SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended Commission File Number: 1-5646
June 30, 1994
CLARK EQUIPMENT COMPANY
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of 38-0425350
incorporation or organization) (IRS Employer Identification No.)
100 North Michigan Street 46634
P.O. Box 7008 (Zip Code)
South Bend, Indiana
(Address of Principal
Executive Offices)
Registrant's telephone number,
including area code: (219) 239-0100
Indicate by a check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 17,396,906 shares of
$7.50 Par Value Common Stock were outstanding at the close of business on
August 8, 1994.
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Total Number of Pages: 27
Exhibit Index at Page: 21
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PART I FINANCIAL INFORMATION
The following items are attached to this report:
For Clark Equipment Company and Consolidated Subsidiaries:
Statement of Income and Retained Earnings
Balance Sheet
Statement of Cash Flows
Management's Discussion and Analysis of Financial Condition
and Results of Operations
For 50 Percent Owned Company
Selected Financial Data - VME Group, N.V.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Burkeen et al. v Clark Equipment Company
On March 26, 1993, James R. Burkeen, Betty F. Burkeen and
Burkeen Manufacturing Company filed a Complaint in the
United States District Court for the Northern District of
Mississippi. The Complaint alleged fraud, negligent
misrepresentation, breach of contract, breach of duty of
good faith and fair dealing, breach of warranty and
tortious interference with contract and business relations
in connection with Registrant's sale of its trencher
equipment business to Burkeen Manufacturing Company in
December of 1991. Burkeen Manufacturing Company sought
compensatory damages of $40,000,000, James R. Burkeen and
Betty F. Burkeen sought compensatory damages of $5,000,000
and all plaintiffs sought punitive damages of $90,000,000.
The Registrant filed an Answer denying liability and a
Counterclaim seeking recovery of certain amounts owed by
Burkeen Manufacturing Company in connection with the sale.
In June of 1994, this lawsuit was settled on terms which
are not material to Registrant's financial condition or
results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
The Registrant held its Annual Meeting of Stockholders on
May 10, 1994. At this meeting, the following matters were
submitted to a vote of the stockholders: (1) the election
of directors; (2) the ratification of the appointment of
Price Waterhouse as the Registrant's independent
accountants for the fiscal year ended December 31, 1994;
(3) the approval of the Clark Equipment Company 1994 Long
Term Incentive Plan and (4) the approval of the Clark
Equipment Company Stock Acquisition Plan for Non-Employee
Directors. Set forth below is a summary of the results of
the stockholders' vote on these items:
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Number of
Number of Votes Against Absten- Broker
Votes For or Withheld tions Non-Votes
(1) Election of Directors
James C. Chapman 14,662,821 94,074 0 0
Donald N. Frey 14,649,358 107,537 0 0
James A.D. Geier 14,662,352 94,543 0 0
Gaynor N. Kelley 14,665,730 91,165 0 0
Leo J. McKernan 14,653,653 103,242 0 0
Ray B. Mundt 14,665,296 91,599 0 0
Frank M. Sims 14,662,268 94,627 0 0
(2) Ratification of 14,656,269 36,944 63,682 0
Appointment of
Price Waterhouse
(3) Approval of Clark 10,489,294 2,377,838 492,357 1,397,406
Equipment Company
1994 Long-Term
Incentive Plan
(4) Approval of Clark 11,863,530 991,438 504,521 1,397,406
Equipment Company
Stock Acquisition
Plan for Non-
Employee Directors
Item 5. Other Information
Attached hereto as Exhibit (99) is a Computation of
Registrant's Ratio of Earnings to Fixed Charges for the six
months ended June 30, 1994.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(See attached Exhibit List and Index)
(b) Reports on Form 8-K:
1. The Registrant filed a Form 8-K dated April 20, 1994
reporting on Item 5, OTHER EVENTS, and Item 7,
FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
2. The Registrant filed a Form 8-K dated April 25, 1994
reporting on Item 5, OTHER EVENTS, and Item 7,
FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS. This Form 8-K included Registrant's
income statement and balance sheet for the period
ended March 31, 1994.
3. The Registrant filed a Form 8-K dated May 16, 1994
reporting on Item 5, OTHER EVENTS, and Item 7,
FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
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4. The Registrant filed a Form 8-K dated May 27, 1994
reporting on Item 2, ACQUISITION OR DISPOSITION OF
ASSETS, and Item 7, FINANCIAL STATEMENTS AND EXHIBITS.
5. The Registrant filed a Form 8-K dated May 27, 1994
reporting on Item 2, ACQUISITION OR DISPOSITION OF
ASSETS, and Item 7, FINANCIAL STATEMENTS AND EXHIBITS.
This Form 8-K included the following financial
statements: (a) pro forma income statements of the
Registrant for the years ended December 31, 1993, 1992
and 1991 which reflect the deconsolidation of Clark
Automotive Products Corporation ("CAPCO") and (b) a
pro forma balance sheet of Registrant as of March 31,
1994 which reflects the deconsolidation of CAPCO.
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***********
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 15, 1994 By: /s/ B. D. Henely
B. D. Henely
Vice President, General Counsel
and Secretary
(Duly Authorized Officer)
Date: August 15, 1994 By: /s/ W. N. Harper
W. N. Harper
Vice President and Controller
(Principal Accounting Officer)
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CLARK EQUIPMENT COMPANY AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF INCOME AND RETAINED EARNINGS (UNAUDITED)
<CAPTION>
For the Period Ended June 30,
(Amounts in Thousands, except per share data) Second Quarter Six Months
1994 1993* 1994 1993*
<S> <C> <C> <C> <C>
Net sales....................................$ 242,525 $ 187,333 $ 447,688 $ 350,360
Operating costs and expenses:
Cost of goods sold......................... 190,035 147,038 352,122 276,261
Selling, general and
administrative expenses................. 28,993 25,111 54,540 47,321
219,028 172,149 406,662 323,582
Operating income.............................. 23,497 15,184 41,026 26,778
Other income, net............................. 2,845 2,748 9,861 5,169
Interest expense.............................. (4,661) (5,693) (10,231) (10,592)
Pre-tax income from consolidated operations... 21,681 12,239 40,656 21,355
Provision for income taxes.................... 7,417 3,886 14,076 5,993
Income from consolidated operations........... 14,264 8,353 26,580 15,362
Equity in net income (loss)
of associated company...................... 15,488 888 28,637 (4,334)
Income from continuing operations............. 29,752 9,241 55,217 11,028
Discontinued operations:
Income (loss) from operations.............. (164) 1,558 1,275 2,375
Gain on sale............................... 32,884 0 32,884 0
Income from discontinued operations........... 32,720 1,558 34,159 2,375
Income before effect of
change in accounting principle............. 62,472 10,799 89,376 13,403
Effect of accounting change--income taxes..... - - - 6,150
Net income.................................... 62,472 10,799 89,376 19,553
Add: Income retained
at beginning of period.................. 119,612 53,551 92,708 44,869
Deduct: Excess cost of treasury shares issued over
the cost of certain employee benefits...... 0 4 0 76
Income retained at end of period.............$ 182,084 $ 64,346 $ 182,084 $ 64,346
Income per share:
From continuing operations................$ 1.71 $ .53 $ 3.17 $ .63
From discontinued operations............... 1.88 .09 1.96 .14
From effect of accounting change........... - - - .35
Net income................................$ 3.59 $ .62 $ 5.13 $ 1.12
Average number of shares...................... 17,399 17,438 17,424 17,418
Number of shares outstanding
at end of period........................... 17,394 17,368 17,394 17,368
<FN>
* Restated to reflect the deconsolidation of the automotive business.
See Notes to Financial Statements
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CLARK EQUIPMENT COMPANY AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
<CAPTION>
Amounts in Thousands
Jun. 30, Dec. 31,
1994 1993
ASSETS Unaudited Audited
<S> <C> <C>
Current Assets:
Cash, cash equivalents and short-term investments................$ 225,452 $ 235,828
Accounts and notes receivable.................................... 113,272 77,103
Accounts receivable from associated companies.................... 599 2,041
Refundable income taxes........................................... 0 3,543
Inventories:
Raw materials................................................. 36,685 32,212
Work-in-process and finished goods............................ 75,963 65,928
Manufacturing supplies........................................ 4,076 10,480
Total inventory........................................ 116,724 108,620
Deferred tax assets.............................................. 28,321 29,202
Other current assets............................................. 5,560 5,434
Total current assets................................... 489,928 461,771
Investments and advances ........................................ 164,271 122,106
Deferred tax assets - net........................................ 105,718 101,018
Property, plant and equipment - at cost.......................... 383,746 487,330
Less accumulated depreciation.................................... 206,286 285,406
Net property, plant and equipment...................... 177,460 201,924
Assets held for sale ............................................ 8,662 6,765
Goodwill......................................................... 169,338 67,461
Other assets..................................................... 33,219 40,890
$1,148,596 $1,001,935
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable....................................................$ 17,852 $ 22,512
Accounts payable and accruals.................................... 128,201 115,333
Accrued payrolls, social security and general taxes.............. 30,432 34,809
Accrued postretirement benefits - current........................ 20,412 19,560
Taxes on income.................................................. 12,078 4,139
Deferred income taxes............................................ 4,348 800
Current installments on long-term debt........................... 20,100 9,612
Total current liabilities.............................. 233,423 206,765
Long-term debt................................................... 194,657 204,770
Other non-current liabilities.................................... 95,474 74,686
Accrued postretirement benefits.................................. 239,921 233,239
Deferred income taxes............................................ 15,986 14,322
Total liabilities...................................... 779,461 733,782
Stockholders' Equity:
Preferred stock - authorized 3,000,000 shares at $1.00 par
value - none issued........................................... - -
Capital stock common - authorized 40,000,000 shares at
$7.50 par value - issued 19,194,684 shares and 19,194,334 shares
at June 30, 1994 and December 31, 1993, respectively.......... 143,960 143,958
Capital in excess of par value of stock.......................... 179,944 179,582
Retained earnings................................................ 182,084 92,708
Cumulative translation and other adjustments..................... (51,901) (67,083)
454,087 349,165
Less, common stock held in treasury, at cost - 1,800,410 shares
and 1,792,431 shares at June 30, 1994 and
December 31, 1993, respectively............................... (53,668) (49,728)
Less, unallocated LESOP shares purchased with debt -
1,009,155 shares at June 30, 1994 and December 31,
1993, respectively............................................ (31,284) (31,284)
Total stockholders' equity............................. 369,135 268,153
<FN> $1,148,596 $1,001,935
See Notes to Financial Statements
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CLARK EQUIPMENT COMPANY AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CASH FLOWS
<CAPTION>
Six months ended June 30
Amounts in Thousands
1994 1993
Unaudited Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income......................................................$ 89,376 $ 19,553
Adjustments to reconcile net income to net cash
provided by operating activities:
Effect of accounting changes............................... 0 (6,150)
Depreciation............................................... 17,881 18,789
Amortization of intangibles................................ 1,286 1,061
Net gain on sale of a business............................. (32,884) 0
Exchange (gain) loss....................................... 1,621 (1,921)
Employee benefit expense funded with treasury stock........ 1,351 403
Loss (earnings) of unconsolidated companies................ (28,637) 4,334
Increase in receivables and other current assets........... (30,852) (41,886)
Decrease in refundable income taxes........................ 3,543 0
Decrease (increase) in inventory........................... (5,915) 1,426
Decrease in net deferred tax assets........................ 274 681
Increase in payables and accruals.......................... 17,567 26,905
Increase in postretirement benefit accruals................ 3,198 1,251
Decrease (increase) in other non-current assets............ 9,141 (639)
Increase (decrease) in other long-term liabilities......... 8,420 (3,699)
Other...................................................... 167 30
Net cash provided by operating activities.................. 55,537 20,138
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of business (net of business' cash).......... 103,405 0
Cost of acquisition - net of cash acquired...................... (144,326) 0
Additions to properties......................................... (18,121) (10,252)
Sales of properties............................................. 446 421
Decrease (increase) in short-term investments................... 34,600 (40,600)
Decrease in investments and advances--associated companies...... 0 3,959
Net cash used in investing activities...................... (23,996) (46,472)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term borrowings............................... 26 90,597
Payments on long-term debt...................................... (849) (72,472)
Decrease in notes payable--current.............................. (6,484) (1,167)
Proceeds from sale of stock under option plans.................. 10 0
Other........................................................... 2,266 179
Net cash provided (used) in financing activities........... (5,031) 17,137
Effect of exchange rate changes on cash......................... (2,286) 1,536
Increase (decrease) in cash and cash equivalents................ 24,224 (7,661)
Cash and cash equivalents at beginning of year.................. 35,228 71,024
Cash and cash equivalents at end of period...................... 59,452 63,363
Short-term investments (cost approximates market)............... 166,000 161,500
Cash, cash equivalents and short-term investments...............$ 225,452 $ 224,863
<FN>
See Notes to Financial Statements
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CLARK EQUIPMENT COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
General Information
These financial statements have been prepared from the unaudited financial
records of the Registrant (also referred to herein as the "Company" or
"Clark"). The statements should be read in conjunction with the Company's
1993 Annual Report filed on Form 10-K. In the opinion of management, all
adjustments necessary for a fair statement of the results of operations
for the interim periods have been reflected.
Net income per share amounts are in dollars, based on the average number
of shares outstanding for the period, taking into account the dilutive
effect of common stock equivalents under the Registrant's stock option
plans. The number of shares used to compute net income per share for the
six month period ended June 30, 1994 and June 30, 1993, were 17,424,203
and 17,417,987, respectively. There were no dividends paid during the six
months ending June 30, 1994 or June 30, 1993.
7,738 shares of common stock were reserved for issuance pursuant to the
exercise of options under the 1985 Stock Option Plan on June 30, 1994.
Options for 7,738 shares were outstanding under the 1985 Stock Option Plan
on the same date.
Recent Developments
In the second quarter of 1994, the Company completed the sale of Clark
Automotive Products Corporation ("CAPCO") to the public through an initial
public offering. CAPCO was a business unit of Clark which manufactured
transmissions, primarily for on-highway applications for sale in Brazil
and North America. Clark sold approximately 91 percent of its interest in
CAPCO and received net proceeds of approximately $103 million. A gain of
approximately $33 million was realized on the sale. CAPCO has been
included in the financial statements as a discontinued operation for all
periods presented.
On May 13, 1994, the Company completed the purchase of Blaw-Knox
Construction Equipment Corporation ("Blaw-Knox") from White Consolidated
Industries ("WCI"). Blaw-Knox is a leading manufacturer of asphalt pavers
which are sold in North America and into other world markets. The
preliminary purchase price was approximately $144 million. The purchase
price is subject to final adjustment pursuant to the terms of the
Agreement of Purchase and Sale between WCI and Clark. The balance sheet
and the results of operations of Blaw-Knox are included in the
consolidated accounts of Clark subsequent to the acquisition date. If
Blaw-Knox had been consolidated with Clark from January 1, 1993, pro forma
year-to-date sales would have been $486.3 million in 1994 and $395.8
million in 1993. Pro forma second quarter sales would have been $254.3
million in 1994 and $209.8 million in 1993. The Blaw-Knox acquisition as
of an earlier date would not have materially affected Clark's net income
from continuing operations in either 1994 or 1993.
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Contingencies
The Company is self-insured with respect to product liability risk,
although insurance coverage is obtained for catastrophic losses. The
Company has pending approximately 78 claims, with respect to which
approximately 42 suits have been filed alleging damages for injuries or
deaths arising from accidents involving products manufactured by the
Company's continuing operations. In the aggregate, these claims could be
material to the Company. At June 30, 1994, the Company had reserves of
approximately $12 million related to product liability exposures.
The Company is involved in numerous other lawsuits arising out of the
ordinary conduct of its business. These lawsuits pertain to various
matters, including warranties, civil rights, safety, anti-trust, and other
issues. The ultimate results of these claims and proceedings at June 30,
1994 are subject to a high degree of estimation and cannot be determined
with complete precision. However, in the opinion of management, either
adequate provision for anticipated costs has been made through insurance
coverage or accruals, or the ultimate costs will not materially affect the
consolidated financial position of the Company.
The Company has given certain guarantees to third parties and has entered
into certain repurchase arrangements relating to product distribution and
product financing activities involving the Company's continuing
operations. As of June 30, 1994, guarantees are approximately $23 million
and repurchase arrangements relating to product financing by an
independent finance company approximate $67 million.
It is not practicable to determine the additional amount subject to
repurchase solely under dealer distribution agreements. Under the
repurchase arrangements, when dealer terminations do occur, a newly
selected dealer generally acquires the assets of the prior dealer and
assumes any related financial obligations. Accordingly, the risk of loss
to Clark is minimal, and historically Clark has incurred only immaterial
losses relating to these arrangements.
The Company is or may be liable for other matters, including contingencies
related to the sale of its forklift truck business, Clark Material
Handling Company ("CMHC") and environmental issues (see pages 15 - 16
"Management's Discussion and Analysis of Operations").
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General Overview:
Recent Developments
In the second quarter of 1994, the Company completed the sale of Clark
Automotive Products Corporation ("CAPCO") to the public through an initial
public offering. CAPCO was a business unit of Clark which manufactured
transmissions, primarily for on-highway applications for sale in Brazil
and North America. Clark sold approximately 91 percent of its interest in
CAPCO and received net proceeds of approximately $103 million. A gain of
approximately $33 million was realized on the sale. CAPCO has been
included in the financial statements as a discontinued operation for all
periods presented.
On May 13, 1994, the Company completed the purchase of Blaw-Knox
Construction Equipment Corporation ("Blaw-Knox") from White Consolidated
Industries ("WCI"). Blaw-Knox is a leading manufacturer of asphalt pavers
which are sold in North America and into other world markets. The
preliminary purchase price was approximately $144 million. The purchase
price is subject to final adjustment pursuant to the terms of the
Agreement of Purchase and Sale between WCI and Clark. The balance sheet
and the results of operations of Blaw-Knox are included in the
consolidated accounts of Clark subsequent to the acquisition date. If
Blaw-Knox had been consolidated with Clark from January 1, 1993, pro forma
year-to-date sales would have been $486.3 million in 1994 and $395.8
million in 1993. Pro forma second quarter sales would have been $254.3
million in 1994 and $209.8 million in 1993. The Blaw-Knox acquisition as
of an earlier date would not have materially affected Clark's net income
from continuing operations in either 1994 or 1993.
General Discussion of Second Quarter and Six Month Results:
Second quarter 1994 sales increased 29.5 percent over second quarter 1993
sales. The increase was the result of improved sales levels at both
Clark-Hurth and Melroe and reflects incremental sales of approximately
$14.8 million as a result of the acquisition of Blaw-Knox in May of 1994.
The increased sales resulted in higher income from consolidated operations
which amounted to $14.3 million in the second quarter of 1994 compared to
$8.4 million in the second quarter of 1993. VME, Clark's 50 percent owned
construction machinery joint venture, also reported significantly higher
earnings in 1994 as a result of improved economic conditions, currency
devaluations and past actions taken to reduce costs. Clark's share of
VME's earnings were $15.5 million in the second quarter of 1994 compared
to $.9 million in the second quarter of 1993. Clark's overall results
from continuing operations improved to $29.8 million or $1.71 per share in
the second quarter of 1994 from $9.2 million or $.53 per share in the same
period of 1993. Income from discontinued operations, which primarily
related to the gain on the sale of CAPCO in 1994, increased to $32.7
million or $1.88 per share in the second quarter of 1994 compared with
$1.6 million or $.09 per share in the same period of 1993. The income
from discontinued operations in 1993 related to the operations of CAPCO.
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In the first six months of 1994, Clark earned $55.2 million or $3.17 per
share from continuing operations compared to $11.0 million or $.63 per
share in the first six months of 1993. The improvement resulted from a 28
percent growth in sales relating to consolidated operations and
significantly improved VME earnings. Comparative earnings, including
continuing and discontinued operations and the impacts of accounting
changes, were $89.4 million or $5.13 per share in the first six months of
1994 compared to $19.6 million or $1.12 per share in the first six months
of 1993. The 1993 results include a change in accounting for income taxes
at VME which contributed $6.2 million or $0.35 per share to earnings.
Results of Operations:
Second Quarter of 1994 Compared to Second Quarter of 1993:
Sales in the second quarter of 1994 were $242.5 million compared with
$187.3 million in the second quarter of 1993. The consolidated sales
increase of $55.2 million relates mostly to volume improvements and
reflects incremental sales of $14.8 million as a result of the acquisition
of Blaw-Knox in May of 1994. Minor price increases also contributed to
the sales improvement. Unfavorable foreign currency translation impacts
decreased sales by about $1.2 million.
Strength in North American construction machinery markets was the primary
cause of the second quarter 1994 sales increase. Selected European
markets also showed some improvement. Excluding Blaw-Knox sales, North
American sales increased by $31.7 million, or 26.4 percent in the second
quarter of 1994 when compared with the second quarter of 1993 and overseas
sales increased $8.7 million, or 12.9 percent when comparing the same
period.
Gross margins were $52.5 million, or 21.6 percent of sales in the second
quarter of 1994 compared with $40.3 million, or 21.5 percent of sales in
the same period of 1993. The $12.2 million margin increase was the result
of higher sales. Foreign currency translation and exchange results
included in cost of sales were losses of $1.5 million in 1994 and gains of
$1.5 million in 1993.
Selling, general and administrative expenses were $29.0 million or 12.0
percent of sales in the second quarter of 1994 compared with $25.1 million
or 13.4 percent of sales in the second quarter of 1993. The increase in
expenditures was principally related to expense associated with stock
appreciation rights ($1.1 million) and volume/promotional related selling
expense ($2.8 million).
Operating income from continuing consolidated operations increased about
55 percent to $23.5 million from the 1993 second quarter level of $15.2
million. Operating income as a percentage of sales was 9.7 percent in the
second quarter of 1994 compared to 8.1 percent in the second quarter of
1993. Increased operating income is attributable to higher sales and
higher gross margins, partially offset by increases in selling, general
and administrative expenses.
Other income of $2.8 million in the second quarter of 1994 approximated
the 1993 level. Both years related principally to interest income.
Interest expense decreased approximately $1.0 million in the second
quarter of 1994 when compared to the same period of 1993 due to lower
average debt balances outstanding during the second quarter of 1994.
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Pre-tax income from consolidated continuing operations in the second
quarter of 1994 was $21.7 million compared to $12.2 million for the same
period of 1993. The improved results reflect higher sales and improved
gross margins.
Tax provisions of $7.4 million and $3.9 million were recorded in the
respective second quarter periods of 1994 and 1993. The effective tax
rate in the second quarter of 1994 was 34.2 percent which approximates the
statutory rate. The 1993 second quarter rate of 31.8 percent was lower
than the U.S. statutory rate because of expected utilization of certain
foreign net operating loss carryforwards and U.S. capital loss
carryforwards.
Clark's share of VME earnings for the second quarter increased to $15.5
million, or $0.89 per share, compared to $0.9 million, or $0.05 per share,
in the same 1993 period. VME's consolidated sales were $406.0 million, up
24 percent from second quarter 1993 sales of $327.1 million and 24 percent
above first quarter 1994. VME earnings improvements were driven by higher
sales volumes, improved price realization, and lower interest costs due to
declining debt levels. VME's North American markets continued to show
strength in all product areas while most European economies continued
their slow progress toward economic recovery.
Results from continuing operations, which includes the results of VME,
were income of $29.8 million and $9.2 million, respectively, in the second
quarter of 1994 and 1993.
Discontinued operations, which primarily related to the gain on the sale
of CAPCO in the second quarter of 1994, increased to $32.7 million
compared with $1.6 million in the second quarter of 1993. The income from
discontinued operations in 1993 related to the operations of CAPCO.
In the aggregate, Clark recorded income of $62.5 million, or $3.59 per
share in the second quarter of 1994 and $10.8 million, or $0.62 per share
in the same period of 1993.
First Half of 1994 Compared to First Half of 1993:
Sales in the first half of 1994 were $447.7 million compared with $350.4
million in the first six months of 1993. The consolidated sales increase
of $97.3 million relates mostly to volume improvements and reflects
incremental sales of $14.8 million as a result of the acquisition of Blaw-
Knox in May of 1994. Minor price increases also contributed to the sales
improvement. Unfavorable foreign currency translation impacts decreased
sales by about $2.2 million.
Strength in North American construction machinery markets was the primary
cause of the first half 1994 sales increase. Selected European markets
also showed some improvement. Excluding Blaw-Knox sales, North American
sales increased by $69.4 million, or 31.1 percent in the first half of
1994 when compared with the first half of 1993 and overseas sales
increased $13.1 million, or 10.3 percent when comparing the same period.
Gross margins were $95.6 million, or 21.3 percent of sales in the first
half of 1994 compared with $74.1 million, or 21.1 percent of sales in the
same period of 1993. The $21.5 million margin increase was principally
the result of higher sales. Foreign currency translation and exchange
results included in cost of sales were losses of $1.6 million in the first
six months of 1994 and gains of $4.0 million in the first six months of
1993.
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Selling, general and administrative expenses were $54.5 million or 12.2
percent of sales in the first half of 1994 compared with $47.3 million or
13.5 percent of sales in the first six months of 1993. The increase in
expenditures was principally related to expense associated with stock
appreciation rights ($5.3 million) and volume/promotional related selling
expense ($3.1 million) which increase was offset by certain 1993 expenses
which were not incurred during 1994.
Operating income from continuing consolidated operations increased about
53 percent to $41.0 million from the 1993 first half level of $26.8
million. Operating income as a percentage of sales was 9.2 percent in the
first half of 1994 and 7.6 percent in the first half of 1993. The
increased level of operating income is attributable to higher sales and
higher gross margins, partially offset by increases in selling, general
and administrative expenses.
Other income increased by $4.7 million from the first half 1993 level to
$9.9 million. This principally resulted from an increase of $0.8 million
in interest income and a gain of about $4.1 million on the sale of certain
overseas bonds.
Interest expense decreased approximately $0.4 million in the first half of
1994 when compared to the same period of 1993 due to lower average debt
balances outstanding during the first half of 1994.
Pre-tax income from consolidated continuing operations in the first half
of 1994 was $40.7 million compared to $21.4 million for the same period of
1993. The improved results reflect higher sales and improved gross
margins.
Tax provisions of $14.1 million and $6.0 million were recorded in the
respective first six month periods of 1994 and 1993. The effective tax
rate in the first half of 1994 was 34.6 percent which approximates the
statutory rate. The 1993 first half rate of 28.1 percent was lower than
the U.S. statutory rate because of expected utilization of certain foreign
net operating loss carryforwards and U.S. capital loss carryforwards.
Through June 30, 1994, Clark has recorded equity income in VME of $28.6
million. This compares to a loss of $4.3 million in the first six month
period of 1993. VME's consolidated sales for the first half increased by
20.3 percent to $733.6 million compared to last year. Higher unit and
spare parts sales drove the gain. Market conditions in North America
continued to strengthen in all product lines and selected markets in
Western Europe, such as Great Britain and Scandinavia, also improved. The
German market, though down, has been above expectations.
Results from continuing operations, which include the results of VME, were
income of $55.2 million and $11.0 million, respectively, in the first half
of 1994 and 1993.
Income from discontinued operations, which consisted primarily of the
$32.9 million gain on the sale of CAPCO, increased to $34.2 million
compared to $2.4 million in the first half of 1993. The income from
discontinued operations in 1993 related to the operations of CAPCO.
Including the discontinued operations, but before the effect of a change
in accounting principles, Clark recorded income of $89.4 million, or $5.13
per share, in the first half of 1994 and $13.4 million or $0.77 per share,
for the same period of 1993. Also, effective January 1, 1993, VME adopted
FAS
-14-<PAGE>
<PAGE>
No. 109, "Accounting for Income Taxes" and Clark's 50 percent share of the
impact of the accounting change was $6.2 million, or $0.35 per share. In
the aggregate, Clark recorded net results of $19.6 million, or $1.12 per
share, for the first half of 1993.
Contingencies:
Environmental
The Company is involved in environmental clean-up activities or litigation
in connection with ten former waste disposal sites and four former U.S.
plant locations. The Company is also involved in an environmental clean-
up action at one current location. The Company is also a defendant in a
lawsuit filed by the United States Environmental Protection Agency which
seeks civil penalties for alleged violations of the Clean Water Act
arising out of the discharge of certain metal finishing wastewaters
generated at the Company's Melroe facility in Gwinner, North Dakota.
At each of the ten waste disposal sites, Clark contracted with independent
waste disposal operators to properly handle the disposal of its waste.
The Environmental Protection Agency (EPA) also has identified other
parties responsible for clean-up costs at the waste disposal sites. The
Company has and will continue to accrue these costs when the liability can
be reasonably estimated. As of June 30, 1994, the Company had reserves of
approximately $16.1 million for potential future environmental clean-up
costs. The environmental reserves represent Clark's current estimate of
its liability for environmental clean-up costs and are not reduced by any
possible recoveries from insurance companies or other potentially
responsible parties not specifically identified by the EPA. Although
management cannot determine whether or not a material effect on future
operations is reasonably likely to occur, it believes that the recorded
reserve levels are appropriate estimates of the potential liability.
Further, management believes that the additional maximum exposure level in
excess of the recorded reserve level would not be material to the
financial condition of the Company. Although settlement of the reserves
will cause future cash outlays, it is not expected that such outlays will
materially impact the Company's liquidity position. The Company's
expenditures in the first half of 1994 relating to environmental
compliance and clean-up activities were immaterial.
Sale of Clark Material Handling Company ("CMHC")
The Company sold its forklift truck business, CMHC, to Terex on July 31,
1992. As part of the sale, Terex and CMHC assumed substantially all of
the obligations of the Company relating to the CMHC operations, including:
1) contingent liabilities of the Company with respect to floor plan and
rental repurchase agreements, 2) certain guarantees of obligations of
third parties, and 3) existing and future product liability claims
involving CMHC products. In the event that Terex and CMHC fail to perform
or are unable to discharge any of the assumed obligations, the Company
could be required to discharge such obligations.
1) Repurchase Agreements
At the time of the sale, the Company had agreed with an independent
finance company to repurchase approximately $220 million of CMHC
dealer floor plan and rental inventory in the event of a default by
individual dealers for whom the inventory is financed. Since the
sale, dealer floor plan and rental inventory obligations have been
liquidating in the normal course of business and stand at
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<PAGE>
approximately $60 million at June 30, 1994. These obligations will
continue to liquidate in an orderly fashion. The Company will not be
required to perform these repurchase obligations unless the dealer
defaults in the underlying obligations and Terex and CMHC default in
their repurchase obligations. Should that occur, the collateral
value securing the obligations should be sufficient to reduce any
loss to an immaterial amount.
2) Third Party Guarantees
The Company has guaranteed approximately $21 million of obligations
of third parties relating to the CMHC operation. Approximately $14
million of these guarantees relate to national account rental
arrangements with a number of large creditworthy customers.
Approximately $7 million relates to capital loans given by a finance
company to independent CMHC dealers, which are secured by a lien on
substantially all of the dealer's assets. These guaranteed
obligations are expected to liquidate over time. The Company
believes, based on past experience, that the national account
customers and dealers, who are the primary obligors, will meet their
obligations, resulting in immaterial losses to the Company regardless
of whether CMHC and Terex are able to perform their obligations.
3) Product Liability Claims
CMHC had approximately $45 million of reserves relating to existing
product liability claims at the time of the sale. Future accidents
will likely occur, which will result in increased product liability
exposure over time. The Company will incur losses relating to these
product liability claims if CMHC and Terex fail to perform their
obligations. The impact of any such losses would be mitigated by
available tax benefits and by insurance coverage that is available
for catastrophic losses. Cash settlement of product liability claims
are generally made over extended periods of time, thereby
significantly reducing the impact of cash flow in any one year.
Uncertainty exists as to the ultimate effect on Clark if Terex and CMHC
fail to perform these obligations and commitments. While the aggregate
losses associated with these obligations could be material, the Company
does not believe such an event would materially affect the Company's
ability to meet its cash requirements.
In its Form 10-Q for the first quarter of 1994, Terex reported that it was
continuing to incur operating losses and had a deficit stockholders'
investment. In their latest report on the financial statements that were
filed as part of Terex's Form 10-K for 1992, Terex's independent
accountants indicated that Terex's recurring losses, its capital
deficiency, and its inability to borrow additional funds under a bank
lending agreement raised doubts about Terex's ability to continue as a
going concern. In August 1994, Terex announced that in the second quarter
of 1994, it earned $10 million, which included $19.7 million from the sale
of certain non-strategic assets.
Other:
Clark has certain other contingent liabilities which have arisen in the
normal course of business. These are discussed further in the Notes to
the Financial Statements on page 10.
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<PAGE>
Liquidity and Capital Resources:
At June 30, 1994, the Company's cash and short-term investments amounted
to $225.5 million compared with $235.8 million at December 31, 1993. The
decrease in cash is principally due to the expenditure of approximately
$144 million for the acquisition of Blaw-Knox; partially offset by
proceeds from the sale of CAPCO of approximately $103 million and cash
flow from operations of approximately $31 million.
On April 6, 1994, the Company entered into a $100 million Master Credit
Agreement with nine banks. The new agreement has a term of three years
and replaces a previous agreement of $66.2 million. There were no
outstanding borrowings under the Company's line of credit as of June 30,
1994.
In the first quarter of 1993, the Company filed a shelf registration
statement with the Securities and Exchange Commission to register $150
million of medium term notes. To date, $90.2 million of the medium term
notes have been issued, leaving $59.8 million available for future
issuance.
The Company believes that it has adequate liquidity either through cash
reserves, its line of credit, or through its access to public and private
markets to meet its operating needs and strategic objectives.
Capital Investment (Including CAPCO):
Capital expenditures were $18.1 million in the first half of 1994 as
compared to $10.3 million in the first six months of 1993. A comparative
breakdown of expenditures is as follows:
In Millions
1994 1993
By Type:
. Capital facilities and equipment $14.4 $ 8.3
. Tooling 3.7 2.0
Total $18.1 $10.3
By Location:
. North America $ 8.0 $ 7.5
. Foreign locations 10.1 2.8
Total $18.1 $10.3
Depreciation of fixed assets was $17.9 million in the first half of 1994
as compared to $18.8 million in the first half of 1993.
Capitalization:
At June 30, 1994, debt as a percentage of total capitalization (total debt
and stockholders' equity) was 38.7 percent compared with 46.9 percent at
December 31, 1993. The improvement in the ratio relates to increased
stockholders' equity, principally, the current year income of $89.4
million. Total debt at June 30, 1994 decreased to $232.6 million from the
December 31, 1993, level of $236.9 million. Stockholders' equity per
share was $21.22 at June 30, 1994 and $15.41 at December 31, 1993.
Outlook:
The backlog at June 30, 1994 was $191.2 million, up from $121.0 million at
June 30, 1993. The backlog amount in the second quarter of 1994 includes
Blaw-Knox.
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<PAGE>
The Company believes the level of business activity as demonstrated by the
second quarter results and order rates provide an optimistic picture of
business activity for the balance of the year. Although normal seasonal
patterns indicate that third quarter results will come in below seasonal
peaks reached in the second quarter, third quarter 1994 results should
show a substantial improvement over 1993 performance levels.
-18-<PAGE>
<PAGE>
SELECTED FINANCIAL DATA - VME GROUP N.V.
In 1985 a joint venture was formed combining the construction machinery
businesses of Clark Equipment Company and AB Volvo of Sweden. VME Group
N.V. ("VME") is owned 50 percent each by Clark and Volvo as a result of
their contribution of ownership in their construction machinery
subsidiaries VME Americas Inc. (then Clark Michigan Company) and VME
Holding Sweden AB (then Volvo BM AB), respectively.
Following are condensed consolidated financial data of VME Group N.V.
(amounts in millions):
2nd Quarter Six Months
1994 1993 1994 1993
Sales $406.0 $327.1 $733.6 $609.6
Income (loss) before income taxes
and changes in accounting principle 44.4 10.5 84.7 (0.8)
Provision for income taxes 12.8 6.8 26.3 5.5
Income (loss) before changes in
accounting principle 31.6 3.7 58.4 (6.3)
Effect of change in accounting
principle - - - 12.3
Net income $ 31.6 $ 3.7 $ 58.4 $ 6.0
VME's sales during the first half of 1994 were $733.6 million, an increase
of $124.0 million from the $609.6 million recorded in the first half of
1993. The increase resulted because demand for construction equipment
continued to strengthen in North America and Great Britain and started to
show improvement from low levels in other markets, including the Nordic
countries, France, Spain and Australia. The German market was also
stronger.
VME recorded net income of $31.6 million in the second quarter of 1994
compared to a net income of $3.7 in the same period of 1993, a change of
$27.9 million. VME's net income of $58.4 million in the first half of
1994 compares to a net income of $6.0 million in the same period of 1993.
The improvement in operating results is mainly due to the following:
- Higher production and sales volumes
- Improved price realization
- Reduced overhead expenses in both distribution and manufacturing
In the first quarter of 1993, VME adopted FAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and FAS No.
109, "Accounting for Income Taxes".
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<PAGE>
VME elected to recognize its estimated obligations under FAS No. 106 on a
transitional basis over 20 years. A net charge of $1.4 million was
included in the first half of 1994 and 1993. The impact in 1993 of the
change of principle relating to accounting for income taxes, FAS 109, was
$12.3 million.
Total assets of VME were $875.7 million at the end of June 1994, an
increase of $37.4 million from $838.3 million in June 1993. The increase
is mainly from higher receivables resulting from higher sales volumes and
increased goodwill related to the purchase of remaining shares in
Zettelmeyer Baumaschinen GmbH as of January 1, 1994.
-20- <PAGE>
<PAGE>
EXHIBITS LIST AND INDEX
Filed Herewith Unless
Exhibit Description Otherwise Indicated
(2)(a) Underwriting Agreement Incorporated by reference to
dated May 6, 1994 among Exhibit (2)(a) to Registrant's
Automotive Products Company, Form 8-K filed on May 27, 1994
Clark Automotive Products with respect to Registrant's
Corporation, and Clark disposition of Clark Automotive
Equipment Company and CS Products Corporation
First Boston Corporation
and Merrill, Lynch, Pierce,
Fenner & Smith Incorporated
as representatives of the
Underwriters
(2)(b) Subscription Agreement dated Incorporated by reference to
May 6, 1994 among Automotive Exhibit (2)(b) to Registrant's
Products Company, Clark Form 8-K filed on May 27, 1994
Automotive Products Corpora- with respect to Registrant's
tion, Clark Equipment disposition of Clark Automotive
Company, CS First Boston Products Corporation
Limited, Merrill Lynch
International Limited, ABN
AMRO Bank N.V., Banque
Bruxelles Lambert S.A.,
Cazenove & Co., Dresdner
Bank Aktiengesellschaft
and UBS Limited
(2)(c) Agreement of Purchase and Incorporated by reference to
Sale dated April 20, 1994 Exhibit (2) to Registrant's
between Clark Equipment Form 8-K filed on May 27, 1994
Company and White Consoli- with respect to Registrant's
dated Industries Inc. acquisition of Blaw-Knox
Construction Equipment
Corporation
(99) Computation of Ratio of Page 22
Earnings to Fixed Charges
for the six months ended
June 30, 1994
(10)(a) Stock Purchase Program Page 23
-21-<PAGE>
<PAGE> EXHIBIT (99)
CLARK EQUIPMENT COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
Six Months
1994
Earnings Before Tax:
Clark - From Continuing Consolidated Operations $40.6
Clark's 50 Percent Share of VME (Net of Clark Goodwill
Amortization and Other VME Related Expenses) 41.7
Total Pre-Tax Earnings (1) $82.3
Fixed Charges:
Clark:
Interest Expense $10.2
Interest Portion of Rent Expense 0.9
Clark's Share of VME:
Interest Expense 4.5
Interest Portion of Rent Expense 1.4
Total Fixed Charges (2) $17.0
Earnings from Continuing Operations before Taxes
and Fixed Charges (1 Plus 2) $99.3
Ratio of Earnings to Fixed Charges 5.84
=====
Note:
Earnings to fixed charges have been determined based on continuing
operations and have been computed by dividing earnings before income taxes
and fixed charges by fixed charges. Earnings before income tax include
the pre-tax income from Clark's consolidated continuing operations and
Clark's 50 percent share of VME's pre-tax income, net of Clark goodwill
amortization related to its VME investment, and other expenses directly
related to VME. Fixed charges include interest expense relating to
Clark's consolidated continuing operations and Clark's 50 percent share of
VME's interest. Fixed charges also include one-third of Clark rentals for
consolidated continuing operations and Clark's 50 percent share of one-
third of the VME rentals. The Company believes that one-third of such
rentals constitutes a representative interest factor. Capitalized
interest has been excluded from fixed charges as it is immaterial.
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<PAGE>
CLARK EQUIPMENT COMPANY
STOCK PURCHASE PROGRAM
Adopted the 10th day of May, 1994, by action of the Human
Effectiveness Committee of the Board of Directors of Clark Equipment
Company, pursuant to the authority delegated to such Committee under
Section 6 of the Clark Equipment Company 1994 Long-Term Incentive Plan
(the "1994 LTIP").
1. Purpose. The purpose of this Stock Purchase Program (the
"Program") of Clark Equipment Company ("Clark"), is to secure for Clark
and its stockholders the benefits of the incentive which an interest in
the ownership of common stock of Clark will provide to those officers and
other employees who will be responsible for Clark's future growth and
continued success. This Program is established pursuant to Section 6 of
the 1994 LTIP and shall be subject to the terms and conditions of the 1994
LTIP. Unless the context clearly implies or indicates to the contrary, a
word, term or phase used or defined in the 1994 LTIP is similarly used or
defined for purposes of the Program.
2. Participation. All officers of Clark shall be eligible to
participate in the Program. The Committee (as defined in the 1994 LTIP)
may, from time to time, designate other employees of Clark as eligible to
participate in the Program. For purposes of this Program, the term
"officer" shall mean the Chairman, President and Chief Executive Officer,
and all Vice Presidents.
An eligible person may become a participant in the Program (a
"Participant") or may thereafter increase, decrease or discontinue
contributions to the Program by delivering to the Secretary of Clark the
prescribed election form. The Committee may impose such advance election
requirements as it determines to be appropriate.
3. Contributions by Participants. All contributions by Participants
shall be by pay deduction. The amount of such pay deduction shall be
fixed in the election form delivered by the Participant, but shall not
exceed fifteen percent (15%) of Eligible Compensation. To the extent that
a Participant elects to suspend participation to conform to requirements
of SEC Rule 16b-3, make-up contributions shall be made by the Participant
(and make-up contributions shall be made by Clark under paragraph 4) by
doubling the amount of Participant contributions for each month, beginning
with the month following the month in which the suspension period ends,
until such time as the missed contributions have been made up.
"Eligible Compensation" shall mean base salary, unreduced by amounts
deferred pursuant to any qualified or non-qualified deferred compensation
plans maintained by Clark, and incentive compensation awards.
4. Contributions by Clark. Clark shall contribute into the Program
with respect to each Participant an amount equal to sixty-six and two-
thirds percent (66-2/3%) of the Participant's monthly contribution
including the month in which a contribution from incentive compensation is
made. The contribution of each Participant, together with Clark's
corresponding contribution, will be applied to the purchase of shares of
Clark common stock as hereinafter described.
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<PAGE>
5. Purchase of Shares. Shares of common stock of Clark (the
"Shares") acquired by Participants pursuant to the Program shall be shares
currently authorized but unissued or currently held or subsequently
acquired by Clark as treasury shares, including shares purchased in the
open market or in private transactions. In all cases, the price to the
Participant of the Shares shall be the Fair Market Value (as defined in
the 1994 LTIP) per Share, determined as if such Shares are purchased on
the first business day of the month after the month for which the
Participant's contribution is deducted from his or her pay. Shares
purchased with funds contributed by the Participant shall be registered in
the name of the Participant or in such other or additional name or names
as the Participant may have designated in the prescribed election form.
Shares purchased with funds contributed by Clark shall be held by Clark or
deposited in a bank or other location for safekeeping with appropriate
credit made to the account of the Participant in records kept for such
purpose.
6. Interest of the Participant in Shares. An account will be
maintained for each Participant showing the number of Shares purchased
from funds contributed by the Participant and from funds contributed by
Clark for the benefit of the Participant. A Participant shall at all
times have a vested interest in the Shares in his or her account purchased
with his or her contributions. A Participant's interest in Shares
purchased with the contributions of Clark shall not be immediately vested
but shall vest in five equal annual installments, beginning 2 January of
the second calendar year following the year of purchase of such Shares.
The foregoing vesting schedule is subject to the provisions of paragraph 8
hereof regarding termination of participation in the Program.
Notwithstanding any other provision of the Program to the contrary,
upon the occurrence of a Change in Control of Clark (as defined in the
1994 LTIP), each Participant shall have a fully vested right to all Shares
purchased with the contributions of Clark and credited to his or her
account and a stock certificate for such Shares, registered in the name of
the Participant or his or her designee as provided herein, along with cash
for the value of any fractional Share, shall then be distributed to each
Participant.
7. Issuance of Shares Certificates and Distribution of Dividends.
After the end of each calendar month there shall be distributed to each
Participant a stock certificate registered in the name of the Participant,
or in such other name or names as he or she may have designated in the
prescribed election form, representing the number of whole Shares
purchased during the preceding calendar month from funds contributed by
the Participant.
After 2 January of each year, there shall be distributed to each
Participant a stock certificate registered in the name of the Participant,
or in such other name or names as he or she may have designated in the
prescribed election form, representing the number of whole Shares
purchased from funds contributed by Clark in which the Participant's
interest shall have vested. Concurrently, there shall be furnished to
each Participant an annual statement which shall reflect the amount of his
or her contributions to date, the corresponding contributions by Clark to
date, the aggregate cost of the Shares represented by the certificate
distributed to the Participant, the fractional share, if any, to which the
Participant may be entitled, and the number of Shares in the Participant's
account in which his or her interest shall not have vested. A similar
statement will be furnished on termination of participation in the
Program.
Dividends on all Shares, whether or not such Shares have vested, will
be distributed currently. -24-<PAGE>
<PAGE>
8. Termination of Participation. If a Participant ceases, because
of death or disability, to be an eligible person, his or her participation
in the Program shall automatically terminate as of the end of the calendar
month of his or her death or disability. Upon such termination, the
Participant's interest in all Shares in his or her account purchased with
contributions by Clark shall immediately vest and there shall be delivered
to the Participant, or to the estate of a deceased Participant (a) a stock
certificate registered in the name of the Participant, or such other name
or names as he or she may have designated in the prescribed election form,
representing any whole Shares in the Participant's account purchased from
funds contributed by the Participant which have not been previously
distributed to him or her, (b) a stock certificate registered in the name
of the Participant, or such other name or names as he or she may have
designated, representing the whole Shares in the Participant's account
purchased from funds contributed by Clark, and (c) cash representing the
value of any fractional Share to which the Participant is entitled as of
the effective date of termination of his or her participation in the
Program. Disability as used above shall mean having a physical or mental
condition which, in the reasonable judgment of a majority of the
Committee, will permanently preclude further active employment.
If a Participant ceases because of Retirement (as defined in the 1994
LTIP) either before or after age 60 to be an eligible person, his or her
participation in the Program shall automatically terminate as of the end
of the calendar month of such Retirement. Upon such termination, the
Participant's interest in all Shares in his or her account purchased with
contributions by Clark shall continue to vest in the same manner and
pursuant to the same vesting schedule as if such Retirement had not
occurred; provided, however, that the Committee may, in its sole
discretion immediately vest all such unvested Shares if the Participant
was at least age 60 upon such Retirement, or upon the Participant's
attainment of age 60 and, in such event, there shall then be delivered to
the Participant (a) a stock certificate registered in the name of the
Participant, or such other name or names as he or she may have designated
in the prescribed election form representing any whole Shares in the
Participant's account purchased from funds contributed by the Participant
which have not been previously distributed to him or her, (b) a stock
certificate registered in the name of the Participant, or such other name
or names as he or she may have designated, representing the whole Shares
in the Participant's account purchased from funds contributed by Clark,
and (c) cash representing the value of any fractional share to which the
Participant is entitled as of the effective date of termination of his or
her participation in the Program.
If a Participant ceases to be an eligible person before his or her
death, disability or Retirement, his or her participation in the Program
shall automatically terminate as of the end of the month that he or she
ceased to be an eligible person. There shall then be delivered to the
Participant stock certificates, in the manner and registered as described
in the preceding paragraph, representing the whole Shares in the
Participant's account that are then vested to his or her interest, and
cash representing any fractional Share to which he or she is then
entitled. The Committee shall have the sole discretion to determine
whether the Shares in this account in which his or her interest is not
then vested shall continue to vest (and if so, in what manner), and then
be distributed, or whether all of his interest in such Shares shall then
terminate. Subject to the terms and conditions of the 1994 LTIP, the
Shares in the Participant's account which have not vested and in which his
or her interest terminates will thereafter be available to reduce the
number of Shares otherwise required to be purchased with contributions by
Clark under the Program.
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<PAGE>
9. Expenses. In addition to contributions, Clark will pay all fees
and expenses incurred in connection with the Program, except that
brokerage fees or commissions incurred in the purchase of Shares shall be
considered part of the cost of the Shares and shall be paid from
contributions under the Program. No charge or deduction for any expenses
will be made to a Participant upon the termination of his or her
participation under the Program or upon the distribution of certificates
representing Shares purchased with his or her contributions or the
contributions of Clark.
10. Administration. The Program shall be administered by the
Committee. Subject to the express provisions of the Program, the
Committee shall have authority to interpret the Program, to prescribe,
amend and rescind rules and regulations relating to it, and to make all
other determinations deemed necessary or advisable in administering the
Program. The Committee may, at its sole discretion and without advance
notice, suspend contributions to the Program from month to month with
respect to any or all Participants. The determinations of the Committee
on the matters referred to in this Paragraph shall be conclusive.
11. Amendment and Termination. The Committee may terminate the
Program at any time and may amend the Program from time to time in any
respect; provided, however, that upon any termination of the Program, all
assets vested under the Program shall be distributed to the Participants,
and provided further, that no amendment to the Program shall adversely
affect the right of a Participant to receive his interest in the assets in
his account which have vested under the Program.
12. Government and Other Regulations. The obligation of Clark to
make contributions under the Program, and the obligation of Clark to
purchase Shares under the Program, shall be subject to all applicable
laws, rules and regulations, and to such approvals by any governmental
agencies as may be required.
13. Non-Alienation. No Participant shall be permitted to
anticipate, assign, alienate, sell, transfer, pledge, or otherwise
encumber his interest under the Program prior to the distribution of stock
certificates to him. Any attempt to anticipate, assign, alienate, sell,
transfer, pledge, or otherwise encumber a Participant's interest under the
Program prior to distribution of stock certificates to him shall be void
and of no effect.
14. No Right to Continue. The Program does not constitute a
contract of employment, and selection as a Participant will not give any
employee the right to be retained in the employ of Clark or any
subsidiary, nor any right or claim to any benefit under the Program,
unless such right or claim has specifically accrued under the terms of the
Program.
15. Accounting and Administration. The Committee, or its delegate,
shall be responsible for accepting and accounting for the amounts
contributed by Participants and by Clark, the purchase, custody and
distribution of the Shares, and the distribution of any dividends paid on
Shares held by Clark or deposited in a bank account or other location.
Until such time as the Committee determines otherwise, the Committee's
responsibilities under this paragraph 15 shall be delegated to the
officers and employees of Clark who regularly perform such functions.
16. Non-Compete. Notwithstanding any other provision of this
Program to the contrary, no Shares purchased with Clark contributions, or
any dividends paid thereon, will vest or be distributable pursuant to this
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Program to any Participant or former Participant who violates the
Competition Restrictions or Confidentiality Restrictions set forth in the
1994 LTIP. If any Participant or former Participant violates such
Competition Restrictions or Confidentiality Restrictions, his or her
interest in all Shares which have not vested will terminate.
17. Effective Date. The Program is effective May 11, 1994 (the
"Effective Date").
As of the Effective Date, no further purchases may be made under the
Clark Equipment Company Stock Purchase Plan (the "Stock Purchase Plan")
and such Stock Purchase Plan shall have no further effect, except with
respect to purchases made under such Stock Purchase Plan prior to the
Effective Date. The Program is intended to be a successor to the Stock
Purchase Plan and in no event shall a Participant be entitled to an
accelerated vesting or distribution of his shares under the Stock Purchase
Plan by reason of this paragraph 17 or the adoption of this Program.
05.06.94
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