FORM 10-Q
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 December 31, 1998
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
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(414) 268-8965
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(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 February 10, 1999 was 14,271,000.
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Index
- --------------------------------------------------------------------------------
Page
Number
------
Part I Financial Information
Item 1. Financial Statements (Unaudited, except as noted)
Consolidated Balance Sheet at December 31, 1998
and September 30, 1998 (Audited) 3
Consolidated Statement of Income for the
three months ended December 31, 1998 and
December 31, 1997 4
Consolidated Statement of Changes in
Stockholders' Equity for the three months
ended December 31, 1998 5
Consolidated Statement of Cash Flows for the
three months ended December 31, 1998 and
December 31, 1997 6
Notes to Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 10-15
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 15
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
2
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Item 1. Financial Statements
Consolidated Balance Sheet
(Dollars in Thousands Except Per Share Data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $ 933 $ 4,684
Accounts receivable, net 60,738 66,580
Inventories 86,789 71,065
Prepaid expenses and other current assets 10,350 10,020
--------------- ---------------
Total current assets 158,810 152,349
Property, plant and equipment, net 47,331 41,375
Goodwill, net 119,394 120,746
Other assets, net 1,869 1,992
--------------- ---------------
$ 327,404 $ 316,462
=============== ===============
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $ 14,553 $ 13,750
Accounts payable 50,422 47,834
Accrued liabilities 25,496 31,873
--------------- ---------------
Total current liabilities 90,471 93,457
--------------- ---------------
Long-term debt 132,021 124,250
Other noncurrent liabilities, net 418 418
Deferred income taxes 3,368 3,368
--------------- ---------------
135,807 128,036
--------------- ---------------
Commitments and contingencies (Notes 3 and 6)
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; 14,271,000 and 14,270,000 shares
issued and outstanding, respectively 143 143
Additional paid-in capital 44,128 44,128
Other (731) (754)
Cumulative translation adjustment (479) (1,657)
Retained earnings 58,065 53,109
--------------- ---------------
Total stockholders' equity 101,126 94,969
--------------- ---------------
$ 327,404 $ 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 Per Share Data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months Three months
ended ended
December 31, December 31
1998 1997
<S> <C> <C>
Net sales $ 113,513 $ 84,575
Cost of sales 88,907 63,433
------------ ------------
Gross profit 24,606 21,142
Selling, general and administrative expenses 13,092 9,459
------------ ------------
Operating profit 11,514 11,683
Other expenses:
Interest on indebtedness 2,510 1,805
Other finance charges 470 674
Other, net (36) (47)
------------ ------------
2,944 2,432
------------ ------------
Income before income taxes and extraordinary item 8,570 9,251
Provision for income taxes 3,471 3,711
------------ ------------
Income before extraordinary item 5,099 5,540
Extraordinary item - loss on debt refinancing,
net of income tax benefit of $371 - (545)
------------ ------------
Net income $ 5,099 $ 4,995
============ ============
Basic earnings per share:
Income before extraordinary item $ 0.36 $ 0.39
Extraordinary item - (0.04)
------------ ------------
Net income $ 0.36 $ 0.35
============ ============
Weighted average shares 14,271 14,255
============ ============
Diluted earnings per share:
Income before extraordinary item $ 0.36 $ 0.39
Extraordinary item - (0.04)
------------ ------------
Net income $ 0.36 $ 0.35
============ ============
Weighted average shares 14,287 14,366
============ ============
</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)
- --------------------------------------------------------------------------------
<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) $ 5,099 5,099 5,099
Other comprehensive income:
Foreign currency translation
adjustments (unaudited) 1,178 1,178 1,178
-----------
Comprehensive income (unaudited) $ 6,277
===========
Partial repayment of stock
subscriptions receivable (audited) 23 23
Dividends paid (unaudited) (143) (143)
---------- ------------ ---------- ------------ --------- ---------
Balance, December 31, 1998 $ 58,065 $ (479) $ 143 $ 44,128 $ (731) $101,126
========== ============ ========== ============ ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months Three months
ended ended
December 31, December 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,099 $ 4,995
Adjustments to reconcile net income to net cash provided
by operating activities, excluding the effect of an acquisition:
Depreciation 1,618 892
Amortization 849 710
Loss on debt refinancing - 916
Decrease in notes receivable 10 10
(Increase) decrease in current assets, excluding the
effect of an acquisition:
Accounts receivable, net 5,842 (7,066)
Inventories (15,724) (1,217)
Prepaid expenses and other current assets (330) (66)
Increase (decrease) in current liabilities, excluding
the effect of an acquisition:
Accounts payable 2,588 (3,819)
Other current liabilities (5,812) (6,922)
------------- -------------
Net cash used in operating activities (5,860) (11,567)
------------- -------------
Cash flows from investing activities:
Acquisition of net assets of Snorkel Division of Figgie International Inc. - (107,640)
Capital expenditures, net (7,574) (1,424)
------------- -------------
Net cash used in investing activities (7,574) (109,064)
------------- -------------
Cash flows from financing activities:
Proceeds from refinancing - 125,000
Net proceeds from revolver 11,000 28,640
Payments on long-term debt (2,426) (31,125)
Payment of dividends (143) (142)
Financing costs - (1,742)
Other 74 -
------------- -------------
Net cash provided by financing activities 8,505 120,631
------------- -------------
Effect of exchange rate changes on cash 1,178 -
------------- -------------
Net change in cash (3,751) 0
Cash beginning of period 4,684 5
------------- -------------
Cash at end of period $ 933 $ 5
============= =============
</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
(Dollars in Thousands Except Per Share Data)
- --------------------------------------------------------------------------------
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 Form 10-K
filed 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 year-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 quarter ended
December 31, 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 borrowing under a new $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 is expected to result in additional
goodwill for financial reporting purposes. 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 new credit facility which replaced the
existing Loan and Security Agreement. The new agreement provides for a
$165,000 credit facility consisting of a $40,000 revolving credit
facility which expires in 2004 and a $125,000 term loan. The term loan
requires quarterly principal payments 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 an additional rate (ranging from 0.0% to 1.125%) based on the
Company's leverage ratio (debt/EBITDA). At December 31, 1998, the
interest rate on the Company's borrowings ranged from 6.1% to 7.8%.
Amounts outstanding under the revolving credit facility and term loan
at December 31, 1998 were $34,000 and $111,574, respectively. In
addition, the Company had
7
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Item 1. Financial Statements
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
- --------------------------------------------------------------------------------
approximately $200 in outstanding letters of credit and had unused
borrowing capacity of $4,800 under this facility.
In conjunction with entering into the new credit facility, the Company
recognized an extraordinary loss in November 1997 of $545 attributable
to the write-off of $916 of unamortized deferred financing fees, net of
a related $371 tax benefit.
4. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
(unaudited)
<S> <C> <C>
Raw material and purchased components $ 46,292 $ 43,521
Work-in-process 12,182 11,751
Finished goods 28,083 15,651
Unbilled government contract costs 232 142
--------------------- ------------------
$ 86,789 $ 71,065
===================== ==================
</TABLE>
5. 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 December 31,
1998 and the changes during the three months then ended is presented
below:
<TABLE>
<CAPTION>
Shares Weighted average
exercise price
<S> <C> <C>
Outstanding at September 30, 1998 817,250 $ 14.84
Granted 5,000 $ 15.25
Exercised - -
Forfeited (10,000) $ 15.5
---------------
Outstanding at December 31, 1998 812,250 $ 14.84
===============
Exercisable at December 31, 1998 - -
</TABLE>
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 three months ended December 31, 1998 and 1997, 1,000 shares and
10,000 shares, respectively, of restricted stock were granted. No
performance stock awards have been granted by the Company at December
31, 1998.
6. 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
8
<PAGE>
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 $60,452 at December 31, 1998. Under the Company's agreements, the
Company either provides a back-up guarantee of a dealer's credit or an
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).
7. 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 has adopted SFAS 130 for the quarter ended December 31,
1998.
8. 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 months ended
December 31, 1998 and 1997 (share data in thousands):
<TABLE>
<CAPTION>
Three months ended
December 31,
1998 1997
<S> <C> <C>
Numerator:
Income before extraordinary loss $ 5,099 $ 5,540
===========================
Denominator:
Basic weighted average shares outstanding 14,271 14,255
Effect of dilutive securities:
Stock options 16 111
---------------------------
Weighted average shares and dilutive potential common shares 14,287 14,366
===========================
</TABLE>
9
<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 months ended
December 31, 1998 compared to the three months ended December 31, 1997. The
discussion should be read in conjunction with the consolidated financial
statements as of September 30, 1998 and the associated notes to consolidated
financial statements included in the Company's Form-10K filed 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 new $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 is expected to result in additional goodwill for
financial reporting purposes. Snorkel's results of operations are reflected in
the accompanying financial statements from the date of acquisition.
Certain statements included herein are forward-looking statements concerning the
Company's operations, economic performance and financial condition. Such
forward-looking statements are subject to various 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 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.
10
<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 December 31,
1998 1997
---- ----
Net sales 100.0% 100.0%
Cost of sales 78.3% 75.0%
-------------- --------------
Gross profit 21.7% 25.0%
Selling, general and administrative
expenses 11.6% 11.2%
-------------- --------------
Operating income 10.1% 13.8%
Interest expense 2.2% 2.1%
Other finance charges 0.4% 0.8%
-------------- --------------
Income before income taxes and
extraordinary item 7.5% 10.9%
Provision for income taxes 3.0% 4.4%
-------------- --------------
Income before income taxes 4.5% 6.5%
Extraordinary item - -0.6%
-------------- --------------
Net income 4.5% 5.9%
============== ==============
Three months Ended December 31, 1998 Compared to Three Months Ended
December 31, 1997
Net sales for the three months ended December 31, 1998 were $113.5 million, an
increase of $28.9 million over net sales of $84.6 million for the three months
ended December 31, 1997. Of the $28.9 million increase, net sales from the
Snorkel division (acquired in November 1997) accounted for $23.9 million, while
net sales for the existing OmniQuip business increased by $5.0 million or 7.5%.
($ in millions)
Three months ended
December 31,
<TABLE>
<CAPTION>
Increase
1998 1997 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
Commercial Telescopic Material Handlers $ 55.6 $ 52.6 $ 3.0
Military Telescopic Material Handlers 5.9 5.3 0.6
Compact Products (1) 5.2 5.3 (0.1)
Aerial Work Platforms 37.4 16.1 21.3
Parts and Other Products 9.4 5.3 4.1
-------------- -------------- ------------
$ 113.5 $ 84.6 $ 28.9
============== ============== ============
</TABLE>
- ----------
(1) Compact products includes skid steer loaders, mini-excavators, power
haulers and power lifters and articulated forklifts and loaders.
11
<PAGE>
Commercial sales of telescopic material handlers for the three months ended
December 31, 1998 increased approximately 5.7% over the three months ended
December 31, 1997 due to continued strong market demand. Military sales under
the U.S. Army ATLAS contract increased approximately 11.3% over the three months
ended December 31, 1997. Sales of aerial work platforms increased 17% on a pro
forma basis, also due to strong market demand. Sales of parts and other products
for the three months ended December 31, 1998 increased approximately 77.9% over
the three months ended December 31, 1997, primarily due to the net sales of
Snorkel parts.
Gross profit for the three months ended December 31, 1998 was $24.6 million, an
increase of $3.5 million over gross profit of $21.1 million for the three months
ended December 31, 1997. The increase in gross profit primarily reflected the
increase in net sales discussed above. The gross margin decreased to 21.7% for
the three months ended December 31, 1998 from 25.0% for the three months ended
December 31, 1997. The decline in gross margin was due partly to the addition of
Snorkel sales at a lower gross margin than existing OmniQuip sales. Gross margin
for the existing OmniQuip business decreased to 24.4% for the three months ended
December 31, 1998 from 26.7% for the three months ended December 31, 1997 due to
manufacturing inefficiencies at various of the Company plants, primarily as a
result of a relocation of boom manufacturing operations for all telescopic
material handler product lines to a new facility in Port Washington, and to
higher volume discounts and rebates to large national rental fleet customers.
Selling, general and administrative (SG&A) expenses for the three months ended
December 31, 1998 were $13.1 million, an increase of $3.6 million over SG&A
expenses of $9.5 million for the three months ended December 31, 1997. Of the
$3.6 million increase, $2.5 million resulted from the acquisition of Snorkel,
including $0.2 million of goodwill amortization. SG&A expenses as a percentage
of net sales increased to 11.5% for the three months ended December 31, 1998
from 11.2% for the three months ended December 31, 1997. This increase in the
SG&A percentage reflected the effect of the acquisition of Snorkel, whose SG&A
percentage is higher than that of OmniQuip.
Operating income for the three months ended December 31, 1998 was $11.5 million,
a decrease of $0.2 million, or 1.4%, from operating income of $11.7 million for
the three months ended December 31, 1997 due to the factors discussed above.
Operating margin decreased to 10.1% for the three months ended December 31, 1998
from 13.8% for the 1997 period, primarily reflecting the effects of the
acquisition of Snorkel and the gross margin decline discussed above. The decline
in operating margin primarily reflected the acquisition of Snorkel as discussed
above. Excluding Snorkel, operating margin declined to 12.3% for the three
months ended December 31, 1998 from 16.0% for the three months ended December
31, 1997 due to the decline in gross margin discussed above.
Interest expense for the three months ended December 31, 1998 was $2.5 million,
an increase of $0.7 million, compared to interest expense of $1.8 million for
the three months ended December 31, 1997. The increase in interest expense was
due primarily to the increased debt level outstanding for the three months ended
December 31, 1998 compared to the three months ended December 31, 1997.
Other finance charges, which are primarily comprised of dealer-related finance
charges, were $0.4 million for the three months ended December 31, 1998 compared
to $0.7 million for the three months ended December 31, 1997, reflecting a lower
proportion of financed sales for the 1998 period. Other finance charges as a
percentage of net sales decreased to 0.4% from 0.8%. The reduction in finance
charges as a percentage of sales primarily reflected a shift in sales to the
national rental fleets which historically have not utilized the dealer-related
finance programs.
Provision for income taxes for the three months ended December 31, 1998 was $3.5
million compared to $3.7 million for the three months ended December 31, 1997.
The decrease reflected the decrease in income before income taxes of $0.7
million. The Company's effective tax rate was 40.5% for the three months ended
December 31, 1998 compared to 40.3% for the three months ended December 31,
1997.
Income from continuing operations for the three months ended December 31, 1998
was $5.1 million, a decrease of $0.4 million, or 8%, from income from continuing
operations for the three months ended December 31, 1997 as a result of the
factors described above.
12
<PAGE>
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 three months ended December 31, 1998 was $5.1 million, an
increase of $0.1 million or 0.2% over net income of $5.0 million for the three
months ended December 31, 1997, as a result of the factors described above.
Basic and diluted earnings per share were $0.36 for the three months ended
December 31, 1998. Basic and diluted earnings per share, before the effect of
the extraordinary item discussed above, were $0.39 for the three months ended
December 31, 1997. Basic and diluted earnings per share for the three months
ended December 31, 1997 were $0.35.
Capital Resources and Liquidity
Net cash used in operating activities of the Company was $5.9 million for the
three months ended December 31, 1998. Working capital (excluding the effects of
changes in cash and current portions of long-term debt) increased by $13.4
million in the period, primarily reflecting a $15.7 million increase in
inventories and a $5.8 million decrease in other current liabilities, offset by
a $5.8 million decrease in accounts receivable and a $2.6 million increase in
accounts payable. The decrease in accounts receivable and other current
liabilities primarily reflected customer utilization of volume rebates. The
increase in inventories was due to certain delayed shipments due to the buying
patterns of the large national rental fleets. Net cash used in investing
activities was $7.6 million for capital expenditures. See further discussion on
the capacity expansion program below.
Net cash used in operating activities of the Company was $11.6 million for the
three months ended December 31, 1997. Working capital (excluding the effects of
changes in cash and current portions of long-term debt) increased by $19.1
million in the period, primarily reflecting a $7.1 million increase in accounts
receivable, a $6.9 million decrease in other current liabilities and a $3.8
million decrease in accounts payable. Accounts receivable increased due to
timing of shipments at the end of the quarter and temporary delays in collecting
certain accounts. The decrease in other current liabilities primarily reflected
the issuance of volume rebates and the payment of year-end bonuses. The decrease
in accounts payable primarily reflected the pay off of past due accounts at
Snorkel subsequent to the acquisition on November 17, 1997. Net cash used in
investing activities was $109.1 million including $1.4 million for capital
expenditures and $107.6 million for acquisition of the net assets of the Snorkel
Division of Figgie International, Inc. These cash requirements were financed
with a new credit facility described below.
During November 1997, in connection with the acquisition of Snorkel, the Company
entered into a new credit facility which replaced the existing loan and security
agreement. The new agreement provides for a $165.0 million credit facility
consisting of a $40.0 million revolving credit facility and a $125.0 million
term loan. The term loan requires quarterly principal payments ranging from $2.5
million to $6.25 million commencing on February 28, 1998 with the final maturity
on November 17, 2004. Borrowings under the agreement bear interest at a rate
that is determined from a pricing grid based on the Company's leverage ratio
(debt / EBITDA). At December 31, 1998, the interest rate under this agreement
was prime or LIBOR plus 0.875%. In conjunction with entering into the new credit
facility, the Company recognized an extraordinary loss in November 1997 of $0.5
million attributable to the write-off of $0.9 million of unamortized deferred
financing fees, net of related tax benefits.
Amounts outstanding under the credit facility at December 31, 1998 were $146.6
million. In addition, the Company had $0.2 million in outstanding letters of
credit under this revolving line of credit facility. At December 31, 1998 the
Company had unused borrowing capacity of $4.8 million under this facility.
Pursuant to the Snorkel acquisition, the Company will be required to pay an
additional purchase price of up to $50 million in May 1999. The additional
payment will be equal to the amount of the net sales of Snorkel for the
twelve-month period commencing on April 1, 1998 and ending on March 31, 1999 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 currently
estimates this payment is likely to be between $20 million
13
<PAGE>
and $40 million and intends to finance such payment through an increase in the
existing credit facility. Such an increase in the credit facility would be
subject to approval by the banks and will likely result in a higher interest
rate.
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 expected to address these issues. However, it is expected that
these capacity constraints will continue to affect the material handling
business in fiscal 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 $22
million, approximately $16 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 which are likely
to be financed through a capital lease. It is anticipated that approximately 75%
of the capital spending for fiscal year 1999 will occur in the first half of the
fiscal year.
Backlog
The Company's backlog as of December 31, 1998 was approximately $143.9 million
of which $30.3 million relates to the ATLAS military contract. It is expected
that substantially all of the commercial backlog and approximately 70% of the
military backlog will be shipped before December 31, 1999.
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 $65.0 million outstanding under an interest rate swap
agreement which fixes LIBOR at 6.24% through November 2004. 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 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 beginning after June 15, 1999. The Company is
continuing to evaluate the provisions of SFAS 133 to determine its impact on
financial position and results of operations.
14
<PAGE>
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 2000. The
Company has established a plan, utilizing third-party consultants where
necessary, 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 June 1999 and for
testing to be conducted in July 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 July 31, 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 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 April 1999.
The Company plans to develop a contingency plan by June 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.
15
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
PART II. Other Information
- --------------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
On October 2, 1998, a Current Report on Form 8-K was filed to
report, pursuant to Item 5 thereof, the amendment of the
Rights Agreement, dated as of August 21, 1998, by and between
the Company and First Chicago Trust Company of New York, as
Rights Agent, and the amendment of the By-Laws of the Company.
16
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OMNIQUIP INTERNATIONAL, INC.
Date: February 11, 1999 /s/ Curtis J. Laetz
-------------------
Curtis J. Laetz
Senior Vice President, Chief Administrative
Officer and Assistant Secretary
/s/ David Peffer
----------------
David Peffer
(Acting principal accounting and
financial officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This document contains summary financial information extracted from the attached
quarterly report on Form 10-Q for the three months ended December 31, 1998 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 933
<SECURITIES> 0
<RECEIVABLES> 62,220
<ALLOWANCES> 1,482
<INVENTORY> 86,789
<CURRENT-ASSETS> 158,810
<PP&E> 47,331
<DEPRECIATION> 9,401
<TOTAL-ASSETS> 327,404
<CURRENT-LIABILITIES> 90,471
<BONDS> 132,021
0
0
<COMMON> 143
<OTHER-SE> 42,918
<TOTAL-LIABILITY-AND-EQUITY> 327,404
<SALES> 113,513
<TOTAL-REVENUES> 113,513
<CGS> 88,907
<TOTAL-COSTS> 101,999
<OTHER-EXPENSES> 434
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,510
<INCOME-PRETAX> 8,570
<INCOME-TAX> 3,471
<INCOME-CONTINUING> 5,099
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,099
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
</TABLE>
