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 June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File Number 333-18957
CLARK Material Handling Company
(Exact Name of Registrant as Specified in Its Charter)
Delaware 61-1312827
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
172 Trade Street, Lexington, Kentucky 40511
(Address of Principal Executive Offices) (Zip Code)
(606) 288-1200
(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 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 ( )
As of April 30, 1997, there were 1,000 shares of the registrant's common stock,
par value $1.00 per share, outstanding, all of which were owned by an affiliate
of the registrant.
<PAGE>
CLARK MATERIAL HANDLING COMPANY
INDEX
Page No.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements 2
Consolidated Balance Sheet -
June 30, 1997 and December 31, 1996 2
Consolidated Statement of Operations -
Three Months ended June 30, 1997 and 1996 3
Consolidated Statement of Operations -
Six months ended June 30, 1997 and 1996 4
Consolidated Statement of Cash Flows -
Six months ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Change in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matter to a Vote of Security Holders 10
Item 5. Other Information. 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CLARK Material Handling Company
Consolidated Balance Sheet
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
The Company
------------------------------------
June 30, December 31,
1997 1996
---------------- ---------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 16,152 $ 16,554
Cash securing letters of credit 189 1,092
Net trade receivables 37,130 38,154
Net inventories 61,999 60,441
Other current assets 5,200 6,255
--------------- --------------
Total current assets 120,670 122,496
Long-term assets
Property, plant and equipment-net 46,736 51,014
Goodwill, net of accumulated amortization of $1,574
at June 30, 1997 and $231 at December 31, 1996 108,962 109,311
Other assets 17,355 18,486
-------------- --------------
Total assets $ 293,723 $ 301,307
============== ==============
Current liabilities
Notes payable$ 2,456 $ 3,246
Current portion of capital lease obligations 2,124 2,407
Trade accounts payable 52,760 53,562
Accrued compensation and benefits 5,251 5,319
Accrued warranties and product liability 19,758 23,383
Other current liabilities 8,076 9,489
-------------- --------------
Total current liabilities 90,425 97,406
Non-current liabilities
Senior notes payable 130,000 130,000
Capital lease obligations, less current portion 3,199 3,600
Accrued warranties and product liability 35,744 30,826
Other non-current liabilities 13,881 14,402
-------------- --------------
Total liabilities 273,249 276,234
-------------- --------------
Commitments and contingencies - -
Stockholder's equity
Common stock, par value $1 per share,
1,000 shares authorized, issued and outstanding 1 1
Paid-in-capital 24,999 24,999
Retained earnings 1,837 535
Cumulative translation adjustment (6,363) (462)
--------------- ---------------
Total stockholder's equity 20,474 25,073
--------------- --------------
Total liabilities and stockholder's equity $ 293,723 $ 301,307
=============== ==============
</TABLE>
See accompanying notes to unaudited financial statements.
2
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Consolidated Statement of Operations
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
The Company Predecessor
----------- -----------
Three Months Three Months
Ended Ended
June 30, June 30,
1997 1996
------------ ------------
<S> <C> <C>
Net sales $ 118,988 $ 115,429
Cost of goods sold 105,399 102,430
--------------- ---------------
Gross profit 13,589 12,999
Engineering, selling and administrative expenses 8,716 6,818
Parent company management fees - 1,568
--------------- ---------------
Total engineering selling and administrative expenses 8,716 8,386
Income from operations 4,873 4,613
Other income (expense):
Interest income 252 33
Interest expense (3,590) (49)
Allocated interest expense from parent company - (4,367)
Amortization interest expense from parent company - (93)
Other income (expense)-net (272) 367
---------------- --------------
Income (loss) before income taxes 1,263 504
Provision for income taxes 187 -
--------------- ---------------
Net income (loss) $ 1,076 $ 504
=============== ===============
</TABLE>
See accompanying notes to unaudited financial statements.
3
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Consolidated Statement of Operations
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
The Company Predecessor
----------- -----------
Six Months Six Months
Ended Ended
June 30, June 30,
1997 1996
----------- -----------
<S> <C> <C>
Net sales $ 229,733 $ 224,191
Cost of goods sold 203,510 199,818
--------------- ---------------
Gross profit 26,223 24,373
Engineering, selling and administrative expenses 17,481 14,115
Parent company management fees - 3,134
--------------- ---------------
Total engineering selling and administrative expenses 17,481 17,249
Income from operations 8,742 7,124
Other income (expense):
Interest income 509 76
Interest expense (7,528) (148)
Allocated interest expense from parent company - (8,757)
Amortization interest expense from parent company - (193)
Other income (expense)-net (197) (92)
--------------- ----------------
Income (loss) before income taxes 1,526 (1,990)
Provision for income taxes 224 -
--------------- ----------------
Net income (loss) $ 1,302 $ (1,990)
=============== ================
</TABLE>
See accompanying notes to unaudited financial statements.
4
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
The Company Predecessor
----------- -----------
Six Months Six Months
Ended Ended
June 30, June 30,
1997 1996
---------- ----------
<S> <C> <C>
Operating activities:
Net income (loss) $ 1,302 $ (1,990)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation and amortization 6,456 6,188
Changes in operating assets and liabilities:
Restricted cash 802 (435)
Trade receivables (1,817) (3,920)
Net inventories 241 5,492
Trade accounts payable 805 138
Accrued compensation and benefits 78 386
Accrued warranties and product liability 1,435 (1,082)
Other assets and liabilities, net (1,277) (1,765)
-------------- ----------------
Net cash provided by operating activities 8,025 3,012
-------------- ----------------
Investing activities - capital expenditures 2,603) (1,853)
-------------- -----------------
Financing activities - repayment of notes payable, net (5,129) (704)
-------------- -----------------
Effect of exchange rate changes on cash and cash equivalents (695) (749)
-------------- -----------------
Net increase (decrease) in cash and cash equivalents (402) (294)
Cash and cash equivalents at beginning of period 16,554 819
-------------- -----------------
Cash and cash equivalents at end of period $ 16,152 $ 525
============== =================
</TABLE>
See accompanying notes to unaudited financial statements.
5
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Notes to Unaudited Financial Statements
1. The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with Rule 10-01 of SEC Regulation S-X.
Consequently, they do not include all the disclosures required under
generally accepted accounting principles for complete financial statements.
However, in the opinion of the management of CLARK Material Handling
Company (the "Company"), the consolidated financial statements presented
herein contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows of the Company and its consolidated subsidiaries.
For further information regarding the Company's accounting policies and the
basis of presentation of the financial statements, refer to the
consolidated financial statements and notes included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
2. Inventories consist of the following:
June 30, December 31,
1997 1996
-------- ------------
Finished equipment $ 10,477 $ 12,797
Replacement parts 21,837 24,107
Work-in-progress 5,669 1,402
Raw materials and supplies 24,016 22,135
---------- ------------
Net inventories $ 61,999 $ 60,441
========== ============
3. There have been no material changes in the status of the Company's legal
proceedings or its other contingent obligations since December 31, 1996.
4. On February 28, 1997, the Company purchased substantially all the assets of
HLT (Hydroelectric Lift Trucks) a supplier of upright material handling
equipment, for $5 million. Assets acquired included $3.9 million of
inventory and $1.1 million of equipment and tooling. The purchase was
financed through a short-term note which was paid in the second quarter of
1997. The Company is leasing the former company's facility and is
continuing production of the equipment, primarily for its own use. The
acquisition was not significant and pro forma data is not presented because
it is not material.
5. 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.
and Germany and exports products to more than 50 countries worldwide. The
Company's foreign sales, the majority of which occur in Germany, are
subject to exchange rate volatility. The Company has not historically
hedged its foreign currency risk.
6
<PAGE>
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 for
the fiscal year ended December 31, 1996.
General
The Company is a leading international designer, manufacturer and marketer of a
complete line of forklift trucks, which it markets through a global network of
285 dealers. The Company's large installed base, which management estimates to
be approximately 350,000 units in operation worldwide, provides for substantial
ongoing replacement part sales, which typically generate significantly higher
gross margins than new product sales.
Results of Operations
Three months ended June 30, 1997, compared to the three months ended June 30,
1996:
Net Sales
- ---------
Net sales were $119.0 million for the three months ended June 30, 1997, an
increase of $3.6 million or 3.1% from $115.4 million for the same period in
1996. Machines sales increased 3.4% while parts sales increased 1.9%. Machine
unit sales in North America increased 5.3% due to the continuing strong North
American market while European machine unit sales also increased by 6.9% due to
a strengthening European market.
Gross Profit
- ------------
Gross profit increased $0.6 million (4.6%) to $13.6 million in the second
quarter of 1997 compared to $13.0 million in the second quarter of 1996. Cost
reduction programs, mainly in material costs, and favorable efficiencies due to
higher sales and production levels resulted in this increase in gross profit.
Engineering, Selling and Administrative Expense
- -----------------------------------------------
Engineering, selling and administrative expense increased $0.3 million to $8.7
million for the second quarter of 1997 from $8.4 million (including parent
company management fees) during the same period of 1996. Increases in
engineering, information systems, and selling expense to support the Company's
growth objectives were offset by decreases in administrative expenses.
Administrative expenses decreased by approximately $1.2 million due to net
savings resulting from the purchase of the Company from it's previous owner.
Income from Operations
- ----------------------
Income from operations increased $0.3 million to $4.9 million for the three
months ended June 30, 1997, compared to $4.6 million for the same period in 1996
due to the reasons discussed above.
Interest and Other Costs
- ------------------------
Net interest and other expense of the Company was $3.6 million during the three
months ended June 30, 1997, while the predecessor to the Company (the
"Predecessor") incurred net interest and other expense of
7
<PAGE>
$4.1 million during the three months ended June 30, 1996. The Predecessor's
parent charged the Predecessor more interest costs than the Company presently
incurs as an independent entity.
Net Income (Loss)
- -----------------
The Company reported net income of $1.1 million during the three months ended
June 30, 1997 while the Predecessor recorded a net income of $0.5 million for
the same period in 1996. Higher operating profit and reduced interest and other
costs resulted in higher net income during the second quarter of 1997.
Results of Operations
- ---------------------
Six months ended June 30, 1997, compared to the six months ended June 30, 1996:
Net Sales
- ---------
Net sales were $229.7 million for the six months ended June 30, 1997, an
increase of $5.5 million or 2.5% from $224.2 million for the same period in
1996. Machines sales increased 3.5% while parts sales declined 1.4%. Machine
unit sales in North America increased 8.6% due to the stronger North American
market while European machine unit sales decreased by 2.3%.
North American parts sales were greater than those of the prior year by 1.7%
while parts sales declined in Europe due to a combination of lower activity
levels and increased competition.
Gross Profit
- ------------
Gross profit increased $1.8 million (7.4%) to $26.2 million in the first six
months of 1997 compared to $24.4 in the first quarter of 1996. Cost reduction
programs, mainly in material costs, and favorable efficiencies due to higher
sales and production levels resulted in this increase in gross profit.
Engineering, Selling and Administrative Expense
- -----------------------------------------------
Engineering, selling and administrative expense remained about the same at $17.5
million for the first half of 1997 compared to the same period of 1996.
Increases in engineering and selling expense to support the Company's growth
objectives were offset by decreases in administrative expenses. In the first
half of 1997, administrative expenses were approximately $2.3 million lower than
in the first half of 1996 due to net savings resulting from the purchase of the
Company from it's previous owner.
Income from Operations
- ----------------------
Income from operations increased $1.6 million (or 22.5%) to $8.7 million for the
six months ended June 30, 1997, compared to $7.1 million for the same period in
1996 due to the reasons discussed above.
Interest and Other Costs
- ------------------------
Net interest and other expense of the Company was $7.2 million during the six
months ended June 30, 1997, while the Predecessor incurred net interest and
other expense of $9.1 million during the six months ended June 30, 1996. The
Predecessor's parent charged the Predecessor more interest costs than the
Company presently incurs as an independent entity.
8
<PAGE>
Net Income (Loss)
- -----------------
The Company reported net income of $1.3 million during the six months ended June
30, 1997 while the Predecessor recorded a loss of $2.0 million for the same
period in 1996. Higher operating profit and reduced interest and other costs
resulted in net income during the first half of 1997 as compared to the same
period in 1996.
Backlog
The Company's backlog of orders at June 30, 1997 was $97.4 million, up 25.5%
from June 30, 1996, when the backlog of orders was $77.6 million, due to
stronger market conditions. Substantially all of the Company's backlog of orders
are expected to be filled within one year, although there can be no assurance
that all such orders will be filled within that time period. The cancellation or
delay of certain orders could have a material adverse effect on the Company.
Capital Resources, Liquidity and Financial Condition
The Company's financial condition and working capital did not change
significantly at June 30, 1997 from December 31, 1996. Declines in the value of
the German Deutsche-mark reduced the working capital of the Company's German
operations; these declines were offset by increases in domestic working capital.
The fluctuation in the German currency resulted in a substantial increase in the
currency translation amount included within stockholder's equity. Cash provided
by operating activities was $8.0 million, and the Company's cash levels remained
consistent with December 31, 1996 levels. Capital expenditures totaled $2.7
million for the six months ended June 30, 1997. In addition, the Company
purchased substantially all the assets of Hydroelectric Lift Trucks ("HLT") on
February 28, 1997 in exchange for a $5.0 million short-term note which matured
and was paid in the second quarter of 1997. The Company was not required to
borrow any funds under its $30 million line of credit during the quarter, and
the full amount of credit under the line remained available at June 30, 1997.
The Company's ability to incur additional indebtedness is somewhat restricted by
the covenants set forth in the Company's borrowing arrangements.
In addition to paying the note issued to acquire HLT, the Company made its first
interest payment of $6.5 million on its 10 3/4% Senior Notes on May 15, 1997.
Management believes that existing cash levels and the $30 million line of credit
will be sufficient to meet the Company's needs for the next twelve months.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Except for the legal proceedings reported in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996 for which there have been no
material developments, the Company believes there is no outstanding litigation
which could have a material impact on its financial position or results of
operations.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended June 30, 1997.
10
<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.
CLARK MATERIAL HANDLING COMPANY
Date: August 14, 1997 By: /s/ Joseph F. Lingg
--------------------------------------------
Joseph F. Lingg
Vice President, Finance, Human Resources
and Treasurer
(Principal Financial and Accounting Officer)
11
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 16,341,000
<SECURITIES> 0
<RECEIVABLES> 39,578,000
<ALLOWANCES> (2,448,000)
<INVENTORY> 61,999,000
<CURRENT-ASSETS> 20,670
<PP&E> 51,331,000
<DEPRECIATION> (4,595,000)
<TOTAL-ASSETS> 293,723,000
<CURRENT-LIABILITIES> 90,425,000
<BONDS> 135,323,000
0
0
<COMMON> 1,000
<OTHER-SE> 24,999,000
<TOTAL-LIABILITY-AND-EQUITY> 293,723,000
<SALES> 229,733,000
<TOTAL-REVENUES> 229,733,000
<CGS> 203,510,000
<TOTAL-COSTS> 203,510,000
<OTHER-EXPENSES> 17,481,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,528,000
<INCOME-PRETAX> 1,526,000
<INCOME-TAX> 224,000
<INCOME-CONTINUING> 1,302,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,302,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
