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, 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 April 30, 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>
CLARK MATERIAL HANDLING COMPANY
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements 2
Consolidated Balance Sheet -
March 31, 1998 and December 31, 1997 2
Consolidated Statement of Operations -
Three Months ended March 31, 1998 and 1997 3
Consolidated Statement of Cash Flows -
Three months ended March 31, 1998 and 1997 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 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CLARK Material Handling Company
Consolidated Balance Sheet
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ---------------
Current assets
<S> <C> <C>
Cash and cash equivalents $ 4,309 $ 6,334
Cash securing letters of credit 278 320
Net trade receivables 49,192 47,018
Net inventories 79,151 70,784
Other current assets 7,139 7,281
--------------- ---------------
Total current assets 140,069 131,737
Long-term assets
Property, plant and equipment-net 47,460 47,836
Goodwill, net of accumulated amortization of $3,825
at March 31, 1998 and $3,081 at December 31, 1997 114,680 114,887
Other assets 18,881 18,794
--------------- ---------------
Total assets $ 321,090 $ 313,254
=============== ===============
Current liabilities
Notes payable $ 2,103 $ 3,184
Current portion of capital lease obligations 2,856 2,732
Trade accounts payable 65,802 62,002
Accrued compensation and benefits 5,924 5,730
Accrued warranties and product liability 19,964 20,774
Other current liabilities 14,533 10,728
---------------- ---------------
Total current liabilities 111,182 105,150
Non-current liabilities
Senior notes payable 130,000 130,000
Capital lease obligations, less current portion 4,298 3,864
Accrued warranties and product liability 39,376 38,497
Other non-current liabilities 12,584 12,002
--------------- ---------------
Total liabilities 297,440 289,513
--------------- ---------------
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 8,699 8,406
Cumulative translation adjustment (10,049) (9,665)
--------------- ---------------
Total stockholder's equity 23,650 23,741
--------------- ---------------
Total liabilities and stockholder's equity $ 321,090 $ 313,254
=============== ===============
See accompanying notes to unaudited financial statements.
</TABLE>
2
<PAGE>
CLARK Material Handling Company
Consolidated Statement of Operations
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
--------------- ----------------
<S> <C> <C>
Net sales $ 129,595 $ 110,823
Cost of goods sold 113,932 98,192
--------------- ---------------
Gross profit 15,663 12,631
Engineering, selling and administrative expenses 11,236 8,762
--------------- ---------------
Income from operations 4,427 3,869
Other income (expense):
Interest income 53 257
Interest expense (3,719) (3,938)
Other (expense) income-net (248) 75
---------------- ---------------
Income before income taxes 513 263
Provision for income taxes 220 37
--------------- ---------------
Net income $ 293 $ 226
=============== ===============
See accompanying notes to unaudited financial statements.
</TABLE>
3
<PAGE>
CLARK Material Handling Company
Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
------------------ ----------------
Operating activities:
<S> <C> <C>
Net income $ 293 $ 226
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 3,363 3,166
Changes in operating assets and liabilities:
Restricted cash 33 767
Trade receivables (2,230) (6,466)
Net inventories (8,675) 24
Trade accounts payable 4,131 1,022
Accrued compensation and benefits 240 (596)
Accrued warranties and product liability 97 107
Other assets and liabilities, net 2,917 4,040
--------------- ---------------
Net cash provided by operating activities 169 2,290
--------------- ---------------
Investing activities - capital expenditures (1,900) (761)
--------------- ---------------
Financing activities - repayment of notes payable, net (222) (109)
--------------- ---------------
Effect of exchange rate changes on cash and cash equivalents (72) (476)
--------------- ---------------
Net (decrease) increase in cash and cash equivalents (2,025) 944
Cash and cash equivalents at beginning of period 6,334 16,554
--------------- ---------------
Cash and cash equivalents at end of period $ 4,309 $ 17,498
=============== ===============
See accompanying notes to unaudited financial statements.
</TABLE>
4
<PAGE>
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:
March 31, December 31,
1998 1997
-------------- -----------------
Finished equipment $ 15,459 $ 12,000
Replacement parts 29,423 28,302
Work-in-process 7,313 5,356
Raw materials and supplies 26,956 25,126
---------- ------------
Net inventories $ 79,151 $ 70,784
========== ============
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 HLT (Hydroelectric Lift Trucks) a supplier of upright material handling
equipment, for $4,948 million. 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 Companies under a non compete agreement), an
obligation payable over three years totaling $1,105 under a non compete
agreement with a shareholder of Blue Giant Companies 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 of $1,026 is being amortized on a straight-line basis over forty
years.
5
<PAGE>
The following unaudited proforma summary presents the consolidated results
of operations as though the acquisition of Blue Giant Companies had been
completed on January 1 of 1997.
Three Months
Ended
March 31, 1997
--------------
Net Sales $115,931
Income from operations $ 3,745
Net Income $ 65
6. The Company had a total comprehensive loss of $91 and $3,894 for the three
months ended March 31, 1998 and 1997, respectively. The difference between
the Company's net income and total comprehensive loss relates to the
cumulative translation adjustment of its foreign subsidiaries.
7. Reclassifications. 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.
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, 1997.
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
more than 290 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, 1998, compared to the three months ended March 31,
1997:
Net Sales
Net sales were $129.6 million for the three months ended March 31, 1998, an
increase of $18.8 million or 17.0% from $110.8 million for the same period in
1997. Machine sales increased 20.9% mainly due to stronger markets, while parts
sales increased 2.2%. The acquisition of the Blue Giant Companies contributed
35.1 % or $6.6 million toward the Company's increased sales.
Gross Profit
Gross profit increased 24.6% or $3.1 million to $15.7 million in the first
quarter of 1997 compared to $12.6 million in the first quarter of 1997.
Increased sales volume contributed $2.1 million of additional gross profit while
cost reduction programs, as well as, higher production levels absorbing more
fixed costs
6
<PAGE>
contributed to the balance of the increase. As a percentage of sales, gross
profits were 12.1% for the first quarter of 1998 compared to 11.4% for the same
period in the prior year.
Engineering, Selling and Administrative Expense
- -----------------------------------------------
Engineering, selling and administrative expense increased 27.3% or $2.4 million
to $11.2 million for the first quarter of 1998 from $8.8 million during the same
period of 1997. The 1997 acquisitions accounted for 45.8% or $1.1 million of
this increased expense while investments in engineering and selling, to support
programs for growth, accounted for the balance.
Income from Operations
- ----------------------
Income from operations increased 12.8% or $0.5 million to $4.4 million for the
three months ended March 31, 1998, compared to $3.9 million for the same period
in 1997 due to the reasons discussed above.
Interest and Other Costs
- ------------------------
Net interest and other expense of the Company was $3.9 million during the three
months ended March 31, 1998, compared to $3.6 million during the three months
ended March 31, 1997 primarily due to increase in exchange losses in the Korean
and Brazilian subsidiaries.
The provision for income taxes of the Company was $0.2 million for the three
months ended March 31, 1998 as compared to $0.03 million for the three months
ended March 31, 1997. The increase was primarily due to income generated from
the newly acquired Blue Giant Limited.
Net Income
- ----------
The Company reported net income of $0.3 million during the three months ended
March 31, 1998 compared to $0.2 million for the same period in 1997.
Backlog
The Company's backlog of orders at March 31, 1998 was $121.2 million, up 34%
from March 31, 1997, when the backlog of orders was $90.4 million, and is 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 March
31, 1998 from December 31, 1997. However, working capital increased $2.3 million
primarily due to higher accounts receivable and inventories somewhat offset by
higher accounts payable and other current liabilities. Cash provided by
operating activities through the first three months of 1998 was $0.2 million,
and the Company's cash levels were down $2.0 million from December 31, 1997
levels. Capital expenditures totaled $1.9 million for the three months ended
March 31, 1998. The Company's $30 million revolving credit facility was undrawn
and available at March 31, 1998. The Company's ability to incur additional
indebtedness is somewhat restricted by the covenants set forth in the Company's
borrowing arrangements.
7
<PAGE>
Management believes that existing cash levels and the $30 million line of credit
will be sufficient to meet the Company's ordinary operating 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.
8
<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, 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.
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 March 31, 1998.
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, 1998 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
- ----------- -----------
27 Financial Data Schedule
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,309
<SECURITIES> 0
<RECEIVABLES> 51,348
<ALLOWANCES> (2,156)
<INVENTORY> 79,151
<CURRENT-ASSETS> 140,069
<PP&E> 56,728
<DEPRECIATION> (9,268)
<TOTAL-ASSETS> 321,090
<CURRENT-LIABILITIES> 111,182
<BONDS> 137,154
0
0
<COMMON> 1
<OTHER-SE> 24,999
<TOTAL-LIABILITY-AND-EQUITY> 321,090
<SALES> 129,595
<TOTAL-REVENUES> 129,595
<CGS> 113,932
<TOTAL-COSTS> 113,932
<OTHER-EXPENSES> 11,236
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,719
<INCOME-PRETAX> 513
<INCOME-TAX> 220
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 293
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
