SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 20, 1994
CLARK EQUIPMENT COMPANY
(Exact name of registrant as specified in its charter)
Delaware 1-5646 38-0425350
(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification Number)
100 North Michigan Street
P. O. Box 7008
South Bend, Indiana
(Address of principal 46634
executive offices) (Zip Code)
Registrant's telephone number (219) 239-0100
including area code
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ITEM 5. OTHER EVENTS
On April 20, 1994, Registrant issued a press release which announced that
Registrant had signed a definitive agreement to acquire Blaw-Knox
Construction Equipment Corporation, a leading producer of asphalt road-
paving equipment, from White Consolidated Industries. A copy of this
press release is attached as Exhibit (99)(a) and incorporated in this Item
by reference. Additional information regarding Blaw-Knox Construction
Equipment Corporation is attached as Exhibit (99)(b) and incorporated in
this Item by reference. Exhibits (99)(a) and (99)(b) contain certain
forward-looking statements about Registrant as defined in paragraph (c) of
Rule 3b-6, "Liability for Certain Statements by Issuers" issued pursuant
to the Securities Exchange Act of 1934. The forward-looking statements of
Registrant published in the press release are reaffirmed hereby.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
Exhibit (99)(a) - Registrant's press release regarding its acquisition of
Blaw-Knox Construction Equipment Corporation issued April 20, 1994.
Exhibit (99)(b) - Additional information regarding Blaw-Knox Construction
Equipment Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CLARK EQUIPMENT COMPANY
/s/ John J. Moran, Jr.
John J. Moran, Jr.
Assistant Secretary
Date: April 20, 1994
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EXHIBIT (99)(a)
Clark Equipment Company
100 North Michigan St.
P.O. Box 7008
South Bend, Indiana 46634
NEWS RELEASE
Contact: Joe Fimbianti Release Date: Immediate
219-239-0176
CLARK TO ACQUIRE LEADING ROAD PAVER COMPANY
SOUTH BEND, INDIANA, April 20, 1994 -- Clark Equipment Company (NYSE: CKL)
today announced that it had signed a definitive agreement to acquire Blaw-
Knox Construction Equipment Corporation, a leading producer of asphalt
road-paving equipment, from White Consolidated Industries, a wholly-owned
subsidiary of AB Electrolux of Sweden. The aggregate purchase price will
be approximately $144.0 million. The acquisition is expected to slightly
increase Clark's reported earnings in 1994 after all acquisition costs and
goodwill.
Blaw-Knox is headquartered in Mattoon, Illinois, and has two plants, 700
employees, and 239 dealer outlets worldwide. Consolidated sales for 1993
were $87.3 million, with pre-tax operating earnings at approximately 19
percent of sales.
In announcing the acquisition, Mr. Leo J. McKernan, Clark Chairman, said,
"We believe that Blaw-Knox is an excellent company which should benefit
from the continued actions of the state and federal governments to repair
and rebuild the transportation infrastructure of the United States. Blaw-
Knox is one of the best known names in the paving industry, worldwide. It
has a market share in the United States above 50 percent and has been
consistently profitable. Blaw-Knox has a reputation for excellent product
durability and technology and has the finest distributor network in the
industry. This business is similar to Clark's other end-product businesses
in the manufacturing, distribution, and the financial merchandising of its
products. Clark believes it can add substantial value in the future."
The transaction is subject to normal U.S. antitrust review and the
approval of Clark's Board of Directors.
Clark Equipment Company's business is the design, manufacture, and sale of
skid-steer loaders, construction machinery, transmissions for on-highway
vehicles, and axles and transmissions for off-highway equipment.
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EXHIBIT (99)(b)
BLAW-KNOX CONSTRUCTION EQUIPMENT CORPORATION
Blaw-Knox is North America's leading producer of asphalt paving machinery,
related equipment, and parts, with a market share exceeding 50 percent.
The company enjoys a strong market position in selected markets in Europe,
the Middle East and the Far East. The company employs 700 people
worldwide and is headquartered in Mattoon, Illinois. Major production
facilities are in Mattoon and Rochester, England. Consolidated sales for
1993 were $87.3 million, with operating earnings (EBIT) of $16.3 million.
Currently, Blaw-Knox is the only manufacturer in the asphalt paving
industry that relies on paving equipment as its sole revenue source. This
singular focus provides in-depth understanding of its markets and paver
requirements. Blaw-Knox competitive advantage derives from its wide
product range, excellent product quality and durability, dealer network,
and extensive product support both in training of equipment operators and
maintenance personnel.
End Markets and Customers
It is estimated that over 90 percent of the paved roads in the United
States are surfaced in asphalt. Its estimated that at least 80 percent
are asphalt based, and the remaining roads are concrete based resurfaced
in asphalt.
The primary customers of asphalt paving machinery are contractors who
serve two primary markets:
- Public work projects (highways and airports) -- 65% to 70%
- Commercial construction (parking lots and mall access) -- 30% to
35%.
- - Public Works. The public spending segment is approximately twice as
large as the commercial segment and is beginning to benefit from
increased state and federal spending to improve the conditions of
roadways in the U.S. The most important recent legislation is the
Intermodal Surface Transportation Efficiency Act, dubbed ISTEA,
passed by Congress in December, 1991. This act designated $121
billion in highway spending from 1992 to 1997.
- - Commercial Construction. Commercial asphalt paving is dependent on
new commercial real estate development. Recently, depressed
conditions in the real estate market have adversely affected paver
industry shipments. However, maintenance work on existing
installations have helped stabilize paver demand. Historically,
less than one-third of Blaw-Knox sales have been to the commercial
market.
Market Dynamics
Currently the road building industry is changing in two important areas:
- - Customer emphasis on increased product sophistication. The use of
synthetic materials and changes in paving techniques and road
materials demand constant product development by manufacturers as
customers require more road surface durability and smoothness. One
current, key product development area relates to more accurate and
adaptable paver control systems. Paving companies, like Blaw-Knox,
with strong technical knowledge and leadership in product development
are benefiting from this trend.
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- - Customer emphasis on increased machine reliability and better
service. Increasingly, road paving contracts are tied to specific
performance dates with financial incentives serving as both a
"carrot" and a "stick". Consequently, contractors are demanding more
product reliability and after-sales support from paving
manufacturers. In addition, the increasing sophistication of the
machines requires more training for operators and maintenance
personnel. A strong, customer-oriented and well-trained dealer
network is critical to satisfying the new customer service
requirements.
Products/Technology
Asphalt pavers/finishers are used to apply paving materials to a prepared
road base as one of the final steps in road construction. In addition to
graded aggregate materials for the actual driving surface, these machines
can be used to apply base and sub-base layers made of various other
materials. Blaw-Knox products are focused at the higher end of the paver
market. It offers one of the broadest product ranges in the industry and
has a reputation for exceptionally high quality, durability and paving
performance. Its machines are often regarded as the "Cadillac" of the
industry and excel at meeting the most stringent job specifications.
Historically, the company has placed substantial emphasis on product
development and is the leader in the new, more accurate control systems,
such as microprocessor-based, road profile controls and ultrasonic
material controls. Its emphasis on technical enhancements puts the
company in a leading position to benefit from increased product
sophistication required by customers.
The purchasing decisions of paving contractors are primarily driven by
machine quality and durability. Paving machines are subject to extreme
environmental conditions on a regular basis. Since time lost due to
machine breakdown translates into higher cost and lower revenue, paving
contractors primarily focus on higher quality machines with lower
maintenance costs rather than price. Contractors will pay for extra
quality and durability rather than risk the downtime and expenses with an
inferior machine.
Distribution/Service and Training
Machines are typically sold through a dealer network that both distributes
and serves the products and sells spare parts. Dealers selling asphalt
pavers serve a distinct customer base comprised of service intensive
contractors. The dealer/customer relationship is critical and takes years
to build.
Blaw-Knox has one of the strongest and largest independent dealer networks
handling asphalt paving equipment in North America. The company has 57
primary dealers organized in nine regions, representing a total of 155
outlets that cover virtually all of the U.S. and Canada. The company also
has a global presence and 84 outlets internationally, covering Europe, the
Middle East, the Far East and South America.
Since the costs of downtime are relatively high in the applications in
which asphalt paving products are used, the product knowledge and support
that Blaw-Knox and its dealers provide to contractors is real value-added
and is an important competitive advantage in retaining existing customers
and in generating new business.
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Additionally, since it takes several weeks to retrain operators and one or
more full seasons to retrain maintenance personnel, customers have an
added incentive not to switch products. Blaw-Knox has reinforced this
competitive advantage by giving training programs to contractor personnel
at its field-training and factory schools. These schools have trained
over 90,000 operators and maintenance personnel since being established in
the 1960's. Blaw-Knox currently trains approximately 4500 dealers and
operators yearly in the U.S. and approximately 200 operators and
maintenance personnel yearly in the U.K. The training schools are also
used by Blaw-Knox to obtain feedback from operators to modify and improve
product. Because of the high cost of downtime and product switching,
customers tend to be very conservative in their buying decisions and are
reluctant to switch brands.
Market Share and Profits
Blaw-Knox has a market share above 50 percent of the North American
market, which is about twice that of the next competitor. Other major
North American competitors include: Barber-Greene (owned by
Caterpillar), Cedarapids, and Ingersoll-Rand. There is no meaningful
foreign competition in the U.S. market. Since Blaw-Knox has had a
dominant market share (above 50 percent) for more than 20 years, there is
a significant field population requiring service and repair parts.
Asphalt paving machines have hot, highly abrasive aggregate flowing over
all critical areas, and they require frequent maintenance. Parts sales
represent a substantial source of income, which is relatively stable
regardless of economic cycles. The profitable parts volume and the
loyalty of end users have allowed Blaw-Knox to remain consistently
profitable even in severe economic downturns. Even with relatively
sluggish conditions in 1993, the company had an operating margin
(EBIT/sales) of 18.7 percent.
Blaw-Knox Financial Performance
($ million)
1993 1992 1991
Sales $87.3 $74.9 $58.0
EBIT $16.3 $ 6.8 $ 5.0
Operating Margin 18.7% 9.1% 8.7%
International
Blaw-Knox has a ten percent share of the European market and a presence in
the Far East, the Middle East, Africa, and South America. It has a major
market presence in Egypt, Mexico, Taiwan, Korea, New Zealand and Hong
Kong. While Blaw-Knox international market share is smaller than in the
U.S., it is still one of the major competitors in the fragmented European
market. Its market position, together with the opportunities in growth
economies throughout the world, present significant international
expansion potential.
