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, 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
Consolidated Balance Sheet -
March 31, 1997 and December 31, 1996 2
Consolidated Statement of Operations -
Three months March 31, 1997 and 1996 3
Consolidated Statement of Cash Flows -
Three months ended March 31, 1997 and 1996 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 2. Change in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matter to a Vote of
Security Holders 8
Item 5. Other Information. 8
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 10
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CLARK Material Handling Company
Consolidated Balance Sheet
(in thousands)
<TABLE>
<CAPTION>
The Company
----------------------------------
March 31, December 31,
1997 1996
--------------- ---------------
(unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 17,498 $ 16,554
Cash securing letters of credit 245 1,092
Net trade receivables 39,530 38,154
Net inventories 62,880 60,441
Other current assets 5,538 6,255
--------------- ---------------
Total current assets 125,691 122,496
Long-term assets
Property, plant and equipment-net 48,125 51,014
Goodwill, net of accumulated amortization of $924
at March 31, 1997 and $231 at December 31, 1996 109,636 109,311
Other assets 17,982 18,486
--------------- ---------------
Total assets $ 301,434 $ 301,307
=============== ===============
Current liabilities
Notes payable $ 7,211 $ 3,246
Current portion of capital lease obligations 2,215 2,407
Trade accounts payable 52,861 53,562
Accrued compensation and benefits 4,940 5,319
Accrued warranties and product liability 19,745 23,383
Other current liabilities 11,192 9,489
--------------- ---------------
Total current liabilities 98,164 97,406
Non-current liabilities
Senior notes payable 130,000 130,000
Capital lease obligations, less current portion 3,312 3,600
Accrued warranties and product liability 34,360 30,826
Other non-current liabilities 14,419 14,402
--------------- ---------------
Total liabilities 280,255 276,234
--------------- ---------------
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 761 535
Cumulative translation adjustment (4,582) (462)
--------------- ---------------
Total stockholder's equity 21,179 25,073
--------------- ---------------
Total liabilities and stockholder's equity $ 301,434 $ 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)
<TABLE>
<CAPTION>
The Company Predecessor
----------- -----------
Three Months Three Months
Ended Ended
March 31, March 31,
1997 1996
------------ ------------
(unaudited) (unaudited)
<S> <C> <C>
Net sales $ 110,745 $ 108,762
Cost of goods sold 98,111 97,388
------------ ------------
Gross profit 12,634 11,374
Engineering, selling and administrative expenses 8,765 7,297
Parent company management fees - 1,566
------------ ------------
Total engineering selling and administrative expenses 8,765 8,863
------------ ------------
Income from operations 3,869 2,511
Other income (expense):
Interest income 257 43
Interest expense (3,938) (99)
Allocated interest expense from parent company - (4,390)
Amortization interest expense from parent company - (100)
Other income (expense)-net 75 (459)
------------ ------------
Income (loss) before income taxes 263 (2,494)
Provision for income taxes 37 -
------------ ------------
Net income (loss) $ 226 $ (2,494)
============ ============
</TABLE>
See accompanying notes to unaudited financial statements.
-3-
<PAGE>
CLARK Material Handling Company
and Predecessor Businesses
Consolidated Statement of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
The Company Predecessor
----------- -----------
Three Months Three Months
Ended Ended
March 31, March 31,
1997 1996
(unaudited) (unaudited)
<S> <C> <C>
Operating activities:
Net income (loss) $ 226 $ (2,494)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation and amortization 2,740 2,767
Changes in operating assets and liabilities:
Restricted cash 767 (366)
Trade receivables (6,466) 1,190
Net inventories 24 2,729
Trade accounts payable 1,022 (1,035)
Accrued compensation and benefits (596) 168
Accrued warranties and product liability 107 189
Other assets and liabilities, net 4,466 (1,121)
--------------- ---------------
Net cash provided by operating activities 2,290 2,027
--------------- ---------------
Investing activities - capital expenditures (761) (940)
--------------- ---------------
Financing activities, net (109) (567)
--------------- ---------------
Effect of exchange rate changes on cash and cash equivalents (476) (565)
--------------- ---------------
Net increase (decrease) in cash and cash equivalents 944 (45)
Cash and cash equivalents at beginning of period 16,554 819
--------------- ---------------
Cash and cash equivalents at end of period $ 17,498 $ 774
=============== ===============
</TABLE>
See accompanying notes to unaudited financial statements.
-4-
<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:
March 31, December 31,
1997 1996
Finished equipment $ 10,215 $ 12,797
Replacement parts 22,553 24,107
Work-in-progress 5,201 1,402
Raw materials and supplies 24,911 22,135
--------------- ---------------
Net inventories $ 62,880 $ 60,441
=============== ===============
3. There have been no material changes in the status of the Company's
various 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 maturing 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-
<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 as of
and for each of the three years in the period 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 March 31, 1997, compared to the three months ended March 31,
1996:
Net Sales
Net sales were $110.7 million for the three months ended March 31, 1997, an
increase of $1.9 million or 1.7% from $108.8 million for the same period is
1996. Machines sales increased 3.6% while parts sales declined 4.3%. Machine
unit sales in North America increased 12.0% due to the stronger market while
European machine unit sales were off 11.0%.
North American parts sales were about the same as the prior year while parts
sales declined in Europe due to a combination of lower activity levels and
increased competition.
Gross Profit
Gross profit increased $1.2 million (10.5%) to $12.6 million in the first
quarter of 1997 compared to $11.4 in the first quarter of 1996. Cost reduction
programs, mainly in material costs, favorable pricing offset by lower parts
margin, and favorable efficiencies due to higher production resulted in this
gross profit increase.
Engineering, Selling and Administrative Expense
Engineering, selling and administrative expense decreased $.1 million to $8.8
million for the first quarter of 1997 from $8.9 million (including parent
company management fees) during the same period of 1996. Increases in
engineering and selling expense were offset by decreases in administrative
expenses. Administrative expenses were approximately $1.2 million lower due to
net savings resulting from the purchase of the Company from it's previous owner.
Income from Operations
Income from operations increased $1.4 million to $3.9 million for the three
months ended March 31, 1997, compared to $2.5 million for the same period in
1996 due to the reasons discussed above.
-6-
<PAGE>
Interest and Other Costs
Net interest and other expense of the Company was $3.6 million during the three
months ended March 31, 1997, while the Predecessor incurred net interest and
other expense of $5.0 million during the three months ended March 31, 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 million during the three months ended
March 31, 1997 while the Predecessor recorded a loss of $2.5 million for the
same period in 1996. Higher operating profit and reduced interest and other
costs resulted in net income during the first quarter of 1997.
Backlog
The Company's backlog of orders at March 31, 1997, was $90.4 million, up 6.2%
from March 31, 1996, at $85.1 million. Substantially all of the Company's
backlog 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 March 31, 1997 from December 31, 1996. Declines in the value of
the German Deutsche-mark reduced the assets and liabilities of the Company's
German operations; these declines were offset by increases domestically. 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 $2.3 million, and the Company's cash levels remained
consistent with December 31, 1996 levels. Capital expenditures totaled $0.8
million for the three months ended March 31, 1997. In addition, the Company
purchased substantially all the assets of HLT on February 28, 1997 in exchange
for a $5.0 million short-term note which matures 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 March 31, 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 will be
required to make its first interest payment of $7.0 million on its 10 3/4%
Senior Notes on May 15, 1997. Existing cash levels are expected be sufficient to
meet these cash requirements; additionally, 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.
-7-
<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
----------- -----------
3.1 Certificate of Incorporation, as amended, of the
Company (incorporated by reference to Exhibit 3.1
to the Company's Registration Statement on Form
S-4, Registration No. 333-18957)
3.2 By-laws of the Company (incorporated by reference
to Exhibit 3.2 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
4.1 Indenture dated as of November 27, 1996 between
the Company and United States Trust Company of New
York, as Trustee (incorporated by reference to
Exhibit 4.1 to the Company's Registration
Statement on Form S- 4, Registration No.
333-18957)
4.2 Registration Rights Agreement dated as of November
27, 1996 among the Company, Jefferies & Company,
Inc. and Bear Stearns & Co. Inc. (incorporated by
reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-4, Registration
No. 333-18957)
-8-
<PAGE>
4.3 Form of 10 3/4% Senior Notes due 2006 (included in
Exhibit 4.1)
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 March 31, 1997.
-9-
<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: May 15, 1997 By: /s/ Joseph F. Lingg
--------------------------------------------
Joseph F. Lingg
Vice President, Finance, Human Resources
and Treasurer
(Principal Financial and Accounting Officer)
-10-
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
3.1 Certificate of Incorporation, as amended, of the
Company (incorporated by reference to Exhibit 3.1
to the Company's Registration Statement on Form
S-4, Registration No. 333-18957)
3.2 By-laws of the Company (incorporated by reference
to Exhibit 3.2 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
4.1 Indenture dated as of November 27, 1996 between
the Company and United States Trust Company of New
York, as Trustee (incorporated by reference to
Exhibit 4.1 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
4.2 Registration Rights Agreement dated as of November
27, 1996 among the Company, Jefferies & Company,
Inc. and Bear Stearns & Co. Inc. (incorporated by
reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-4, Registration
No. 333-18957)
4.3 Form of 10 3/4% Senior Notes due 2006 (included in
Exhibit 4.1)
27 Financial Data Schedule
-11-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 17,743,000
<SECURITIES> 0
<RECEIVABLES> 41,912,000
<ALLOWANCES> (2,382,000)
<INVENTORY> 62,880,000
<CURRENT-ASSETS> 125,691,000
<PP&E> 50,869,000
<DEPRECIATION> (2,744,000)
<TOTAL-ASSETS> 301,434,000
<CURRENT-LIABILITIES> 98,164,000
<BONDS> 130,000,000
0
0
<COMMON> 1,000
<OTHER-SE> 21,178,000
<TOTAL-LIABILITY-AND-EQUITY> 301,434,000
<SALES> 110,745,000
<TOTAL-REVENUES> 110,745,000
<CGS> 98,111,000
<TOTAL-COSTS> 8,765,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,681,000
<INCOME-PRETAX> 263,000
<INCOME-TAX> 37,000
<INCOME-CONTINUING> 226,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 226,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
