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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, 2000
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or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
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Commission file number: 01-13407
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Hussmann International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 43-1791715
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12999 St. Charles Rock Road, Bridgeton, Missouri 63044-2483
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(Address of principal executive offices) (Zip Code)
(314) 291-2000
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(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
--- ---
Common Stock outstanding at March 31, 2000: 50,539,000 shares
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
HUSSMANN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions, except share data)
<CAPTION>
Three Months Ended
March 31,
--------------------------------
2000 1999
--------------- ---------------
<S> <C> <C>
Revenues $ 295.0 $ 271.1
Cost of goods sold 239.7 226.1
--------------- ---------------
Gross profit 55.3 45.0
Selling, general and administrative expenses 39.5 33.0
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Operating income 15.8 12.0
Interest expense (5.9) (4.3)
Foreign exchange loss on purchase price hedge - (10.3)
Other income, net 1.2 0.5
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Income (loss) before income tax expense
(benefit) and minority interests 11.1 (2.1)
Income tax expense (benefit) 4.0 (0.8)
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Net income (loss) before minority interests 7.1 (1.3)
Minority interests (0.4) 0.5
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Net income (loss) $ 6.7 $ (0.8)
=============== ==============
Basic and diluted earnings (loss) per share $ 0.13 $ (0.02)
Weighted average shares - Basic 50,817,000 50,791,000
Weighted average shares - Diluted 51,183,000 50,791,000
See accompanying notes to consolidated financial statements.
</TABLE>
2
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<TABLE>
HUSSMANN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
<CAPTION>
(Unaudited)
March 31, December 31,
2000 1999
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 36.1 $ 34.9
Receivables, net of allowance for doubtful
accounts of $5.3 and $4.3, respectively 279.5 290.5
Inventories 118.0 139.3
Other current assets 19.7 19.8
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Total current assets 453.3 484.5
Property and equipment, net 199.3 199.5
Intangible assets, net 100.8 109.1
Other assets 23.9 23.3
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Total assets $777.3 $816.4
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current maturities
of long-term debt $ 16.7 $ 18.4
Accounts payable 120.5 149.5
Income taxes payable 5.2 1.7
Accrued expenses 57.8 64.7
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Total current liabilities 200.2 234.3
Long-term debt 296.8 294.6
Other liabilities 52.8 51.9
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Total liabilities 549.8 580.8
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Shareholders' equity:
Preferred stock, $.001 par value,
20,000,000 shares authorized, none
issued or outstanding - -
Common stock, $.001 par value, 150,000,000
shares authorized, 51,254,000 and 51,166,000 shares issued;
50,539,000 and 50,909,000 shares outstanding, respectively 0.1 0.1
Additional paid-in capital 92.8 92.8
Retained earnings 222.8 217.1
Accumulated other comprehensive loss (77.9) (70.2)
Treasury stock, at cost, 715,000 and 257,000 shares,
respectively (10.3) (4.2)
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Total shareholders' equity 227.5 235.6
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Total liabilities and shareholders'
equity $777.3 $816.4
=========== ============
See accompanying notes to consolidated financial statements.
</TABLE>
3
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<TABLE>
HUSSMANN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
<CAPTION>
Three Months Ended
March 31,
-------------------------
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 6.7 $ (0.8)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation and amortization 8.2 6.2
Changes in assets and liabilities,
exclusive of acquisitions:
Receivables, net 11.0 41.8
Inventories 21.3 13.6
Accounts payable (29.0) (25.9)
Income taxes payable 3.5 (9.2)
Accrued expenses (6.9) (23.3)
Other assets and liabilities 0.5 8.2
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Net cash provided by operating activities 15.3 10.6
Cash flows from investing activities:
Capital investments (8.1) (8.2)
Business acquired, net of cash - (128.7)
Other 0.7 6.6
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Net cash used in investing activities (7.4) (130.3)
Cash flows from financing activities:
Net decrease in short-term debt (1.6) (5.0)
Net borrowings on revolving credit facility and
lines-of-credit 2.1 154.9
Proceeds from the sale of common stock under
option plans - 0.4
Dividends paid (1.0) (1.0)
Repurchase of common stock (6.1) -
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Net cash (used in) provided by financing activities (6.6) 149.3
Effects of foreign exchange rate changes on cash and
cash equivalents (0.1) (5.8)
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Net change in cash and cash equivalents 1.2 23.8
Cash and cash equivalents, beginning of period 34.9 26.1
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Cash and cash equivalents, end of period $ 36.1 $ 49.9
========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
4
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HUSSMANN INTERNATIONAL, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; in millions)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements present the
operations of Hussmann International, Inc. and subsidiaries ("Hussmann"
or the "Company") for the three months ended March 31, 2000 and 1999.
In the opinion of Management, the accompanying unaudited consolidated
financial statements include all adjustments (consisting of normal,
recurring items) necessary to present fairly Hussmann's consolidated
financial condition, results of operations and cash flows for the
periods presented. The unaudited consolidated financial statements are
presented in accordance with the requirements of Regulation S-X and
consequently do not include all disclosures required by generally
accepted accounting principles. The interim results are not necessarily
indicative of the results that may be expected for a full year. Certain
prior year amounts have been reclassified to conform to current year
presentation.
2. EARNINGS PER SHARE
The number of shares of Hussmann Common Stock used in the calculation of
earnings per share for the three months ended March 31, is as follows
(in thousands):
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Weighted average shares outstanding - basic 50,817 50,791
Dilutive effect of stock options 366 -
---------- ----------
Weighted average shares outstanding - diluted 51,183 50,791
========== ==========
</TABLE>
Options to purchase 4,170,000 shares of Hussmann Common Stock at prices
ranging from $13.66 to $18.34 per share were outstanding during the
three months ended March 31, 2000, but were not included in the
computation of diluted earnings per share due to the exercise price of
these options being greater than the average market price of Hussmann
Common Stock. These options begin to expire in 2008.
Since Hussmann recorded a net loss for the three months ended March 31,
1999, all options to purchase shares of Hussmann Common Stock
outstanding during the first quarter of 1999 were excluded from the
calculation of diluted EPS.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
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<S> <C> <C>
Raw materials and work in process $ 80.0 $102.7
Finished goods 38.0 36.6
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Total $118.0 $139.3
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</TABLE>
5
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4. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
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<S> <C> <C>
Land $ 11.1 $ 12.0
Buildings and improvements 84.7 84.4
Machinery and equipment 270.2 267.3
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Total property and equipment 366.0 363.7
Accumulated depreciation (175.2) (168.2)
Construction in progress 8.5 4.0
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$ 199.3 $ 199.5
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</TABLE>
5. BUSINESS SEGMENT INFORMATION
The Company is organized and managed on a geographic basis with three
operating segments: the U.S. and Canada, Europe and Other
International. The Corporate segment includes certain financing and
employee benefit costs, certain information systems costs and other
general corporate income and expense items.
Revenues are attributed to the location from which products are shipped
or services are provided. Certain prior year amounts included in the
tables below have been reclassified to conform to current year
presentation. Summarized information about Hussmann's operations in each
of its business segments for the three months ended March 31 is as
follows:
<TABLE>
<CAPTION>
Operating
Revenues Income
------------------------- ------------------------
2000 1999 2000 1999
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
U.S. and Canada $220.1 $204.0 $27.4 $25.3
Europe 39.3 35.7 (0.5) (2.8)
Other International 35.6 31.4 (2.9) (3.7)
---------- ---------- --------- ---------
Total $295.0 $271.1 24.0 18.8
========== ==========
Corporate admin. expenses (8.2) (6.8)
--------- ---------
Total operating income $15.8 $12.0
========= =========
</TABLE>
6. COMPREHENSIVE LOSS
Comprehensive loss for the three months ended March 31, consists of the
following:
<TABLE>
<CAPTION>
2000 1999
--------- ----------
<S> <C> <C>
Net income (loss) $ 6.7 $ (0.8)
Cumulative translation adjustment (7.7) (9.9)
--------- ----------
Comprehensive loss $(1.0) $(10.7)
========= ==========
</TABLE>
6
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7. BUSINESS COMBINATION
Hussmann completed its acquisition of Koxka C.E., S.A. ("Koxka") on
March 23, 1999. Hussmann acquired virtually 100% of the outstanding
stock of Koxka through a cash tender offer. Koxka manufactures a
complete line of commercial and industrial refrigeration products at
five manufacturing facilities located throughout Spain.
Hussmann paid approximately $135.0 in cash for the acquisition. This
excludes the $10.3 loss related to the purchase price hedge used by the
Company to lock-in the U.S. Dollar purchase price of $145.0. Since only
direct costs of an acquisition can be capitalized in determining the
purchase price, the loss on the hedging instruments was expensed during
the first quarter of 1999. The purchase price was principally funded
with borrowings under Hussmann's 5-year unsecured revolving credit
facility. The acquisition of Koxka was accounted for using the purchase
method of accounting, and accordingly, the results of its operations
have been reflected in the consolidated statements of operations since
the date of acquisition. The purchase price has been allocated to the
assets acquired and the liabilities assumed based upon their estimated
fair market value.
8. SUBSEQUENT EVENTS
On May 11, 2000, Hussmann entered into an Agreement and Plan of Merger
with Ingersoll-Rand Company ("Ingersoll") under which Ingersoll has agreed
to acquire Hussmann for $29 per share, in cash. The acquisition will be
effected through a cash tender offer for all outstanding shares of Hussmann
Common Stock. Completion of the tender offer is subject to at least a majority
of shares of Hussmann Common Stock on a fully diluted basis being tendered,
receipt of all necessary regulatory approvals and other customary conditions.
7
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Hussmann International, Inc. and Subsidiaries
(In millions)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
Hussmann International, Inc. ("Hussmann" or the "Company") manufactures,
sells, installs and services merchandising and refrigeration systems for
the commercial food industry throughout the world. Products include
refrigerated and non-refrigerated display merchandisers, refrigeration
systems and controls, beverage coolers, air handlers, evaporative
condensers, heat exchange coils and walk-in storage coolers and
freezers. Hussmann operates in three geographic segments: U.S. and
Canada, Europe and Other International which includes Latin America and
Asia-Pacific.
RECENT EVENTS
On May 11, 2000, Hussmann entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Ingersoll-Rand Company ("Ingersoll")
and IR Merger Corporation, a wholly owned subsidiary of Ingersoll,
under which Ingersoll has agreed to acquire Hussmann. The acquisition
will be effected through a cash tender offer for all outstanding shares
of Hussmann Common Stock at $29 per share. Completion of the tender offer
is subject to at least a majority of shares of Hussmann Common Stock on a
fully diluted basis being tendered, receipt of all necessary regulatory
approvals and other customary conditions. The acquisition is not subject
to any condition relating to financing.
Other information concerning the tender offer and the merger will be
included in, and a copy of the Merger Agreement will be filed as an
exhibit to, the Solicitation/Recommendation Statement on Schedule 14D-9
of the Company and Schedule TO of Ingersoll, to be filed with the
Securities and Exchange Commission (the "SEC").
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH
THREE MONTHS ENDED MARCH 31, 1999.
REVENUES
Revenues of $295.0 for the three months ended March 31, 2000 were $23.9
or 9% over the same period 1999 revenues of $271.1. Revenues increased
in all three geographic segments. The following table provides a
summarized analysis:
<TABLE>
<CAPTION>
2000 Change
Revenues From 1999 Increase
- ------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. and Canada $220.1 $16.1 8%
Europe 39.3 3.6 10
Other International 35.6 4.2 13
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Total $295.0 $23.9 9%
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</TABLE>
The 8% increase in revenues in the U.S. and Canada was principally
driven by continued strong U.S. supermarket and specialty case demand.
The 10% increase in revenues in Europe was due to the acquisition of
Koxka, which contributed approximately $23.0 in revenues for the three
months ended March 31, 2000. Excluding Koxka, revenues in Europe would
have decreased nearly 54% due to the planned reduction of lower-margin
contracting business in the U.K. The 13% increase in revenues in Other
International was primarily due to revenue growth in Brazil. Revenues in
Brazil increased significantly due to increased beverage cooler sales
and the negative impact of the significant devaluation of the Brazilian
Real, which took place during the first quarter of 1999.
GROSS PROFIT
Gross profit increased $10.3 or 23% for the three months ended March
31, 2000 over the same period 1999. Gross profit as a percent of revenue
increased to 18.7% from 16.6% in the prior year. This improvement
primarily reflects the addition of higher-margin Koxka sales, the
planned reduction of lower-margin contracting business in the U.K. and
continued focus on worldwide manufacturing efficiencies.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Total selling, general and administrative ("SG&A") expenses increased
20% to $39.5 in 2000 from $33.0 in 1999. The increase in SG&A expenses
relates primarily to the acquisition of Koxka.
8
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OPERATING INCOME
Operating income of $15.8 for the first quarter of 2000 was 31% or $3.8
greater than that reported for the comparable period of 1999. The
following table provides a summary of operating income by segment:
<TABLE>
<CAPTION>
2000
Operating Change Increase
Income (loss) From 1999 (decrease)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. and Canada $27.4 $ 2.1 8%
Europe (0.5) 2.3 82
Other International (2.9) 0.8 22
- ------------------------------------------------------------------------------
24.0 5.2 28
Corporate admin. expenses (8.2) (1.4) (21)
- ------------------------------------------------------------------------------
Total operating income $15.8 $ 3.8 31%
- ------------------------------------------------------------------------------
</TABLE>
The increase in the U.S. and Canada was primarily due to increased
volume. The operating loss in Europe improved by 82% to $0.5 from an
operating loss of $2.8 for the same period of 1999. This improvement was
largely due to the acquisition of Koxka. The improvement was also the
result of increased productivity, the planned reduction of lower-margin
contracting business in the U.K. and the related reductions in overhead
costs. The operating loss in Other International improved by 22% to $2.9
primarily due to a strong performance in Brazil.
INTEREST EXPENSE
Interest expense of $5.9 increased $1.6 or 39% over 1999 primarily due
to increased borrowings to fund the acquisition of Koxka. The
acquisition was consummated on March 23, 1999, and therefore, the 1999
consolidated statement of operations includes only one week of interest
expense for debt associated with the acquisition.
FOREIGN EXCHANGE LOSS
The Company recognized a one-time $10.3 pretax loss associated with the
hedge of the Koxka purchase price. Because Koxka was a publicly traded
company in Spain, the purchase price was denominated in Spanish Pesetas.
In order to avoid foreign currency exposure over the extended period
involved in completing the acquisition, Management hedged the Company's
Peseta exposure to lock-in a U.S. Dollar purchase price of $145.0. The
$10.3 loss associated with the financial instruments used to hedge the
Koxka purchase price (the "Koxka Charge") has been reflected in the
consolidated statements of operations as foreign exchange loss on
purchase price hedge.
EFFECTIVE INCOME TAX RATE
Hussmann's effective income tax rate was 36.0% for the three months
ended March 31, 2000, or 2.0 points lower than the 1999 effective tax
rate of 38.0%. This lower effective tax rate is the result of tax
strategies relating to both domestic and international operations and a
lower statutory rate in Spain than in the U.S.
NET INCOME AND EARNINGS PER SHARE
Net income for the three months ended March 31, 2000 increased by $7.5
to $6.7 from a loss of $0.8 for the same period of 1999. Net income for
the period ended March 31, 1999 was negatively impacted by the
aforementioned Koxka Charge. The after-tax impact of the Koxka Charge
was $6.4 or 13 cents per diluted share.
9
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LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES
CASH FLOWS FROM OPERATIONS
During the first quarter of 2000 the Company provided cash from
operations of $15.3 compared to $10.6 for the same period of 1999. This
increase is primarily due to the improvement in net income.
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities was $7.4 and $130.3 for the three
months ended March 31, 2000 and 1999, respectively. Cash used for
capital investments in 2000 was flat compared to the same period of
1999. The significant use of cash in 1999 primarily represents the
purchase price of Koxka. In 1999, other cash flows from investing
activities include the cash proceeds from the sale of the Company's
interest in an airplane and the sale of a manufacturing facility in
Scotland.
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash (used in) provided by financing activities was ($6.6) and
$149.3 for the three months ended March 31, 2000 and 1999, respectively.
The majority of cash used in financing activities for the three months
ended March 31, 2000 represents the repurchase of Hussmann Common Stock
under the Company's stock repurchase program. For the three months ended
March 31, 2000, the Company repurchased approximately 458,000 shares at
a cost of $6.1. The stock repurchase program was funded utilizing free
cash flow generated in the same period. The significant increase in
1999's reported balance represents borrowings under the Company's Credit
Facility (defined below) to fund the acquisition of Koxka.
AVAILABLE CASH AND BORROWINGS
Hussmann has an existing credit facility with a syndicate of commercial
banks and financial institutions, which enables Hussmann to borrow funds
at variable interest rates on a revolving credit basis up to an
aggregate principal amount of $350.0 (the "Credit Facility").
In March 1999, Hussmann borrowed approximately $145.0 under the Credit
Facility to fund the acquisition of Koxka and to pay related expenses.
As of March 31, 2000, $85.0 was outstanding under the Credit Facility.
In addition, as of March 31, 2000, Hussmann had $80.0 and $47.0 of
uncommitted domestic lines-of-credit available and outstanding,
respectively, and $30.0 and $4.8 of uncommitted international lines-of-
credit available and outstanding, respectively.
In June 1999, the Company borrowed $46.0 in the form of a seven-year
amortizing note. The interest rate is established semi-annually based on
LIBOR (London Interbank Offer Rate). The current interest rate is
approximately 6.9%. The Company used the proceeds from the note to repay
amounts borrowed under the Credit Facility. As of March 31, 2000, there
was approximately $42.9 outstanding on the amortizing note.
Management believes cash flows from operations, unused amounts available
under the Credit Facility and the Shelf Registration and access to
capital markets will be sufficient to satisfy Hussmann's future working
capital, capital investments, acquisitions, share repurchase program and
other financing requirements for the foreseeable future. Management also
believes Hussmann will be able to access capital markets on satisfactory
terms, although there can be no assurance that will be the case.
10
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NON-U.S. OPERATIONS
Hussmann's most significant non-U.S. operations are located in Canada,
Mexico, Spain and the U.K., with smaller operations located in, among
other countries, New Zealand, Australia, Brazil and China. Because the
majority of Hussmann's non-U.S. entities conduct the majority of their
business in their respective local currencies, Hussmann is subject to
foreign currency risks when translating its non-U.S. entity financial
statements into U.S. Dollars for financial reporting purposes.
Hussmann uses foreign currency risk management instruments to manage its
more significant exposures to changes in foreign currency exchange rates
with respect to certain foreign currency transactions. Management
continually monitors the Company's use of foreign currency risk
management instruments in order to mitigate the Company's exposures.
In addition to foreign currency translation and transaction risks, the
Company faces other risks associated with its non-U.S. operations
including the potential for restrictive actions taken by host country
governments, risks relating to non-U.S. economic and political
conditions and risks relating to limits on the transfer of funds from
non-U.S. entities to Hussmann. Management believes it has sufficient
insurance coverage to protect the Company from significant losses
associated with these risks.
NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"). SFAS 133 establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. In June 1999,
SFAS 133 was amended whereby the effective date was deferred one year,
to fiscal years beginning after June 15, 2000. Management is currently
assessing the effects of this statement on the Company's consolidated
financial statements and notes thereto. However, management does not
believe SFAS 133 will have a significant impact on Hussmann's
consolidated results of operations, financial condition or its cash
flows.
SAFE HARBOR STATEMENT
Management has made and will make certain forward-looking statements in
its reports filed with the SEC, reports to shareholders and in certain
other contexts relating to future revenues, costs, expenses, production
schedules, profitability and financial resources, among others. These
statements are forward-looking statements made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements are based on Management's beliefs
and assumptions using information currently available. Accordingly,
Hussmann's actual results may differ materially from those projected,
expressed or implied in such forward-looking statements due to known and
unknown risks and uncertainties that exist in Hussmann's operations and
business environment, including, among other factors: 1) failure of the
Company to produce anticipated cost savings or improved productivity; 2)
the timing and magnitude of capital investments; 3) economic and market
conditions in the U.S. and worldwide; 4) foreign currency exchange
rates; 5) changes in customer spending levels and demand for new
products; 6) cost and availability of raw materials; 7) continuation of
growth in significant developing markets such as Latin America and Asia-
Pacific; 8) overall competitive activities; and 9) other risks described
in the Company's other filings with the SEC.
11
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
FOREIGN CURRENCY RISK
Hussmann's most significant non-U.S. operations are located in Canada,
Mexico, Spain and the U.K., with smaller operations located in, among
other countries, New Zealand, Australia, Brazil and China. Because the
majority of Hussmann's non-U.S. entities conduct the majority of their
business in their respective local currencies, Hussmann is subject to
foreign currency risks when translating its non-U.S. entity financial
statements into U.S. Dollars for financial reporting purposes.
Hussmann uses foreign currency risk management instruments to manage its
more significant exposures to changes in foreign currency exchange rates
with respect to certain foreign currency transactions. Management
continually monitors the Company's use of foreign currency risk
management instruments in order to mitigate the Company's exposures.
As previously announced, Hussmann hedged the purchase price established
in the agreement to purchase Koxka which was denominated in Spanish
Pesetas. Hussmann hedged the Peseta exposure to lock-in a U.S. Dollar
purchase price of $145.0 using forward currency exchange contracts. The
realized loss of $10.3 from settling these forward contracts is
reflected in the consolidated statements of operations as foreign
exchange loss on purchase price hedge.
INTEREST RATE RISK
As of March 31, 2000, Hussmann had $303.1 in long-term debt outstanding,
$125.0 of which represented senior note obligations with a fixed rate of
6.75%. The majority of the remaining balance represents amounts
outstanding on the Company's Credit Facility and the amortizing note,
both with interest based on LIBOR. Given the current mix of the
Company's outstanding indebtedness, Management does not believe the
Company's exposure to short-term interest rate changes would have a
significant impact on Hussmann's results of operations, financial
condition or its cash flows.
COMMODITY RISK
Hussmann uses copper wiring and tubing in the manufacture of its
products. As a result, the Company's operating results are subject to
fluctuations in the price of copper. Hussmann uses hedging instruments
to mitigate a portion of these risks. Overall, this hedging activity is
not considered to be material to Hussmann's consolidated results of
operations, financial condition or its cash flows.
12
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit
Number Exhibit
- ------- -------
10.11 Stock Option Agreement dated as of February 1, 2000 between
Hussmann International, Inc. and Richard G. Cline (incorporated
by reference to Exhibit 10.11 to Hussmann International Inc.'s
Form 10-K for the fiscal year ended December 31, 1999).
27 Financial Data Schedule
(filed electronically with the SEC only)
(b) Reports on Form 8-K
Hussmann filed a Current Report on Form 8-K dated January 12, 2000 to
report that Hussmann and Richard G. Cline, Chairman of the Board of
Hussmann, had signed an agreement pursuant to which Mr. Cline agreed,
pending his re-election to the Board of Directors of Hussmann at the
2000 Annual Meeting of Stockholders, to extend his term as Chairman of
the Board for a period of twelve months expiring January 31, 2001.
13
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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.
HUSSMANN INTERNATIONAL, INC.
/s/ Thomas G. Korte
---------------------------------------
Thomas G. Korte
Vice President
and Corporate Controller
(as duly authorized officer
and principal accounting
Dated: May 15, 2000 officer of the registrant)
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY CONSOLIDATED FINANCIAL INFORMATION
EXTRACTED FROM HUSSMANN INTERNATIONAL'S CONSOLIDATED FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 36
<SECURITIES> 0
<RECEIVABLES> 285
<ALLOWANCES> 5
<INVENTORY> 118
<CURRENT-ASSETS> 453
<PP&E> 374
<DEPRECIATION> 175
<TOTAL-ASSETS> 777
<CURRENT-LIABILITIES> 200
<BONDS> 297
<COMMON> 0
0
0
<OTHER-SE> 228
<TOTAL-LIABILITY-AND-EQUITY> 777
<SALES> 295
<TOTAL-REVENUES> 295
<CGS> 240
<TOTAL-COSTS> 240
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 11
<INCOME-TAX> 4
<INCOME-CONTINUING> 7
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7
<EPS-BASIC> 0.13<F1>
<EPS-DILUTED> 0.13
<FN>
<F1>For purposes of this exhibit, primary means basic.
</TABLE>
