<PAGE>
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 July 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 Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
333-52529 MMH HOLDINGS, INC. 39-1924039
(a Delaware Corporation)
4915 South Howell Avenue, 2nd Floor
Milwaukee, Wisconsin 53207
(414) 486-6100
333-52527 MORRIS MATERIAL HANDLING, INC. 39-1716155
(a Delaware Corporation)
4915 South Howell Avenue, 2nd Floor
Milwaukee, Wisconsin 53207
(414) 486-6100
------------------------------
Indicate by check mark whether each of the registrants (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
registrants were required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ ] No[ X ]
Indicate the number of shares outstanding of each of the issuers' classes of
common stock, as of the latest practicable date (July 31, 1998):
MMH Holdings, Inc. Nonvoting common stock, $.01 Par
Value, 720 shares outstanding.
Voting common stock, $.01 Par
Value, 10,169 shares outstanding.
Morris Material Handling, Inc. Common stock, $.01 Par Value,
100 shares outstanding. MMH
Holdings, Inc. holds all of the
outstanding common stock of Morris
Material Handling, Inc.
<PAGE>
MMH HOLDINGS, INC.
MORRIS MATERIAL HANDLING, INC.
INDEX
<TABLE>
<CAPTION>
Item Page No.
<S> <C>
INTRODUCTION 1
FINANCIAL INFORMATION:
MMH Holdings, Inc.
Condensed Balance Sheets 2
Condensed Statements of Income 3
Condensed Statements of Cash Flows 4
Statement of Preferred Stock and Shareholders' Equity 5
Morris Material Handling, Inc.
Condensed Balance Sheets 6
Condensed Statements of Income 7
Condensed Statements of Cash Flows 8
Statement of Shareholder's Equity 9
Notes to Financial Statements of
MMH Holdings, Inc. and
Morris Material Handling, Inc. 10-20
Management's Discussion and Analysis of
Financial Condition and Results of Operations of
MMH Holdings, Inc. and
Morris Material Handling, Inc. 21-28
</TABLE>
INTRODUCTION
MMH Holdings, Inc. ("Holdings") is a holding company whose sole direct
subsidiary is Morris Material Handling, Inc. ("MMH"), a manufacturer,
distributor and service provider of direct material handling equipment with
its principal operations in the United States, United Kingdom, South Africa,
Singapore, Canada and Mexico. The unaudited interim financial statements
presented in this combined report (collectively, the "Financial Statements")
include the condensed financial statements of Holdings as well as separate
financial statements for MMH. Unless the context requires otherwise,
references to the "Company" in this combined 10-Q are to MMH, its
subsidiaries and their predecessors. Prior to the Recapitalization discussed
in notes 1 and 2 to the Financial Statements, the Company operated as one of
several operating units of Harnischfeger Industries, Inc. ("HII"). For the
purposes hereof, it is assumed that Holdings has historically owned the
capital stock of MMH, that all the assets of the material handling equipment
business of HII and its affiliates (the "MHE Business") were wholly-owned by
subsidiaries of MMH and that, immediately prior to the consummation of the
Recapitalization, the historical combined financial statements of Holdings
were identical to those of the MHE Business.
The Financial Statements have been prepared by Holdings and the Company pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The Financial
Statements should be read in conjunction with the audited combined financial
statements and notes thereto of the MHE Business for each of the three years in
the period ended October 31, 1997 included in the Registration Statements on
Form S-4 of each of Holdings and MMH dated August 12, 1998.
1
<PAGE>
MMH HOLDINGS, INC.
CONDENSED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
July 31, October 31,
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash $ 3,582 $ 1,532
Accounts receivable--net 77,391 82,209
Inventories 38,435 33,497
Other current assets 4,666 4,765
----------- -----------
Total current assets 124,074 122,003
Property, Plant and Equipment
Cost 64,477 60,763
Less accumulated depreciation (25,236) (21,396)
----------- -----------
39,241 39,367
----------- -----------
Other Assets
Goodwill 31,547 32,229
Debt financing costs 18,234 --
Deferred income taxes 74,091 --
Other 9,958 6,001
----------- -----------
133,830 38,230
----------- -----------
Total assets $ 297,145 $ 199,600
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY/ PARENT INVESTMENT
Current Liabilities
Short-term notes payable and current portion of long-term obligations $ 8,800 $ 752
Bank overdrafts 1,133 4,293
Trade accounts payable 21,704 32,656
Advance payments and progress billings 8,303 7,685
Accrued warranties 2,584 3,998
Accrued interest 6,884 --
Other current liabilities 21,166 21,376
----------- -----------
Total current liabilities 70,574 70,760
Senior Notes 200,000 --
Term Loans 52,938 --
Other Long-Term Debt 1,652 1,043
Deferred Income Taxes 3,724 3,088
----------- -----------
Total liabilities 328,888 74,891
Minority Interest 357 391
Mandatorily Redeemable Preferred Stock 92,368 --
Shareholders' Equity/Parent Investment (124,468) 124,318
----------- -----------
Total liabilities and shareholders' equity/parent investment $ 297,145 $ 199,600
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
MMH HOLDINGS, INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended July 31, Ended July 31,
-------------------- -------------------
1998 1997 1998 1997
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Revenues
Net sales $ 74,426 $ 81,817 $ 231,675 $ 258,871
Other income - net 391 836 1,117 2,337
--------- ---------- --------- ----------
74,817 82,653 232,792 261,208
Cost of Sales 52,152 60,002 167,324 193,634
Selling, General and Administrative Expenses 14,582 13,967 44,096 41,239
HII Management Fee -- 663 1,155 2,097
Non-Recurring Employee Benefit Costs -- -- 1,906 --
--------- ---------- --------- ----------
Operating income 8,083 8,021 18,311 24,238
Interest Expense - Net
HII affiliates -- (189) (1,448) (258)
Third party (7,013) (122) (9,716) (281)
--------- ---------- --------- ----------
Income before Income Taxes and Minority Interest 1,070 7,710 7,147 23,699
Provision for Income Taxes (450) (3,079) (2,896) (9,463)
Minority Interest (4) (5) 34 (8)
--------- ---------- --------- ----------
Net income $ 616 $ 4,626 $ 4,285 $ 14,228
--------- ---------- --------- ----------
--------- ---------- --------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
MMH HOLDINGS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
For the Nine Months
Ended July 31,
--------------------
1998 1997
---------- ----------
<S> <C> <C>
Operating Activities
Net Income $ 4,285 $ 14,228
Add (deduct) - items not affecting cash provided by operating activities:
Depreciation and amortization 5,196 4,584
Amortization of debt financing costs 655 --
Minority interest (34) 8
Deferred income taxes - net 411 (251)
Divestiture bonus 1,216 --
Gain on fire insurance claim -- (2,011)
Other -- (600)
Changes in working capital, excluding the effects of acquisition opening
balance sheets:
Accounts receivable 4,246 10,088
Inventories (5,563) (1,802)
Other current assets (2,466) 1,152
Trade accounts payable and bank overdrafts (14,104) (8,300)
Advance payments and progress billings 941 (10,420)
Accrued warranties (1,428) 139
Accrued interest 6,884 --
Other current liabilities (375) (3,950)
Activity with parent and other affiliates 1,748 9,499
---------- ----------
Net cash provided by operating activites 1,612 12,364
---------- ----------
Investment and Other Transactions
Fixed asset additions - net (3,556) (4,294)
Acquisition of businesses - net of cash acquired (3,203) (11,787)
Fire insurance claim activity - net -- 2,011
Issuance of loans to senior management (900) --
Other - net (941) 289
---------- ----------
Net cash used for investment and other transactions (8,600) (13,781)
---------- ----------
Financing Activities
Changes in short-term notes payable 6,324 (681)
Proceeds from Senior Note Offering 200,000 --
Proceeds from New Credit Facility 55,000 --
Redemption of common stock and preferred stock (287,000) --
Net proceeds from issuance of Series A preferred stock
and related common shares 57,094 --
Stock redemption transaction costs (3,181) --
Debt financing costs (18,889) --
Repayments of debt (338) (87)
---------- ----------
Net cash provided by (used for) financing activities 9,010 (768)
---------- ----------
Effect of Exchange Rate Changes on
Cash and Cash Equivalents 28 (8)
---------- ----------
Increase (Decrease) in Cash and Cash Equivalents 2,050 (2,193)
Cash and Cash Equivalents
Beginning of Period 1,532 3,821
---------- ----------
End of Period $ 3,582 $ 1,628
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
MMH HOLDINGS, INC.
STATEMENT OF PREFERRED STOCK AND SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JULY 31, 1998
(Dollars In Thousands)
<TABLE>
<CAPTION>
Preferred Stock
---------------------------------------------------------------------------------------
Series A Series B Series C
----------------------- --------------------- -----------------------
Shares Carrying Shares Carrying Shares Carrying
Outstanding Value Outstanding Value Outstanding Value Total
------------ -------- ----------- -------- ----------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1997 -- $ -- -- $ -- -- $ -- $ --
Net Income -- -- -- -- -- -- --
Change in foreign currency
translation -- -- -- -- -- -- --
Exchange of 450 common shares
outstanding for 100,000 shares
of new common stock
and 30,000 shares of Series C
preferred stock -- -- -- -- 30,000 30,000 30,000
Issue Series A preferred and
common shares for $60 million
(net of $2.906 million fees) 57,710 54,804 -- -- -- -- 54,804
Redemption of shares from
Harnco and related costs -- -- -- -- (1,145) (1,145) (1,145)
Exchange of 1,512 common
shares for Series B preferred
shares -- -- 4,809 4,809 -- -- 4,809
Preferred stock dividends -- 2,309 -- 196 -- 1,202 3,707
Amortization of preferred stock
discount -- 193 -- -- -- -- 193
Capital contribution from HII -- -- -- -- -- -- --
Issuance of loans to senior
management -- -- -- -- -- -- --
Deferred taxes arising from
change in U.S. federal income
tax basis -- -- -- -- -- -- --
Activity with HII and other
affiliates, October 31, 1997-
March 30, 1998 -- -- -- -- -- -- --
------------ -------- ----------- -------- ----------- --------- -------
Balance at July 31, 1998 57,710 $ 57,306 4,809 $ 5,005 28,855 $ 30,057 $ 92,368
------------ -------- ----------- -------- ----------- --------- -------
------------ -------- ----------- -------- ----------- --------- -------
</TABLE>
<TABLE>
<CAPTION>
Parent
Common Stock Investment/
---------------------- Additional Cumulative Total
Shares Par Paid-in Translation Retained Shareholders'
Outstanding Value Capital Adjustment Earnings Equity
(A)
----------- ------- ------------ ------------ --------- -------------
<S> <C> <C> <C> <C> <C>
Balance at October 31, 1997 450 $ -- $ 124,618 $ (300) $ -- $ 124,318
Net Income -- -- -- -- 4,285 4,285
Change in foreign currency
translation -- -- -- (2,285) -- (2,285)
Exchange of 450 common shares
outstanding for 100,000 shares
of new common stock
and 30,000 shares of Series C
preferred stock 99,550 1 (30,001) -- -- (30,000)
Issue Series A preferred and
common shares for $60 million
(net of $2.906 million fees) 720 -- 2,290 -- -- 2,290
Redemption of shares from
Harnco and related costs (88,319) (1) (289,035) -- -- (289,036)
Exchange of 1,512 common
shares for Series B preferred
shares (1,512) -- (4,809) -- -- (4,809)
Preferred stock dividends -- -- -- -- (3,707) (3,707)
Amortization of preferred stock
discount -- -- -- -- (193) (193)
Capital contribution from HII -- -- 1,216 -- -- 1,216
Issuance of loans to senior
management -- -- (900) -- -- (900)
Deferred taxes arising from
change in U.S. federal income
tax basis -- -- 71,129 -- -- 71,129
Activity with HII and other
affiliates, October 31, 1997-
March 30, 1998 -- -- 3,224 -- -- 3,224
----------- ------- ------------ ------------ --------- -------------
Balance at July 31, 1998 10,889 $ -- $(122,268) $ (2,585) $ 385 $(124,468)
----------- ------- ------------ ------------ --------- -------------
----------- ------- ------------ ------------ --------- -------------
</TABLE>
- ----------
(A) Due to the MHE Business having historically been operated as a division of
HII, a historical retained earnings balance cannot be determined.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
MORRIS MATERIAL HANDLING, INC.
CONDENSED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
July 31, October 31,
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash $ 3,582 $ 1,532
Accounts receivable--net 77,391 82,209
Inventories 38,435 33,497
Other current assets 4,666 4,765
----------- -----------
Total current assets 124,074 122,003
Property, Plant and Equipment
Cost 64,477 60,763
Less accumulated depreciation (25,236) (21,396)
----------- -----------
39,241 39,367
----------- -----------
Other Assets
Goodwill 31,547 32,229
Debt financing costs 18,234 --
Deferred income taxes 74,091 --
Other 9,958 6,001
----------- -----------
133,830 38,230
----------- -----------
Total assets $ 297,145 $ 199,600
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDER'S EQUITY/ PARENT INVESTMENT
Current Liabilities
Short-term notes payable and current portion of long-term obligations $ 8,800 $ 752
Bank overdrafts 1,133 4,293
Trade accounts payable 21,704 32,656
Advance payments and progress billings 8,303 7,685
Accrued warranties 2,584 3,998
Accrued interest 6,884 --
Other current liabilities 21,166 21,376
----------- -----------
Total current liabilities 70,574 70,760
Senior Notes 200,000 --
Term Loans 52,938 --
Other Long-Term Debt 1,652 1,043
Deferred Income Taxes 3,724 3,088
----------- -----------
Total liabilities 328,888 74,891
Minority Interest 357 391
Shareholder's Equity/Parent Investment (32,100) 124,318
----------- -----------
Total liabilities and shareholder's equity/parent investment $ 297,145 $ 199,600
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
MORRIS MATERIAL HANDLING, INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended July 31, Ended July 31,
---------------------- ----------------------
1998 1997 1998 1997
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Revenues
Net sales $ 74,426 $ 81,817 $ 231,675 $ 258,871
Other income - net 391 836 1,117 2,337
--------- ---------- --------- ----------
74,817 82,653 232,792 261,208
Cost of Sales 52,152 60,002 167,324 193,634
Selling, General and Administrative Expenses 14,582 13,967 44,096 41,239
HII Management Fee -- 663 1,155 2,097
Non-Recurring Employee Benefit Costs -- -- 1,906 --
--------- ---------- --------- ----------
Operating income 8,083 8,021 18,311 24,238
Interest Expense - Net
HII Affiliates -- (189) (1,448) (258)
Third party (7,013) (122) (9,716) (281)
--------- ---------- --------- ----------
Income before Income Taxes and Minority Interest 1,070 7,710 7,147 23,699
Provision for Income Taxes (450) (3,079) (2,896) (9,463)
Minority Interest (4) (5) 34 (8)
--------- ---------- --------- ----------
Net income $ 616 $ 4,626 $ 4,285 $ 14,228
--------- ---------- --------- ----------
--------- ---------- --------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
MORRIS MATERIAL HANDLING, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
For the Nine Months
Ended July 31,
-----------------------
1998 1997
---------- -----------
<S> <C> <C>
Operating Activities
Net Income $ 4,285 $ 14,228
Add (deduct) - items not affecting cash provided by
operating activities:
Depreciation and amortization 5,196 4,584
Amortization of debt financing costs 655 --
Minority interest (34) 8
Deferred income taxes - net 411 (251)
Divestiture bonus 1,216 --
Gain on fire insurance claim -- (2,011)
Other -- (600)
Changes in working capital, excluding the effects of acquisition opening
balance sheets:
Accounts receivable 4,246 10,088
Inventories (5,563) (1,802)
Other current assets (2,466) 1,152
Trade accounts payable and bank overdrafts (14,104) (8,300)
Advance payments and progress billings 941 (10,420)
Accrued warranties (1,428) 139
Accrued interest 6,884 --
Other current liabilities (375) (3,950)
Activity with parent and other affiliates 1,748 9,499
---------- -----------
Net cash provided by operating activites 1,612 12,364
---------- -----------
Investment and Other Transactions
Fixed asset additions - net (3,556) (4,294)
Acquisition of businesses - net of cash acquired (3,203) (11,787)
Fire insurance claim activity - net -- 2,011
Issuance of loans to senior management (900) --
Other - net (941) 289
---------- -----------
Net cash used for investment and other transactions (8,600) (13,781)
---------- -----------
Financing Activities
Changes in short-term notes payable 6,324 (681)
Proceeds from Senior Note Offering 200,000 --
Proceeds from New Credit Facility 55,000 --
Dividend to and redemption of shares held by Holdings (233,087) --
Debt financing costs (18,889) --
Repayments of debt (338) (87)
---------- -----------
Net cash provided by (used for) financing activities 9,010 (768)
---------- -----------
Effect of Exchange Rate Changes on
Cash and Cash Equivalents 28 (8)
Increase (Decrease) in Cash and Cash Equivalents 2,050 (2,193)
Cash and Cash Equivalents
Beginning of Period 1,532 3,821
---------- -----------
End of Period $ 3,582 $ 1,628
---------- -----------
---------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
MORRIS MATERIAL HANDLING, INC.
STATEMENT OF SHAREHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED JULY 31, 1998
(Dollars In '000's)
<TABLE>
<CAPTION>
Common Stock Parent
---------------------- Investment/ Cumulative
# of Shares Additional Translation Retained
Outstanding Par Value Paid-In Capital Adjustment Earnings Total
----------- ---------- --------------- ----------- -------- ---------
(A)
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1997 -- $ -- $ 124,618 $ (300) $ -- $ 124,318
Net Income -- -- -- -- 4,285 4,285
Change in foreign currency translation -- -- -- (2,285) -- (2,285)
Stock issued to Holdings in exchange
for certain operating assets and
ownership interests of the MHE business 200 -- -- -- -- --
Dividend to and redemption of shares from
Holdings (100) -- (233,087) -- -- (233,087)
Issuance of loans to senior management -- -- (900) -- -- (900)
Deferred taxes arising from change in U.S.
federal income tax basis -- -- 71,129 -- -- 71,129
Capital contribution from HII -- -- 1,216 -- -- 1,216
Activity with HII and other affiliates,
October 31, 1997 - March 30, 1998 -- -- 3,224 -- -- 3,224
----------- ---------- --------------- ----------- -------- ---------
Balance at July 31, 1998 100 $ -- $ (33,800) $ (2,585) $ 4,285 $ (32,100)
----------- ---------- --------------- ----------- -------- ---------
----------- ---------- --------------- ----------- -------- ---------
</TABLE>
- ----------
(A) Due to the MHE Business having historically been operated as a division of
HII, a historical retained earnings balance cannot be determined.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
MMH HOLDINGS, INC.
MORRIS MATERIAL HANDLING, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS UNLESS INDICATED)
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
On January 28, 1998, Harnischfeger Industries, Inc. ("HII") reached an agreement
with MHE Investments, Inc. ("MHE Investments") an affiliate of Chartwell
Investments Inc. ("Chartwell") for the sale of an approximately 80 percent
common ownership interest in HII's Material Handling Equipment Business (the
"MHE Business"). As more fully described in Note 2, the resulting transactions
(the "Recapitalization"), which closed on March 30, 1998 (the "Recapitalization
Closing"), led to a significant change in the Company's capital structure and a
reorganization of the underlying legal entities of the MHE Business. As a
result of the Recapitalization, MMH Holdings, Inc. ("Holdings"), a
pre-existing company engaged in the MHE Business, became an indirect holding
company for the operating entities engaged in the MHE Business. Specifically,
Morris Material Handling, Inc. ("MMH" and collectively with its subsidiaries
and their predecessors, the "Company"), a newly formed wholly-owned direct
subsidiary of Holdings, directly or indirectly acquired the various operating
entities engaged in the MHE Business. Holdings was recapitalized in order to
effect the redemption of certain shares of common stock of Holdings held by
Harnischfeger Corporation ("HarnCo"). As a result of the reorganization of
the legal entities of the MHE Business, Holdings and MMH became the successor
companies to the MHE Business. The transactions have been accounted for as a
recapitalization and accordingly, the consolidated financial statements
presented herewith reflect the underlying historical accounting basis of the
MHE Business.
The historical combined financial statements of the MHE Business for periods
prior to the Recapitalization are included in the accompanying unaudited
financial statements for all periods presented. These financial statements
should be read in conjunction with the audited combined financial statements and
the notes thereto of the Material Handling Equipment Business of Harnischfeger
Industries, Inc. for each of the three years in the period ended October 31,
1997.
In the opinion of management, all adjustments necessary for the fair
presentation of the results of operations for the three and nine months ended
July 31, 1998 and 1997, cash flows for the nine months ended July 31, 1998 and
1997, and financial position at July 31, 1998 have been made. All adjustments
made are of a normal recurring nature. The results of operations for any interim
period are not necessarily indicative of the results to be expected for the full
year.
NOTE 2 - RECAPITALIZATION TRANSACTION
The Recapitalization was effectuated pursuant to the January 28, 1998
Recapitalization Agreement among MHE Investments, HarnCo and certain of HarnCo's
affiliates. Pursuant to this agreement, HarnCo and other HII affiliates effected
a number of transactions which resulted in Holdings, a pre-existing company
within the MHE Business, owning, directly or indirectly, all of the equity
interests of the operating entities engaged in the MHE Business that were
previously owned by HarnCo and its affiliates. Holdings in turn formed MMH as a
wholly owned subsidiary to directly or indirectly hold the various operating
entities engaged in the MHE Business.
The principal transactions effected as part of the Recapitalization were the
following: (i) MHE Investments acquired 7,907 shares of Holdings' common stock
for $25.1 million and $28.9 million liquidation preference of Holdings' 12 1/2%
Series C Junior Voting Exchangeable Preferred Stock (the "Series C Junior Voting
Preferred Stock") from HarnCo, (ii) Holdings redeemed certain shares of its
common stock and Series C Junior Voting Preferred Stock held by HarnCo for $287
million in cash (including a $5 million prepayment of a potential post-closing
redemption price adjustment) and approximately $4.8 million liquidation
preference of Holdings' 12 1/4% Series B Junior Exchangeable Preferred Stock
(the "Series B Junior Preferred Stock"); and (iii) HarnCo retained 2,261 shares
of Holdings' common stock.
10
<PAGE>
To finance the Recapitalization, Holdings sold $60 million of Series A Units,
consisting of $57.7 million liquidation preference of Holdings' 12% Series A
Senior Exchangeable Preferred Stock (the "Series A Senior Preferred Stock") and
$2.3 million of Holdings' non-voting common stock, to institutional investors.
In addition, MMH issued $200 million of aggregate principal amount of its 9 1/2%
Senior Notes due 2008 (the "Note Offering") and entered into a senior secured
credit facility (the "New Credit Facility") (See Note 5). MMH used a portion of
the $200 million aggregate proceeds from the Note Offering and $55 million
aggregate borrowings under the New Credit Facility to redeem certain of its
common shares from Holdings and pay Holdings a dividend which on a combined
basis totaled $233.8 million. Holdings, in turn, used the proceeds from this
redemption, together with the proceeds of the sale of the Series A Units, to
finance the cash portion of the redemption price for HarnCo's shares. The
remainder of the proceeds were used by Holdings and MMH (i) to make loans to
senior management to acquire indirect equity interests in Holdings, (ii) to fund
certain transaction fees and expenses and (iii) for general corporate purposes.
As a result of the Recapitalization, MHE Investments owns approximately 72.6% of
the common stock of Holdings and $28.9 million liquidation preference of the
Series C Junior Voting Preferred Stock and HarnCo owns approximately 20.8% of
the common stock of Holdings and $4.8 million liquidation preference of the
Series B Junior Preferred Stock. The remaining equity interests are held by
institutional investors and consist of non-voting stock representing
approximately 6.6% of the common stock of Holdings outstanding and $57.7 million
liquidation preference of the Series A Senior Preferred Stock.
In connection with the Recapitalization, MMH entered into a Trademark License
Agreement with an affiliate of HarnCo pursuant to which MMH has the right to use
the P&H trademark with respect to all MHE Business products on a worldwide
exclusive basis from March 30, 1998 until 15 years after the earlier to occur of
a sale of Holdings to a third party or a public offering of the common stock of
Holdings, MMH or their parents or successors (and for an additional seven years
thereafter for aftermarket products and services). The royalty fee for use of
the trademark is a percentage of the aggregate net sales of the MHE Business for
the ten year period commencing March 30, 1999. There will be no royalty fee for
the remainder of the term following such ten year period. MMH also entered into
a number of agreements pursuant to which HII will continue to provide, on an
interim basis, certain supplies, products and services to MMH and its
subsidiaries located in the United States on substantially similar terms and
conditions to those historically provided.
NOTE 3 - ACQUISITIONS
During the nine months ended July 31, 1998, the Company completed two
acquisitions for an aggregate purchase price of $4.0 million, net of cash
acquired. Cash paid in the third quarter 1998 was $3.2 million with the
remaining cash obligation payable in annual installments beginning January
1999 and ending in January 2006. The first acquisition was a distribution and
service center located in Arizona related to the Company's aftermarket
business. The second acquisition was a distribution and service business
located in Australia.
During the nine months ended July 31, 1997, the Company completed the
acquisition of a large distribution and service business in Ohio for an
aggregate purchase price of $11.8 million, net of cash acquired. This
acquisition was related to the Company's aftermarket business.
Each of these three acquisitions was accounted for as a purchase transaction
with the purchase price allocated to the fair value of specific assets acquired
and liabilities assumed. Resultant goodwill is being amortized over 40 years.
Pro forma results of operations reflecting these acquisitions are not materially
different than actual results reported for the periods reported and accordingly
are not presented.
NOTE 4 - INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
July 31, 1998 October 31, 1997
-----------------------------------
<S> <C> <C>
Raw materials $17,226 $17,391
Work-in-process 15,927 13,654
Finished parts 12,880 10,704
-----------------------------------
46,033 41,749
Less excess of current cost
over stated LIFO value (7,598) (8,252)
-----------------------------------
-----------------------------------
$38,435 $33,497
-----------------------------------
-----------------------------------
</TABLE>
11
<PAGE>
NOTE 5 - INDEBTEDNESS
On March 30, 1998, MMH issued $200 million aggregate principal amount of
9 1/2% Senior Notes due April 1, 2008 (the "Notes") in connection with the
Recapitalization as discussed in Note 2. Interest on the Notes is payable
semiannually on each April 1 and October 1, commencing October 1, 1998. The
Notes will be redeemable at the option of MMH, in whole or in part, at any time
on or after April 1, 2003, at the appropriate redemption price, plus accrued and
unpaid interest thereon to the redemption date. In addition, MMH may redeem in
the aggregate up to 35% of the original principal amount of the Notes at any
time and from time to time prior to April 1, 2001 at a redemption price equal to
109.5% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon to the redemption date, subject to certain provisions. The
Notes are senior unsecured obligations and are unconditionally guaranteed,
jointly and severally, on a senior unsecured basis by substantially all of MMH's
subsidiaries. See further discussion in Note 11. The Notes are subject to
various covenants that, among other things, limit the ability of MMH and its
subsidiaries to incur additional indebtedness, incur liens, pay dividends and
make certain other restricted payments, make investments, repurchase stock,
consummate certain asset sales, enter into certain transactions with affiliates,
issue capital stock of their subsidiaries, create dividend or other payment
restrictions affecting their subsidiaries, consolidate or merge with any person
in a transaction involving all or substantially all of the consolidated assets
of MMH or transfer or sell all or substantially all of the consolidated assets
of MMH.
At the Recapitalization Closing, MMH entered into a New Credit Facility which
consists of a $70 million revolving credit facility (the "Revolving Credit
Facility"), a $30 million acquisition facility (the "Acquisition Facility"), a
$20 million term loan ("Term Loan A") and a $35 million term loan ("Term Loan
B").
The Revolving Credit Facility permits, subject to compliance with certain
conditions, MMH to borrow, repay and reborrow up to $70 million (of which $15
million is reserved under the indenture governing the notes (the "Note
Indenture") for issuance of letters of credit) at any time until the fifth
anniversary of the Recapitalization Closing, the proceeds of which may be used
for working capital and other corporate purposes. At July 31, 1998, the Company
had $6.9 million of borrowings outstanding under the Revolving Credit Facility.
The Acquisition Facility, the proceeds of which may be used for acquisitions,
permits, subject to compliance with certain conditions, MMH to borrow up to $30
million at any time until the third anniversary of the Recapitalization Closing,
and to repay the same in installments on or prior to the seventh anniversary of
the Recapitalization Closing. Term Loan A and Term Loan B are repayable in 20
and 28 quarterly installments, respectively, which commenced June 1998.
Borrowings under the New Credit Facility are secured by certain of MMH's and its
subsidiaries' assets, including substantially all of their assets located in the
United States and the United Kingdom, and are guaranteed by Holdings and
substantially all of MMH's subsidiaries.
Borrowings under the New Credit Facility bear interest at various interest
rates based on certain floating reference rates (the "Floating Rate"). To
limit the effect of increases in the interest rates under the New Credit
Facility, the Company has entered into an interest rate swap arrangement. The
effect of this agreement, which expires on March 31, 2001, is to limit the
interest rate exposure on specified amounts up to $55.0 million borrowed
under the New Credit Facility to a fixed LIBOR rate of 5.875% (the "Fixed
Rate") plus 2.25% or 2.75%, as applicable. As a result, the interest rates
applicable to Term Loan A and Term Loan B at July 31, 1998 have been fixed at
8.125% and 8.625%, respectively. The differential between the Floating Rate
and the Fixed Rate is accrued as interest rates change and is recorded as
interest expense. Payments under the swap are made quarterly. At July 31,
1998, the interest rate on borrowings outstanding under the Revolving Credit
Facility was 7.9%.
NOTE 6 - CONTINGENT LIABILITIES
To secure the performance of sales contracts related to MMH operations, MMH had
the following at July 31, 1998: (i) $3.2 million of outstanding letters of
credit and surety bonds under the New Credit Facility, (ii) $1.1 million under a
surety arrangement for outstanding surety bonds and (iii) $4.0 million of surety
bonds with other institutions. Prior to the Recapitalization Closing, HII and
its affiliates ("HII Group") provided credit support for the MHE Business. As
part of the Recapitalization, HII agreed to maintain in place credit support
(including letters of credit and surety bonds) in existence at the
Recapitalization Closing and the Company agreed to reimburse HII for any
payments made by the HII Group with respect to such credit support. At July 31,
1998, approximately $32.0 million of HII Group letters of credit and surety
bonds remained outstanding.
As of the Recapitalization Closing, HarnCo retained certain income and other tax
liabilities relating to the MHE Business, all environmental liabilities relating
to previously shared facilities, any liabilities for which HarnCo or its
12
<PAGE>
affiliates have been named as potentially responsible parties with respect to
Superfund sites, and any liabilities arising in connection with claims alleging
exposure to asbestos in connection with the MHE Business prior to the
Recapitalization Closing. Additionally, HarnCo retained all liability for
medical and disability benefit claims for current United States employees made
prior to the Recapitalization Closing and all claims with respect to any of the
HII benefit plans for former United States employees.
HarnCo has been and is currently a defendant to a number of asbestos related
lawsuits and will likely be named in future such actions. Most suits involve
multiple defendants including asbestos manufacturers. MMH has agreed to
indemnify HarnCo and its affiliates with respect to any liabilities in excess of
insurance arising in connection with past and future asbestos litigation
relating to the MHE Business. HII's insurance program included coverage for
asbestos related claim activity through 1986, when coverage for asbestos related
claims ceased to be available. HII's insurer has provided first dollar coverage
for policy periods through 1976. During the 1977 to 1985 policy periods, HII had
a variety of policies, with retention levels ranging from $100,000 to $15.0
million and total coverage limits ranging from $12.5 million to $50.0 million.
To date, HII's insurer has paid all liabilities relating to asbestos claims
(which amounts have not been material to the MHE Business) but there can be no
assurance such insurers will continue to do so in the future or that there will
be insurance coverage for such claims. In addition, policy primary aggregate
levels were exhausted in certain years, which would require the participation of
excess insurers for future claim activity. Given its experience to date with
such claims, the Company believes that its exposure to asbestos related claims
is not material, but there can be no assurance that such liability will in fact
not be material.
MMH is a party to various litigation matters, including product liability and
other claims, which are normal in the course of its operations. Also, as a
normal part of its operations, MMH undertakes certain contractual obligations
and warranties in connection with the sale of products or services. Although the
outcome of these matters cannot be predicted with certainty, management believes
that such matters will not have a material adverse effect on the consolidated
results of operations, financial position or cash flows of Holdings or MMH.
MMH is also involved in certain proceedings and potential proceedings relating
to environmental matters. It is management's opinion that none of these matters,
individually or in the aggregate, will have a materially adverse effect on
Holdings' or MMH's consolidated results of operations, financial position or
cash flows. However, because of the uncertainties associated with environmental
assessment and redemption activities, the ultimate cost related to such
matters could be materially higher than management's current estimates.
NOTE 7 - INCOME TAXES
The deferred income tax accounts reflect the impact of temporary differences
between the basis of assets and liabilities for financial reporting purposes and
their related basis as measured by income tax regulations. For income tax
purposes, MMH and Holdings will be deemed to have acquired the assets of the MHE
Business pursuant to Internal Revenue Code Section 338(h)(10). Accordingly, the
Recapitalization increased the tax basis of certain assets and created
tax-deductible goodwill, and resulted in significant book/tax basis differences.
Substantially all of the additional deferred taxes recorded resulted from this
goodwill created for tax purposes. A valuation allowance of approximately $15
million was recorded to reflect the estimated amount of deferred tax assets
which may not be realized due primarily to the possible limitation on the future
use of certain foreign tax credits. The resulting net adjustment to deferred
income taxes of approximately $71 million has been recorded as an adjustment to
Holdings' and MMH's shareholders' equity.
As a result of the Section 338(h)(10) election made in connection with the
Recapitalization, all historical earnings and profits were taxed. Accordingly,
any dividends remitted from pre-closing retained earnings of MMH's foreign
subsidiaries would be treated as previously taxed and subject only to local
withholding taxes for which MMH may claim a foreign tax credit.
NOTE 8 - GAIN ON FIRE INSURANCE CLAIM
During the nine months ended July 31, 1997, the Company recognized a gain of
approximately $2.0 million based upon the status of the property loss and
business interruption insurance claim related to the fiscal 1995 fire at its
facility in the United Kingdom.
NOTE 9 - SALE OF FACILITY
13
<PAGE>
During the first quarter of fiscal 1998, the Company completed the sale of its
Dayton, Ohio land and building which it had acquired in connection with the
acquisition of an aftermarket operation during the prior year. The operation's
former owners reacquired these assets in exchange for a note receivable of
$427,000 and settlement of the remaining amount of $300,000 due to the former
owners related to the Company's acquisition. The balance of the note was
collected in full by the Company during the quarter ended April 30, 1998. No
significant gain or loss was recognized in connection with this transaction.
NOTE 10 - NON-RECURRING EMPLOYEE BENEFIT COSTS
As a result of the Recapitalization, the Company recognized certain
non-recurring employee benefit costs. These costs included severance costs
associated with restructuring the Company's United Kingdom manufacturing
operation and incentives to certain members of management. The Company's former
parent, not the Company, is responsible for making these incentive payments and
accordingly, this amount has been reported as a capital contribution in the
accompanying financial statements. The severance costs were approximately $0.7
million and the incentives to management were approximately $1.2 million.
NOTE 11 - SUPPLEMENTAL CONDENSED COMBINING FINANCIAL INFORMATION
In connection with the Recapitalization, MMH, a direct wholly-owned subsidiary
of Holdings, issued debt securities that are guaranteed by certain of MMH's
subsidiaries (the "Guarantor Subsidiaries"). Each of the Guarantor Subsidiaries
is a wholly-owned subsidiary, directly or indirectly, of MMH and the guarantees
are full, unconditional and joint and several. Both Holdings and MMH are holding
companies with no material operating assets. All of the Company's business
operations are conducted through subsidiaries of MMH.
Separate financial statements of the Guarantor Subsidiaries are not presented
because management has determined that they would not be material to
investors. The following supplemental financial information sets forth the
balance sheet, statement of operations and cash flow information for the
Guarantor Subsidiaries and for MMH's other subsidiaries (the "Non-Guarantor
Subsidiaries"). The supplemental financial information reflects the
investments of the Guarantor Subsidiaries in the Non-Guarantor Subsidiaries
using the equity method of accounting. For purposes of this presentation, it
is assumed that all of the assets of the MHE Business were wholly-owned by
subsidiaries of MMH, which is an entity that was formed by Holdings in
connection with the Recapitalization and that the historical combined
financial statements of MMH and Holdings prior to the Recapitalization
Closing are identical following completion of the transaction.
14
<PAGE>
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
JULY 31, 1998
(UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Non- Morris
Guarantor Guarantor Material
Subsidiaries Subsidiaries Handling, Inc. Eliminations
------------ ------------ -------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 3,306 $ 276 $ - $ -
Accounts receivable - net 71,324 6,067 - -
Intercompany accounts receivable 7,448 - 2,402 (9,850)
Inventories 35,379 3,056 - -
Other current assets 3,668 261 737 -
------------ ------------ -------------- ---------------
121,125 9,660 3,139 (9,850)
------------ ------------ -------------- ---------------
Property, Plant and Equipment-net 36,607 2,634 - -
------------ ------------ -------------- ---------------
Other Assets
Goodwill 29,515 2,032 - -
Debt financing costs - - 18,234 -
Noncurrent intercompany receivable 3,777 - 78,931 (82,708)
Investment in affiliates 144 - 58,156 (58,300)
Deferred income taxes - - 74,091 -
Other 9,958 - - -
------------ ------------ -------------- ---------------
43,394 2,032 229,412 (141,008)
------------ ------------ -------------- ---------------
$201,126 $14,326 $232,551 $(150,858)
------------ ------------ -------------- ---------------
------------ ------------ -------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term notes payable and
current portion of long-term obligations $7,009 $ 66 $ 1,725 $ -
Bank overdrafts 77 1,056 - -
Trade accounts payable 19,886 1,818 - -
Intercompany accounts payable 2,402 4,344 3,104 (9,850)
Advance payments and progress billings 8,272 31 - -
Accrued warranties 2,467 117 - -
Accrued interest - - 6,884
Other current liabilities 19,151 2,015 - -
------------ ------------ -------------- ---------------
59,264 9,447 11,713 (9,850)
------------ ------------ -------------- ---------------
Senior Notes - - 200,000 -
Term Loans - - 52,938 -
Other Term Debt 1,051 601 - -
Noncurrent Intercompany Payable 78,931 3,777 - (82,708)
Deferred Income Taxes 3,724 - - -
------------ ------------ -------------- ---------------
142,970 13,825 264,651 (92,558)
Minority Interest - - - 357
Mandatorily Redeemable Preferred Stock - - - -
Shareholders' Equity 58,156 501 (32,100) (58,657)
------------ ------------ -------------- ---------------
$201,126 $14,326 $232,551 $(150,858)
------------ ------------ -------------- ---------------
------------ ------------ -------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
Consolidated Consolidated
Morris Material MMH MMH
Handling, Inc. Holdings, Inc. Eliminations Holdings, Inc.
--------------- --------------- ------------ ---------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $3,582 $ - $- $ 3,582
Accounts receivable - net 77,391 - - 77,391
Intercompany accounts receivable - - - -
Inventories 38,435 - - 38,435
Other current assets 4,666 - - 4,666
--------------- --------------- ------------ ---------------
124,074 - - 124,074
--------------- --------------- ------------ ---------------
Property, Plant and Equipment-net 39,241 - - 39,241
--------------- --------------- ------------ ---------------
Other Assets
Goodwill 31,547 - - 31,547
Debt financing costs 18,234 - - 18,234
Noncurrent intercompany receivable - - - -
Investment in affiliates - (32,100) 32,100 -
Deferred income taxes 74,091 - - 74,091
Other 9,958 - - 9,958
--------------- --------------- ------------ ---------------
133,830 (32,100) 32,100 133,830
--------------- --------------- ------------ ---------------
$297,145 $(32,100) $32,100 $297,145
--------------- --------------- ------------ ---------------
--------------- --------------- ------------ ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term notes payable and
current portion of long-term obligation $ 8,800 $ - $ - $ 8,800
Bank overdrafts 1,133 - - 1,133
Trade accounts payable 21,704 - - 21,704
Intercompany accounts payable - - - -
Advance payments and progress billings 8,303 - - 8,303
Accrued warranties 2,584 - - 2,584
Accrued interest 6,884 6,884
Other current liabilities 21,166 - - 21,166
--------------- --------------- ------------ ---------------
70,574 - - 70,574
--------------- --------------- ------------ ---------------
Senior Notes 200,000 - - 200,000
Term Loans 52,938 - - 52,938
Other Term Debt 1,652 - - 1,652
Noncurrent Intercompany Payable - - - -
Deferred Income Taxes 3,724 - - 3,724
--------------- --------------- ------------ ---------------
328,888 - - 328,888
Minority Interest 357 - - 357
Mandatorily Redeemable Preferred Stock - 92,368 - 92,368
Shareholders' Equity (32,100) (124,468) 32,100 (124,468)
--------------- --------------- ------------ ---------------
$297,145 $ (32,100) $32,100 $297,145
--------------- --------------- ------------ ---------------
--------------- --------------- ------------ ---------------
</TABLE>
15
<PAGE>
SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEET
October 31, 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Combined
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,393 $ 139 $ -- $ 1,532
Accounts receivable - net 73,220 8,989 -- 82,209
Intercompany accounts receivable 5,250 1,539 (6,789) --
Inventories 30,855 2,642 -- 33,497
Other current assets 4,486 279 -- 4,765
---------- ---------- ---------- ---------
115,204 13,588 (6,789) 122,003
---------- ---------- ---------- ---------
Property, Plant and Equipment - net 36,192 3,175 -- 39,367
---------- ---------- ---------- ---------
Other Assets
Goodwill 30,368 1,861 -- 32,229
Noncurrent intercompany receivable 3,136 -- (3,136) --
Investment in affiliates 1,174 -- (1,174) --
Other 6,001 -- -- 6,001
---------- ---------- ---------- ---------
40,679 1,861 (4,310) 38,230
---------- ---------- ---------- ---------
$ 192,075 $ 18,624 $ (11,099) $ 199,600
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
LIABILITIES AND SHAREHOLDER'S INVESTMENT
Current Liabilities
Short-term notes payable and
current portion of long-term obligations $ 692 $ 60 $ -- $ 752
Bank overdrafts 2,076 2,217 -- 4,293
Trade accounts payable 27,824 4,832 -- 32,656
Intercompany accounts payable 1,539 5,250 (6,789) --
Advance payments and progress billings 7,626 59 -- 7,685
Accrued warranties 3,913 85 -- 3,998
Other current liabilities 20,644 732 -- 21,376
---------- ---------- ---------- ---------
64,314 13,235 (6,789) 70,760
---------- ---------- ---------- ---------
Long-Term Obligations 355 688 -- 1,043
Noncurrent Intercompany Payable -- 3,136 (3,136) --
Deferred Income Taxes 3,088 -- -- 3,088
Minority Interest -- -- 391 391
Shareholder's Investment 124,318 1,565 (1,565) 124,318
---------- ---------- ---------- ---------
$192,075 $ 18,624 $(11,099) $ 199,600
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
</TABLE>
16
<PAGE>
SUPPLEMENTAL CONDENSED COMBINING/CONSOLIDATING STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED JULY 31, 1998
---------------------------------------------------------
Non- Morris
Guarantor Guarantor Material
Subsidiaries Subsidiaries Handling, Inc. Eliminations
------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Revenues
Net sales $ 219,633 $ 16,449 $ -- $ (4,407)
Other income - net 1,117 -- -- --
--------- --------- --------- ------------
220,750 16,449 -- (4,407)
Cost of Sales 158,828 12,903 -- (4,407)
Selling, General
and Administrative Expenses 40,507 3,256 333 --
HII Management Fee 1,155 -- -- --
Non-Recurring Employee Benefit Costs 690 -- 1,216 --
--------- --------- --------- ------------
Operating Income 19,570 290 (1,549) --
Interest Income (Expense) - Net
Affiliates (3,726) (124) 2,402 --
Third party (204) (401) (9,111) --
--------- --------- --------- ------------
Income (Loss) Before Income Taxes,
Equity in Earnings (Loss) of
Subsidiaries and Minority Interest 15,640 (235) (8,258) --
Provision for Income Taxes (2,896) -- -- --
Equity in Earnings (Loss) of Subsidiaries (201) -- 12,543 (12,342)
Minority Interest -- -- -- 34
--------- --------- --------- ------------
Net Income (Loss) $ 12,543 $ (235) $ 4,285 $(12,308)
--------- --------- --------- ------------
--------- --------- --------- ------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED JULY 31, 1998
----------------------------------------------------------------
Combined/ Combined/
Consolidated Consolidated
Morris Material MMH MMH
Handling, Inc. Holdings,Inc. Eliminations Holdings, Inc.
--------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
Revenues
Net sales $ 231,675 $ -- $ -- $ 231,675
Other income - net 1,117 -- -- 1,117
---------- ------- -------- ----------
232,792 -- -- 232,792
Cost of Sales 167,324 -- -- 167,324
Selling, General
and Administrative Expenses 44,096 -- -- 44,096
HII Management Fee 1,155 -- -- 1,155
Non-Recurring Employee Benefit Costs 1,906 -- -- 1,906
---------- ------- -------- ----------
Operating Income 18,311 -- -- 18,311
Interest Income (Expense) - Net
Affiliates (1,448) -- -- (1,448)
Third party (9,716) -- -- (9,716)
---------- ------- -------- ----------
Income (Loss) Before Income Taxes,
Equity in Earnings (Loss) of
Subsidiaries and Minority Interest 7,147 -- -- 7,147
Provision for Income Taxes (2,896) -- -- (2,896)
Equity in Earnings (Loss) of Subsidiaries -- 4,285 (4,285) --
Minority Interest 34 -- -- 34
---------- ------- -------- ----------
Net Income (Loss) $ 4,285 $ 4,285 $ (4,285) $ 4,285
---------- ------- -------- ----------
---------- ------- -------- ----------
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JULY 31, 1998
---------------------------------------------------------
Non- Morris
Guarantor Guarantor Material
Subsidiaries Subsidiaries Handling, Inc. Eliminations
------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Revenues
Net sales $70,422 $5,135 $ - $ (1,131)
Other income - net 391 - - -
--------- ------- --------- ----------
70,813 5,135 - (1,131)
Cost of Sales 49,252 4,031 - (1,131)
Selling, General
and Administrative Expenses 13,400 932 250 -
HII Management Fee - - - -
Non-Recurring Employee Benefit Costs - - - -
--------- ------- --------- ----------
Operating Income 8,161 172 (250) -
Interest Income (Expense) - Net
Affiliates (1,651) (37) 1,688 -
Third party (6) (119) (6,888) -
--------- ------- --------- ----------
Income (Loss) Before Income Taxes,
Equity in Earnings (Loss) of
Subsidiaries and Minority Interest 6,504 16 (5,450) -
Provision for Income Taxes (450) - - -
Equity in Earnings (Loss) of Subsidiaries 12 - 6,066 (6,078)
Minority Interest - - - (4)
--------- ------- --------- ----------
Net Income (Loss) $ 6,066 $ 16 $ 616 $ (6,082)
--------- ------- --------- ----------
--------- ------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JULY 31, 1998
----------------------------------------------------------------
Combined/ Combined/
Consolidated Consolidated
Morris Material MMH MMH
Handling, Inc. Holdings,Inc. Eliminations Holdings, Inc.
--------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
Revenues
Net sales $ 74,426 $ - $ - $ 74,426
Other income - net 391 - - 391
----------- ---------- ---------- ------------
74,817 - - 74,817
Cost of Sales 52,152 - - 52,152
Selling, General
and Administrative Expenses 14,582 - - 14,582
HII Management Fee - - - -
Non-Recurring Employee Benefit Costs - - - -
----------- ---------- ---------- ------------
Operating Income 8,083 - - 8,083
Interest Income (Expense) - Net
Affiliates - - - -
Third party (7,013) - - (7,013)
----------- ---------- ---------- ------------
Income (Loss) Before Income Taxes,
Equity in Earnings (Loss) of
Subsidiaries and Minority Interest 1,070 - - 1,070
Provision for Income Taxes (450) - - (450)
Equity in Earnings (Loss) of Subsidiaries - 616 (616) -
Minority Interest (4) - - (4)
----------- ---------- ---------- ------------
Net Income (Loss) $ 616 $ 616 $ (616) $ 616
----------- ---------- ---------- ------------
----------- ---------- ---------- ------------
</TABLE>
17
<PAGE>
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED JULY 31, 1997
---------------------------------------------------------
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Combined
------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Revenues
Net sales $ 244,498 $ 16,389 $ (2,016) $ 258,871
Other income - net 2,337 -- -- 2,337
---------- ---------- ---------- ---------
246,835 16,389 (2,016) 261,208
Cost of Sales 183,069 12,581 (2,016) 193,634
Selling, General
and Administrative Expenses 37,982 3,257 -- 41,239
HII Management Fee 2,097 -- -- 2,097
---------- ---------- ---------- ---------
Operating Income 23,687 551 -- 24,238
Interest (Expense) Income - Net
Affiliates (107) (151) -- (258)
Third party 19 (300) -- (281)
---------- ---------- ---------- ---------
Income Before Income Taxes, Equity in
Loss of Combined Affiliates and Minority
Interest 23,599 100 -- 23,699
Provision for Income Taxes (9,384) (79) -- (9,463)
Equity in Loss of Combined Affiliates 13 -- (13) --
Minority Interest -- -- (8) (8)
---------- ---------- ---------- ---------
Net Income (Loss) $ 14,228 $ 21 $ (21) $ 14,228
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JULY 31, 1997
---------------------------------------------------------
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Combined
------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Revenues
Net sales $ 77,163 $ 5,329 $ (675) $ 81,817
Other income - net 836 -- -- 836
---------- ---------- ---------- ---------
77,999 5,329 (675) 82,653
Cost of Sales 56,880 3,797 (675) 60,002
Selling, General
and Administrative Expenses 12,775 1,192 -- 13,967
HII Management Fee 663 -- -- 663
---------- ---------- ---------- ---------
Operating Income 7,681 340 -- 8,021
Interest (Expense) Income - Net
Affiliates (139) (50) -- (189)
Third party 11 (133) -- (122)
---------- ---------- ---------- ---------
Income Before Income Taxes, Equity in
Loss of Combined Affiliates and Minority
Interest 7,553 157 -- 7,710
Provision for Income Taxes (3,083) 4 -- (3,079)
Equity in Loss of Combined Affiliates 156 -- (156) --
Minority Interest -- -- (5) (5)
---------- ---------- ---------- ---------
Net Income (Loss) $ 4,626 $ 161 $ (161) $ 4,626
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
</TABLE>
18
<PAGE>
SUPPLEMENTAL CONDENSED COMBINING/CONSOLIDATING STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED JULY 31, 1998
(UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Non- Morris
Guarantor Guarantor Material
Subsidiaries Subsidiaries Handling, Inc. Eliminations
------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Operating Activities
Net income (loss) $ 12,543 $ (235) $ 4,285 $ (12,308)
Add (deduct)-items not affecting cash provided by
operating activities:
Depreciation and amortization 4,857 339 655 --
Equity in (earnings) loss of subsidiaries 201 -- (12,543) 12,342
Minority interest -- -- -- (34)
Deferred income taxes - net 411 -- -- --
Divestiture bonus -- -- 1,216 --
Changes in working capital, excluding the effects of
acquisition opening balance sheets:
Accounts receivable 2,771 1,475 -- --
Inventories (7,011) 1,448 -- --
Other current assets (639) (1,090) (737) --
Trade accounts payable and bank overdrafts (11,446) (2,658) -- --
Accrued interest -- -- 6,884 --
Other current liabilities (2,262) 1,400 -- --
Activity with parent and other affiliates - net 4,745 (595) (2,402) --
----------- ---------- ----------- ----------
Net cash provided by (used for) operating activities 4,170 84 (2,642) --
----------- ---------- ----------- ----------
Investment and Other Transactions
Fixed asset additions - net (3,450) (106) -- --
Acquisition of business - net of cash received (3,203) -- -- --
Issuance of loans to senior management -- -- (900) --
Other - net (1,147) 206 -- --
----------- ---------- ----------- ----------
Net cash used for investment and other transactions (7,800) 100 (900) --
----------- ---------- ----------- ----------
Financing Activities
Change in short-term notes payable 6,361 (37) --
Proceeds from Senior Note Offering -- -- 200,000 --
Proceeds from New Credit Facility -- -- 55,000 --
Redemption of shares held by Holdings -- -- (233,087) --
Redemption of common stock and
preferred stock -- -- -- --
Net proceeds from issuance of Series A preferred
stock and related common shares -- -- -- --
Stock redemption transaction costs -- -- -- --
Debt financing costs -- -- (18,889) --
Distribution to parent (856) -- 856 --
Repayments of debt -- -- (338) --
----------- ---------- ----------- ----------
Net cash provided by (used for) financing activities 5,505 (37) 3,542 --
----------- ---------- ----------- ----------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents 38 (10) -- --
----------- ---------- ----------- ----------
Increase in Cash and Cash Equivalents 1,913 137 -- --
Cash and Cash Equivalents
Beginning of Period 1,393 139 -- --
----------- ---------- ----------- ----------
End of Period $ 3,306 $ 276 $ -- $ --
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
</TABLE>
<TABLE>
<CAPTION>
Combined/ Combined/
Consolidated Consolidated
Morris Material MMH MMH
Handling, Inc. Holdings,Inc. Eliminations Holdings, Inc.
--------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
Operating Activities
Net income (loss) $ 4,285 $ 4,285 $ (4,285) $ 4,285
Add (deduct)-items not affecting cash provided by
operating activities:
Depreciation and amortization 5,851 -- -- 5,851
Equity in (earnings) loss of subsidiaries -- (4,285) 4,285
Minority interest (34) -- -- (34)
Deferred income taxes - net 411 -- -- 411
Divestiture bonus 1,216 -- -- 1,216
Changes in working capital, excluding the effects of
acquisition opening balance sheets:
Accounts receivable 4,246 -- -- 4,246
Inventories (5,563) -- -- (5,563)
Other current assets (2,466) -- -- (2,466)
Trade accounts payable and bank overdrafts (14,104) -- -- (14,104)
Accrued interest 6,884 -- -- 6,884
Other current liabilities (862) -- -- (862)
Activity with parent and other affiliates - net 1,748 -- -- 1,748
--------------- ------------- ------------ ---------------
Net cash provided by (used for) operating activities 1,612 -- -- 1,612
Investment and Other Transactions
Fixed asset additions - net (3,556) -- -- (3,556)
Acquisition of business - net of cash received (3,203) -- -- (3,203)
Issuance of loans to senior management (900) (900)
Other - net (941) -- -- (941)
--------------- ------------- ------------ ---------------
Net cash used for investment and other transactions (8,600) -- -- (8,600)
--------------- ------------- ------------ ---------------
Financing Activities
Change in short-term notes payable 6,324 -- -- 6,324
Proceeds from Senior Note Offering 200,000 -- -- 200,000
Proceeds from New Credit Facility 55,000 -- -- 55,000
Redemption of shares held by Holdings (233,087) 233,087 -- --
Redemption of common stock and
preferred stock -- (287,000) -- (287,000)
Net proceeds from issuance of Series A preferred
stock and related common shares -- 57,094 -- 57,094
Stock redemption transaction costs -- (3,181) -- (3,181)
Debt financing costs (18,889) -- -- (18,889)
Distribution to parent -- -- -- --
Repayments of debt (338) -- -- (338)
--------------- ------------- ------------ ---------------
Net cash provided by (used for) financing activities 9,010 -- -- 9,010
--------------- ------------- ------------ ---------------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents 28 -- -- 28
--------------- ------------- ------------ ---------------
Increase in Cash and Cash Equivalents 2,050 -- -- 2,050
Cash and Cash Equivalents
Beginning of Period 1,532 -- -- 1,532
--------------- ------------- ------------ ---------------
End of Period $ 3,582 $ -- $ -- $ 3,582
--------------- ------------- ------------ ---------------
--------------- ------------- ------------ ---------------
</TABLE>
19
<PAGE>
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED JULY 31, 1997
(UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Combined
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Operating Activities
Net income $ 14,228 $ 21 $ (21) $ 14,228
Add (deduct)-items not affecting cash provided by
operating activities:
Depreciation and amortization 4,332 252 -- 4,584
Equity in loss of combined affiliates (13) -- 13 --
Minority interest -- -- 8 8
Deferred income taxes - net (251) -- -- (251)
Gain on fire insurance claim (2,011) -- -- (2,011)
Other (600) -- -- (600)
Changes in working capital, excluding the effects of
acquisition opening balance sheets:
Accounts receivable 7,482 2,606 -- 10,088
Inventories (1,212) (590) -- (1,802)
Other current assets 1,211 (59) -- 1,152
Trade accounts payable and bank overdrafts (5,035) (3,265) -- (8,300)
Other current liabilities (14,172) (59) -- (14,231)
Activity with parent and other affiliates - net 7,737 1,762 -- 9,499
---------- ---------- ---------- ----------
Net cash provided by operating activities 11,696 668 -- 12,364
---------- ---------- ---------- ----------
Investment and Other Transactions
Fixed asset additions - net (4,050) (244) -- (4,294)
Acquisition of businesses - net of cash acquired (11,787) -- -- (11,787)
Fire insurance claim activity - net 2,011 -- -- 2,011
Other - net 859 (570) -- 289
---------- ---------- ---------- ----------
Net cash used for investment and other transactions (12,967) (814) -- (13,781)
---------- ---------- ---------- ----------
Financing Activities
Repayments of notes payable (681) -- (681)
Repayments of debt (27) (60) -- (87)
---------- ---------- ---------- ----------
Net cash used for financing activities (708) (60) -- (768)
---------- ---------- ---------- ----------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (10) 2 -- (8)
---------- ---------- ---------- ----------
Decrease in Cash and Cash Equivalents (1,989) (204) -- (2,193)
Cash and Cash Equivalents
Beginning of Period 3,582 239 -- 3,821
---------- ---------- ---------- ----------
End of Period $ 1,593 $ 35 $ -- $ 1,628
---------- ---------- ---------- ----------
</TABLE>
20
<PAGE>
MMH HOLDINGS, INC.
MORRIS MATERIAL HANDLING, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS OF MMH HOLDINGS, INC. ("HOLDINGS") AND MORRIS MATERIAL HANDLING,
INC. ("MMH") AND THE RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS
DOCUMENT. REFERENCES TO THE "COMPANY" ARE TO MMH, ITS SUBSIDIARIES AND THEIR
PREDECESSORS. HOLDINGS IS A HOLDING COMPANY, WITH NO MATERIAL OPERATIONS,
THAT CONDUCTS ITS BUSINESS OPERATIONS THROUGH ITS DIRECTLY WHOLLY-OWNED
SUBSIDIARY MMH. FOR PERIODS PRIOR TO MARCH 30, 1998, REFERENCES TO THE
COMPANY ARE TO THE "THROUGH-THE-AIR" MATERIAL HANDLING EQUIPMENT BUSINESS OF
HARNISCHFEGER CORPORATION ("HARNCO") AND THOSE SUBSIDIARIES AND AFFILIATES OF
HARNCO THAT WERE ENGAGED THEREIN (THE "MHE BUSINESS"). FOR PURPOSES HEREOF,
IT IS ASSUMED THAT HOLDINGS HAS HISTORICALLY OWNED THE CAPITAL STOCK OF MMH,
THAT ALL OF THE ASSETS OF THE MHE BUSINESS WERE OWNED BY SUBSIDIARIES OF MMH
AND THAT, IMMEDIATELY PRIOR TO THE CONSUMMATION OF THE RECAPITALIZATION (AS
DEFINED BELOW), THE HISTORICAL COMBINED FINANCIAL STATEMENTS OF HOLDINGS WERE
IDENTICAL TO THOSE OF THE MHE BUSINESS. THE COMPANY'S FISCAL YEAR ENDS
OCTOBER 31. CONSEQUENTLY, ANY REFERENCE TO ANY PARTICULAR FISCAL YEAR MEANS
THE FISCAL YEAR ENDED OCTOBER 31 OF SUCH YEAR.
GENERAL
The Company is a leading international provider of "through-the-air" material
handling products and services used in most manufacturing industries. The
Company's original equipment operations design and manufacture a comprehensive
line of industrial cranes, hoists and other component products. Through its
aftermarket operations, the Company provides a variety of related products and
services, including replacement parts, repair and maintenance services and
product modernizations. In recent years, the Company has shifted its orientation
from an original equipment-focused United States manufacturer to an
international full service provider with a significant emphasis on the high
margin aftermarket business. The Company's revenues are derived principally from
the sale of industrial overhead cranes, component products and aftermarket
products and services.
RECAPITALIZATION. Historically, the Company conducted its business as one of
several operating units of Harnishfeger Industries, Inc. (" HII"). Until October
1997, the core United States operations of the Company were conducted directly
by HarnCo, while the remainder of the Company's operations (including the
Company's operations in the United Kingdom and South Africa since their
acquisition in 1994) were conducted through a number of entities owned, directly
or indirectly, by HII and its affiliates.
On January 28, 1998, HII reached an agreement with MHE Investments, Inc. ("MHE
Investments"), a newly formed affiliate of Chartwell Investments Inc., for the
sale of an approximately 80 percent common ownership interest in the MHE
Business. Pursuant to this agreement, HarnCo and other HII affiliates effected a
number of transactions (the "Transactions" or the "Recapitalization") that
resulted in Holdings, a preexisting company engaged in the MHE Business, owning
indirectly the equity interests of all of the operating entities engaged in the
MHE Business. Specifically, Holdings, through MMH, its newly formed wholly owned
subsidiary, indirectly acquired all of the various operating entities engaged in
the MHE Business. As a result of the reorganization of the MHE Business' legal
entities, Holdings and the Company became the successor companies to the MHE
Business. The Transactions are accounted for as a recapitalization for financial
reporting purposes. Accordingly, the historical basis of the Company's assets
and liabilities was not impacted by the Transactions.
In conjunction with the Recapitalization, which closed on March 30, 1998 (the
"Recapitalization Closing"), Holdings sold $60.0 million of Series A Units,
consisting of $57.7 million liquidation preference of Holdings' 12% Series A
Senior Exchangeable Preferred Stock (the "Series A Senior Preferred Stock") and
720 shares of non-voting common stock, to institutional investors. In addition,
MMH sold $200.0 million aggregate principal amount of 9 1/2% Senior Notes due
2008 (the "Senior Notes") and entered into a senior secured credit facility (the
"New Credit Facility").
At the Recapitalization Closing, (i) MHE Investments paid HarnCo $54.0 million
for 72.6% of the common stock of Holdings (the "Holdings Common Stock") (after
giving effect to the Transactions) and approximately $28.9 million liquidation
preference of the 12 1/2% Series C Junior Voting Exchangeable Preferred Stock of
Holdings (the "Series C Junior Preferred Stock"), (ii) Holdings redeemed certain
shares of Holdings Common Stock and Series C Junior Voting Preferred Stock from
HarnCo for $282.0 million in cash (subject to potential post-Recapitalization
adjustments as to which an additional $5.0 million was provided to HarnCo) and
approximately $4.8 million liquidation
21
<PAGE>
preference of the 12 1/4% Series B Junior Exchangeable Preferred Stock of
Holdings (the "Series B Junior Preferred Stock"), and (iii) HarnCo retained
approximately 20.8% of the Holdings Common Stock (after giving effect to the
Transactions).
Until the Recapitalization Closing, HII and HarnCo performed a number of
functions necessary to the operations of the Company, including manufacturing
certain products and providing certain information systems, administrative
services and credit support. Holdings' and MMH's historical financial statements
include charges allocated to the MHE Business by HII for these products and
services. Because the Company operates independently of HII since the
Recapitalization Closing, however, Holdings' and MMH's pre-Recapitalization
performance may not be indicative of future financial results.
At the Recapitalization Closing, MMH entered into a number of agreements
pursuant to which HII and its affiliates will continue to provide to MMH and to
its subsidiaries located in the United States, on an interim basis and under
substantially the same terms and conditions as before the closing, certain
products and services. In addition, HII and MMH entered into a credit
indemnification agreement (the "Credit Indemnification Agreement") pursuant to
which HII will maintain in place the credit support obligations in existence at
the Recapitalization Closing but have no further duty to extend, renew or enter
into any new credit support obligations (except as to the MHE Business
obligations existing at the Recapitalization Closing). MMH is required to pay,
in advance, HII an annual fee equal to 1% of the amounts outstanding under each
letter of credit and bond provided by HarnCo and its affiliates (approximately
$32.0 million as of July 31, 1998). MMH paid a pro-rated fee of $290,000 for
calendar year 1998 at the Recapitalization Closing. HII is required to refund
the Company on a quarterly basis a pro-rata portion of the annual fee for any
reductions in the outstanding amount of credit that occurred during such
quarter. In addition, the Company will also reimburse HII for certain future
fees and expenses. The Company also entered into a surety arrangement at the
Recapitalization Closing to provide credit support for its post-Recapitalization
Closing operations.
In connection with the Recapitalization, the Company also entered into a
trademark license agreement with an affiliate of HarnCo, pursuant to which the
Company has the right to use the P&H trademark with respect to all MHE Business
products on a worldwide exclusive basis from the date of the Recapitalization
Closing until 15 years after the earlier to occur of a sale of Holdings to a
third party or a public offering of the common stock of Holdings, the Company or
their parents or successors (and for an additional seven years thereafter for
aftermarket products and services). The royalty fee for use of the trademark is
0.75% of the aggregate net sales of the MHE Business for the ten year period
commencing March 30, 1999.
For income tax purposes, Holdings and MMH were deemed to acquire the assets of
the MHE Business pursuant to Code Section 338(h)(10) in connection with the
Transactions. Accordingly, this transaction increased the tax basis of certain
assets and created tax-deductible goodwill, which will generate significant
future tax deductions to reduce taxable income.
ACQUISITIONS
The Company completed the purchase of two businesses during the third quarter of
1998. The first acquisition, which closed on June 30, 1998, was of a
distribution and service business in the overhead material handling industry,
located in Arizona. This business generates revenue by distributing new material
handling equipment, selling related spare parts and performing maintenance
services. Its customer base includes the local mining industry as well as other
industrial concerns. On July 2, 1998, the Company acquired a distributor of a
wide range of material handling equipment located in Australia. This business
also includes a service division, which undertakes regular and breakdown
maintenance contracts, some fabrication and manufacturing projects, crane
refurbishments and operator training, and a major projects division, which
undertakes the design, procurement and installation of material handling
projects greater than $500,000. The combined purchase price for these two
acquisitions was $4.0 million. These two acquisitions did not have a material
impact on the Company's results in the third fiscal quarter of 1998.
22
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain financial data for the periods indicated.
Supplemental Data
(dollars in millions)
<TABLE>
<CAPTION>
Three months ended Three months ended Nine months ended Nine months ended
---------------------- ------------------ ------------------- -------------------
July 31, 1998 July 31, 1997 July 31, 1998 July 31, 1997
----------------------- ----------------- ------------------ -------------------
Percent of Percent of Percent of Percent of
$ net sales $ net sales $ net sales $ net sales
---------- ----------- --------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 74.4 100.0% $ 81.8 100.0% $ 231.7 100.0% $ 258.9 100.0%
Other income - net 0.4 0.5% 0.8 1.0% 1.1 0.5% 2.3 0.9%
Cost of sales 52.2 70.1% 60.0 73.3% 167.3 72.2% 193.6 74.8%
Selling, general and
administrative expenses 14.6 19.6% 14.0 17.1% 44.1 19.0% 41.2 15.9%
HII management fee -- 0.0% 0.7 0.8% 1.2 0.5% 2.1 0.8%
Nonrecurring employee
benefit costs (1) -- 0.0% -- 0.0% 1.9 0.8% -- 0.0%
Operating income 8.1 10.9% 8.0 9.8% 18.3 7.9% 24.2 9.4%
Net income 0.6 0.8% 4.6 5.7% 4.3 1.8% 14.2 5.5%
</TABLE>
- ----------
(1) Severance costs and incentives as described below.
THREE MONTHS ENDED JULY 31, 1998 AS COMPARED TO THREE MONTHS ENDED JULY 31, 1997
Net sales for the three months ended July 31, 1998 ("Third Quarter 1998")
decreased $7.4 million or 9.0% to $74.4 million from $81.8 million for the three
months ended July 31, 1997 ("Third Quarter 1997"). The decrease was primarily
caused by: (i) a $14.5 million decrease in engineered crane sales worldwide as
Third Quarter 1997 included the completion of several large projects in both the
United States and the United Kingdom without a corresponding level of projects
in Third Quarter 1998; (ii) a $6.1 million increase in standard crane sales
attributable to a product mix shift away from engineered cranes, new product
sales (trolleys) and the continued expansion of the Company's North American DSC
("DSC") network; (iii) a $2.3 million increase in modernization sales due to
increased percentage of completion revenue resulting from several on-going large
projects; (iv) a $1.7 million decrease in hoist and component sales resulting
from lower winch shipments and a change in product mix, shifting toward more
standard hoists; and (v) a $0.5 million increase in combined parts and service
sales. The decline in engineered crane sales was primarily due to a downturn in
orders in the United Kingdom container crane business and the failure to win
certain large projects in the United States.
Cost of sales decreased $7.8 million or 13.0% to $52.2 million in Third Quarter
1998 from $60.0 million in Third Quarter 1997 primarily due to the lower sales
volumes described above. Cost of sales continued to decrease as a percentage of
net sales from 73.3% in Third Quarter 1997 to 70.1% in Third Quarter 1998 due to
the continued shift in the Company's sales mix toward the higher margin standard
cranes and aftermarket products and away from engineered cranes.
Selling, general and administrative expenses increased $0.6 million or 4.3% to
$14.6 million in Third Quarter 1998 from $14.0 million in Third Quarter 1997.
The primary causes were unabsorbed engineering costs due to lower engineered
crane sales, additional costs associated with the separation from HII and
general cost increases. Additionally, management fees of approximately $0.3
million for the period after the Recapitalization are included in 1998 selling,
general and administrative expenses.
Parent management fees allocated by HII (prior to the Recapitalization) (the
"HII Management Fee"), which represented an allocation of HII's corporate
expenses, were $0.7 million in Third Quarter 1997.
23
<PAGE>
Approximately $7.0 million in interest expense was recorded in Third Quarter
1998 resulting from the issuance of debt in connection with the
Recapitalization, including $0.6 million in amortization of related financing
costs. The Company paid $1.4 million in interest and commitment fees during the
Third Quarter 1998.
The provision for income taxes was approximately 42% and 40% of income before
income taxes and minority interest for Third Quarter 1998 and Third Quarter
1997, respectively.
Net income decreased $4.0 million, or 86.9% to $0.6 million in Third Quarter
1998 from $4.6 million in Third Quarter 1997. Net income represented 0.8% of net
sales in Third Quarter 1998 compared to 5.7% of net sales in Third Quarter 1997.
The Company's backlog of orders at July 31, 1998 was approximately $83.3 million
compared to approximately $108.5 million at July 31, 1997. Bookings in Third
Quarter 1998 were $54.2 million compared to $92.9 million in Third Quarter 1997.
The change in backlog and bookings was primarily due to weak world wide demand
for container cranes during Third Quarter 1998 and the typical variability in
booking patterns for highly engineered cranes. Parts and service bookings for
the quarter were unchanged compared to the year ago period.
NINE MONTHS ENDED JULY 31, 1998 AS COMPARED TO NINE MONTHS ENDED JULY 31, 1997
Net sales for the nine months ended July 31, 1998 ("First Nine Months 1998")
decreased $27.2 million or 10.5% to $231.7 million from $258.9 million for the
nine months ended July 31, 1997 ("First Nine Months 1997"). The change in net
sales was primarily the result of: (i) a $53.4 million decrease in engineered
crane sales worldwide as First Nine Months 1997 included the completion of
several large projects in both the United States and the United Kingdom without
a corresponding level of projects in First Nine Months 1998; (ii) a $21.2
million increase in standard crane sales in First Nine Months 1998 due to a
product mix shift away from engineered cranes, new product sales (trolleys) and
the continued expansion of the Company's DSC network; (iii) a $2.8 million
increase in modernization sales resulting from percentage of completion revenue
recognized on several large, on-going projects; and (iv) a $2.2 million increase
in sales of parts, service, hoists and components also due to the expanded DSC
network. Included in the above net sales changes is a $7.4 million increase in
First Nine Months 1998 due to a full nine month operation of a DSC in Ohio
acquired in February 1997. The decline in engineered crane sales was due to a
downturn in orders in the United Kingdom container crane business and the
failure to win certain large projects in the United States.
Other income - net decreased from $2.3 million in First Nine Months 1997 to $1.1
million in First Nine Months 1998 primarily due to the recognition of a $2.0
million gain in First Nine Months 1997 on an insurance claim relating to a fire
at the Morris Mechanical Handling Ltd. facility in the United Kingdom in fiscal
1995. Other income - net in 1998 includes a gain on the sale of certain fixed
assets, including a building.
Cost of sales decreased $26.3 million or 13.6% to $167.3 million in First Nine
Months 1998 from $193.6 million in First Nine Months 1997 primarily due to the
lower sales volumes described above. Cost of sales continued to decrease as a
percentage of net sales, from 74.8% in First Nine Months 1997 to 72.2% in First
Nine Months 1998. This improvement was caused by a shift in the Company's sales
mix toward the higher margin standard cranes and aftermarket products and away
from engineered cranes.
Selling, general and administrative expenses increased $2.9 million or 7.0% to
$44.1 million in First Nine Months 1998 from $41.2 million in First Nine Months
1997. The most significant cause of the increase was the fact that only five
months of selling, general and administrative expenses related to the Ohio DSC
(acquired in February 1997) were recorded in First Nine Months 1997. Other
causes for the increase were unabsorbed engineering costs due to lower
engineered crane sales, additional costs associated with the separation from HII
and general cost increases. Additionally, management fees of approximately $0.3
million are included in 1998 selling, general and administrative expenses for
periods subsequent to the Recapitalization.
As a result of the Recapitalization, the Company experienced a series of
non-recurring employee benefit costs. These costs included severance costs
associated with restructuring the Company's United Kingdom manufacturing
operation and incentives to certain members of management. While the cost of
these incentive payments appear on the Company's income statements, HII, the
Company's former parent, not the Company, is responsible for paying these
incentives. The severance costs were approximately $0.7 million and the
incentives to management were approximately $1.2 million.
24
<PAGE>
Approximately $8.9 million in interest expense was recorded in First Nine Months
1998 resulting from the issuance of debt in connection with the
Recapitalization, including $0.7 million of amortization of related financing
costs. The Company paid $1.4 million in interest and commitment fees during the
First Nine Months 1998.
The provision for income taxes was approximately 40% of income before income
taxes and minority interest for both First Nine Months 1998 and First Nine
Months 1997.
Net income decreased $9.9 million, or 69.7% to $4.3 million in First Nine Months
1998 from $14.2 million in First Nine Months 1997. Net income represented 1.8%
of net sales in First Nine Months 1998 compared to 5.5% of net sales in First
Nine Months 1997.
LIQUIDITY AND CAPITAL RESOURCES
The majority of the Company's sales of products and services are recorded as
products are shipped or services are rendered. Revenue on certain long-term
contracts is recorded using the percentage-of-completion method. Net cash flow
from operations is affected by the volume of, and timing of payments under,
percentage-of-completion long-term contracts.
Net cash flow provided by operating activities was $1.6 million for First
Nine Months 1998 compared to $12.4 million for First Nine Months 1997. A
significant cause of the decrease was due to lower levels of funding provided
by HII and its affiliates related to the acquisition of the Ohio DSC in
February 1997. Other causes include lower net income, offset by increases in
1998 in non-cash expenses such as depreciation, amortization of financing
costs and divestiture bonuses, and changes in cash flows related to the
payment of vendor invoices, accrual of interest on indebtedness and the
receipt of customer deposits and accounts receivable.
Net cash used for investment and other transactions for First Nine Months 1998
and 1997 was $8.6 million and $13.8 million, respectively. The decrease was
primarily due to a lower level of acquisition expenditures, in 1998, offset in
part, by the receipt of an insurance claim in 1997 due to an earlier fire. The
Company currently anticipates that fiscal 1998 capital expenditure requirements
for the maintenance and improvement of existing operations and for the
implementation of systems projects will be approximately $5.0 million.
Net cash provided by financing activities was $9.0 million in First Nine Months
1998, compared to net cash used for financing activities of $0.8 million in
First Nine Months 1997. The increase was primarily due to financing activities
associated with the Recapitalization.
As part of the Recapitalization, MMH sold $200.0 million aggregate principal
amount of its Senior Notes. Interest accrues on the Senior Notes from March 30,
1998, the date of issuance of the Senior Notes, and will be payable
semi-annually on each April 1 and October 1, commencing October 1, 1998. The
Senior Notes will mature on April 1, 2008.
The Company also entered into the New Credit Facility on the date of the
Recapitalization Closing, which includes $55.0 million of term loans, a
revolving credit facility (the "Revolving Credit Facility") and an
acquisition facility (the "Acquisition Facility"). The Revolving Credit
Facility provides the Company with up to $70.0 million of availability (of
which $15.0 million is required under the indenture governing the Senior
Notes (the "Note Indenture") to be reserved for issuance of letters of
credit) until the fifth anniversary of the Recapitalization Closing for
working capital, acquisitions and other corporate purposes, subject to
compliance with certain conditions, including a borrowing base test. Up to
$20.0 million of the Revolving Credit Facility (of which $15.0 million will
not be subject to a borrowing base) is available for the issuance of
documentary and standby letters of credit. At July 31, 1998, there were
approximately $6.9 million of borrowings outstanding and $3.2 million of
letters of credit and surety bonds issued under the Revolving Credit
Facility. The Acquisition Facility permits the Company to borrow up to $30.0
million until the third anniversary of the Recapitalization Closing (and to
repay the same in installments prior to the seventh anniversary of the
Recapitalization Closing) to finance acquisitions, subject to compliance with
certain conditions. Term Loan A ($20.0 million) is payable in 20 quarterly
installments, which commenced on June 30, 1998, and Term Loan B ($35.0
million) is payable in 28 quarterly installments, which commenced on June 30,
1998.
Aggregate yearly term loan principal payments under the New Credit Facility are
as follows: (i) $675,000 in 1998; (ii) $2,100,000 in 1999; (iii) $3,600,000 in
2000; (iv) $5,100,000 in 2001; (v) $6,600,000 in 2002; (vi) $11,988,000 in 2003;
(vii) $16,625,000 in 2004; and (viii) $8,313,000 in 2005. Historically, the
Company's interest expense has
25
<PAGE>
not been material. On a pro forma basis, assuming the Recapitalization had
occurred on November 1, 1996, the Company's cash interest expense for 1997 would
have been $24,841,000.
Borrowings under the New Credit Facility bear interest at various interest
rates based on certain floating reference rates (the "Floating Rate"). To
limit the effect of increases in the interest rates under the New Credit
Facility, the Company has entered into an interest rate swap arrangement. The
effect of this agreement, which expires on March 31, 2001, is to limit the
interest rate exposure on specified amounts up to $55.0 million borrowed
under the New Credit Facility to a fixed LIBOR rate of 5.875% (the "Fixed
Rate") plus 2.25% or 2.75%, as applicable. As a result, the interest rates
applicable to Term Loan A and Term Loan B at July 31, 1998 have been fixed at
8.125% and 8.625%, respectively. The differential between the Floating Rate
and the Fixed Rate is accrued as interest rates change and is recorded as
interest expense. Payments under the swap are made quarterly. At July 31,
1998, the interest rate on borrowings outstanding under the Revolving Credit
Facility was 7.9%.
Borrowings under the New Credit Facility are (i) secured by substantially all of
the present and future assets of MMH and its subsidiaries located in the United
States and the United Kingdom, certain of MMH's subsidiaries' present and future
assets located in Canada and by a pledge of substantially all of the issued and
outstanding shares of capital stock of MMH and its current and future
subsidiaries and (ii) guaranteed by Holdings and substantially all of MMH's
subsidiaries.
As of July 31, 1998, Holdings and the Company had an aggregate of $264.5 million
of indebtedness outstanding, including $200.0 million principal amount of the
Senior Notes issued by MMH and $61.6 million of borrowings under the New Credit
Facility. The Company's known debt service and lease commitments for the next
twelve months amounts to approximately $31.1 million, consisting of $1.7 million
in principal payments, $25.3 million in interest payments and $4.1 million in
lease payments.
At July 31, 1998, MMH had, subject to compliance with certain conditions,
approximately $59.3 million of availability (of which $15.0 million is required
under the Note Indenture to be reserved for issuance of letters of credit) under
the Revolving Credit Facility. Management believes that cash flow from
operations, together with borrowings under the Revolving Credit Facility, will
be sufficient to meet MMH's anticipated cash requirements for interest and
principal payments, working capital, the payments to be made to Holdings
described below and capital expenditures for the next twelve months and
thereafter. The Company also expects that expansion and future acquisitions will
be financed from funds generated from operations and borrowings under the
Revolving Credit Facility and the Acquisition Facility.
Holdings primary cash needs are for administrative expenses and for the payment
of income taxes of Holdings and its affiliates related to the MHE Business.
Holdings is a holding company that conducts all of its operations through its
subsidiaries. Consequently, Holdings' ability to meet its cash needs depends
upon receiving dividends, loans, advances or other payments from its
subsidiaries. The New Credit Facility and the Note Indenture generally restrict
the ability of Holdings' subsidiaries to transfer funds to Holdings, other than
for administrative fees and expenses (subject to a general limit) and other than
for the payment of income taxes. Under the terms of the Note Indenture, the
Company is generally restricted from paying dividends or making other restricted
payments to Holdings unless, among other things, the ratio of the Company's
EBITDA (defined as operating income before depreciation, amortization, the HII
Management Fee, non-recurring employee benefit costs and charges related to
certain depreciation expenses for HarnCo assets) to Consolidated Interest
Expense (as defined in the Note Indenture) for the four most recent consecutive
fiscal quarters is at least 2 to 1. Moreover, the terms of the Series A Senior
Preferred Stock, as well as the Series B Junior Preferred Stock and the Series C
Junior Voting Preferred Stock, restrict the ability of Holdings and its
subsidiaries to incur additional indebtedness. As a result of these
restrictions, among others, there can be no assurance that Holdings will have
available to it sufficient cash resources to pay cash dividends on the Series A
Senior Preferred Stock (or on the Series B Junior Preferred Stock and Series C
Junior Voting Preferred Stock) commencing October 1, 2003. In addition, all
issues of Holdings' preferred stock are mandatorily redeemable. The inability of
Holdings' subsidiaries, or any limitation on such ability, to pay dividends or
make other payments to Holdings could have a material adverse effect on
Holdings' ability to meet its cash requirements.
MMH has no operations or assets other than an investment in its operating
subsidiaries. Accordingly, MMH's ability to service its debt also depends
upon receiving dividends, loans, advances or other payments from its
subsidiaries. There are no current material restrictions on the ability of
its subsidiaries to pay dividends or otherwise make payments to MMH. In
addition, MMH anticipates that there will not be any material economic
restrictions or adverse tax effects with respect to MMH's ability to
repatriate foreign assets. There can be no assurance, however, that such
limitations will not exist in the future. Although the New Credit Facility
and the Note
26
<PAGE>
Indenture impose certain limitations on the ability of subsidiaries of MMH to
enter into agreements restricting their ability to declare dividends or make
distributions or advances to MMH, such limitations are subject to a number of
qualifications. The inability of MMH's subsidiaries, or any limitation on
such ability, to pay dividends or make other payments to MMH could have a
material adverse effect on MMH's ability to meet its cash requirements.
The Company's products are sold in over 50 countries around the world. Although
revenues of the Company are generated in foreign currencies, the vast majority
of both sales and associated costs are in United States dollars, Pounds Sterling
and Canadian Dollars. The Company may, from time to time, hedge specifically
identified committed cash flows in foreign currencies using forward currency
sale or purchase contracts. Such foreign currency contracts historically have
not been material in amount.
FUTURE ACCOUNTING CHANGES
The Financial Accounting Standards Board (FASB) has issued Statement of
Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and
Hedging Activities" which is effective for periods beginning after June 15,
1999. Due to the Company's current limited use of derivative instruments, the
adoption of this statement is not expected to have a material effect on the
Company's financial condition or results of operations. In June 1997, the FASB
issued SFAS No. 130 "Reporting Comprehensive Income" which is effective for
fiscal years beginning after December 15, 1997. The adoption of this statement
is not expected to have a material effect on the Company's financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," was also issued by the FASB and is effective for fiscal years
beginning after December 15, 1997. This statement establishes standards for the
way that business enterprises report information, financial and descriptive,
about operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also, establishes standards for
related disclosures about products and services, geographic areas and major
customers. Management is addressing the applicability of this statement to its
financial statements.
YEAR 2000 COMPLIANCE
The Year 2000 issue arises as a result of computer programs having been written,
and systems having been designed, using two digits rather than four to define
the applicable year. Consequently, such software has the potential to recognize
a date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities. The Company is
currently in the process of identifying those programs and systems that are not
Year 2000 compliant. At this time, the Company does not anticipate that the
costs to ensure that its systems will be Year 2000 compliant will have a
material adverse effect on its business, financial condition and results of
operations. Because the Company has not yet completed the analysis of its
software applications, however, there can be no assurance that at the year 2000
such systems will in fact be compliant. If the systems of the Company or other
companies on whose services the Company depends, or with whom the Company's
systems interface are not Year 2000 compliant, there could be a material adverse
effect on the Company's financial condition or results of operations.
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Quarterly Report on Form 10-Q are
"forward-looking statements" intended to qualify for the safe harbor from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because the
context of the statement will include such words as the Company "believes,"
"anticipates" or "expects," or words of similar import. Similarly, statements
that describe the Company's future plans, objectives or goals are also
forward-looking statements. The forward-looking statements are subject to
certain risks and uncertainties which could cause actual results to differ
materially from those currently anticipated. Such risks and uncertainties
include competitive conditions in the markets served by the Company, changes in
the Company's plans regarding capital expenditures, general economic conditions,
unanticipated events related to solving the Year 2000 issue and interest and
foreign currency fluctuations. Shareholders, note holders, potential investors
and other readers are urged to consider these factors carefully in evaluating
the forward-looking statements and are cautioned not to place undue reliance on
such forward-looking statements.
27
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the subsidiaries of MMH are involved in routine
litigation incident to their operations. MMH and Holdings believe that any
pending or threatened litigation will not have a material adverse effect on
their consolidated results of operations and financial condition.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
The Registrant filed no reports on Form 8-K during the quarter ended
July 31, 1998.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
MORRIS MATERIAL HANDLING, INC.
(Registrant)
Date: September 14, 1998 /s/ David D. Smith
------------------------------
David D. Smith
Vice President and
Chief Financial Officer
(Principal Financial Officer)
MMH HOLDINGS, INC.
(Registrant)
Date: September 14, 1998 /s/ David D. Smith
------------------------------
David D. Smith
Vice President and
Chief Financial Officer
(Principal Financial Officer)
29
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description
- ----------- -------------------
<S> <C>
27.1 Financial Data Schedule
27.2 Financial Data Schedule
</TABLE>
30
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
INFORMATION FOR MMH HOLDINGS, INC. AND IS QUALIFIED IN ITS ENTIRETY TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001060951
<NAME> MORRIS MATERIAL HANDLING, INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> OCT-31-1998 OCT-31-1998
<PERIOD-START> NOV-01-1997 MAY-01-1998
<PERIOD-END> JUL-31-1998 JUL-31-1998
<CASH> 3,582 3,582
<SECURITIES> 0 0
<RECEIVABLES> 78,489 78,489
<ALLOWANCES> (1,098) (1,098)
<INVENTORY> 38,435 38,435
<CURRENT-ASSETS> 4,666 4,666
<PP&E> 64,477 64,477
<DEPRECIATION> (25,236) (25,236)
<TOTAL-ASSETS> 297,145 297,145
<CURRENT-LIABILITIES> 70,574 70,574
<BONDS> 254,590 254,590
92,368 92,368
0 0
<COMMON> 0 0
<OTHER-SE> (124,468) (124,468)
<TOTAL-LIABILITY-AND-EQUITY> 297,145 297,145
<SALES> 231,675 74,426
<TOTAL-REVENUES> 232,792 74,817
<CGS> 167,324 52,152
<TOTAL-COSTS> 44,096 14,582
<OTHER-EXPENSES> 3,061<F1> 0<F2>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (11,164) (7,013)
<INCOME-PRETAX> 7,181 1,066
<INCOME-TAX> (2,896) (450)
<INCOME-CONTINUING> 4,285 616
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,285 616
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<FN>
<F1>AS A RESULT OF THE RECAPITALIZATION, THE COMPANY EXPERIENCED A SERIES OF
NON-RECURRING EMPLOYEE BENEFIT COSTS. THESE COSTS INCLUDED SEVERENCE COSTS
ASSOCIATED WITH RESTRUCTURING THE COMPANY'S UNITED KINGDOM MANUFACTURING
OPERATION AND INCENTIVES TO CERTAIN MEMBERS OF MANAGEMENT. THE COMPANY'S FORMER
PARENT, NOT THE COMPANY, IS RESPONSIBLE FOR MAKING THESE INCENTIVE PAYMENTS.
THE SEVERANCE COSTS WERE APPROXIMATELY $0.7 MILLION AND THE INCENTIVES TO
MANAGEMENT WERE APPROXIMATELY $1.2 MILLION.
PARENT MANAGEMENT FEES ALLOCATED BY HII (PRIOR TO THE RECAPITALIZATION) WHICH
REPRESENTED AN ALLOCATION OF HII'S CORPORATE EXPENSES WERE $1.2 MILLION AND
$1.4 MILLION FOR THE FIRST NINE MONTHS 1998 AND FIRST NINE MONTHS 1997,
RESPECTIVELY.
<F2>PARENT MANAGEMENT FEES ALLOCATED BY HII (PRIOR TO THE RECAPITALIZATION)
WHICH REPRESENTED AN ALLOCATION OF HII'S CORPORATE EXPENSES WERE $0.0 MILLION
AND $0.7 FOR THIRD QUARTER 1998 AND THIRD QUARTER 1997, RESPECTIVELY.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
INFORMATION FOR MORRIS MATERIAL HANDLING, INC. AND IS QUALIFIED IN ITS ENTIRETY
TO SUCH FINANCIAL STATEMENT.
</LEGEND>
<CIK> 0001060948
<NAME> MMH HOLDINGS, INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> OCT-31-1998 OCT-31-1998
<PERIOD-START> NOV-01-1997 MAY-01-1998
<PERIOD-END> JUL-31-1998 JUL-31-1998
<CASH> 3,582 3,582
<SECURITIES> 0 0
<RECEIVABLES> 78,489 78,489
<ALLOWANCES> (1,098) (1,098)
<INVENTORY> 38,435 38,435
<CURRENT-ASSETS> 4,666 4,666
<PP&E> 64,477 64,477
<DEPRECIATION> (25,236) (25,236)
<TOTAL-ASSETS> 297,145 297,145
<CURRENT-LIABILITIES> 70,574 70,574
<BONDS> 254,590 254,590
0 0
0 0
<COMMON> 0 0
<OTHER-SE> (32,100) (32,100)
<TOTAL-LIABILITY-AND-EQUITY> 297,145 297,145
<SALES> 231,675 74,426
<TOTAL-REVENUES> 232,792 74,817
<CGS> 167,324 52,152
<TOTAL-COSTS> 44,096 14,582
<OTHER-EXPENSES> 3,061<F1> 0<F2>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (11,164) (7,013)
<INCOME-PRETAX> 7,181 1,066
<INCOME-TAX> (2,896) (450)
<INCOME-CONTINUING> 4,285 616
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,285 616
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<FN>
<F1>AS A RESULT OF THE RECAPITALIZATION, THE COMPANY EXPERIENCED A SERIES OF
NON-RECURRING EMPLOYEE BENEFIT COSTS. THESE COSTS INCLUDED SEVERANCE COSTS
ASSOCIATED WITH RESTRUCTURING THE COMPANY'S UNITED KINGDOM MANUFACTURING
OPERATION AND INCENTIVES TO CERTAIN MEMBERS OF MANAGEMENT. THE COMPANY'S FORMER
PARENT, NOT THE COMPANY, IS RESPONSIBLE FOR MAKING THESE INCENTIVE PAYMENTS.
THE SEVERANCE COSTS WERE APPROXIMATELY $0.7 MILLION AND THE INCENTIVES TO
MANAGEMENT WERE APPROXIMATELY $1.2 MILLION.
PARENT MANAGEMENT FEES ALLOCATED BY HII (PRIOR TO THE RECAPITALIZATION) WHICH
REPRESENTED AN ALLOCATION OF HII'S CORPORATE EXPENSES WERE $1.2 MILLION AND
$1.4 MILLION FOR THE FIRST NINE MONTHS 1998 AND FIRST NINE MONTHS 1997,
RESPECTIVELY.
<F2>PARENT MANAGEMENT FEES ALLOCATED BY HII (PRIOR TO THE RECAPITALIZATION) WHICH
REPRESENTED AN ALLOCATION OF HII'S CORPORATE EXPENSES WERE $0.0 MILLION AND
$0.7 FOR THE THIRD QUARTER 1998 AND THIRD QUARTER 1997, RESPECTIVELY.
</FN>
</TABLE>
