================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[|X|] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended March 31, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from ______ to _______
Commission file number: 333-17305
International Knife & Saw, Inc.
(Exact name of registrant as specified in its charter)
Delaware 57-0697252
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1299 Cox Avenue
Erlanger, Kentucky 41018
(Address of principal executive offices)
(859) 371-0333
(Registrant's telephone number, including area code)
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 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 __
As of April 28, 2000, there were 481,971 shares of the registrant's common stock
outstanding, all of which were owned by an affiliate of the registrant.
================================================================================
<PAGE>
International Knife & Saw, Inc. and Subsidiaries
Index
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 13
Part II. Other Information
Item 1. Legal Proceedings 14
Item 2. Change in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
(a) Exhibits
(b) Reports on Form 8-K 14
Signatures 15
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
International Knife & Saw, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, December 31,
2000 1999
-------------------------------------
Assets (in thousands)
Current assets:
Cash and cash equivalents $ 2,836 $ 1,862
Accounts receivable, trade, less allowances for
doubtful accounts of $1,977 and $1,856 30,266 25,620
Inventories 32,185 27,922
Due from parent 1,192 1,159
Other current assets 2,692 2,759
-------------------------------------
Total current assets 69,171 59,322
Other assets:
Goodwill 16,578 17,015
Debt issuance costs 2,620 2,736
Other noncurrent assets 2,774 2,163
-------------------------------------
21,972 21,914
Property, plant and equipment-net 49,637 46,382
-------------------------------------
Total assets $ 140,780 $ 127,618
=====================================
</TABLE>
See accompanying notes.
3
<PAGE>
International Knife & Saw, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, December 31,
2000 1999
---------------------------------------
(in thousands)
Liabilities and shareholder's deficit Current liabilities:
Notes payable $ 11,853 $ 4,362
Current portion of long-term debt 3,447 2,465
Accounts payable 13,013 13,007
Accrued liabilities 15,127 10,619
---------------------------------------
Total current liabilities 43,440 30,453
Long-term debt, less current portion 110,885 112,391
Other liabilities 9,966 6,557
---------------------------------------
Total liabilities 164,291 149,401
Minority interest 1,113 1,063
Shareholder's deficit:
Common stock, no par value - authorized - 580,000 shares;
issued - 526,904 shares; outstanding - 481,971 shares 5 5
Additional paid-in capital 10,153 10,153
Accumulated deficit (27,015) (25,898)
Accumulated other comprehensive loss (4,335) (3,674)
Treasury stock, at cost (3,432) (3,432)
---------------------------------------
Total shareholder's deficit (24,624) (22,846)
=======================================
Total liabilities and shareholder's deficit $ 140,780 $ 127,618
=======================================
</TABLE>
See accompanying notes.
4
<PAGE>
International Knife & Saw, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Quarter ended
March 31,
2000 1999
----------------------------------
(in thousands, except per
share amounts)
Net sales $ 43,663 $ 39,236
Cost of sales 31,409 27,576
----------------------------------
Gross profit 12,254 11,660
Selling, general and administrative expenses 9,552 8,267
----------------------------------
Operating income 2,702 3,393
Other expenses (income):
Interest income (21) (23)
Interest expense 3,104 3,167
Minority interest 66 54
----------------------------------
3,149 3,198
----------------------------------
Income (loss) before income taxes (447) 195
Income tax provision 670 79
==================================
Net (loss) income $ (1,117) $ 116
==================================
Net (loss) income per common share $ (2.32) $ .24
See accompanying notes.
</TABLE>
5
<PAGE>
International Knife & Saw, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Quarter ended
March 31,
2000 1999
----------------------------
(in thousands)
Operating activities
Net (loss) income $ (1,117) $ 116
Adjustments to reconcile net (loss) income to net cash (used)
provided by operating activities:
Depreciation and amortization 1,935 1,729
Loss (gain) on sale of property, plant and equipment 16 (44)
Minority interest in income of subsidiary 66 54
Changes in operating assets and liabilities,
net of effects from purchases of operations:
Accounts receivable (2,347) (1,847)
Inventories 228 1,040
Accounts payable (710) 1,603
Accrued liabilities 401 3,481
Other 406 57
----------------------------
Net cash (used) provided by operating activities (1,122) 6,189
Investing activities
Purchases of operations, net of cash acquired (956) -
Purchases of property, plant and equipment (2,071) (1,820)
Proceeds from sale of property, plant and equipment 68 90
Decrease (increase) in notes receivable and other assets (3) 317
----------------------------
Net cash used by investing activities (2,962) (1,413)
Financing activities
Decrease (increase) in amounts due to parent 33 (341)
Increase in notes payable and long-term debt 9,997 7,857
Repayment of notes payable and long-term debt (4,822) (10,447)
----------------------------
Net cash provided (used) by financing activities 5,208 (2,931)
Effect of exchange rates on cash and cash equivalents (150) (72)
----------------------------
Increase in cash and cash equivalents 974 1,773
Cash and cash equivalents at beginning of period 1,862 2,032
----------------------------
Cash and cash equivalents at end of period $ 2,836 $ 3,805
============================
</TABLE>
See accompanying notes.
6
<PAGE>
International Knife & Saw, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
(in thousands)
1. Basis of Presentation
The unaudited interim consolidated financial statements contain all adjustments,
consisting of normal recurring adjustments, which are, in the opinion of the
management of International Knife & Saw, Inc. and its consolidated subsidiaries
("the Company"), necessary to present fairly the consolidated financial position
and consolidated results of operations and cash flows of the Company. Results of
operations for the periods presented are not necessarily indicative of the
results for the full fiscal year.
These financial statements should be read in conjunction with the audited
consolidated financial statements and related notes included in the Company's
Form 10-K for the year ended December 31, 1999. The consolidated balance sheet
at December 31, 1999 has been derived from the audited consolidated financial
statements at that date. Certain 1999 amounts have been reclassified to conform
to the current year presentation.
2. Acquisitions
In January 2000 the Company's German subsidiary acquired all of the shares of
Boehler Miller Messer und Saegen GmbH ("BMMS"). BMMS is headquartered in
Waidhofen, Austria. The purchase price consisted of 13,300 Austrian Schillings
(approximately $956) in cash, net of cash acquired, and 63,000 Austrian
Schillings (approximately $4,530) in assumed debt. The Company's lines of credit
were increased in order to finance the cash payment. Additional consideration is
contingent upon BMMS achieving certain annual earnings and would be payable in
2002. BMMS produces knives, saws and ground flats for the wood, paper and metal
industries with annual sales of approximately 300,000 Austrian Schillings
(approximately $21,600). The acquisition was accounted for under the purchase
method. There was no goodwill on this acquisition.
3. Comprehensive Income
The Company includes minimum pension liabilities and foreign currency
translation adjustments in other comprehensive income. For the quarters ended
March 31, 2000 and 1999, total comprehensive losses amounted to $1,778 and
$1,262, respectively, including $661 and $1,378 of other comprehensive losses
related to foreign currency translation adjustments.
7
<PAGE>
International Knife & Saw, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(Unaudited)
(in thousands)
4. Notes Payable and Long -Term Debt
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, December 31,
2000 1999
--------------------------------------
Notes payable:
Notes payable on demand in German Marks to a German bank,
issued under revolving credit agreements,
interest payable quarterly $ 5,200 $ 1,347
Notes payable on demand in Chinese Yuan Renminbi to Chinese banks,
issued under revolving credit agreements, interest
payable monthly 1,628 1,765
Notes payable on demand in Austrian Schillings to Austrian banks 1,391 -
Notes payable on demand in U.S. Dollars to a U.S. bank 775 -
Notes payable on demand in U.S. Dollars to a German bank, issued
under revolving credit agreements, interest payable quarterly 2,859 1,250
======================================
$ 11,853 $ 4,362
======================================
March 31, December 31,
2000 1999
--------------------------------------
Long-term debt:
11-3/8% Senior Subordinated Notes due 2006 $ 90,000 $ 90,000
Notes payable in German Marks to a German bank 15,543 16,399
Notes payable in Chinese Yuan Renminbi to
Chinese banks 1,560 1,680
Capitalized lease obligations in U.S. dollars to U.S. lenders 3,984 4,261
Notes payable in Austrian Schillings to an Austrian bank 1,407 -
Promissory note payable in Dutch Guilders to a
former shareholder of the Diacarb Company 1,761 2,414
Other 77 102
--------------------------------------
114,332 114,856
Less current portion 3,447 2,465
======================================
$ 110,885 $ 112,391
======================================
</TABLE>
At March 31, 2000, the Company had committed global, multi-currency credit
facilities of US $40,002. Unused committed lines of credit from these facilities
were US $18,838, compared to US $16,801 at December 31, 1999. A facility fee of
0.25% per annum is charged on the unused portion of the U.S. dollar component of
the facility.
8
<PAGE>
International Knife & Saw, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(Unaudited)
(in thousands)
5. Income Taxes
IKS Corporation, of which the Company is a wholly-owned subsidiary, files a
consolidated Federal income tax return which includes the Company. The Company's
provision/benefit for income taxes includes U.S. federal, state, and local
income taxes as well as non-U.S. income taxes in certain jurisdictions. The
current and deferred tax provision and benefit for the Company are recorded as
if it filed on a stand-alone basis. All participants in the consolidated income
tax return are separately liable for the full amount of the taxes, including
penalties and interest, if any, which may be assessed against the consolidated
group. The current provision/benefit for United States income taxes is recorded
to the intercompany account with IKS Corporation. The Company did not record a
tax benefit related to the pre-tax losses in the United States for the quarter
ended March 31, 2000, in accordance with income tax accounting rules.
6. Inventories
March 31, December 31,
2000 1999
----------------------------------------
Finished goods $ 18,841 $ 17,120
Work in process 5,652 5,088
Raw materials and supplies 7,692 5,714
----------------------------------------
$ 32,185 $ 27,922
========================================
7. Organization
The Company operates in one business segment - industrial knives and saws. The
Company manufactures, markets and services primarily industrial knives and saws
internationally, and its customers include distributors, original equipment
manufacturers and customers purchasing replacement parts and services. The
Company has a leading market share in each of the major sectors it serves: Paper
& Packaging; Wood; Metal; and Plastic/Recycling. The Company's operations are
principally in the United States, Germany and Austria, representing 50%, 20%,
and 12% of 2000 net sales, respectively. The Company plans to continue its
international growth. As a result of the Company's broad product range and
numerous applications, no customer accounts for more than 3% of net sales. The
Company performs periodic credit evaluations of its customers and generally does
not require collateral.
Sales attributable to German and Austrian operations are based on external sales
generated by subsidiaries located in those countries.
9
<PAGE>
International Knife & Saw, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(Unaudited)
(in thousands)
7. Organization (continued)
The following table summarizes the Company's United States, German, Austrian and
other operations.
<TABLE>
<CAPTION>
<S> <C> <C>
Quarter ended March 31,
2000 1999
- ----------------------------------------------------- ------------------------- -------------------------
United States Operations:
Net sales - Customers $ 21,928 $ 22,639
Long Lived Assets 22,449 22,288
German Operations:
Net sales - Customers $ 8,612 $ 9,049
Long Lived Assets 12,734 13,914
Austrian Operations:
Net sales - Customers $ 5,392 $ -
Long Lived Assets 4,012 -
Other Operations:
Net sales - Customers $ 7,731 $ 7,548
Long Lived Assets 11,055 12,173
Consolidated:
Net sales $ 43,663 $ 39,236
Long Lived Assets 50,250 48,375
</TABLE>
8. Subsequent Event
On April 25, 2000, P. Daniel Miller, the Company's President and CEO, submitted
his resignation to the Board of Directors of the Company effective May 1, 2000.
The Company expects to incur approximately $400 in severance costs related to
Mr. Miller's departure. These costs will be included in the results for the
second quarter of 2000.
As of that date, the Board of Directors established an executive committee
comprised of Messrs. Thomas W.G. Meyer, Executive Vice President, Europe and
Asia; William M. Schult, Executive Vice President-CFO, Treasurer and Secretary;
Bradley H. Widmann, Vice President - Operations for the Americas; and Jeffrey H.
Welday, Vice President of Sales and Marketing for the Americas. This committee
is responsible for all operations of the Company and reports directly to the
Board of Directors.
10
<PAGE>
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward looking statements. Certain matters discussed in
this filing could be characterized as forward looking statements, such as
statements relating to plans for future expansion, other capital spending,
financing sources and effects of regulation and competition. Such forward
looking statements involve important risks and uncertainties that could cause
actual results to differ materially from those expressed in such forward looking
statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the
Consolidated Financial Statements and related notes included in the Company's
Form 10-K as of and for each of the three years in the period ended December 31,
1999.
General
The Company is a global leader in the manufacturing, servicing and
marketing of industrial and commercial machine knives and saws. The Company has
been manufacturing knives and saws for nearly 100 years, beginning in Europe and
expanding its presence to the United States in the 1960s. The Company operates
on an international basis with facilities in North America, Europe, Asia and
South America and products sold in over 75 countries. The Company offers a broad
range of products, used for various applications in numerous markets.
Presence outside the U.S.
The Company's North American operations account for 58% of its net
sales and 31% of its operating income for the first quarter of 2000. Its other
international operations account for the remainder and are located primarily in
Europe, 38% of first quarter net sales, and 61% of first quarter operating
income, and Asia.
The Company's operating results are subject to fluctuations in foreign
currency exchange rates as well as the currency translation of its foreign
operations into U.S. Dollars. The Company manufactures products in the U.S.,
Germany, Austria, Canada and China and exports products to more than 75
countries. The Company's foreign sales, the majority of which occur in European
countries, are subject to exchange rate volatility. In addition, the Company
consolidates German, Austrian, Dutch, French, Canadian, Mexican, Chinese and
other Asian operations and changes in exchange rates relative to the U.S. Dollar
have impacted financial results. As a result, a decline in the value of the U.S.
Dollar relative to these other currencies can have a favorable effect on the
profitability of the Company and an increase in the value of the U.S. Dollar
relative to these other currencies can have a negative effect on the
profitability of the Company. Comparing exchange rates for the first quarter of
2000 to the first quarter of 1999, there was a negative impact of $2.0 million
on sales with a minimal impact on net income. In addition, in the first quarter
of 2000 there was a decrease in shareholder's equity from December 31, 1999 due
to a $.7 million change in foreign currency translation adjustment. To mitigate
the short-term effect of changes in currency exchange rates on the Company's
foreign currency based purchases and its functional currency based sales, the
Company occasionally hedges its exposure by entering into foreign exchange and
U.S. Dollar forward contracts to hedge a portion of its budgeted (future) net
foreign exchange and U.S. Dollar transactions over periods ranging from one to
six months.
Results of Operations
As used in the following discussion of the Company's results of
operations, (i) the term "gross profit" means the dollar difference between the
Company's net sales and cost of sales and (ii) the term "gross margin" means the
Company's gross profit divided by its net sales.
11
<PAGE>
First quarter ended March 31, 2000 compared to first quarter ended March 31,
1999
Net Sales: Net sales increased 11.3% to $43.7 million for the first
quarter of 2000 from $39.2 million for the first quarter of 1999 primarily
attributable to the acquisition of BMMS in January 2000. The Company experienced
sales reductions in its North American operations (2.3% to $25.2 million) for
the first quarter of 2000 compared to the same period in 1999 primarily
attributable to continuing organizational issues. The Company has been
addressing these organizational issues through several senior management changes
including the hiring of a new CEO in May 1999. On April 25, 2000, P. Daniel
Miller, the Company's President and CEO, resigned from the Company effective May
1, 2000. An executive committee was established comprised of four officers of
the Company which reports directly to the Board of Directors. The Company
experienced sales improvements (38.0% to $18.5 million) in its other operations
for the first quarter of 2000 compared to the same period in 1999 primarily
attributable to the BMMS acquisition.
Gross Profit: Gross profit increased slightly to $12.3 for the first
quarter of 2000 up from $11.7 million for the same period in 1999. Gross margin
decreased to 28.1% for the first quarter of 2000 compared to 29.7% for the same
period in 1999 primarily attributable to softness in the North American market
caused by the factors noted above. The Company experienced gross profit declines
in its North American operations (14.0% to $6.4 million) for the first quarter
of 2000 compared to the same period in 1999 primarily attributable to the
factors noted above. The Company experienced gross profit improvements (37.2% to
$5.9 million) in its other operations for the first quarter of 2000 compared to
the same period in 1999 primarily attributable to the BMMS acquisition in
January 2000.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses were $9.6 million for the first quarter of 2000 compared
to $8.3 million for the same period in 1999. The increase is primarily
attributable to the BMMS acquisition. Selling, general and administrative
expenses increased to 21.9% from 21.1% of sales for the respective periods.
Interest Expense, net: Net interest expense remained constant at $3.1
million for the first quarter of 2000 and for the same period in 1999 .
Income Taxes: Due to pre-tax losses in the United States in the first
quarter of 2000 for which the Company did not record the related current tax
benefits in accordance with income tax accounting rules, and as a result of
pre-tax income in the Company's other operations for which the Company recorded
related tax provisions, the Company has recorded a consolidated provision for
income tax on a consolidated pre-tax loss of $447,000. The Company's effective
tax rate was 40.5% for the first quarter of 1999. The significant change in
income taxes from 1999 is due to the above factors and significant changes in
income contributions for the Company's operations in certain tax jurisdictions.
12
<PAGE>
Liquidity and Capital Resources
The Company's principal capital requirements are to fund working
capital needs, to meet required debt and interest payments, and to complete
planned maintenance and expansion expenditures. The Company anticipates that its
operating cash flow, together with available borrowings of $18.8 million under
existing credit facilities, will be sufficient to meet its capital requirements.
As of March 31, 2000, the Company's total long term debt and shareholder's
deficit was $114.3 million and $24.6 million, respectively.
Net cash flow used in operations aggregated $1.1 million for the first
quarter of 2000 compared to $6.2 million provided by operations for the same
period in 1999. The decrease was primarily attributable to a $6.4 million
increase in working capital and a $1.2 million decrease in net income compared
to 1999.
Cash used in investing activities for the first quarter of 2000 was
$3.0 million compared to $1.4 million for the same period in 1999. The increased
use of cash is primarily due to the BMMS acquisition.
Cash provided by financing activities for the first quarter of 2000 was
$5.2 million compared to cash used of $2.9 million for the same period in 1999.
The increase in cash provided compared to the prior year is primarily due to
increased net borrowings in 2000 compared to 1999 due to the BMMS acquisition.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Information required by Item 3 is included in Item 2 on page 11 of this
Form 10-Q.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is from time to time involved in legal proceedings arising
in the normal course of business. The Company believes there is no outstanding
litigation which could have a material impact on its financial position or
results of operations.
Item 2. Change in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit
No. Description
------- ------------------------------------------------
10.15 Summary of Permitted Indebtedness, Commitments
from Banks, and Availability at March 31, 2000
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
14
<PAGE>
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.
INTERNATIONAL KNIFE & SAW, INC.
By: /s/ William M. Schult
-------------------------------------------
William M. Schult
Executive Vice President - Chief
Financial Officer, Treasurer
and Secretary (Principal Financial and
Accounting Officer, and Executive
Committee member)
May 10, 2000
15
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
------- ------------------------------------------------
10.15 Summary of Permitted Indebtedness, Commitments
from Banks, and Availability at March 31, 2000
27 Financial Data Schedule
16
Summary of Permitted Indebtedness, Commitments from Banks,
and Availability at March 31, 2000
(in thousands)
Capitalized terms not otherwise defined in this summary are defined as in the
Indenture.
Pursuant to Section 4.10 of the Indenture between International Knife & Saw,
Inc. (the "Company") and United States Trust Company of New York as Trustee,
dated November 6, 1996, the Company shall not incur directly or indirectly any
Indebtedness unless certain cash flow coverage ratios are achieved. This
limitation, however, does not apply to Permitted Indebtedness.
Permitted Indebtedness includes Indebtedness of the Company arising under the
Senior Credit Facility and Indebtedness of IKS Klingelnberg GmbH and its
Subsidiaries arising under the German Subsidiary Facilities, in an aggregate
principal amount not to exceed at any time outstanding the greater of (x)
$30,000, less any permanent reduction in commitments thereunder, and (y) the
sum, at such time, of (i) 85% of the consolidated book value of net accounts
receivable of the Company and the Restricted Subsidiaries and (ii) 60% of the
consolidated book value of inventory of the Company and the Restricted
Subsidiaries.
According to the formula referred to above, Permitted Indebtedness at March 31,
2000 is equal to $42,884. The Company has commitments from banks in the amount
of $40,002. These commitments are broken down as follows:
Deutsche Bank AG has provided a $13,000 line of credit to International Knife &
Saw, Inc. under the Senior Credit Facility. This facility was initially $20,000,
but was modified and partially replaced with the unsecured line of credit from
the Fifth Third Bank of Northern Kentucky, Inc. As of March 31, 2000, $2,859 of
the Senior Credit Facility was used and $10,141 was unused. Collateral for this
facility includes inventories and accounts receivable. Covenants for this
facility are described in the letter agreement with Deutsche Bank AG dated
October 8, 1996. This letter agreement was filed by the Company in its Amended
Registration Statement on Form S-4 filed with the Securities and Exchange
Commission on January 28, 1997.
Fifth Third Bank of Northern Kentucky, Inc. has provided an unsecured $1,500
line of credit to International Knife & Saw, Inc. This facility replaced a
portion of the Senior Credit Facility. As of March 31, 2000, $775 of this
facility was used and $725 was unused.
Deutsche Bank AG has provided a DEM 68,000 ($33,275) line of credit to IKS
Klingelnberg GmbH ("GmbH") under the German Subsidiary facilities. These
facilities encompass a) a guarantee by Deutsche Bank AG of GmbH's promissory
note in the amount of DEM 3,599 ($1,761) to a former owner of the Diacarb
company (this debt has been incurred pursuant to section 4.10(b)(xiii) of the
Indenture); b) assumed debt, for
<PAGE>
which GmbH serves as guarantor, in the amount of ATS 44,000 (approximately DEM
5,718 or $2,798) on the books of and in connection with GmbH's acquisition of
Boehler Miller Messer und Saegen GmbH in January 2000; c) Indebtedness of GmbH
which was outstanding on the Issue Date in the amount of approximately DEM 6,566
($3,213); and d) a general line of credit in the amount of DEM 52,117 ($25,503).
Of this general line of credit in the amount of DEM 52,117 ($25,503), as of
March 31, 2000, DEM 35,826 ($17,531) of the facility was used and DEM 16,291
($7,972) was unused. Collateral and covenants for this facility are described in
the letter agreement with Deutsche Bank AG dated October 8, 1996. This letter
agreement was filed by the Company in its Amended Registration Statement on Form
S-4 filed with the Securities and Exchange Commission on January 28, 1997.
2
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,836,000
<SECURITIES> 0
<RECEIVABLES> 32,243,000
<ALLOWANCES> 1,977,000
<INVENTORY> 32,185,000
<CURRENT-ASSETS> 69,171,000
<PP&E> 84,280,000
<DEPRECIATION> (34,643,000)
<TOTAL-ASSETS> 140,780,000
<CURRENT-LIABILITIES> 43,440,000
<BONDS> 0
0
0
<COMMON> 5,000
<OTHER-SE> (24,629,000)
<TOTAL-LIABILITY-AND-EQUITY> 140,780,000
<SALES> 43,663,000
<TOTAL-REVENUES> 43,663,000
<CGS> 31,409,000
<TOTAL-COSTS> 31,409,000
<OTHER-EXPENSES> 9,552,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,104,000
<INCOME-PRETAX> (447,000)
<INCOME-TAX> 670,000
<INCOME-CONTINUING> (1,117,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,117,000)
<EPS-BASIC> (2.32)
<EPS-DILUTED> (2.32)
</TABLE>
