<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended December 27, 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: 333-31187
W.R. CARPENTER NORTH AMERICA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 54-1049647
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
801 S. PINE ST.
MADERA, CALIFORNIA 93637
(Address of principal executive offices and zip code)
(559) 662-3900
(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 [ ]
At February 8, 1999, there were 55,000 shares of Class A common stock, $1.00 par
value, and 5,000 shares of Class B common stock, $1.00 par value, of the
registrant issued and outstanding.
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
Jun. 28 Dec. 28 Dec. 27
1998 1997 1998
(audited) (unaudited) (unaudited)
--------- ----------- -----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 63,669 $ 70,397 $ 44,925
Accounts receivable (net of allowance for doubtful 28,625 23,514 25,584
accounts of $410, $405, and $604, respectively)
Inventories 27,407 19,084 35,914
Prepaid expenses and other 2,995 1,737 2,699
Deferred income taxes 1,791 1,091 1,790
-------- -------- --------
Total current assets 124,487 115,823 110,912
Property, plant and equipment, net 62,765 51,558 88,341
Other assets 9,407 5,531 8,927
-------- -------- --------
Total assets $196,659 $172,912 $208,180
======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 18,028 $ 10,790 $ 19,116
Other accrued expenses 11,778 6,527 10,744
Current portion of long-term debt 6,191 2,011 3,829
-------- -------- --------
Total current liabilities 35,997 19,328 33,689
Senior Subordinated Notes Payable 104,571 104,547 104,595
Long-term debt, net of current portion 13,365 12,170 24,452
Other long-term liabilities 5,108 5,031 5,377
Deferred income taxes 2,928 2,548 3,234
-------- -------- --------
Total liabilities $161,969 $143,624 $171,347
-------- -------- --------
Commitments and contingencies
Stockholder's equity
Common stock 60 60 60
Preferred stock 25 25 25
Additional paid-in capital 8,767 8,767 8,767
Cumulative currency translation adjustment (CTA) 2,084 2,084 2,084
Retained earnings (on July 3, 1994 a deficit of $31,395 was
eliminated due to a subsidiary's quasi-reorganization) 23,754 18,352 25,897
-------- -------- --------
34,690 29,288 36,833
-------- -------- --------
Total liabilities and stockholder's equity $196,659 $172,912 $208,180
======== ======== ========
</TABLE>
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W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per-share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
Dec. 28 Dec. 27 Dec. 28 Dec. 27
1997 1998 1997 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Equipment sales
New $ 31,438 $ 30,128 $ 60,626 $ 70,695
Used 905 1,620 1,426 3,031
Rental, parts and service 7,713 10,809 15,038 20,588
-------- -------- -------- --------
Total revenues 40,056 42,557 77,090 94,314
-------- -------- -------- --------
Cost of Revenues
Equipment sales
New 21,883 21,958 42,914 51,652
Used 517 1,082 768 1,963
Rental, parts and service 4,535 6,713 8,906 12,691
-------- -------- -------- --------
Total cost of revenues 26,935 29,753 52,588 66,306
-------- -------- -------- --------
Gross profit
Equipment sales
New 9,555 8,170 17,712 19,043
Used 388 538 658 1,068
Rental, parts and service 3,178 4,096 6,132 7,897
-------- -------- -------- --------
Total gross profit 13,121 12,804 24,502 28,008
-------- -------- -------- --------
Operating expenses
Selling, general and administrative 5,650 7,031 11,311 14,264
Product liability 758 420 1,697 870
Research and development 1,710 2,242 3,095 4,175
-------- -------- -------- --------
Total operating expenses 8,118 9,693 16,103 19,309
-------- -------- -------- --------
Income from operations 5,003 3,111 8,399 8,699
Other income (expense)
Interest expense, net (2,163) (2,759) (4,289) (5,451)
Other (expense) income (168) 26 (353) (34)
-------- -------- -------- --------
Income before income taxes 2,672 378 3,757 3,282
Provision for income taxes (1,068) (130) (1,500) (1,139)
-------- -------- -------- --------
Net income $ 1,604 $ 248 $ 2,257 $ 2,143
======== ======== ======== ========
Net income per common share $ 26.73 $ 4.13 $ 37.62 $ 35.72
======== ======== ======== ========
Weighted average number of
common shares used to compute net
income per share 60,000 60,000 60,000 60,000
======== ======== ======== ========
</TABLE>
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W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
---------------------------
Dec. 28 Dec. 27
1997 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net income $ 2,257 $ 2,143
-------- --------
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 3,616 5,916
Gain on disposition of property, plant and equipment (667) (1,068)
Changes in operating assets and liabilities
Accounts receivable 77 3,041
Inventories (2,251) (8,507)
Prepaid expenses and other assets 36 296
Deferred income taxes, net 413 (1,027)
Accounts payable (795) 1,088
Accrued expenses (2,833) 300
Other, net 1,463 606
-------- --------
Total adjustments (941) 645
-------- --------
Net cash provided by operating activities 1,316 2,788
-------- --------
Cash flows from investing activities
Additions to property, plant and equipment (13,672) (33,160)
Proceeds from disposition of assets 1,333 3,031
-------- --------
Net cash used by investing activities (12,339) (30,129)
-------- --------
Cash flows from financing activities
Proceeds from long-term debt 4,688 12,245
Repayment of long-term debt (613) (3,648)
-------- --------
Net cash provided by financing activities 4,075 8,597
-------- --------
Net decrease in cash and cash equivalents (6,948) (18,744)
Cash and cash equivalents at beginning of period 77,345 63,669
-------- --------
Cash and cash equivalents at end of period $ 70,397 $ 44,925
======== ========
</TABLE>
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W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements for the three and six months
ended December 27, 1998, have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Results of operations for the interim periods are not necessarily indicative of
the results that may be expected for a full year.
2. CONTINGENCIES
W.R. Carpenter North America, Inc. ("the Company") and its subsidiaries have
various product liability claims and suits pending. The Company's policy is to
defend each suit vigorously, regardless of the amount sought in damages.
Although the outcome of such litigation cannot be predicted with certainty, it
is the opinion of management, based on the advice of legal counsel and other
considerations, that all claims, legal actions, complaints and proceedings which
have been filed or are pending against the Company and its subsidiaries, as well
as possible future claims, are adequately covered by reserves or insurance, and
are not expected to have a material adverse effect on the Company's consolidated
financial position.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements in this Quarterly Report on Form 10-Q include forward-looking
information within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and
are subject to the "safe harbor" created by those sections. These
forward-looking statements involve certain risks and uncertainties that could
cause actual results to differ materially from those in the forward-looking
statement. Such risks and uncertainties include, but are not limited to, the
following factors: substantial leverage of the Company; industrial cyclicality;
dependence on the construction industry; consolidation of the customer base;
dependence upon major customers; risks relating to growth; significance of new
product development; the need for continual capital expenditures; competition;
product liability; insurance; availability of product components; reliance on
suppliers; foreign sales; government and environmental regulation; labor
matters; holding company structure; restrictions under debt agreements;
fraudulent conveyance; and control by the sole stockholder.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain historical
income statement data derived from the Company's consolidated statements of
operations expressed in dollars and as a percentage of net revenue.
<TABLE>
<CAPTION>
Three Months Ended
------------------
December 27, 1998 December 28, 1997
----------------- -----------------
(Dollars in Thousands)
(Unaudited)
<S> <C> <C> <C> <C>
Revenue $ 42,557 100.0% $ 40,056 100.0%
Cost of revenue 29,753 69.9 26,935 67.2
Gross profit 12,804 30.1 13,121 32.8
Operating expenses 9,693 22.8 8,118 20.3
Operating income 3,111 7.3 5,003 12.5
Interest expense, net 2,759 6.5 2,163 5.4
Other (expenses)/income 26 0.1 (168) 0.4
Provision for income taxes 130 0.3 1,068 2.7
Net income 248 0.6 1,604 0.4
EBITDA 6,302 14.8 6,840 17.1
Depreciation and amortization 3,191 7.5 1,837 4.6
</TABLE>
SEGMENT OPERATIONS
The Company, through its wholly-owned subsidiaries, UpRight, Inc. ("UpRight")
and Horizon High Reach, Inc. ("Horizon"), manufactures, sells, rents and
services aerial work platform equipment to a diverse customer base.
UpRight is a leading manufacturer of aerial work platforms. Horizon is a leading
industrial equipment rental, sales and service company specializing in aerial
work platforms and is a significant customer of UpRight. Sales to Horizon
accounted for approximately 30.6% and 10.2% of UpRight's revenue for the three
months ended December 27, 1998 and December 28, 1997, respectively. Sales to
Horizon accounted for approximately 23.0% and 15.5% of UpRight's revenue for the
six months ended December 27, 1998 and December 28, 1997, respectively.
When equipment purchased from UpRight by Horizon is included in Horizon's rental
fleet, or held as sales inventory at the end of a reporting period, the gross
profit earned by UpRight on the sale of this equipment is eliminated from the
Company's consolidated Gross Profit. As Horizon's purchases of equipment for
rental fleet purposes vary by quarter, and the level of UpRight equipment held
in sales inventory by Horizon fluctuates by quarter, the resulting elimination
of Gross Profit on consolidation can cause consolidated Income from operations
to fluctuate on a quarterly basis.
The Company believes its results of operations for its UpRight and Horizon
subsidiaries are most meaningful when analyzed from the perspective of two
arm's-length companies. The following table sets forth for the periods indicated
certain historical consolidating income statement data derived from the
Company's consolidated statements of operations expressed in dollars and as a
percentage of revenue.
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<TABLE>
<CAPTION>
Consolidating Statement of Operations
Three Months Ended
December 27, 1998
(Dollars in Thousands)
(Unaudited)
-----------------------------------------------------------------------------
Carpenter Horizon UpRight Eliminations Consolidated
--------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
New equipment sales $ 7,262 $ 32,968 $(10,102) $ 30,128
Used equipment sales 1,620 1,620
Rental, parts and service 10,809 10,809
-------- -------- -------- -------- --------
TOTAL REVENUES 19,691 32,968 (10,102) 42,557
-------- -------- -------- -------- --------
COST OF REVENUES
New equipment sales 5,942 24,038 (8,022) 21,958
Used equipment sales 1,082 1,082
Rental, parts and service 6,713 6,713
-------- -------- -------- -------- --------
TOTAL COST OF REVENUES 13,737 24,038 (8,022) 29,753
-------- -------- -------- -------- --------
GROSS PROFIT
New equipment sales 1,320 8,930 (2,080) 8,170
Used equipment sales 538 538
Rental, parts and service 4,096 4,096
-------- -------- -------- -------- --------
TOTAL GROSS PROFIT 5,954 8,930 (2,080) 12,804
-------- -------- -------- -------- --------
% of revenue 30.2% 27.1% 30.1%
INCOME FROM OPERATIONS
Selling, general and administrative $ 995 3,210 2,826 7,031
Product liability 420 420
Research and development 2,242 2,242
-------- -------- -------- -------- --------
Total operating expenses 995 3,210 5,488 9,693
======== ======== ======== ======== ========
INCOME FROM OPERATIONS (995) 2,744 3,442 (2,080) 3,111
% of revenue 13.9% 10.4% 20.6% 7.3%
</TABLE>
<TABLE>
<CAPTION>
Consolidating Statement of Operations
Three Months Ended
December 28, 1997
(Dollars in Thousands)
(Unaudited)
----------------------------------------------------------------------
Carpenter Horizon UpRight Eliminations Consolidated
--------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
New equipment sales $ 4,075 $30,461 $(3,098) $31,438
Used equipment sales 905 905
Rental, parts and service 7,713 7,713
------- ------- ------- ------- -------
TOTAL REVENUES 12,693 30,461 (3,098) 40,056
------- ------- ------- ------- -------
COST OF REVENUES
New equipment sales 3,337 21,494 (2,948) 21,883
Used equipment sales 517 517
Rental, parts and service 4,535 4,535
------- ------- ------- ------- -------
TOTAL COST OF REVENUES 8,389 21,494 (2,948) 26,935
------- ------- ------- ------- -------
GROSS PROFIT
New equipment sales 738 8,967 (150) 9,555
Used equipment sales 388 388
Rental, parts and service 3,178 3,178
------- ------- ------- ------- -------
TOTAL GROSS PROFIT 4,304 8,967 (150) 13,121
------- ------- ------- ------- -------
% of revenue 33.9% 29.4% 32.8%
INCOME FROM OPERATIONS
Selling, general and administrative $ 642 2,433 2,575 5,650
Product liability 758 758
Research and development 1,710 1,710
------- ------- ------- ------- -------
Total operating expenses 642 2,433 5,043 8,118
======= ======= ======= ======= =======
INCOME FROM OPERATIONS (642) 1,871 3,924 (150) 5,003
% of revenue 14.7% 12.9% 4.8% 12.5%
</TABLE>
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<TABLE>
<CAPTION>
Consolidating Statement of Operations
Six Months Ended
December 27, 1998
(Dollars in Thousands)
(Unaudited)
------------------------------------------------------------------
Carpenter Horizon UpRight Eliminations Consolidated
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
New equipment sales $13,292 $74,559 $(17,156) $70,695
Used equipment sales 3,031 3,031
Rental, parts and service 20,588 20,588
-------- ------- ------- -------- -------
TOTAL REVENUES 36,911 74,559 (17,156) 94,314
-------- ------- ------- -------- -------
COST OF REVENUES
New equipment sales 10,852 54,906 (14,106) 51,652
Used equipment sales 1,963 1,963
Rental, parts and service 12,691 12,691
-------- ------- ------- -------- -------
TOTAL COST OF REVENUES 25,506 54,906 (14,106) 66,306
-------- ------- ------- -------- -------
GROSS PROFIT
New equipment sales 2,440 19,653 (3,050) 19,043
Used equipment sales 1,068 --- 1,068
Rental, parts and service 7,897 --- 7,897
-------- ------- ------- -------- -------
TOTAL GROSS PROFIT 11,405 19,653 (3,050) 28,008
-------- ------- ------- -------- -------
% of revenue 30.9% 26.4% 29.7%
INCOME FROM OPERATIONS
Selling, general and administrative $ 2,290 6,339 5,635 14,264
Product liability 870 870
Research and development 4,175 4,175
-------- ------- ------- -------- -------
Total operating expenses 2,290 6,339 10,680 19,309
======== ======= ======= ======== =======
INCOME FROM OPERATIONS (2,290) 5,066 8,973 (3,050) 8,699
% of revenue 13.7% 12.0% 17.8% 9.2%
</TABLE>
<TABLE>
<CAPTION>
Consolidating Statement of Operations
Six Months Ended
December 28, 1997
(Dollars in Thousands)
(Unaudited)
--------------------------------------------------------------
Carpenter Horizon UpRight Eliminations Consolidated
--------- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
New equipment sales $ 8,416 $ 61,816 $ (9,606) $ 60,626
Used equipment sales 1,426 1,426
Rental, parts and service 15,038 15,038
-------- --------- -------- -------- ---------
TOTAL REVENUES 24,880 61,816 (9,606) 77,090
-------- --------- -------- -------- ---------
COST OF REVENUES
New equipment sales 6,769 44,169 (8,024) 42,914
Used equipment sales 768 768
Rental, parts and service 8,906 8,906
-------- --------- -------- -------- ---------
TOTAL COST OF REVENUES 16,443 44,169 (8,024) 52,588
-------- --------- -------- -------- ---------
GROSS PROFIT
New equipment sales 1,647 17,647 (1,582) 17,712
Used equipment sales 658 658
Rental, parts and service 6,132 6,132
-------- --------- -------- -------- ---------
TOTAL GROSS PROFIT 8,437 17,647 (1,582) 24,502
-------- --------- -------- -------- ---------
% of revenue 33.9% 28.5% 31.8%
INCOME FROM OPERATIONS
Selling, general and administrative $ 1,245 4,793 5,273 11,311
Product liability 1,697 1,697
Research and development 3,095 3,095
-------- --------- -------- -------- ---------
Total operating expenses 1,245 4,793 10,065 16,103
======== ========= ======== ======== =========
INCOME FROM OPERATIONS (1,245) 3,644 7,582 (1,582) 8,399
% of revenue 14.6% 12.3% 16.5% 10.9%
</TABLE>
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THREE MONTHS ENDED DECEMBER 27, 1998 COMPARED TO THREE MONTHS ENDED DECEMBER 28,
1997
Revenue for the three months ended December 27, 1998 was $42.6 million, an
increase of $2.5 million over revenue of $40.1 million for the three months
ended December 28, 1997. The increase in revenue was mainly due to an increase
in Horizon's rental, parts and service revenue of $3.1 million in the same
period. The increase in Horizon's rental, parts and service revenue is primarily
attributable to rental fleet additions and the inclusion of results from
businesses acquired subsequent to the first quarter of fiscal 1998.
Gross profit for the three months ended December 27, 1998 was $12.8 million, a
decrease of $0.3 million from gross profit of $13.1 million for the three months
ended December 28, 1997. Gross margin decreased to 30.1% in the three months
ended December 27, 1998 compared to 32.8% in the three months ended December 28,
1997. The decline in gross profit is due to increased pricing pressures, higher
depreciation expense on rental equipment and higher elimination of gross profit
attributable to UpRight's products held in Horizon's rental fleet as of December
27, 1998 compared to December 28, 1997.
Operating expenses, consisting of selling, general and administrative expense
(SG & A), product liability and research and development expense, were $9.7
million in the three months ended December 27, 1998 compared to $8.1 million for
the same period last year. SG & A expenses increased by $1.4 million to $7.0
million in the three months ended December 27, 1998 compared to the three months
ended December 28, 1997. As a percentage of revenue SG & A expenses increased by
2.4% to 16.5% in the quarter ended December 27, 1998 compared to the quarter
ended December 28, 1997 mainly due to higher elimination of inter-company
revenue. Product liability expense was $0.4 million in the three months ended
December 27, 1998 compared to $0.8 million in the three months ended December
28, 1997. Research and development expenses for the three months ended December
27, 1998 were $2.2 million, an increase of $ 0.5 million compared to the three
months ended December 28, 1997. The increase in research and development
expenses reflected the Company's continued emphasis on developing new and
re-designed aerial work platform products.
Interest expense, net of interest income, increased to $2.8 million for the
three months ended December 27, 1998 from $2.2 million for the three months
ended December 28, 1997 due to higher borrowing by UpRight and lower cash
balances.
Income tax for the three months ended December 27, 1998 was $0.1 million
compared to $1.1 million for the three months ended December 28, 1997. The
Company's effective tax rate was 34.4% for the three months ended December 27,
1998 compared to 40.0% for the three months ended December 28, 1997.
Net income for the three months ended December 27, 1998 was $0.2 million,
representing a decrease of $1.4 million from net income of $1.6 million for the
three months ended December 28, 1997, as a result of the factors described
above.
SIX MONTHS ENDED DECEMBER 27, 1998 COMPARED TO SIX MONTHS ENDED DECEMBER 28,
1997
Revenue for the six months ended December 27, 1998 was $94.3 million, an
increase of $17.2 million over revenue of $77.1 million for the six months ended
December 28, 1997. The increase in revenue was mainly attributable to an
increase in revenue from sales of boom lifts and large scissor lifts of $10.1
million and an increase in rental, parts and service revenue of $5.6 million
compared to the six months ended December 28, 1997.
Gross profit increased from $24.5 million for the six months ended December 28,
1997 to $28.0 million for the six months ended December 27, 1998. However, gross
profit as a percentage of total revenue decreased to 29.7% for the six months
ended December 27, 1998 compared to 31.8% for the same period during the prior
year due to the factors described above.
Operating expenses were $19.3 million for the six months ended December 27, 1998
compared to $16.1 million for the same period in the previous year, but
represented approximately 21% of revenue for both periods. The $3.2 million
increase in operating expenses in the six months ended December 27, 1998
compared to the six months ended December 28, 1997 primarily resulted from the
factors described above.
Interest expense, net of interest income, increased to $5.5 million for the six
months ended December 27, 1998 compared to $4.3 million during the comparable
period in the previous year. This increase in interest expense resulted
primarily from the factors described above.
Income tax for the six months ended December 27, 1998 was $1.1 million compared
to $1.5 million for the six months ended December 28, 1997. The Company's
effective income tax rate was 34.7% and 39.9% for the six months ended December
27, 1998 and December 28, 1997, respectively.
Net income for the six months ended December 27, 1998 was $2.1 million,
representing a decrease of $0.1 million compared to the six months ended
December 28, 1997. This decrease in net income resulted primarily from the
factors described above.
CAPITAL RESOURCES AND LIQUIDITY
The Company's cash flow requirements are for working capital, capital
expenditures and debt service.
The Company's working capital was $77.2 million and $88.4 million at December
27, 1998 and June 28, 1998, respectively. The reduction of working capital is
mainly due to a reduction in cash of $18.7 million.
The Company's outstanding debt was $132.7 million and $124.1 million at December
27, 1998 and June 28, 1998, respectively. Increased borrowings were due to
UpRight's financing its capital expenditure of $12.5 million during the six
months ended December 27, 1998. Cash and cash equivalents were $44.9 million and
$63.7 million at December 27, 1998 and June 28, 1998, respectively.
Page 9
<PAGE> 10
Net cash provided by operating activities was $2.8 million in the six months
ended December 27, 1998 and $1.3 million for the six months ended December 28,
1997. The increase in net cash provided by operating activities of $1.5 million
is primarily related to higher operating income before depreciation for the six
months ended December 27, 1998 compared to the six months ended December 28,
1997 offset by an increase in working capital other than cash.
Net cash used by investing activities was $30.1 million in the six months ended
December 27, 1998 compared to $12.3 million in the six months ended December 28,
1997. The increase in net cash used by investing activities resulted primarily
from an increase in cash used for the purchase of property, plant and equipment
which totaled $33.2 million for the six months ended December 27, 1998 compared
to $13.7 million for the six months ended December 28, 1997. This capital
expenditure was incurred to construct UpRight's new manufacturing facilities in
Madera, California, buy new equipment for its Selma, California facility and
upgrade and expand Horizon's rental fleet.
Net cash provided by financing activities was $8.6 million and $4.1 million in
the six months ended December 27, 1998 and December 28, 1997, respectively. The
change in net cash provided by financing activities is primarily due to
UpRight's financing its capital expenditure of $12.5 million during the six
months ended December 27, 1998. The Company paid no dividends in either period.
The Company believes that, in addition to its cash on hand, internally generated
funds and amounts available to UpRight and Horizon under revolving credit
facilities are and will continue to be sufficient to satisfy its operating cash
requirements and planned capital expenditures. The Company may, however, require
additional capital through borrowings if the Company undertakes acquisitions.
SEASONALITY
The Company's revenue and operating results historically have fluctuated from
quarter to quarter, and the Company expects that they will continue to do so in
the future. These fluctuations have been caused by a number of factors,
including seasonal purchasing patterns of UpRight's customers and seasonal
rental patterns of Horizon's customers (principally due to the effect of weather
on construction activity). The operating results of any historical period are
not necessarily indicative of results for any future period.
YEAR 2000
The Year 2000 ("Y2K") issue is the result of computer programs being written
using two digits (i.e. "98") rather than four (i.e. "1998") to define the
applicable year. These programs treat years as occurring between 1900 and the
end of 1999 and do not self-convert to reflect the upcoming change in the
century. In addition, February 2000 is a leap year at the end of a century, an
event that occurs only once every 400 years. If not corrected, computer
applications could fail or create erroneous results in date sensitive
applications.
Each of the Company, UpRight and Horizon has undertaken a program to understand
the nature and extent of the work required to make its respective systems Y2K
compliant. These programs encompass information systems, facilities systems,
vehicles, UpRight and Horizon's products and the readiness of UpRight and
Horizon's suppliers and customers. These programs include the following phases:
identification and assessment, compliance plan development, remediation and
testing, and contingency planning.
The objective of each of the Company, UpRight and Horizon is to become Y2K
compliant no later than June 28, 1999. Each of the Company, UpRight and Horizon
has already updated its information systems to be Y2K compliant. The Company
(including UpRight and Horizon) does not believe there to be any Y2K issue with
the products it sells, rents or services. Each of the Company, UpRight and
Horizon will be requesting written assurances from its respective suppliers to
confirm this.
The total cost of the Y2K project to date has not been material. Based on its
program to date, the Company does not expect that future costs of modifications
will have a material adverse effect on the Company's financial position or
results of operations. Because the Company expects that its internal systems
will become Y2K compliant in a timely manner, the Company believes that the most
reasonably likely worst case Y2K scenario would result from suppliers or other
third parties failing to achieve Y2K compliance. Depending upon the number of
third parties, their identity and the nature of the non-compliance, the Y2K
issue could have a material adverse effect on the Company's financial position
or results of operations. The Y2K project is expected to significantly reduce
the Company's level of uncertainty about the compliance and readiness of third
parties. The Company will have a contingency plan in place should any problems
occur in critical areas.
EURO CONVERSION
On January 1, 1999 certain countries of the European Union are scheduled to
establish fixed conversion rates between their existing currencies and one
common currency, the euro. The euro will then trade on currency exchanges and
may be used in business transactions. Beginning in January 2002, new
euro-denominated currencies will be issued and the existing currencies will be
withdrawn from circulation. The Company is currently evaluating the systems and
business issues raised by the euro conversion. These issues include the need to
adapt computer and business systems and equipment and the competitive impact of
cross-border transparency. The Company completed its preliminary estimate of the
potential impact likely to be caused by the euro conversion. Based on the
preliminary estimate, the Company has no reason to believe the euro conversion
will have a material impact on the Company's financial condition or results of
operation.
Page 10
<PAGE> 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
On July 14, 1998, in connection with a sales contract with a customer in
Germany, UpRight entered into a forward foreign exchange contract for the
purpose of managing its exposure to fluctuations in the value of the German
Deutsche Mark. At December 27, 1998, the fair value of this contract was
approximately $4.2 million. The maturity of this instrument is less than 12
months. The Company has not entered into this forward foreign exchange contract
for speculative or trading purposes. The Company's accounting policies for this
contract are based on the Company's designation of such contract as a hedging
transaction. Gains and losses on forward foreign exchange contracts are
recognized in income in the same period as gains and losses on the underlying
transactions. Since the Company has entered into this forward contract only as a
hedge, any change in currency rates would not result in any material gain or
loss, as any gain or loss on the underlying foreign currency denominated balance
would be offset by the gain or loss on the forward contract.
ITEM 5. OTHER INFORMATION
On December 1, 1998, in a corporate reorganization, UpRight International
Limited ("UIL"), the sole shareholder of the Company, transferred 55,000 shares
of the Company's Class A Common Stock, $1.00 par value per share, 5,000 shares
of the Company's Class B Common Stock, $1.00 par value per share, and 25,000
shares of the Company's Preferred Stock, $1.00 par value per share, collectively
constituting 100% of the outstanding shares of the Company, to WRC Holdings,
Inc., a newly formed Delaware corporation and a wholly-owned subsidiary of UIL.
WRC Holdings, Inc. is now the sole shareholder of the Company's outstanding
shares of capital stock, and UIL remains the ultimate parent of the Company.
Page 11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. The following Exhibits are filed herewith and made a part hereof:
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------ -----------------------
<S> <C>
*3.1(i) Certificate of Incorporation of the Company, as amended.
*3.1(ii) Bylaws of the Company, as amended.
*4.1 Indenture, dated as of June 10, 1997, by and among the Company,
the Guarantors named therein and U.S. Trust Company of
California, N.A.
*4.4 Form of Exchange Global Note.
*10.3 Industrial Lease, dated February 7, 1997, between A.L.L., a
general partnership, and UpRight.
*10.4 Lease, entered into as of November, 1995, by and between
Townview Partners, an Ohio partnership, and UpRight.
*10.5 Recourse Agreement, dated February 11, 1997, by and between
Horizon and American Equipment Leasing.
*10.6 Management Services Agreement, dated May 12, 1997, by and
between the Company and Griffin Group International Management
Ltd.
*10.8 Lease, dated January, 1997, by and between Morris Ragona and
Joan Ragona, and Horizon.
*10.9 Agreement of Lease, dated January 26, 1995, by and between
Richard V. Gunner and George Andros, and Horizon.
*10.10(i) Lease Agreement, executed November 10, 1989, by and between
Trussel Electric, Inc., and Up-Right, including Lease Extension
Agreement dated February 28, 1994, Lease Modification Agreement
dated January 26, 1994, and Notice of Option to Renew dated May
7, 1992.
**10.10(ii) Lease Extension and Modification Agreement dated September 3,
1998.
***10.10(iii) Lease Extension and Modification Agreement dated October 28,
1997.
*10.11 Lease Agreement (undated) by and between T.T. Templin and
Horizon.
*10.12 Agreement of Lease, dated October 15, 1992, by and between
Robert I. Selsky and Up-Right Aerial Platforms, Assignment of
Lease, dated June 1994, by and between Up-Right and Horizon and
Consent to Assignment dated July 15, 1994.
*10.13 Lease Agreement, dated April 27, 1990, by and between D.L.
Phillips Investment Builders, Inc., and Up-Right, together with
Supplemental Agreement to Lease, dated September 30, 1994,
Assignment of Lease, dated June 18, 1990, by and between D.L.
Phillips Investment Builders, Inc., and JMA, Ltd., Assignment of
Lease dated June 1994, by and between Up-Right and Horizon and
Consent to Assignment dated July 15, 1994.
*10.15 Lease, dated March 7, 1995, by and between BMB Investment Group
and Horizon.
**10.16 Lease Agreement dated December 31, 1997 by and between William
L. Morillon and Marie Anne Morillon and Horizon High Reach, Inc.
**10.17 Revolving Loan Agreement, dated May 5, 1998, between UpRight,
Inc., and Union Bank of California.
**10.18 Equipment Financing Agreement, dated April 23, 1998, between
UpRight, Inc. and KeyCorp Leasing LTD.
27.1 Financial Data Schedule.
</TABLE>
- --------------------
* Incorporated herein by reference to the Company's Registration Statement
on Form S-4 (Reg. No. 333-31187), filed with the Securities and Exchange
Commission on July 11, 1997.
** Incorporated herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended June 28, 1998, filed with the Securities
and Exchange Commission on September 28, 1998.
*** Incorporated herein by reference to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 27, 1998, filed with
the Securities and Exchange Commission on November 12, 1998.
(b) The Company filed a report on Form 8-K with the Securities and Exchange
Commission on December 2, 1998.
Page 12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
W.R. CARPENTER NORTH AMERICA, INC.
Date: February 9, 1999
By: /s/ Graham D. Croot
-------------------------------------
Graham D. Croot
Chief Financial Officer
(Principal Financial Officer and Duly
Authorized Signatory)
Page 13
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------ -----------------------
<S> <C>
*3.1(i) Certificate of Incorporation of the Company, as amended.
*3.1(ii) Bylaws of the Company, as amended.
*4.1 Indenture, dated as of June 10, 1997, by and among the Company,
the Guarantors named therein and U.S. Trust Company of
California, N.A.
*4.4 Form of Exchange Global Note.
*10.3 Industrial Lease, dated February 7, 1997, between A.L.L., a
general partnership, and UpRight.
*10.4 Lease, entered into as of November, 1995, by and between
Townview Partners, an Ohio partnership, and UpRight.
*10.5 Recourse Agreement, dated February 11, 1997, by and between
Horizon and American Equipment Leasing.
*10.6 Management Services Agreement, dated May 12, 1997, by and
between the Company and Griffin Group International Management
Ltd.
*10.8 Lease, dated January, 1997, by and between Morris Ragona and
Joan Ragona, and Horizon.
*10.9 Agreement of Lease, dated January 26, 1995, by and between
Richard V. Gunner and George Andros, and Horizon.
*10.10(i) Lease Agreement, executed November 10, 1989, by and between
Trussel Electric, Inc., and Up-Right, including Lease Extension
Agreement dated February 28, 1994, Lease Modification Agreement
dated January 26, 1994, and Notice of Option to Renew dated May
7, 1992.
**10.10(ii) Lease Extension and Modification Agreement dated September 3,
1998.
***10.10(iii) Lease Extension and Modification Agreement dated October 28,
1997.
*10.11 Lease Agreement (undated) by and between T.T. Templin and
Horizon.
*10.12 Agreement of Lease, dated October 15, 1992, by and between
Robert I. Selsky and Up-Right Aerial Platforms, Assignment of
Lease, dated June 1994, by and between Up-Right and Horizon and
Consent to Assignment dated July 15, 1994.
*10.13 Lease Agreement, dated April 27, 1990, by and between D.L.
Phillips Investment Builders, Inc., and Up-Right, together with
Supplemental Agreement to Lease, dated September 30, 1994,
Assignment of Lease, dated June 18, 1990, by and between D.L.
Phillips Investment Builders, Inc., and JMA, Ltd., Assignment of
Lease dated June 1994, by and between Up-Right and Horizon and
Consent to Assignment dated July 15, 1994.
*10.15 Lease, dated March 7, 1995, by and between BMB Investment Group
and Horizon.
**10.16 Lease Agreement dated December 31, 1997 by and between William
L. Morillon and Marie Anne Morillon and Horizon High Reach, Inc.
**10.17 Revolving Loan Agreement, dated May 5, 1998, between UpRight,
Inc., and Union Bank of California.
**10.18 Equipment Financing Agreement, dated April 23, 1998, between
UpRight, Inc. and KeyCorp Leasing LTD.
27.1 Financial Data Schedule.
</TABLE>
- ------------
* Incorporated herein by reference to the Company's Registration Statement
on Form S-4 (Reg. No. 333-31187), filed with the Securities and Exchange
Commission on July 11, 1997.
** Incorporated herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended June 28, 1998, filed with the Securities
and Exchange Commission on September 28, 1998.
*** Incorporated herein by reference to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 27, 1998, filed with
the Securities and Exchange Commission on November 12, 1998.
Page 14
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