine months
ended June 30, 1998, as a result of the factors described above.
Basic and diluted earnings per share were $0.92 for the nine months ended June
30, 1999. Basic and diluted earnings per share, before the effect of the
extraordinary item discussed above, were $1.36 and $1.34, respectively, for the
nine months ended June 30, 1998. Basic and diluted earnings per share were $1.32
and $1.30, respectively, for the nine months ended June 30, 1998.
Capital Resources and Liquidity
Net cash provided by operating activities of the Company was $16.8 million for
the nine months ended June 30, 1999. Working capital (excluding the effects of
changes in cash and current portions of long-term debt) decreased by $4.5
million in the period. The decrease primarily reflects a $7.3 million decrease
in accounts receivable, offset by a $11.0 million increase in inventories and a
$6.9 million decrease in other current liabilities, offset by a $8.0 million
increase in accounts payable. The decrease in other current liabilities
primarily reflected customer utilization of volume rebates. The increase in
inventories and accounts payable was due primarily to a build-up in inventory at
Snorkel. Net cash used in investing activities of $47.4 million included capital
expenditures of $18.6 million, $28.0 million for additional purchase price of
Snorkel, and $.8 million investment in Libra Compact Technologies ("Libra").
Libra is a San Marino company which produces mini excavators which are marketed
by the Company under the Scat Trak name. See further discussion on the capacity
expansion program below. These cash requirements were financed with an amended
and restated credit facility described below.
15
<PAGE>
Net cash provided by operating activities of the Company was $8.2 million for
the nine months ended June 30, 1998. Working capital (excluding the effects of
the Snorkel acquisition and changes in cash and current portions of long-term
debt) increased by $17.4 million in the period, primarily reflecting a $17.1
million increase in accounts receivable, an increase in inventories of $11.9
million and a $3.4 million decrease in other current liabilities offset by a
$15.6 million increase in accounts payable. Accounts receivable increased due to
increased sales levels and the timing of shipments at the end of the quarter.
Inventories increased primarily due to capacity constraints which prevented
manufacturing operations from achieving the planned production schedule. The
decrease in other current liabilities primarily reflected the issuance of volume
rebates and the payment of year-end bonuses. The increase in accounts payable
primarily reflected increased inventory purchases due to increases in production
schedules. Net cash used in investing activities was $112.0 million, including
$6.1 million for capital expenditures and $105.4 million for the acquisition of
the net assets of Snorkel.
During February 1999, the Company amended and restated its credit facility. The
amended and restated credit facility provided for a $211.6 million credit
facility consisting of a $40.0 million revolving credit facility, a $40.0
million delayed draw term loan and a $131.6 million term loan. The delayed draw
term loan became effective upon the preliminary payment of the additional
purchase price of Snorkel on April 30, 1999.
On June 29,1999, the Company entered into the first amendment to the amended and
restated credit facility, which adjusted the debt covenants and interest rate
and permitted the establishment of a new money credit facility which became
effective on August 4, 1999. The amended and restated credit facility provides
for a $215.4 million credit facility consisting of a $149.6 million term loan,
$40.0 million revolving credit facility, and the new money revolving credit
facility of $25.8 million. The new money revolving credit facility expires on
November 15, 1999. The new money revolving credit facility is only available
after the regular revolving facility is fully drawn. The term loan requires
quarterly principal payments ranging from $5.25 million to $10.0 million
commencing August 31, 1999 with the final maturity on November 30, 2004.
Borrowings under the amended and restated agreement bear interest at a rate that
is determined from a pricing grid based on the Company's leverage ratio
(debt/EBITDA). At June 30, 1999, the interest rate under this agreement was
prime plus 2.0% or LIBOR plus 3.0%. This amended credit facility is expected to
increase the Company's interest expense in future periods.
Amounts outstanding under the amended and restated credit facility at June 30,
1999 were $164.6 million. In addition, the Company had $0.2 million in
outstanding letters of credit under this revolving line of credit facility. At
June 30, 1999 the Company had unused borrowing capacity of $24.8 million. The
Company was in compliance with all covenants or had obtained a waiver for an
event of non-compliance under its credit facilities at June 30, 1999.
In February 1999, the Company entered into a lease arrangement relating to a
building in Oakes, North Dakota. The agreement extends for period of 180 months
and contains a purchase option. The lease obligation and related fixed assets of
$4.5 million are reflected in consolidated financial statements as a capitalized
lease and requires monthly payments of principal and interest of $.38 million.
Pursuant to the Snorkel acquisition, the Company was required to pay an
additional purchase price of up to $50 million in May 1999. The additional
payment was equal to the net sales of Snorkel for the twelve-month period
commencing on April 1, 1998 and ending on March 31, 1999 (the Earn-Out Period)
in excess of $140 million, such additional amount not to exceed $20 million,
plus 70% of the amount of the net sales of Snorkel during the Earn-Out Period in
excess of $160 million, such additional amount not to exceed $30 million. Based
on the performance of Snorkel since April 1, 1998, the Company made a
preliminary payment of $27 million on April 30, 1999 and financed such payment
through the delayed draw term loan provision of the amended and restated credit
facility. An additional payment of approximately $1.0 million may be required to
be paid when the audit is completed. This payment will be made from the
revolving credit facility.
Certain manufacturing facilities have experienced capacity constraints, which
have limited production output and caused manufacturing inefficiencies during
the last twelve months, thus affecting sales and gross margins. A major capacity
expansion program, which was launched in September 1998 and is described in more
detail below, is
16
<PAGE>
expected to address these issues. However, it is expected that these capacity
constraints will continue to affect the material handling business throughout
1999.
As the result of a major capacity expansion program for telescopic material
handlers launched in September 1998, the Company's capital expenditures for
fiscal year 1999 will be higher than normal. It is expected that total capital
expenditures for the year ending September 30, 1999 will be approximately $25
million, approximately $20 million of which is related to the capacity expansion
program. These capital expenditures are expected to be financed through internal
cash flow and existing credit lines, with the exception of approximately $4.5
million related to the Oakes, North Dakota building expansion that was financed
through a capital lease. Approximately 90% of the capital spending for fiscal
year 1999 had occurred in the first nine months of the fiscal year.
Backlog
The Company's backlog as of June 30, 1999 was approximately $125.5 million, of
which $39.9 million relates to the ATLAS military contract. It is expected that
substantially all of the commercial backlog and approximately 60% of the
military backlog will be shipped before June 30, 2000. The lower backlog
primarily reflects reduced orders for Snorkel products. Changes in customer
buying patterns and increased capacity at the Company's telescopic material
handling plants also contributed to the reduction.
Market Risk
In the ordinary course of business, the Company is exposed to foreign currency
and interest rate risks, which the Company does not currently consider to be
material. These exposures primarily relate to having investments denominated in
foreign currencies and to changes in interest rates. Fluctuations in currency
exchange rates can impact operating results, including net sales and operating
expenses. The Company may utilize derivative financial instruments, including
forward exchange contracts and swap agreements, to manage certain of its foreign
currency and interest rate risks that it considers practical to do so. The
Company currently has $61.3 million notional principal amount outstanding under
an interest rate swap agreement which fixes LIBOR at 6.24% through November
2004. The Company also has $17.5 million notional principal amount outstanding
under an interest rate swap agreement which fixes LIBOR at 5.625% through August
31, 2001. The swap agreement provides for quarterly amounts which increase to
$19.8 million in November 1999 and reduce quarterly thereafter until it expires
on August 31, 2001. The Company does not enter into derivative financial
instruments for trading purposes. Market risks that the Company currently has
elected not to hedge relate to foreign currency exposure and the portion of the
floating rate debt not covered by the interest rate swap.
New Accounting Pronouncements
In June 1997 the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). The statement requires that the Company report certain information
if specific requirements are met about operating segments of the Company
including information about services, geographic areas of operation and major
customers. SFAS 131 is effective for fiscal years beginning after December 15,
1997. The Company is evaluating the provisions of SFAS 131 to determine its
future reporting requirements.
In June 1998 the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). The statement establishes accounting and reporting standards for
derivative instruments and for hedging activities and requires recognition of
all derivatives on the balance sheet measured at fair value. SFAS 133 is
effective for all fiscal quarters of all fiscal years beginning after June 15,
2000. The Company is continuing to evaluate the provisions of SFAS 133 to
determine its impact on financial position and results of operations.
Year 2000
The Company utilizes software and related computer technologies essential to its
operations that use two digits rather than four to specify the year, which could
result in a date recognition problem with the transition to the year
17
<PAGE>
2000. The Company has established a plan to assess the potential impact of the
year 2000 on the Company's systems and operations and to implement solutions to
address this issue. The Company has substantially completed the assessment of
its internal systems for year 2000 compliance issues. The Company's plan for
remediation includes a combination of repair and replacement of affected
systems. For the Company's internal systems at TRAK and Lull, this remediation
is an incidental consequence of the ongoing implementation of a new integrated
core business system. The Company expects the remediation phase to be completed
by August 31, 1999 and for testing to be conducted by September 30, 1999. For
the Company's internal systems at Snorkel, this remediation is a software patch
for the existing system which has been implemented. The Company expects that all
critical systems will be year 2000 compliant by September 30, 1999.
Substantially all of the costs incurred, and expected to be incurred, to achieve
year 2000 compliance have been and are a part of ongoing expenditures to upgrade
systems. The Company is dependent upon various third parties, including certain
product suppliers, to conduct its business operations. The failure of
mission-critical third parties to achieve year 2000 compliance could have a
material adverse effect on the Company's operations. The Company is presently in
the assessment phase of its year 2000 plan with respect to the Company's
suppliers, vendors and service providers for year 2000 compliance. The Company
expects to complete the assessment phase by August 31, 1999. The Company plans
to develop a contingency plan by September 30, 1999 in the event its systems or
its mission-critical vendors do not achieve year 2000 compliance. However, there
can be no assurance that the Company will not experience unanticipated costs
and/or business interruptions due to year 2000 problems in its internal systems
or its supply chain, or that such costs and/or interruptions will not have a
material adverse effect on the Company's consolidated results of operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
See "Market Risk" under Item 2 hereof.
18
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
PART II. Other Information
- --------------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1 - First Amendment to the Amended and Restated Credit
Agreement, dated as of June 29, 1999, by and among OmniQuip
International, Inc., Morgan Stanley Senior Funding, Inc., as
Syndication Agent and Co-Arranger, First Union National Bank, as
Administrative Agent and Co-Arranger, and the various lending
institutions set forth therein.
Exhibit 10.2 - Second Amendment and Waiver to the Amended and Restated
Credit Agreement, dated as of July 29, 1999, by and among OmniQuip
International, Inc., Morgan Stanley Senior Funding, Inc., as
Syndication Agent and Co-Arranger, First Union National Bank, as
Administrative Agent and Co-Arranger, and the various lending
institutions set forth therein.
Exhibit 10.3 - Credit Agreement, dated as of August 4, 1999, by and
among OmniQuip International, Inc., Morgan Stanley Senior Funding,
Inc., as Syndication Agent and Co-Arranger, First Union Capital Markets
Corp., as Co-Arranger, First Union Investors, Inc., as Administrative
Agent, and the various lending institutions set forth therein.
Exhibit 10.4 - Credit Insurance Recourse Addendum, dated May 7, 1999,
by and between TRAK International, Inc., OmniQuip International, Inc.,
Lull International Inc. (f/k/a Lull Industries, Inc.), and Snorkel
International, Inc. and Deutsche Financial Services Corporation (f/k/a
ITT Commercial Finance Corp.) and Deutsche Financial Services, a
division of Deutsche Bank Canada (successor in interest to ITT
Commercial Finance, a division of ITT Industries of Canada Ltd.).
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None.
19
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OMNIQUIP INTERNATIONAL, INC.
Date: August 24, 1999 /s/ Thomas K. Breslin
------------------------------
Thomas K. Breslin
Vice President - Finance and Chief Financial Officer
(Principal accounting and financial officer)
20
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
10.1* First Amendment to the Amended and Restated Credit Agreement,
dated as of June 29, 1999, by and among OmniQuip International,
Inc., Morgan Stanley Senior Funding, Inc., as Syndication Agent
and Co-Arranger, First Union National Bank, as Administrative
Agent and Co-Arranger, and the various lending institutions set
forth therein.
10.2* Second Amendment and Waiver to the Amended and Restated Credit
Agreement, as of dated July 29, 1999, by and among OmniQuip
International, Inc., Morgan Stanley Senior Funding, Inc., as
Syndication Agent and Co-Arranger, First Union National Bank, as
Administrative Agent and Co-Arranger, and the various lending
institutions set forth therein.
10.3* Credit Agreement, dated as of August 4, 1999, by and among
OmniQuip International, Inc., Morgan Stanley Senior Funding, Inc.
as Syndication Agent and Co-Arranger, First Union Capital Markets
Corp., as Co-Arranger, First Union Investors, Inc. as
Administrative Agent, and the various lending institutions set
forth therein.
10.4 Credit Insurance Recourse Addendum, dated May 7, 1999, by and
between TRAK International, Inc., OmniQuip International, Inc.,
Lull International Inc. (f/k/a Lull Industries, Inc.), and
Snorkel International, Inc. and Deutsche Financial Services
Corporation (f/k/a ITT Commercial Finance Corp.) and Deutsche
Financial Services, a division of Deutsche Bank Canada (successor
in interest to ITT Commercial Finance, a division of ITT
Industries of Canada Ltd.).
27* Financial Data Schedule
- ---------------
*Previously filed.
21
CREDIT INSURANCE RECOURSE ADDENDUM
This Credit Insurance Recourse Addendum is made to that certain Floorplan
Repurchase Agreement entered into by and between TRAK International, Inc.,
Omniquip International, Inc., Lull International, Inc. (f/k/a Lull Industries,
Inc.), and Snorkel International, Inc. (individually and collectively "Vendor")
and DEUTSCHE FINANCIAL SERVICES CORPORATION (f/k/a ITT Commercial Finance Corp.)
("DFS-US") and Deutsche Financial Services, a division of Deutsche Bank Canada
(successor in interest to ITT Commercial Finance, a division of ITT Industries
of Canada Ltd.)(DFS-US and DFS_Canada being collectively referreed to as "DFS"),
as of October 2, 1990, as amended ("Agreement").
R - E - C - I - T - A - L - S
WHEREAS, Vendor has requested DFS to provide financing to certain Dealers
(as defined in the Agreement) who desire to purchase Merchandise from Vendor
under loan documentation different than DFS' normal documentation and without
DFS obtaining a security interest in the inventory of such Dealers; and
WHEREAS, DFS is willing, in DFS' discretion, to provide financing to such
Dealers under nonstandard documentation and without obtaining a security
interest, and/or purchase from Vendor the loans made by Vendor to such Dealers
only if Vendor guaranties to DFS that DFS will not incur any losses by providing
financing to such financing; and
WHEREAS Vendor and DFS desire to amend the Agreement as set forth herein.
NOW, THEREFORE, for and in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Vendor and DFS agree as follows:
1. The following is hereby added to the Agreement:
"In addition to all other obligations of Vendor set forth in this
Agreement, as amended or to be amended, in consideration of
financing provided or to be provided by DFS, in its discretion, to
Dealers under loan documentation different than DFS' normal
documentation and without DFS obtaining a security interest in the
inventory of such Dealers (each a "Credit Insured Dealer"), and/or
DFS purchasing from Vendor the loans made by Vendor to Credit
Insured Dealers, in each case to enable such Credit Insured
Dealers to purchase Merchandise from Vendor, and for other good
and valuable consideration received: (a) Vendor will obtain credit
insurance policy(ies) from such company or companies acceptable to
DFS from time to time which policy(ies) insure(s) Vendor and DFS
as joint insureds against loss on such loans to Credit Insured
Dealers, such insurance to be in such amount, with co-insurance
provisions (not to exceed ten percent), and on terms acceptable to
DFS; (b) Vendor will inform each such Credit Insured Dealer and
DFS of the credit limit determined by the issuer of the credit
insurance immediately upon notice of such determination or any
subsequent redetermination by the insurance company(ies); and
(c)(i) Vendor will repurchase Merchandise of each Credit Insured
Dealer which DFS repossesses or comes into the possession of (such
Merchandise of Credit Insured Dealers being hereby incorporated
into the definition of Merchandise in the Agreement) on the terms
set forth elsewhere in this Agreement, and (ii) to the extent that
DFS cannot lawfully repossess or obtain possession of any or all
Merchandise for which such Credit Insured Dealer owes any
indebtedness, or that any or all such Merchandise of a Credit
Insured Dealer is not subject to repurchase by Vendor under this
Agreement, Vendor will jointly, severally, unconditionally and
absolutely guaranty to DFS, from property held separately, jointly
or in
-1-
<PAGE>
community, the immediate payment when due of all current and
future Liabilities owed by each Credit Insured Dealer (whether
owed directly to DFS or purchased by DFS from Vendor) as a result
of the extension of financing to any such Credit Insured Dealer to
enable such Credit Insured Dealer to purchase Merchandise from
Vendor. Credit Insured Dealers will be identified for the purposes
of this Agreement by being listed on Exhibit A attached hereto and
incorporated herein by reference and/or being listed or referred
to in any credit insurance policy as a "buyer", "obligor",
"dealer", "lessee" or other similar term. The term "Liabilities"
as used in this paragraph will mean: the principal balance and any
finance charges due and owing by the Credit Insured Dealer either
directly to DFS or to Vendor and subsequently purchased by DFS
from Vendor, and all costs and expenses (including, without
limitation, reasonable attorneys' fees) incurred by DFS in
attempting to collect such principal and/or finance charges from
the Credit Insured Dealer. Vendor will immediately pay DFS the
amount owed under the terms of this paragraph on receipt of notice
from DFS that Liabilities (as defined herein above) exist with
respect to any Credit Insured Dealer to the extent (1) that any
insurance company has, for any reason whatsoever, not paid DFS all
amounts (other than the amount of coinsurance) owed by a Credit
Insured Dealer immediately upon demand by DFS or Vendor to the
relevant insurance company for such payment; (2) of the amount of
coinsurance under the relevant insurance policy covering the
Credit Insured Dealer; (3) that DFS is not paid in full for all
indebtedness of each Credit Insured Dealer (regardless of any
other limitations in this Agreement as amended or to be amended).
This guaranty will not be released, discharged or affected by the
impairment, sale or other disposition of any inventory of Credit
Insured Dealer, and Vendor acknowledges that DFS may not have a
security interest in any assets of a Credit Insured Dealer. Vendor
will pay DFS even if DFS has not (i) notified the Credit Insured
Dealer that it is in default, or (ii) exercised any of its rights
or remedies against the Credit Insured Dealer, any credit
insurance company, or any other person or any current or future
collateral. If Credit Insured Dealer hereafter undergoes any
change in its ownership, identity or organizational structure,
this Guaranty will extend to all current and future obligations
which such new or changed legal entity owes to DFS.
Vendor irrevocably waives any right of contribution from any third
party, notice of the number and amount of advances made by DFS to
any Credit Insured Dealer in reliance on this Guaranty and any
claim or action against Credit Insured Dealer; all rights of
offset against DFS or Credit Insured Dealer; all defenses to the
enforceability of this Guaranty (including, without limitation,
fraudulent inducement). Vendor further waives all defenses based
on suretyship or impairment of collateral, and defenses which the
Dealer may assert on the underlying debt, including but not
limited to, breach of warranty, fraud, payment of disputed
amounts, statute of frauds, bankruptcy, statute of limitations,
lender liability and, deceptive trade practices."
2. Except as modified by this Addendum, all terms and provisions of the
Agreement shall remain in place in full force and effect, shall be applicable to
the Dealers, and shall constitute the entire agreement among the parties.
3. Except as otherwise defined herein, all capitalized terms shall have
the same meanings as set forth in the Agreement.
4. The recitals set forth herein above are hereby incorporated into and
shall form a part of this Addendum, the truth and accuracy of which are
evidenced by each party's execution hereof.
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<PAGE>
IN WITNESS WHEREOF, Vendor and DFS have executed this Credit Insurance
Recourse Addendum by their duly authorized representatives all as of the 7th day
of May, 1999.
OMNIQUIP INTERNATIONAL, INC. DEUTSCHE FINANCIAL SERVICES CORPORATION
By:/s/ Allan J. Jablonsky By:/s/ Bobby Hawkins
------------------------------ ----------------------------------
Title: Assistant Treasurer Title: VP Operations
TRAK INTERNATIONAL, INC. LULL INTERNATIONAL, INC.
By:/s/ Allan J. Jablonsky By:/s/ Allan J. Jablonsky
------------------------------ -----------------------------------
Title: Assistant Treasurer Title: Assistant Treasuer
SNORKEL INTERNATIONAL, INC.
By:/s/ Allan J. Jablonsky
------------------------------
Title: Assistant Treasurer
-3-
