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 September 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 October 31, 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 -
September 30, 1997 and December 31, 1996 2
Consolidated Statement of Operations -
Three months September 30, 1997 and 1996 3
Consolidated Statement of Operations -
Nine months September 30, 1997 and 1996 4
Consolidated Statement of Cash Flows -
Nine months ended September 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 11
Item 2. Change in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matter to a Vote of
Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CLARK Material Handling Company
Consolidated Balance Sheet
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
The Company
-----------------------------------
September 30, December 31,
1997 1996
------------------ --------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 13,596 $ 16,554
Cash securing letters of credit 359 1,092
Net trade receivables 41,409 38,154
Net inventories 65,097 60,441
Other current assets 5,848 6,255
--------------- --------------
Total current assets 126,309 122,496
Long-term assets
Property, plant and equipment-net 46,140 51,014
Goodwill, net of accumulated amortization of $2,249
at September 30, 1997 and $231 at December 31, 1996 108,452 109,311
Other assets 18,477 18,486
--------------- --------------
Total assets $ 299,378 $ 301,307
=============== ==============
Current liabilities
Notes payable $ 2,040 $ 3,246
Current portion of capital lease obligations 2,691 2,407
Trade accounts payable 51,693 53,562
Accrued compensation and benefits 5,877 5,319
Accrued warranties and product liability 19,447 23,383
Other current liabilities 12,699 9,489
--------------- --------------
Total current liabilities 94,447 97,406
Non-current liabilities
Senior notes payable 130,000 130,000
Capital lease obligations, less current portion 4,053 3,600
Accrued warranties and product liability 36,912 30,826
Other non-current liabilities 11,957 14,402
--------------- --------------
Total liabilities 277,369 276,234
--------------- --------------
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 3,790 535
Cumulative translation adjustment (6,781) (462)
--------------- --------------
Total stockholder's equity 22,009 25,073
--------------- --------------
Total liabilities and stockholder's equity $ 299,378 $ 301,307
=============== ==============
See accompanying notes to unaudited financial statements.
</TABLE>
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
Sept. 30, | Sept. 30,
1997 | 1996
--------- | ---------
|
<S> <C> <C>
Net sales $ 120,646 | $ 110,698
Cost of goods sold 106,291 | 97,479
-------------- | ---------------
|
Gross profit 14,355 | 13,219
|
Engineering, selling and administrative expenses 9,047 | 7,894
|
Parent company management fees - | 1,567
-------------- | ---------------
|
|
Total engineering selling and administrative expenses 9,047 | 9,461
-------------- | ---------------
Income from operations 5,308 | 3,758
|
Other income (expense): |
Interest income 200 | 50
Interest expense (3,699) | (130)
Allocated interest expense from parent company - | (4,418)
Amortization interest expense from parent company - | (145)
Other income (expense)-net 262 | (5)
-------------- | ----------------
|
Income (loss) before income taxes 2,071 | (890)
|
Provision for income taxes 118 | -
-------------- | ----------------
|
Net income (loss) $ 1,953 | $ (890)
============== | ================
See accompanying notes to unaudited financial statements.
</TABLE>
3
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Consolidated Statement of Operations
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
The Company | Predecessor
Nine Months | Nine Months
Ended | Ended
Sept. 30, | Sept. 30,
1997 | 1996
--------- | ---------
|
<S> <C> <C>
Net sales $ 350,379 | $ 334,889
Cost of goods sold 309,801 | 297,297
--------------- | ---------------
|
Gross profit 40,578 | 37,592
|
Engineering, selling and administrative expenses 26,528 | 22,009
|
Parent company management fees - | 4,701
--------------- | ---------------
|
Total engineering selling and administrative expenses 26,528 | 26,710
Income from operations 14,050 | 10,882
|
Other income (expense): |
Interest income 709 | 126
Interest expense (11,227) | (278)
Allocated interest expense from parent company - | (13,175)
Amortization interest expense from parent company - | (338)
Other income (expense)-net 65 | (97)
--------------- | ---------------
|
Income (loss) before income taxes 3,597 | (2,880)
|
Provision for income taxes 342 | -
--------------- | ------------
|
Net income (loss) $ 3,255 | $ (2,880)
=============== | ===============
See accompanying notes to unaudited financial statements.
</TABLE>
4
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
The Company | Predecessor
Nine Months | Nine Months
Ended | Ended
Sept. 30, | Sept. 30,
1997 | 1996
--------- | ---------
|
Operating activities: |
<S> <C> <C>
Net income (loss) $ 3,255 | $ (2,880)
Adjustments to reconcile net income (loss) to cash |
provided by operating activities: |
Depreciation and amortization 9,276 | 8,839
Changes in operating assets and liabilities: |
Restricted cash 607 | (221)
Trade receivables (6,290) | 588
Net inventories (2,973) | 5,467
Trade accounts payable (169) | (9,733)
Accrued compensation and benefits 715 | 326
Accrued warranties and product liability 2,302 | (1,239)
Other assets and liabilities, net 894 | 4,179
-------------- | ------------
|
Net cash provided by operating activities 7,617 | 5,326
-------------- | ------------
|
Investing activities - capital expenditures (3,977) | (2,396)
-------------- | ------------
|
Financing activities - repayment of notes payable, net (5,816) | (892)
-------------- | ------------
|
Effect of exchange rate changes on cash and cash equivalents (782) | (1,433)
-------------- | ------------
|
Net increase (decrease) in cash and cash equivalents (2,958) | 605
Cash and cash equivalents at beginning of period 16,554 | 819
-------------- | ------------
|
Cash and cash equivalents at end of period $ 13,596 | $ 1,424
============== | ============
See accompanying notes to unaudited financial statements.
5
</TABLE>
<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:
Sept. 30, December 31,
1997 1996
----------- -------------
Finished equipment $ 11,054 $ 12,797
Replacement parts 22,565 24,107
Work-in-process 7,283 1,402
Raw materials and supplies 24,195 22,135
---------- ----------
Net inventories $ 65,097 $ 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. On November 7, 1997 the Company closed on its acquisition of substantially
all of the assets and certain liabilities of Blue Giant USA Corporation
(BGU) and Blue Giant Canada Limited (BGC), respectively (collectively, the
Blue Giant Companies) in two separate purchase business combinations with
an effective date of November 1, 1997. Although separate legal entities,
BGU and BGC are under the common control of substantially the same
stockholder group. The primary assets acquired included accounts
receivable, inventories and fixed assets while the primary liabilities
assumed included accounts payables and accrued liabilities related to the
ongoing business. The Blue Giant Companies' bank indebtedness, notes
payable to shareholders and tax obligations were not assumed by the
Company. The purchase price for the acquisition comprised $9,365,000 in
cash (of which $200,000 was paid to a shareholder of the Blue Giant
Companies under a non compete agreement), an obligation payable over three
years totaling $1,104,626 under
6
<PAGE>
a non compete agreement with another shareholder of the Blue Giant
Companies and related out of pocket expenses of approximately $300,000.
Other than this transaction, there is no material relationship between the
Company and the Blue Giant Companies or its stockholders.
The Blue Giant Companies are engaged in the manufacturing and sale of
material handling equipment in the United States, Canada and for export to
foreign countries.
Unaudited pro forma information regarding these acquisitions is included in
the Company's Form 8-K filed with the Securities and Exchange Commission on
November 13, 1997.
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 September 30, 1997, compared to the three months ended
September 30, 1996:
Net Sales
- ---------
Net sales were $120.6 million for the three months ended September 30, 1997, an
increase of $9.9 million or 8.9% from $110.7 million for the same period in
1996. Machines sales increased 11.9% while parts sales decreased 2.1%. Machine
unit sales in North America increased 13.1% and European machine unit sales
increased by 25.9% due to stronger markets. The reduction in parts sales relates
to increased competition in this line of business.
Gross Profit
- ------------
Gross profit increased $1.2 million (9.1%) to $14.4 million in the third quarter
of 1997 compared to $13.2 million in the third quarter of 1996. Cost reduction
programs, and lower freight costs, as well as, higher sales and production
levels resulted in this increase in gross profit. As a percentage of sales,
gross profits were 11.9% for both the 1997 and 1996 periods.
Engineering, Selling and Administrative Expense
- -----------------------------------------------
Engineering, selling and administrative expense decreased $0.5 million to $9.0
million for the third quarter of 1997 from $9.5 million (including parent
company management fees) during the same period of 1996. The decrease in parent
company management fees was partially offset by increases in engineering and
selling expenses.
7
<PAGE>
Income from Operations
- ----------------------
Income from operations increased $1.5 million to $5.3 million for the three
months ended September 30, 1997, compared to $3.8 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 $3.2 million during the three
months ended September 30, 1997, while the predecessor to the Company (the
"Predecessor") incurred net interest and other expense of $4.6 million during
the three months ended September 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 $2.0 million during the three months ended
September 30, 1997 while the Predecessor recorded a net loss of $0.9 million for
the same period in 1996. Higher operating profit and reduced interest and other
costs resulted in higher net income during the third quarter of 1997.
Results of Operations
Nine months ended September 30, 1997, compared to the nine months ended
September 30, 1996:
Net Sales
- ---------
Net sales were $350.4 million for the nine months ended September 30, 1997, an
increase of $15.5 million or 4.6% from $334.9 million for the same period in
1996. Machines sales increased 3.5% while parts sales declined 13.4% mainly in
Europe. Increased competition caused the decline in the parts sales. A change in
the German Deutsche mark ("DM") annual average conversion rate from 1.496 DM to
one U.S. dollar for the first nine months of 1996 to 1.730 DM to one U.S. dollar
for the same period of 1997 had a negative impact on reported sales (and income)
in U.S. dollars from the Company's European operations. Machine unit sales in
North America increased 10.6% and European machine unit sales increased by 5.8%
due to stronger markets.
Gross Profit
- ------------
Gross profit increased $3.0 million (8.0%) to $40.6 million in the first nine
months of 1997 compared to $37.6 million in the first nine months of 1996. As a
percentage of sales, gross profit was 11.6% in the 1997 period and 11.2% in the
1996 period. Cost reduction programs, mainly in material costs, lower freight
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 decreased $0.2 million to $26.5
million for the first nine months of 1997 compared to $26.7 million during 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 nine months of 1997, administrative expenses were approximately
$2.9 million lower than in the same period of 1996 due to net savings resulting
from the purchase of the Company from it's previous owner.
8
<PAGE>
Income from Operations
- ----------------------
Income from operations increased $3.2 million (29.4%) to $14.1 million for the
first nine months ended September 30, 1997, compared to $10.9 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 $10.5 million during the nine
months ended September 30, 1997, while the Predecessor incurred net interest and
other expense of $13.8 million during the nine months ended September 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 $3.3 million during the nine months ended
September 30, 1997 while the Predecessor recorded a loss of $2.9 million for the
same period in 1996. Higher operating profit and reduced interest and other
costs resulted in net income during the nine month period of 1997 as compared to
the same period in 1996.
Backlog
The Company's backlog of orders at September 30, 1997 was $104.2 million, up
35.3% from September 30, 1996, when the backlog of orders was $77.0 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 overall financial condition did not change significantly at
September 30, 1997 from December 31, 1996. However, working capital increased
$6.8 million primarily as a result of improved cash flow from operating
activities, enabling a reduction in accounts payable and taking advantage of
vendor discounts for prompt payment, and the acquisition of Hydroelectric Lift
Trucks ("HLT"). Declines in the value of the DM reduced the working capital of
the Company's European operations; these declines were offset by increases in
domestic working capital. The fluctuation in the German currency also resulted
in a substantial increase in the currency translation amount included within
stockholder's equity. Cash provided by operating activities through the first
nine months of 1997 was $7.6 million, and the Company's cash levels were down
$3.0 million from December 31, 1996 levels. Capital expenditures totaled $4.0
million for the nine months ended September 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 September 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 and
subsequent to September 30, 1997 closed its acquisition of the Blue Giant
Companies in two separate purchase business combinations using existing cash of
$9.4 million (see note 5 to the unaudited interim financial statements at
September 30, 1997).
9
<PAGE>
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.
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.
10
<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 September 30, 1997.
11
<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: November 14, 1997 By: /s/ Joseph F. Lingg
------------------------------
Joseph F. Lingg
Vice President, Finance, Human
Resources and Treasurer
(Principal Financial and
Accounting Officer)
12
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 13,596
<SECURITIES> 0
<RECEIVABLES> 43,355
<ALLOWANCES> (1,946)
<INVENTORY> 65,097
<CURRENT-ASSETS> 126,309
<PP&E> 52,298
<DEPRECIATION> (6,158)
<TOTAL-ASSETS> 299,378
<CURRENT-LIABILITIES> 94,447
<BONDS> 136,744
0
0
<COMMON> 1
<OTHER-SE> 24,999
<TOTAL-LIABILITY-AND-EQUITY> 299,378
<SALES> 350,379
<TOTAL-REVENUES> 350,379
<CGS> 309,801
<TOTAL-COSTS> 309,801
<OTHER-EXPENSES> 26,528
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,227
<INCOME-PRETAX> 3,579
<INCOME-TAX> 342
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,255
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
