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, 1998
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 August 31, 1998, 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> 2
CLARK MATERIAL HANDLING COMPANY
INDEX
Page No.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements 2
Consolidated Balance Sheet -
September 30, 1998 and December 31, 1997 2
Consolidated Statement of Operations -
Three Months ended September 30, 1998 and 1997 3
Consolidated Statement of Operations -
Nine Months ended September 30, 1998 and 1997 4
Consolidated Statement of Cash Flows -
Nine Months ended September 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CLARK Material Handling Company
Consolidated Balance Sheet
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 11,998 $ 6,334
Restricted cash 197 320
Net trade receivables 57,219 47,018
Net inventories (Note 2) 99,541 70,784
Other current assets 9,519 7,281
------------ ------------
Total current assets 178,474 131,737
Long-term assets
Property, plant and equipment-net 70,163 47,836
Goodwill, net of accumulated amortization of $5,332
at September 30, 1998 and $3,081 at December 31, 1997 113,367 114,887
Other assets 21,150 18,794
------------ ------------
Total assets $ 383,154 $ 313,254
============ ============
Current liabilities
Notes payable $ 14,565 $ 3,184
Current portion of capital lease obligations 3,107 2,732
Trade accounts payable 72,650 62,002
Accrued compensation and benefits 6,133 5,730
Accrued warranties and product liability 18,358 20,774
Other current liabilities 20,629 10,728
------------ ------------
Total current liabilities 135,442 105,150
Non-current liabilities
Senior notes payable (Note 6) 150,000 130,000
Capital lease obligations, less current portion 4,363 3,864
Accrued warranties and product liability 35,102 38,497
Other non-current liabilities 13,660 12,002
------------ ------------
Total liabilities 338,567 289,513
------------ ------------
Commitments and contingencies (Note 3) - -
Preferred Stock (Note 6) 20,533 -
------------ ------------
Common stockholder's equity
Common stock, par value $1 per share,
1,000 shares authorized, issued and outstanding 1 1
Paid-in-capital 23,807 24,999
Retained earnings 9,258 8,406
Cumulative translation adjustment (9,012) (9,665)
------------- ------------
Total common stockholder's equity 24,054 23,741
------------ ------------
Total liabilities and stockholder's equity $ 383,154 $ 313,254
============ ============
See accompanying notes to unaudited financial statements.
</TABLE>
<PAGE> 4
CLARK Material Handling Company
Consolidated Statement of Operations
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
September 30, September 30,
1998 1997
------------ ------------
<S> <C> <C>
Net sales $ 134,947 $ 120,868
Cost of goods sold 117,319 106,291
------------ ------------
Gross profit 17,628 14,577
Engineering, selling and administrative expenses 13,135 9,269
------------ ------------
Income from operations 4,493 5,308
Other income (expense):
Interest income 212 200
Interest expense (4,308) (3,699)
Foreign exchange (loss) gain (26) 3
Other (expense) income-net (305) 259
------------- -------------
Income before income taxes 66 2,071
Provision for income taxes 195 118
------------ ------------
Net income $ (129) $ 1,953
============= ============
See accompanying notes to unaudited financial statements.
</TABLE>
<PAGE> 5
CLARK Material Handling Company
Consolidated Statement of Operations
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1998 1997
------------ ------------
<S> <C> <C>
Net sales $ 403,984 $ 350,792
Cost of goods sold 352,923 309,801
------------ ------------
Gross profit 51,061 40,991
Engineering, selling and administrative expenses 35,626 26,941
------------ ------------
Income from operations 15,435 14,050
Other income (expense):
Interest income 340 709
Interest expense (11,898) (11,227)
Foreign exchange (loss) gain (567) 187
Other (expense) income-net (1,169) (122)
------------- -------------
Income before income taxes 2,141 3,597
Provision for income taxes 756 342
------------ ------------
Net income $ 1,385 $ 3,255
============ ============
See accompanying notes to unaudited financial statements.
</TABLE>
<PAGE> 6
CLARK Material Handling Company
Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1998 1997
------------ ------------
<S> <C> <C>
Operating activities:
Net income $ 1,385 $ 3,255
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 10,830 9,276
Changes in operating assets and liabilities, excluding
business combinations:
Restricted cash 137 607
Trade receivables 1,820 (6,290)
Net inventories (16,952) (2,973)
Trade accounts payable 5,612 (169)
Accrued compensation and benefits 300 715
Accrued warranties and product liability (6,244) 2,302
Other assets and liabilities, net 3,503 894
------------ ------------
Net cash provided by operating activities 391 7,617
------------ ------------
Investing activities:
Business combinations (31,630) -
Capital expenditures (13,170) (3,977)
------------- -------------
Net cash used in investing activities (44,800) (3,977)
------------- -------------
Financing activities:
Issuance (repayment of) notes payable, net 11,333 (5,816)
Issuance of senior notes payable, net of issuance costs 18,872 -
Issuance of preferred stock, net of issuance costs 18,808 -
Issuance of other long term debt 815 -
------------ ------------
Net cash provided by (used in) financing activities 49,828 (5,816)
------------ ------------
Effect of exchange rate changes on cash and cash equivalents 245 (782)
------------ ------------
Net increase (decrease) in cash and cash equivalents 5,664 (2,958)
Cash and cash equivalents at beginning of period 6,334 16,554
------------ ------------
Cash and cash equivalents at end of period $ 11,998 $ 13,596
============ ============
See accompanying notes to unaudited financial statements.
</TABLE>
<PAGE> 7
CLARK Material Handling Company
Notes to Unaudited Financial Statements (in thousands)
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, 1997.
2. Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Finished equipment $ 25,031 $ 12,000
Replacement parts 27,573 28,302
Work-in-process 10,383 5,356
Raw materials and supplies 36,554 25,126
------------ ------------
Net inventories $ 99,541 $ 70,784
============ ============
</TABLE>
3. There have been no material changes in the status of the Company's legal
proceedings or its other contingent obligations since December 31, 1997.
4. On February 28, 1997, the Company purchased substantially all the assets
of Hydroelectric Lift Trucks ("HLT") a supplier of upright material
handling equipment, for $4,948. Assets acquired included inventory,
equipment and tooling. The purchase was financed through a short-term
note which matured in the second quarter of 1997. The Company is leasing
the former company's facility and is continuing production, primarily
for its own use. The acquisition was not significant and pro forma data
is not presented.
5. On November 7, 1997 the Company closed its acquisition of substantially
all of the assets and certain liabilities of Blue Giant USA Corporation
("BGU") and Blue Giant Canada Limited ("BGC"), (collectively, "Blue
Giant") in two separate purchase business combinations effective
November 1, 1997. Although separate legal entities, BGU and BGC were
under the common control of substantially the same stockholder group.
The purchase price for the acquisition comprised $9,365 in cash (of
which $200 was paid to a shareholder of Blue Giant under a
noncompetition agreement), an obligation payable over three years
totaling $1,105 under a noncompetition agreement and consulting
agreement with a shareholder of Blue Giant and related out-of-pocket
expenses of approximately $333. The purchase price was allocated to the
estimated fair value of the tangible and intangible net assets acquired,
with the residual being allocated to goodwill. The goodwill is being
amortized on a straight-line basis over forty years.
The following unaudited pro forma summary presents the consolidated
results of operations as though the acquisition of Blue Giant had been
completed on January 1, 1997.
Three Months Nine Months
Ended Ended
September 30, 1997 September 30, 1997
------------------ ------------------
Net Sales $122,946 $366,926
Income from operations $5,466 $14,631
Net Income $2,015 $3,680
6. On July 15, 1998, the Company purchased substantially all the assets and
certain liabilities of Samsung Forklift (hereafter referred to as
"CMHA") for approximately $30,400 (subject to certain post-closing
adjustments) and related expenses of approximately $1,230. The purchase
price was allocated to the estimated fair value of the tangible and
intangible net assets acquired, and the value of the noncurrent assets
was reduced by the excess ($1,390) of the estimated fair market value of
the net assets acquired over the purchase price. This amount will be
subject to further adjustment upon determination of the final
post-closing adjustments. Of the total purchase price, approximately
$7,200 is being held in an escrow account pending final determination of
certain post-closing adjustments. The acquisition was not significant
and pro forma financial information is not presented.
To finance this acquisition, the Company sold $20,000 aggregate
principle amounts of 10 3/4% Senior Notes ("Senior Notes") due 2006 and
20,000 shares of 13% Senior Exchangeable Preferred Stock ("Preferred
Stock") due 2007 with a liquidation preference of $1,000.00 per share.
The Company may, at its option, pay dividends in additional fully paid
and non-assessable shares of Preferred Stock until July 15, 2003. After
July 15, 2003 dividends are to be paid in cash. At September 30, 1998,
accrued dividends totaled $533. Issuance costs related to the Senior
Notes and the Preferred Stock were charged to deferred debt issuance
cost and paid in capital, respectively. At September 30, 1998, the
Company had accrued but unpaid costs relating to the purchase of CMHA
and the issuance of the Senior Notes and Preferred Stock of
approximately $1,140.
7. The Company had a total comprehensive income (loss) of $62 and $1,535
for the three months ended September 30, 1998 and 1997, respectively and
$2,038 and ($3,064) for the nine months ended September 30, 1998 and
1997, respectively. The difference between the Company's net income and
total comprehensive income (loss) relates to the cumulative translation
adjustment of its foreign subsidiaries.
8. Certain reclassifications of prior year amounts have been made to
conform with the current year presentation.
Item 2. Management's Discussion and Analysis of Financial Condition
` and Results of Operations.
<PAGE> 8
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
approximately 300 CLARK dealers and 40 CMHA dealers. In addition, the Company's
Blue Giant(TM) subsidiaries distribute their products through a network of over
390 dealers and agents worldwide. The Company's large installed base, which
management estimates to be approximately 350,000 CLARK units and 25,000 CMHA
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, 1998, compared to the three months ended
September 30, 1997:
Net Sales
- ---------
Net sales were $134.9 million for the three months ended September 30, 1998, an
increase of $14.0 million or 11.6% from $120.9 million for the same period in
1997. Sales increased due to the acquisition of CMHA and Blue Giant, which
contributed $9.5 million and $7.2 million, respectively, toward the Company's
increased sales for the period. North American machine and other sales decreased
$7.3 million or 10.0% due to dealer inventory increases and aggressive
competitive pricing. North American parts sales increased $1.5 million or 8.7%.
Increased European sales of $4.4 million or 13.6% offset some of the sales
decrease in North America. Consolidated parts sales increased $2.7 million or
12% over the same time period last year and are included in the overall increase
discussed above.
Gross Profit
- ------------
Gross profit increased 20.5% or $3.0 million to $17.6 million in the third
quarter of 1998 compared to $14.6 million in the third quarter of 1997. The
acquisitions of CMHA and Blue Giant added $2.3 million of gross profit. Cost
reduction programs and lower product liability expense, offset by higher inbound
freight costs, parts distribution expense, depreciation and amortization expense
and lower production levels absorbing less fixed costs in North America
contributed to the balance of the increase. As a percentage of sales, gross
profits were 13.1% for the third quarter of 1998 compared to 12.1% for the same
period in the prior year.
Engineering, Selling and Administrative Expense
- -----------------------------------------------
Engineering, selling and administrative expense increased $3.8 million to $13.1
million for the third quarter of 1998 from $9.3 million during the same period
of 1997. As a percent of sales engineering, selling and administrative expense
was 9.7% and 7.7% for the same period in 1998 and 1997, respectively. The
acquisition of the CMHA and Blue Giant accounted for $2.5 million of this
increased expense while investments in engineering and selling expenses, to
support programs for growth, accounted for most of the balance of the increase.
Income from Operations
- ----------------------
Income from operations decreased 15.1% or $0.8 million to $4.5 million for the
three months ended September 30, 1998, compared to $5.3 million for the same
period in 1997 due to the reasons discussed above and due to $0.3 million of
startup costs relating to CMHA. As noted above, depreciation and amortization
increased for the three months ended September 30, 1998. The amount of this
increase was $1.1 million.
Interest and Other Expense
- --------------------------
Net interest and other expense of the Company was $4.4 million during the three
months ended September 30, 1998, compared to $3.2 million during the three
months ended September 30, 1997 due, in part, to increases in net interest
expense reflecting increased Senior Notes outstanding, borrowings on the
revolving line of credit and other income related to one time gains from
miscellaneous investments in 1997.
Income Taxes
- ------------
The provision for income taxes was $0.2 million during the three months ended
September 30, 1998 compared to $0.1 million during the three months ended
September 30, 1997. The increase in income taxes is primarily due to foreign
income taxes recorded for Blue Giant Canada, which was acquired in November
1997.
Net Income
- ----------
The Company reported a net loss of $0.1 million during the three months ended
September 30, 1998 compared to net income of $2.0 million for the same period in
1997.
RESULTS OF OPERATIONS
Nine months ended September 30, 1998, compared to the nine months ended
September 30, 1997:
Net Sales
- ---------
Net sales were $404.0 million for the nine months ended September 30, 1998, an
increase of $53.2 million or 15.2% from $350.8 million for the same period in
1997. The acquisition of CMHA and Blue Giant contributed $9.5 million and $19.2
million, respectively to the sales increase. Machine and other sales excluding
the acquired businesses increased 7.7%. Consolidated parts sales increased 7.2%
over the same time period last year.
Gross Profit
- ------------
Gross profit increased 24.6% or $10.1 million to $51.1 million in the first nine
months of 1998 compared to $41.0 million in the first nine months of 1997.
Increased sales and mix contributed $2.8 million of additional gross profit. The
acquisition of CMHA and Blue Giant added $4.7 million of gross profit. Cost
reduction programs, lower product liability expense and higher production levels
absorbing more fixed costs, offset by higher inbound freight and parts
distribution expenses contributed to the balance of the increase. As a
percentage of sales, gross profits were 12.6% for the nine months ended
September 30, 1998 compared to 11.7% for the same period in the prior year.
Engineering, Selling and Administrative Expense
- -----------------------------------------------
Engineering, selling and administrative expense increased $8.7 million to $35.6
million for the nine months ended September 30, 1998 from $26.9 million during
the same period of 1997. As a percent of sales, engineering, selling and
administrative expense was 8.8% and 7.7% for the same period in 1998 and 1997,
respectively. The 1997 acquisitions, HLT and Blue Giant, and the 1998
acquisition of CMHA accounted for $4.2 million of this increased expense while
investments in engineering and selling expense, to support programs for growth
accounted for most of the balance of the increase.
<PAGE> 9
Income from Operations
- ----------------------
Income from operations increased 9.2% or $1.3 million to $15.4 million for the
nine months ended September 30, 1998, compared to $14.1 million for the same
period in 1997 due to the reasons discussed above. As previously commented, the
startup of CMHA resulted in a $0.3 million decrease in income from operations
for this period.
Interest and Other Expense
- --------------------------
Net interest and other expense of the Company was $13.3 million during the nine
months ended September 30, 1998, compared to $10.5 million during the nine
months ended September 30, 1997. This was due, in part, to increases in net
interest expense, exchange loss in foreign subsidiaries, other expenses and
other income related to one-time gains from miscellaneous investments in 1997.
Income Taxes
- ------------
The provision for income taxes was $0.8 million during the nine months ended
September 30, 1998 compared to $0.3 million during the nine months ended
September 30, 1997. The increase in income taxes is primarily due to foreign
income taxes recorded for Blue Giant Canada, which was acquired in November
1997.
Net Income
- -----------
The Company reported net income of $1.4 million during the nine months ended
September 30, 1998 compared to $3.3 million for the same period in 1997.
BACKLOG
During the third quarter of 1998 the Company experienced a downturn in customer
orders, in North America, as dealer inventories increased. As a result, the
Company experienced a decline in its backlog and increases in its inventory
levels. In response, the Company has reevaluated its expected production levels,
and reduced its planned purchasing and production activities.
The Company's backlog of orders at September 30, 1998 was $95.8 million, down
8.1% from September 30, 1997, when the backlog of orders was $104.2 million.
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
Changes in the Company's balance sheet at September 30,1998 from December 31,
1997 relate mainly to the acquisition of CMHA and the factors included under
"Backlog". Working capital, defined as inventory and accounts receivable less
accounts payable, increased $28.3 million compared to the December 31, 1997
levels, which includes $9.3 million of working capital from the newly acquired
CMHA. This increase was primarily due to higher inventories and lower accounts
receivable. Cash generated from operating activities through the first nine
months of 1998 was $0.4 million versus $7.6 million for the first nine months of
1997 primarily due to the increase in working capital discussed above.
<PAGE> 10
Capital expenditures totaled $13.2 million for the nine months ended September
30, 1998. As discussed in Note 6 to the unaudited interim consolidated financial
statements, the Company purchased substantially all the assets and certain
liabilities of CMHA on July 15, 1998. The Company estimates that it will make
approximately $5.0 million of capital expenditures for upgrading and new
equipment in CMHA's manufacturing facilities, of which $3.7 million is included
in the nine months capital expenditures. In order to finance this acquisition,
the Company sold $20.0 million Senior Notes and $20.0 million Preferred Stock.
At September 30, 1998, the Company had $13.6 million drawn against its $30.0
million revolving credit facility, subject to borrowing conditions contained
therein. At October 31, 1998, the Company had approximately $7.9 million drawn
against its $30.0 million revolving credit facility, subject to the borrowing
conditions contained therein. On October 6, 1998, CLARK Europe entered into a
working capital credit line of $10.0 million with Deutsche Bank as permitted
under the terms of its indenture. As of October 31, 1998, the Company had $8.0
million drawn against this line of credit. Management believes that existing
cash levels and the revolving credit facilities will be sufficient to meet the
Company's ordinary operating needs for the next twelve months. The Company's
ability to incur additional indebtedness is somewhat restricted by the covenants
set forth in the Company's borrowing arrangements.
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., Canada,
Germany, and Korea and exports products to more than 80 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.
YEAR 2000
The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium approaches. The "year 2000" problem
is pervasive and complex as virtually every computer operation will be affected
in some way by the rollover of the two digit year value to 00. The issue is
whether computer systems will properly recognize date-sensitive information when
the year changes to 2000. Systems that do not recognize such information could
generate erroneous data or cause a system to fail.
The Company is utilizing both internal and external resources with respect to
its year 2000 issues. With regard to its information technology ("IT") systems,
CLARK is in the process of installing new software to provide improved
operational and financial functionality at each of its worldwide locations. This
new software is year 2000 compliant and handles "Euro" currency transactions.
The installation is expected to be complete at the North American and European
headquarter locations in Kentucky and Germany during the last quarter of 1998
and the first quarter of 1999, respectively. Following the installation and
testing of this new software at these sites, the Company intends to begin
software installation at the Blue Giant, HLT and CMHA facilities. The
installation of the new software by CLARK is a result of a strategic plan to
upgrade its company-wide computer systems which pre-dated the Company's efforts
to make its IT systems year 2000 compliant and is expected to cost approximately
$7.0 million. Therefore, the Company has not incurred and does not anticipate
incurring any material costs specifically related to year 2000 issues that are
in addition to the costs associated with its overall computer system upgrade.
<PAGE> 11
CLARK does not believe that it has any material year 2000 issues with regard to
its non-IT systems. The Company's products employ chips and microprocessors
which use interval timers as opposed to real-time clocks and therefore should
not be affected by the year 2000 rollover. In addition, CLARK does not utilize
computer controlled machines in its factory production, thereby eliminating
potential year 2000 problems relating to its manufacturing equipment.
The Company has ongoing business relationships with many suppliers, dealers and
other parties, which may have their own year 2000 issues. CLARK is in the
process of making contact with each of these third parties with which it has a
material relationship in order to assess whether the Company faces any risks
relating to third party year 2000 problems. The Company expects to be in a
position to make this assessment regarding third party risks during the first
quarter of 1999. There can be no assurance at this time that these third parties
are taking appropriate actions to safeguard their computer systems.
Management cannot at this time predict with any certainty CLARK's most
reasonably likely worst case scenario relating to the year 2000 problem.
However, the Company intends to perform test-runs at each of its facilities
following installation of its new year 2000 compliant software. If a year 2000
problem is identified during any of these test-runs, the Company intends to
immediately seek correction of the problem from its software vendor at no cost
to the Company. Although not anticipated, any failure by the Company to correct
internal computer systems before the Year 2000 could also have a material
adverse affect on the Company's results of operations, financial condition or
cash flow.
EURO CONVERSION
The Euro is scheduled to be introduced on January 1, 1999, at which time the
eleven participating European Monetary Union member countries will establish
fixed conversion rates between their existing currencies (legacy currencies) and
the Euro. During the three-and-a-half year transition period following its
introduction, countries will be allowed to transact business in the Euro and in
their own currencies. On July 1, 2002, the Euro will be the one and only
official currency in European Union countries that are participating in the
conversion.
The Company's European operations have established plans to address the issues
raised by the Euro currency conversion and are cognizant of the potential
business implications of the conversion. CLARK is in the process of installing
new software in each of its worldwide locations that will be able to process
Euro currency transactions. The Company does not expect the conversion costs to
be material. However, due to numerous uncertainties, the Company cannot
reasonably estimate the effect one common currency will have on pricing and the
resulting impact, if any, on its results of operations, financial condition or
cash flow.
<PAGE> 12
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, 1997 for which there have since 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.
On July 17, 1998, the Company issued $20,000,000 aggregate principal amount of
10 3/4% Series C Senior Notes due 2006 (the "Senior Notes") and $20,000,000
aggregate liquidation preference of 13% Series A Senior Exchangeable Preferred
Stock due 2007 (the "Senior Preferred Stock"), and together with the Senior
Notes, (the "Securities"). The principal underwriters involved with this
issuance were Jeffries & Company, Inc. and Bear, Stearns & Co. Inc.. The
Securities were issued to institutional investors at an offering price of 103%
for the Senior Notes (3% discount to the underwriters) and $1,000 per share of
Preferred Stock ($40 discount to the underwriters). The Securities were issued
pursuant to an exemption under Section 4 (2) of the Securities Act of 1933, as
amended (the "Act"). The net proceeds of the issuance of the Securities were
used to finance the acquisition of, and capital expenditure and working capital
requirements relating to, Samsung Forklift, and to pay related fees and
expenses. On October 26, 1998, the Company completed an exchange of (i) an
aggregate principal amount of 10 3/4% Series D Senior Notes due 2006 which were
registered under the Act for all of the Company's outstanding Senior Notes and
(ii) $20,000,000 aggregate liquidation preference of 13% Series B Senior
Exchangeable Preferred Stock due 2007 which were registered under the Act for
all of the Company's outstanding Preferred Stock.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On July 13, 1998, the sole stockholder of the Company, by written consent,
approved an amendment to the Certificate of Incorporation of the Company, which
was subsequently filed with the State of Delaware on July 15, 1998.
Item 5. OTHER INFORMATION.
As mentioned in Note 6 to the Financial Statements, on July 15, 1998, the
Company purchased substantially all the assets and certain liabilities of
Samsung Forklift (hereafter referred to as "CMHA) for approximately $30,400,000
(subject to certain post-closing adjustments). Of the total purchase price,
approximately $7,200,000 is being held in an escrow account pending final
determination of certain post-closing adjustments. The acquisition was not
significant and pro forma financial information is not presented. To finance
this acquisition, the Company sold $20,000,000 aggregate principle amounts of 10
3/4% Senior Notes and 20,000 shares of 13% Senior Exchangeable Preferred Stock
with a liquidation preference of $1,000 per share.
<PAGE> 13
On July 27, 1998, the Company received from the National Labor Relations Board a
petition by the United Steelworkers for an election at the Blue Giant facility
in Pell City, Alabama. On August 25, 1998, this petition was withdrawn by the
United Steelworkers. In addition, the United Steelworkers are no longer
attempting to organize the employees at the Company's Lexington, Kentucky
facility. In the past, there have been repeated attempts by unions to organize
employees at the Lexington facility. However, to date, efforts to unionize the
Company's Kentucky plant have been unsuccessful. The Company plans to actively
continue its efforts to maintain and promote a non-union workforce in its
facilities. Since moving to Kentucky ten years ago, there has not been a union
at any of CLARK's North American manufacturing operations.
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, 1998.
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 16, 1998 By: /s/ Joseph F. Lingg
--------------------------------------
Joseph F. Lingg
Vice President, Finance and Treasurer
(Principal Financial and Accounting Officer)
<PAGE> 14
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 11,998
<SECURITIES> 0
<RECEIVABLES> 64,490
<ALLOWANCES> (7,271)
<INVENTORY> 99,541
<CURRENT-ASSETS> 178,474
<PP&E> 84,060
<DEPRECIATION> (13,897)
<TOTAL-ASSETS> 383,154
<CURRENT-LIABILITIES> 135,442
<BONDS> 157,470
0
20,533
<COMMON> 1
<OTHER-SE> 23,807
<TOTAL-LIABILITY-AND-EQUITY> 383,154
<SALES> 403,984
<TOTAL-REVENUES> 403,984
<CGS> 352,923
<TOTAL-COSTS> 352,923
<OTHER-EXPENSES> 35,626
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,898
<INCOME-PRETAX> 2,141
<INCOME-TAX> 756
<INCOME-CONTINUING> 1,385
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,385
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
