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): September 13, 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
Total Number of Pages: 35
Exhibit Index at Page: 3
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ITEM 5. OTHER EVENTS
On May 13, 1994, Registrant completed an initial public offering of
10,000,000 shares of its indirect wholly-owned subsidiary, Clark
Automotive Products Corporation. This transaction is described in a Form
8-K filed by Registrant on May 27, 1994.
Attached hereto as Exhibit (99) are Registrant's financial statements for
the year ended December 31, 1993, restated to reflect the deconsolidation
of Clark Automotive Products Corporation, together with the report of
Price Waterhouse on those financial statements, which financial statements
are incorporated in this Item by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Registrant's financial statements for the year ended December 31,
1993, restated to reflect the deconsolidation of Clark Automotive
Products Corporation, together with the report of Price Waterhouse on
those financial statements, are attached as Exhibit (99) to this
report.
(b) See attached Exhibit Index.
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: September 13, 1994
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EXHIBIT INDEX
Filed Herewith Unless
Exhibit Description Otherwise Indicated
(23) Consent of Price Waterhouse Page 4
(27) Financial Data Schedules Page 5
(99) Financial Statements of Page 6
Registrant for the year
ended December 31, 1993,
restated to reflect the
deconsolidation of Clark
Automotive Products
Corporation, together
with the report of Price
Waterhouse on those
Financial Statements.
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EXHIBIT (23)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Clark Equipment Company Registration Statements
on Form S-3 (No. 33-60062) and Form S-8 (Nos. 33-44275, 33-36188, 33-
28226, 33-13081, 2-99369, 2-77136, 2-67529, 2-61096, 2-53948, 2-39610,
2-24730, 2-17758 and 2-16146) of our report appearing on page 33 of this
Form 8-K, which report is dated February 14, 1994, except as to the Subsequent
Events Note appearing on page 30, which is dated as of May 13, 1994.
/s/ Price Waterhouse
Price Waterhouse
South Bend, Indiana
September 13, 1994
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT (27)
This schedule contains summary financial information extracted from the financial
statements of Clark Equipment Company for the year ended December 31,1993,
restated to reflect the deconsolidation of Clark Automotive Products
Corporation and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-END> DEC-31-1993
<CASH> 35,228
<SECURITIES> 200,600
<RECEIVABLES> 84,629
<ALLOWANCES> 5,485
<INVENTORY> 108,620
<CURRENT-ASSETS> 461,771
<PP&E> 487,359
<DEPRECIATION> 285,435
<TOTAL-ASSETS> 1,001,935
<CURRENT-LIABILITIES> 206,765
<BONDS> 204,770
<COMMON> 323,540
0
0
<OTHER-SE> (55,387)
<TOTAL-LIABILITY-AND-EQUITY> 1,001,935
<SALES> 691,969
<TOTAL-REVENUES> 692,022
<CGS> 556,233
<TOTAL-COSTS> 556,233
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 905
<INTEREST-EXPENSE> 21,426
<INCOME-PRETAX> 25,775
<INCOME-TAX> 4,196
<INCOME-CONTINUING> 29,419
<DISCONTINUED> 12,450
<EXTRAORDINARY> 0
<CHANGES> 6,150
<NET-INCOME> 48,019
<EPS-PRIMARY> 2.76
<EPS-DILUTED> 2.76
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</TABLE>
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<TABLE>
EXHIBIT (99)
F I N A N C I A L H I G H L I G H T S
<CAPTION>
Dollars in thousands, except per share data
1993 1992 1991
OPERATIONS:
<S> <C> <C> <C>
Net Sales . . . . . . . . . . . . . . . . . . . . .$ 692,022 $ 658,535 $ 589,186
Income(Loss) from Consolidated Operations. . . . . . 21,579 12,016 (30,460)
Net Income(Loss) . . . . . . . . . . . . . . . . . . 48,019 (a) 65,958 (b) (337,520)(c)
Income(Loss) Per Share . . . . . . . . . . . . . . . 2.76 3.81 (19.52)
Depreciation Charges . . . . . . . . . . . . . . . . 36,379 44,120 45,772
Capital Expenditures . . . . . . . . . . . . . . . . 29,877 37,284 48,602
FINANCIAL POSITION AT YEAR-END:
Working Capital . . . . . . . . . . . . . . . . . . $ 255,006 $ 199,608 $ 192,754
Property, Plant and Equipment - Net . . . . . . . . . 201,924 216,196 283,806
Current Ratio . . . . . . . . . . . . . . . . . . . . 2.2 to 1 2.1 to 1 1.6 to 1
Long-Term Debt . . . . . . . . . . . . . . . . . . . 204,770 186,629 216,949
Stockholders' Equity . . . . . . . . . . . . . . . . 268,153 252,587 237,499
Book Value Per Share. . . . . . . . . . . . . . . . . 15.41 14.56 13.72
OTHER YEAR-END DATA:
Shares Outstanding . . . . . . . . . . . . . . . . .17,401,903 17,351,139 17,311,492
Number of Stockholders . . . . . . . . . . . . . . . 2,331 2,627 2,721
Number of Employees. . . . . . . . . . . . . . . . . 5,948 6,316 8,033
Common Stock Prices (During Year):
High . . . . . . . . . . . . . . . . . . . . . . $53 3/4 $28 7/8 $32 7/8
Low . . . . . . . . . . . . . . . . . . . . . . . 19 5/8 16 1/2 20 1/2
<FN>
(a) Includes a non-cash benefit of $6.2 million for a change in accounting principle-income
taxes at VME Group N.V.
(b) Includes a non-cash benefit of $92.0 million for a change in accounting principle-income
taxes.
(c) Includes a non-cash charge of $244.9 million for a change in accounting
principle-postretirement benefits.
</TABLE>
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<TABLE>
B A L A N C E S H E E T
<CAPTION>
Amounts in thousands
December 31
1993 1992
ASSETS:
<S> <C> <C>
Current Assets:
Cash, cash equivalents and short-term investments $ 235,828 $ 191,924
Accounts and notes receivable, less allowances of
$5.5 million and $4.7 million, respectively . 79,144 67,197
Refundable income taxes . . . . . . . . . . . . . 3,543 --
Inventories . . . . . . . . . . . . . . . . . . . 108,620 100,817
Deferred tax assets - net . . . . . . . . . . . . 29,202 21,341
Other current assets . . . . . . . . . . . . . . 5,434 5,198
Total current assets . . . . . . . . . . . . . 461,771 386,477
Investments and advances -VME Group N.V. . . . . . . 122,106 121,314
Deferred tax assets - net . . . . . . . . . . . . . 101,018 101,831
Property, plant and equipment-net . . . . . . . . . 201,924 216,196
Assets held for sale. . . . . . . . . . . . . . . . 6,765 9,676
Goodwill. . . . . . . . . . . . . . . . . . . . . . 67,461 81,653
Other assets . . . . . . . . . . . . . . . . . . . . 40,890 41,544
Total assets. . . . . . . . . . . . . . . . . $1,001,935 $ 958,691
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Notes payable . . . . . . . . . . . . . . . . . .$ 22,512 $ 23,821
Accounts payable and accrued liabilities. . . . . 150,142 118,195
Income taxes payable. . . . . . . . . . . . . . . 4,139 3,320
Accrued postretirement benefits. . . . . . . . . 19,560 19,000
Deferred income taxes. . . . . . . . . . . . . . 800 963
Current installments on long-term debt . . . . . 9,612 21,570
Total current liabilities . . . . . . . . . . 206,765 186,869
Long-term borrowings. . . . . . . . . . . . . . . . 204,770 186,629
Other non-current liabilities. . . . . . . . . . . . 74,686 90,508
Accrued postretirement benefits . . . . . . . . . . 233,239 229,903
Deferred income taxes . . . . . . . . . . . . . . . 14,322 12,195
Total liabilities. . . . . . . . . . . . . . . 733,782 706,104
Contingencies (pages 24 - 27)
Stockholders' Equity:
Capital stock, common . . . . . . . . . . . . . . 143,958 143,938
Capital in excess of par value. . . . . . . . . . 179,582 179,226
Retained earnings. . . . . . . . . . . . . . . . 92,708 44,869
Cumulative translation and other adjustments. . . (67,083) (28,843)
349,165 339,190
Less common stock held in treasury, at cost. . . 49,728 50,951
Less value of LESOP shares. . . . . . . . . . . . 31,284 35,652
Total stockholders' equity . . . . . . . . . . 268,153 252,587
Total liabilities and stockholders' equity . .$1,001,935 $ 958,691
<FN>
See Notes to Financial Statements
</TABLE>
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S T A T E M E N T O F I N C O M E
<CAPTION>
Amounts in thousands, except per share data
Years ended December 31
1993 1992 1991
<S> <C> <C> <C>
NET SALES . . . . . . . . . . . . . . . . . . . . . $692,022 $658,535 $ 589,186
OPERATING COSTS AND EXPENSES:
Cost of goods sold . . . . . . . . . . . . . . . .557,138 544,294 524,740
Selling, general and administrative expenses . . .102,699 87,905 88,249
659,837 632,199 612,989
Operating income (loss). . . . . . . . . . . . . . . 32,185 26,336 (23,803)
Other income. . . . . . . . . . . . . . . . . . . . . 15,016 14,934 12,196
Interest expense . . . . . . . . . . . . . . . . . . (21,426) (23,481) (23,841)
Pre-tax income (loss) from consolidated operations . 25,775 17,789 (35,448)
Provision (credit) for income taxes . . . . . . . . . 4,196 5,773 (4,988)
Income (loss) from consolidated operations . . . . . 21,579 12,016 (30,460)
Equity in net income (loss) of VME Group N.V. . . . . 7,840 (48,083) (23,129)
Income (loss) from continuing operations . . . . . . 29,419 (36,067) (53,589)
Discontinued operations:
Income (loss) - insurance subsidiaries . . . . . . -- 355 (61)
Loss - material handling operations . . . . . . . -- (7,056) (40,723)
Gain on sale - material handling operations. . . . -- 8,519 -
Income - automotive operations . . . . . . . . . 12,450 8,207 1,035
Income (loss) from discontinued operations . . . . . 12,450 10,025 (39,749)
Income (loss) before extraordinary credit and effect
of changes in accounting principles . . . . . . . 41,869 (26,042) (93,338)
Income tax benefit from loss carryforward. . . . . . -- -- 718
Effect of accounting changes:
Postretirement benefits . . . . . . . . . . . . . -- -- (244,900)
Income taxes . . . . . . . . . . . . . . . . . . . 6,150 92,000 --
NET INCOME (LOSS) . . . . . . . . . . . . . . . . . $ 48,019 $ 65,958 $(337,520)
INCOME (LOSS) PER SHARE:
From continuing operations . . . . . . . . . . . $ (1.69) $ (2.08) $ (3.10)
From discontinued operations . . . . . . . . . . . (0.72) 0.58 (2.30)
Extraordinary credit . . . . . . . . . . . . . . . -- -- .04
From effect of accounting changes . . . . . . . . (0.35) 5.31 (14.16)
Net income (loss) . . . . . . . . . . . . . . . .$ 2.76 $ 3.81 $ (19.52)
<FN>
See Notes to Financial Statements
</TABLE>
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<TABLE>
S T A T E M E N T O F C A S H F L O W S
<CAPTION>
Amounts in thousands
Years ended December 31
1993 1992 1991
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) . . . . . . . . . . . . . . . . . . . . $ 48,019 $ 65,958 $(337,520)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Effect of accounting changes . . . . . . . . . . . . . (6,150) (92,000) 244,900
Depreciation. . . . . . . . . . . . . . . . . . . . . . 36,379 44,120 45,772
Amortization of intangibles . . . . . . . . . . . . . . 2,083 2,973 3,353
Net gain on sale of a business . . . . . . . . . . . . -- (8,519) --
Exchange (gain) loss. . . .. . . . . . . . . . . . . . (242) 2,947 2,994
Employee benefit expense funded with treasury
stock . . . . . . . . . . . . . . . . . . . . . . . 800 908 1,074
Dividends from VME Group N.V. . . . . . . . . . . . . . -- -- 5,005
Loss (earnings) of unconsolidated companies . . . . . . (7,840) 47,546 23,190
Changes in assets and liabilities, net of the
effects of business disposition (1992):
Increase in receivables and other current assets . . (65,833) (24,546) (10,047)
Decrease (increase) in refundable income taxes. . . (3,543) 7,400 482
Decrease in inventory. . .. . . . . . . . . . . . . 4,528 5,966 42,332
Decrease (increase) in net deferred tax assets . . . (1,018) 3,926 1,801
Increase in payables and accruals . . . . . . . . . 77,850 4,519 37,051
Decrease (increase) in other non-current assets . . 2,049 (4,499) (6,814)
Increase (decrease) in other long-term liabilities . (17,624) 17,674 6,643
Other. . . . . . . . . . . . . . . . . . . . . . . . 172 78 (3,191)
Net cash provided by operating activities . . . . . 69,630 74,451 57,025
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of business (net of business' cash) . . -- 80,454 --
Additions to properties. . . . . . . . . . . . . . . . . . (29,877) (37,284) (48,602)
Sales of properties. . . . . . . . . . . . . . . . . . . . 1,122 318 2,161
Increase in short-term investments . . . . . . . . . . . . (79,700) (47,506) (73,394)
Decrease (increase) in investments and advances-
associated companies . . . . . . . . . . . . . . . . . (2) (49,397) 2,082
Net cash used in investing activities . . . . . . . . . (108,457) (53,415) (117,753)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term borrowings . . . . . . . . . . . . 91,006 -- 105,855
Payments on long-term debt . . . . . . . . . . . . . . . . (82,290) (25,981) (18,270)
Increase (decrease) in notes payable-current . . . . . . . 459 (28,594) 12,694
Proceeds from sale of stock under option plans . . . . . . 330 -- 26
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 129 214 584
Net cash provided (used) in financing activities . . . 9,634 (54,361) 100,889
Effect of exchange rate changes on cash. . . . . . . . . . (6,603) (5,553) (559)
Increase (decrease) in cash and cash equivalents. . . . . (35,796) (38,878) 39,602
Cash and cash equivalents at beginning of year. . . . . . 71,024 109,902 70,300
Cash and cash equivalents at end of year. . . . . . . . . 35,228 71,024 109,902
Short-term investments (cost approximates market) . . . . 200,600 120,900 73,394
Cash, cash equivalents, and short-term investments . . . .$ 235,828 $ 191,924 $ 183,296
<FN>
See Notes to Financial Statements
</TABLE>
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of Significant Accounting Policies
Principles of Consolidation - The financial statements of Clark
Equipment Company include the accounts of all majority-owned
subsidiaries. All material intercompany balances and transactions
are eliminated. The Company's investments in associated companies
owned 20% or more are accounted for using the equity method.
Investments in companies owned less than 20% are carried at cost.
As outlined in the Subsequent Events note appearing on page 30, the
initial public offering of Clark Automotive Products Corporation
("Clark Automotive") was completed in the second quarter of 1994.
In the preparation of these financial statements, the results of
Clark Automotive have been deconsolidated to reflect the operations
of this segment on a discontinued basis in the Statement of Income
for all periods presented. The notes pertaining to the Statement
of Income do not include the results of Clark Automotive.
The Company sold its Clark Material Handling Company (CMHC) business
unit to Terex Corporation on July 31, 1992, and recorded a gain of
$8.5 million in the third quarter of 1992. The prior year Statements
of Income have deconsolidated CMHC, reflecting its operations as a
discontinued operation for all years presented. The notes pertaining
to the Statement of Income do not include the results of CMHC.
Currency Translation - Financial statements of subsidiaries operating
outside the United States are translated into U.S. dollar equivalents
in accordance with Statement of Financial Accounting Standards (FAS)
No. 52.
Foreign currency exchange results reflected in the Statement of
Income were losses of $9.2 million in 1993 (including losses of $8.4
million from equity investments), losses of $10.8 million in 1992
(including losses of $9.8 million from equity investments), and
losses of $4.3 million in 1991 (including losses of $4.0 million from
equity investments).
Revenue Recognition - The Company's policy is to recognize sales at
the time of shipment. The Company allows dealers to return a certain
level of parts under a formal parts return program. The estimated
liability for this program is accrued in the balance sheet.
Cash, Cash Equivalents, and Short-Term Investments - Cash equivalents
and short-term investments include temporary investments of $231.3
million and $180.4 million at December 31, 1993 and 1992,
respectively. Temporary investments are recorded at cost plus
accrued interest.
For purposes of the Statement of Cash Flows, the Company considers
all highly liquid investments with a maturity of three months or less
from the purchase date to be cash equivalents. The Company's cash
flows from operating activities (including Clark Automotive for all
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years and CMHC for 1992 and 1991)were reduced by cash paid for
interest of $18.8 million, $21.1 million, and $20.8 million and
income taxes of $13.2 million, $5.0 million, and $8.0 million during
1993, 1992, and 1991, respectively. The 1991 tax payments include
$3.3 million of U.S. taxes relating to prior years' tax audit issues.
Fair Value of Financial Instruments - The Company estimates the fair
value of all financial instruments where the face value differs from
the fair value, primarily long-term debt and forward exchange
contracts, based upon quoted amounts or the current rates available
for similar financial instruments. If fair value accounting had been
used at December 31, 1993, instead of the historic basis accounting
used in the financial statements, long-term debt would exceed the
reported level by approximately $20 million, and the value of forward
exchange contracts would approximate the amounts reflected in the
financial statements.
Inventories - Inventories at December 31, 1993 and 1992, net of
valuation reserves of $12.1 million and $15.3 million, respectively,
are classified as follows:
Amounts in millions
1993 1992
Raw materials $ 32.2 $ 26.1
Work in process and finished goods 65.9 62.2
Manufacturing supplies 10.5 12.5
$108.6 $100.8
Inventories are valued at the lower of cost or market by the last-in,
first-out (LIFO) method for domestic inventories and by the first-in,
first-out (FIFO) method for all foreign inventories.
If the FIFO method of inventory accounting had been used worldwide,
inventories would have increased by $27.2 million at December 31,
1993, and $26.7 million at December 31, 1992. Inventory subject to
LIFO approximates 43% of total inventory at December 31, 1993.
During 1992 and 1991, certain domestic inventory quantities were
reduced. These reductions resulted in the liquidation of LIFO
inventory quantities carried at lower costs prevailing in prior
years. The effect decreased cost of goods sold related to continuing
operations by approximately $1.8 million and $2.1 million in the
fourth quarters of 1992 and 1991, respectively. There was no LIFO-
related effect in 1993.
Properties and Depreciation - Property, plant and equipment are
carried at cost. Expenditures for maintenance and repairs are
charged to expense as incurred. Expenditures for major renewals and
betterments are capitalized. The Company generally uses the
straight-line method of depreciation. Depreciation lives generally
range from eight to 50 years for land improvements, eight to 50 years
for buildings, and three to 25 years for machinery and equipment.
Properties retired or sold are removed from the property accounts,
with gains or losses on disposal included in income.
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The year-end property, plant and equipment balances for the past two
years are classified as follows:
Amounts in millions
1993 1992
Land $ 6.9 $ 7.4
Land improvements 5.5 5.9
Buildings 75.6 77.3
Machinery & equipment 399.3 398.4
487.3 489.0
Accumulated depreciation (285.4) (272.8)
$201.9 $216.2
Assets Held for Sale - Assets held for sale, which are net of a $6
million valuation reserve at December 31, 1993, represent one of
CMHC's former manufacturing facilities and are reflected in the
balance sheet at estimated realizable value.
Goodwill Amortization - The Company is generally amortizing goodwill
on a straight-line method over a 40-year period. Goodwill shown in
the consolidated financial statements relates to the Company's 1990
acquisition of Hurth Axle S.p.A., an Italy-based company, and is
remeasured into U.S. dollars using current exchange rates. The
accumulated amortization related to this goodwill approximates $8
million.
Costs and Expenses - Provisions are made currently for estimated
future costs under present product warranties. The costs of health
and life insurance postretirement benefits were charged against
income as paid in years prior to 1991. Effective January 1, 1991,
the Company adopted FAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and immediately
recognized a $244.9 million pre-tax provision to accrue the total of
its estimated accumulated postretirement benefit obligation at that
date. Upon adoption of this Statement, the costs of providing such
benefits are accrued as earned. Annual expense represents a
combination of the interest and service cost provisions of the annual
accrual, along with the actual benefits provided and paid for active
employees. Benefits provided and paid on behalf of retirees are
charged directly against the established reserve. The accounting for
health care benefits anticipates future cost-sharing changes that are
consistent with the Company's expressed intent. Effective January 1,
1993, VME Group N.V., the Company's 50%-owned joint venture, adopted
FAS No. 106 and will recognize its estimated obligation on a
transitional basis over 20 years.
Income Taxes - Prior to 1992, the Company accounted for income taxes
using Accounting Principles Board Opinion No. 11. Effective January
1, 1992, the Company adopted FAS No. 109, "Accounting for Income
Taxes." This adoption resulted in the recognition of a cumulative
net tax benefit of $92 million related to the recognition of
additional net deferred tax assets. Effective January 1, 1993, VME
also adopted FAS No. 109, and Clark's share of the cumulative tax
benefit resulting from this accounting change was $6.2 million.
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The tax cost on foreign earnings remitted to the United States in
1992 and 1991 was $0.6 million and $1.4 million in the respective
years. There was no cost on 1993 remittances. The Company considers
undistributed earnings of its foreign subsidiaries at December 31,
1993, to be permanently invested.
Guarantees and Contingencies - Guarantees and contingencies are
accrued for when a loss is considered probable and the amount is
measurable.
Income (Loss) Per Share - Income (loss) per share amounts are based
on the weighted average number of shares and the dilutive common
equivalent shares outstanding during the years.
Pending Accounting Change - In November, 1992, the Financial
Accounting Standards Board issued SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." This pronouncement
establishes accounting and reporting for the estimated cost of
benefits provided by an employer to former or inactive employees
after employment but before retirement. For the most part, the
Company already accounts for such benefits on an accrual basis.
Therefore, the impact of adoption is not anticipated to have a
significant effect on the Company's financial position or results of
operations.
Discontinued Operations
As outlined in the Subsequent Events note appearing on page 30, the
initial public offering of Clark Automotive was completed in the
second quarter of 1994. In the preparation of these financial
statements, the results of Clark Automotive have been deconsolidated
to reflect the operations of this segment on a discontinued basis in
the Statement of Income for all periods presented.
Condensed income statement information related to Clark Automotive
for the last three years ended December 31 follows:
Amounts in millions
1993 1992 1991
Net sales $184.4 $145.5 $134.9
Pre-tax income from operations 20.7 12.8 5.0
Net income from operations 12.5 8.2 1.0
Included in the pre-tax income from operations is foreign income of
$8.4 million for 1993 and $2.0 million for 1992 and losses of $4.2
million for 1991. Net income in 1993 and 1992 benefited from the
utilization of operating loss carryforwards in Brazil in the
respective amounts of $3.7 million and $1.3 million.
In July 1992, the Company sold its material handling business (CMHC).
This business has been classified in the Statement of Income as a
discontinued operation for all years presented.
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Condensed income statement information related to CMHC for the year
ended December 31, 1991, and through July 31, 1992 follows:
Amounts in millions
1992 1991
Net sales $248.5 $498.2
Pre-tax loss from operations (11.2) (44.0)
Net loss from operations $ (7.0) $(40.7)
Gain on sale 8.5 -
Total income (loss) related to CMHC $ 1.5 $(40.7)
Included in the pre-tax loss from operations is foreign income of
$2.6 million and losses of $16.0 million for 1992 and 1991,
respectively. Included in the gain on the sale of CMHC is a tax
benefit of $7.6 million.
Discontinued operations in 1992 and 1991 include the results of an
insurance subsidiary which had been held for sale. The subsidiary
continues to be liquidated, and due to immateriality, these results
have been reclassified to other income in 1993. The investment in
this operation has been reclassified on the Company's Balance Sheet
to "other assets" for both periods presented.
Investments and Advances - VME Group N.V.
The Company's investments in VME were $122.1 million and $121.3
million in 1993 and 1992, respectively.
VME is a joint venture owned 50% each by the Company and AB Volvo of
Sweden. Following are condensed financial data of VME:
Amounts in millions
Year ended December 31, 1993 1992 1991
Net sales $1,240 $1,357 $1,368
Gross profit 281 188 258
Net income (loss) 30 (94) (45)
As at December 31, 1993 1992
Current assets $ 531 $ 649
Non-current assets 258 321
Current liabilities 314 515
Non-current liabilities and
deferred taxes 247 230
The $7.9 million difference between the Company's investment and its
equity in VME net assets at December 31, 1993, relates primarily to
additional equity contributions made in prior years, which is treated
as goodwill. Goodwill amortization approximated $1.1 million in each
year presented. During the second half of 1992, the Company and AB
Volvo each invested $15 million in VME's capital and each made
subordinated loans of an additional $35 million. The subordinated
loans bear interest of 1.3% over LIBOR and are to be repaid in 1996.
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<PAGE>
Effective January 1, 1993, VME adopted FAS No. 109, "Accounting for
Income Taxes," and recorded a benefit of $12.3 million. VME also
adopted FAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," effective January 1, 1993, and will
recognize its estimated obligation on a transitional basis over 20
years. A charge of $2.8 million is included in VME's 1993 net
income. Clark's share of each of these accounting changes is
consistent with its 50% ownership position in VME.
Transactions with VME are conducted on the basis of normal commercial
relationships, at prevailing market prices, and are considered
immaterial.
Accrued Liabilities
Accounts payable and accrued liabilities include the following:
Amounts in millions
1993 1992
Trade payables $ 65.0 $ 56.1
Accrued payrolls and related taxes 34.8 23.4
Accrued warranty 15.5 15.5
Accrued pension 12.5 .6
Other 22.3 22.6
$150.1 $118.2
Other non-current liabilities include the following:
Amounts in millions
1993 1992
Accrued pension $ 2.4 $ 10.0
Accrued product liability 9.8 7.8
Environmental 13.5 17.8
Income taxes payable 15.4 19.3
Discontinued operations reserves 9.6 11.0
Other 24.0 24.6
$ 74.7 $ 90.5
Other Income
Following is a summary of the major elements of other income for the
years ended December 31:
Amounts in millions
1993 1992 1991
Interest income $11.4 $10.6 $ 9.3
Sundry items, net 3.6 4.3 2.9
$15.0 $14.9 $12.2
The 1993 interest income includes income of $1.7 million from a duty
drawback refund received from the U.S. Customs Service and interest
of $1.8 million due from the settlement of U.S. tax audits for 1989
through 1991.
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Supplementary Income Statement Information
Amounts in millions
1993 1992 1991
Maintenance and repairs $16.3 $16.9 $15.1
Taxes, other than payroll and
income taxes 7.7 8.4 6.1
Rents 4.8 5.0 5.8
Advertising costs 6.0 6.7 6.6
Research and development costs 17.0 14.7 14.9
Income Taxes
Following is a segregation of pre-tax income (loss) from continuing
operations as reported by U.S. and foreign companies (excluding
equity earnings of associated companies):
Amounts in millions
1993 1992 1991
Pre-tax income (loss) -
Consolidated continuing
operations:
United States $27.0 $12.7 $(12.1)
Foreign (1.2) 5.1 (23.4)
$25.8 $17.8 $(35.5)
The elements of the provision (credit) for income taxes are as
follows:
Amounts in millions
1993 1992 1991
Current income taxes:
Federal $ 2.1 $(1.1) $(4.7)
Foreign 1.7 2.4 .9
State .3 .6 .4
Total current 4.1 1.9 (3.4)
Deferred (prepaid) income taxes:
United States -
recurring 4.5 4.5 -
change in tax rates (3.0) - -
Foreign (1.4) (.6) (1.6)
Total deferred (prepaid) .1 3.9 (1.6)
Provision (credit) for income
taxes on consolidated
continuing operations $ 4.2 $ 5.8 $(5.0)
The U.S. corporate income tax rate increased from 34% to 35%
retroactive to January 1, 1993. A tax credit of $3.0 million was
recorded in the third quarter and net U.S. deferred tax assets were
revalued at the higher tax rate.
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<PAGE>
Deferred tax assets before valuation allowances approximate $163
million as of December 31, 1993, and $154 million as of December 31,
1992. These assets consist of:
Amounts in millions
1993 1992
Expected future tax benefits relating
to postretirement benefits $ 94 $ 90
Self-insurance and warranty reserves 11 8
Environmental reserves 6 6
Pension and deferred compensation
commitments 15 14
Loss and credit carryforwards 27 25
Other items 10 11
$163 $154
The Company has reduced gross deferred tax assets by valuation
reserves that approximate $33 million on December 31, 1993, and $31
million at December 31, 1992. These reserves relate principally to
net operating and capital loss carryforwards.
Deferred tax liabilities as of December 31, 1993, of $15 million are
comprised of differences in the recorded book and tax basis of
assets.
As of December 31, 1993, the Company has foreign net operating loss,
U.S. capital loss, and foreign tax credit carryforwards of $9.5
million, $16.0 million and $1.1 million, respectively, for which no
financial statement benefit has been recognized. Approximately $3.1
million of the operating losses expire by 1998, while the remainder
have an indefinite carryforward period. The capital loss and foreign
tax credit carryforwards are limited in use and generally expire by
1997. Benefit relating to these carryforwards has not been reflected
because of the limited carryforward periods and the limitations on
their use. Future benefit may occur to the extent capital gains or
foreign-sourced income are recognized prior to the expiration of the
carryforwards. During 1993 and 1992, pre-tax capital gain income
approximating $3.0 million and $1.8 million, respectively, was
earned, favorably impacting the Company's tax provisions.
No net benefit has been given to the foreign operating loss
carryforwards because of the limited carryforward periods and/or the
uncertain business conditions relating to the operations giving rise
to such carryforwards. Future recognition of these carryforwards
will be reflected if the foreign entities have sufficient earnings
before the expiration periods of the respective loss carryforwards.
The tax provision in 1992 was reduced by approximately $0.5 million
as a result of the utilization of net operating loss carryforwards at
certain locations.
The deferred tax asset valuation reserve at December 31, 1993, is
approximately $33 million, and is $31 million at December 31, 1992.
The valuation reserve increased over the 1992 level as a result of
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<PAGE>
the incurrence of additional net operating loss carryforwards at
certain locations, a revised estimate of the capital loss
carryforward related primarily to the sale of CMHC, and the revision
of foreign tax credit carryforwards resulting from an Internal
Revenue Service audit. The reserve was reduced by $3.7 million as a
result of the realization of net operating loss carryforwards at the
Company's Brazilian operation which is included in discontinued
operations. The valuation allowance at December 31, 1992, of $31
million was $22.3 million less than that originally provided at the
time of the adoption of FAS No. 109. Approximately $19.5 million of
this difference relates to the temporary differences of CMHC, net of
the unrealized capital loss benefit. Valuation reserves for future
tax benefits of CMHC were provided at the time of the adoption of FAS
No. 109 because it was expected that such benefits would accrue to
the purchaser. The remaining difference is reflective of domestic
utilization of capital loss carryforward benefits and the utilization
of operating loss carryforwards at certain foreign locations in 1992,
including $1.3 million in Brazil which is included in discontinued
operations.
A reconciliation of the net effective tax rate for consolidated
continuing operations to the U.S. statutory federal income tax rate
for the three years ended December 31, 1993, is as follows:
Amounts in millions
1993 1992 1991
U.S. federal statutory rate 35.0% 34.0% (34.0)%
Increase (decrease) in rate
resulting from:
Revaluation of deferred tax
assets for change in U.S.
tax rates (11.6) - -
Utilization of net operating
and capital loss carryforwards
and other credits (4.5) (10.9) -
Higher foreign taxes 2.7 7.2 20.7
Foreign distributions, net of
foreign tax credits - 2.6 4.0
Income not subject to tax (3.1) (2.4) (2.2)
Other, net (2.2) 1.9 (2.6)
Net effective tax rate 16.3% 32.4% (14.1)%
Provision has not been made for U.S. or any additional foreign taxes
on the undistributed earnings or book-tax basis differentials of
foreign subsidiaries. Undistributed earnings and basis differentials
approximate $66 million at December 31, 1993. Any future dividends
declared and remitted are expected to be solely from the current
earnings of the respective operations. Undistributed earnings and
existing basis differentials will become subject to tax in the event
that they are remitted or if the Company should sell such operations.
It is not practicable to estimate the amount of additional tax that
might be payable on unremitted earnings or basis differentials
because it is not known when or on what basis these differences may
reverse.
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Long-Term and Short-Term Debt
Following is a summary of long-term debt of the Company and its
consolidated subsidiaries due after one year, as of December 31:
Amounts in millions
1993 1992
Medium-term notes having maturities
ranging from June 14, 1995, to
May 15, 2023, and interest rates
ranging from a floating LIBOR
plus .55% to a fixed 8.35%
(face amount $90,250,000) $ 89.6 $ -
LESOP loan (interest rate tied
to LIBOR) - 40.4
9-3/4% notes due March 1, 2001
(face amount $100,000,000) 99.7 99.6
9-5/8% sinking fund debentures - 16.7
6% industrial development revenue
bonds, payable $400,000 in 1998
and $900,000 annually in
1999-2002 4.0 4.0
Hurth obligations due in periods
ranging from 1994 to 2000, at
an average rate of 9.3% 11.5 15.7
Present value of Hurth purchase
commitment - 6.4
Other long-term notes - 3.8
$204.8 $186.6
Required payments on long-term debt are $9.6 million in 1994, $12.1
million in 1995, $23.0 million in 1996, $1.8 million in 1997, $12.2
million in 1998, and $155.7 million thereafter.
In April, the Company began the sale of certain securities under a
$150 million shelf registration statement. Clark issued $90.2
million of medium-term notes during the second quarter of 1993.
These include $50 million of 30-year notes at an average rate of
approximately 8.20%.
The remaining notes have maturities ranging from June 14, 1995, to
July 1, 1998, at rates ranging from a floating LIBOR plus .55% to a
fixed 6.25%. Approximately $63 million of the notes proceeds were
used to redeem the Company's 9-5/8% sinking fund debentures and to
prepay the LESOP loan.
The Company has a $66.2 million line of credit agreement with seven
banks, which expires in October 1994. The Agreement carries
restrictions on minimum net worth, debt-to-capitalization ratios,
stock repurchases, and dividend payments. At December 31, 1993 and
1992, there were no amounts outstanding under the revolving credit
facility and the Company was in compliance with the facility
requirements. The Company is currently negotiating a new credit
agreement.
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At December 31, worldwide short-term bank lines of credit, subject to
cancellation upon notice by the bank or the Company, were:
Amounts in millions
1993 1992 1991
Lines of credit $46.2 $44.3 $79.0
Unused lines of credit 23.7 31.1 36.6
Maximum borrowings during year 22.5 42.7 45.5
Average borrowings 18.2 27.0 44.2
Average rate on foreign
borrowings outstanding at
December 31 8.2% 9.6% 10.0%
Daily weighted average
interest rate 11.2% 10.8% 9.9%
Capital Stock
The Company has authorization for 40,000,000 shares of $7.50 par
value Common Stock. There were 17,401,903 shares and 17,351,139
shares outstanding at December 31, 1993 and 1992, respectively.
These shares include 2,206,741 shares held in the LESOP trust.
Shares held as treasury stock were 1,792,431 shares and 1,840,595
shares at the respective year-ends. The Company also has
authorization for 3,000,000 shares of $1.00 par value Preferred
Stock, none of which have been issued.
In 1987, the Board of Directors adopted a Rights Plan, which was
amended in 1990 and will expire in 1997. The Rights Plan may become
operative in the event that certain change of control conditions
occur.
Stock Options
Under the 1975 Stock Option Plan, 850 shares and 13,450 shares at
December 31, 1993 and 1992, respectively, of authorized but unissued
Common Stock were reserved for issue to employees at the market value
of the stock on the date the options were granted. Options
representing 850 shares were outstanding under the 1975 Plan at
December 31, 1993.
Under the 1985 Stock Option Plan, 171,301 shares and 292,580 shares
at December 31, 1993 and 1992, respectively, of authorized but
unissued Common Stock were reserved for issue to employees at the
market value of the stock on the date the options were granted.
Options representing 171,301 shares were outstanding under the 1985
Plan at December 31, 1993.
Options under these plans may not be exercised until one year after
the date granted. These options expire 10 years after the date
granted. No further options may be granted under either the 1975 or
1985 Stock Option Plans.
Options were exercisable for 164,413 shares and 86,449 shares at
December 31, 1993 and 1992, respectively. Of the shares for which
options have been granted under the plans, 108,795 shares include
appreciation rights.
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<PAGE>
Following is a summary of the changes in options under the plans for
each of the last three years:
1993 1992 1991
Outstanding at January 1,
at an average price per
share of $20.08, $25.05,
and $24.95, respectively 306,030 114,662 125,077
Options granted at an
average price per share
of $18.50 in 1992 - 219,581 -
Cancelled or lapsed (40,002) (28,213) (3,600)
Exercise of previously
granted options at an
average grant price per
share of $19.71 and $23.80,
respectively (29,278) - (1,115)
Exercise of options with
appreciation rights (64,599) - (5,700)
Outstanding at December 31,
at an average price per
share of $18.57, $20.08,
and $25.05, respectively 172,151 306,030 114,662
Pension Costs
The Company has non-contributory defined benefit pension plans
covering substantially all of its U.S. employees and certain
employees and retirees of previously owned businesses. The plans
covering salaried employees provide benefits based upon years of
service and final average compensation. The plans covering hourly
employees provide monthly benefits based upon a flat rate and years
of service.
Assets of the U.S. plans are invested primarily in U.S. government
and agency bonds, equities, fixed income securities, and insurance
contracts. The Company's funding policy for its qualified plans
generally is to contribute no less than the minimum amount required
by law and no more than the maximum amount that can be deducted for
federal income tax purposes.
Some of the Company's foreign subsidiaries also have defined benefit
pension arrangements. These plans are not required to report to
governmental agencies pursuant to ERISA, and do not otherwise
determine the actuarial value of accumulated benefits or net assets
available for benefits.
Consolidated worldwide 1993 pension expense for defined benefit plans
was $9.2 million, compared with $6.8 million in 1992 and $5.9 million
in 1991. The components of pension expense for each of these years
is as follows:
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Amounts in millions
1993 1992 1991
Current service cost $ 2.9 $ 3.1 $ 3.2
Interest cost 25.2 24.9 25.1
Return anticipated on plan
assets for the year (actual
$70.9 million, $10.4 million,
and $33.2 million for the
respective years) (22.7) (23.6) (24.1)
Other components of pension
expense, net 2.7 1.4 0.6
U.S. pension expense 8.1 5.8 4.8
Non-U.S. pension expense 1.1 1.0 1.1
$ 9.2 $ 6.8 $ 5.9
The following tables reconcile the funded status of the Company's
U.S. pension plans and the amounts recognized on the Company's
Balance Sheet:
Amounts in millions
Active Inactive
December 31, 1993 Plans Plan
Accumulated benefit obligation,
including non-vested benefits
of $13.5 million $101.9 $226.0
Projected benefit obligation $121.0 $226.0
Unrecognized past service cost (1.2) -
Unrecognized net loss from past
experience different from
that assumed (37.4) (27.2)
Unrecognized transition asset 1.8 -
Plan assets at fair value (117.7) (188.6)
Adjustment required to recognize
minimum liability 3.6 27.2
Accrued (prepaid) pension cost $(29.9) $ 37.4
Amounts in millions
Active Inactive
December 31, 1992 Plans Plan
Accumulated benefit obligation,
including non-vested benefits
of $10.2 million $ 78.1 `$210.4
Projected benefit obligation $ 93.3 $210.4
Unrecognized past service cost (1.3) -
Unrecognized net loss from past
experience different from
that assumed (50.4) (18.3)
Unrecognized transition asset 2.1 -
Plan assets at fair value (77.4) (174.5)
Adjustment required to recognize
minimum liability 1.6 18.3
Accrued (prepaid) pension cost $(32.1) $ 35.9
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The discount rates used to determine the projected benefit obligation
was 7.25% in 1993 and ranged from 8.25% to 8.50% in 1992. The rate
of increase in future compensation for determining the projected
benefit obligation was 5.4%.
Balance sheet liabilities for worldwide pensions totaled $14.9
million and $10.6 million at December 31, 1993 and 1992,
respectively. Of these figures, U.S. plans accounted for $7.5
million and $3.8 million in 1993 and 1992, respectively, while
foreign plans accounted for $7.4 million and $6.8 million in 1993 and
1992, respectively.
The Company also has certain defined contribution plans in the United
States and Italy. Expense relating to these plans totaled $2.9
million, $4.0 million, and $3.4 million in 1993, 1992, and 1991,
respectively.
Postretirement Health Care and Life Insurance Benefits
The Company provides certain health care and life insurance benefits
for retired employees, including certain retirees of previously owned
businesses, which will include Clark Automotive. Substantially all
of the Company's U.S. employees may become eligible for these
benefits upon retirement. The coverage is provided on a non-
contributory basis for most retirees who retired prior to August
1986, and on a contributory basis for post-August 1986 retirees and
all active employees.
The Company does not fund its postretirement benefit plans. The
following table presents a reconciliation of the APBO to the
liability for such costs recognized in the Company's Balance Sheet as
of December 31, 1993 and 1992:
Amounts in millions
1993 1992
Accumulated Postretirement Benefit
Obligation (APBO):
Retirees $251.5 $236.6
Fully eligible active
participants 12.8 14.3
Other active participants 20.3 18.0
Total APBO 284.6 268.9
Unrecognized past service cost 11.6 12.6
Unrecognized loss from
changes in assumptions (43.4) (32.6)
Accrued postretirement benefit cost $252.8 $248.9
Net periodic postretirement benefit expense for each of the three
years ended December 31 was comprised of the following components:
Amounts in millions
1993 1992 1991
Service cost of benefit earned $ 1.3 $ 1.4 $ 2.0
Interest cost on APBO 21.5 21.2 19.0
Other (.6) (.6) -
Net periodic postretirement
benefit expense $22.2 $22.0 $21.0
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In measuring the projected APBO for 1993, 1992, and 1991, medical
inflation trend rates were initially assumed at 13%, 13%, and 13%,
with such rates trending downward to 5%, 5%, and 6%, respectively, by
1999. The weighted average discount rates used in each year were
7.5%, 8.25%, and 8%. If the health care cost trend rate were to be
increased by 1%, the APBO as of December 31, 1993, would increase by
approximately $23.9 million, and the net periodic postretirement
expense would increase by approximately $2.0 million.
Leveraged Employee Stock Ownership Plan
The Company has a Leveraged Employee Stock Ownership Plan (LESOP) for
eligible U.S. employees. The Company loaned the LESOP $85 million,
which the LESOP used to purchase 2,741,936 shares of Clark Common
Stock from the Company. Clark has agreed to make future
contributions to the LESOP to service this debt. The related
obligation offsets the note due from the LESOP in Clark's Balance
Sheet.
The Clark Common Stock purchased with the loan proceeds is held by
the LESOP trustee as collateral for the loan owed to Clark. Each
year, the Company makes contributions to the LESOP which in turn are
used to make loan principal and interest payments. With each
principal and interest payment, the LESOP allocates a portion of the
Common Stock to participating employees. As of December 31, 1993 and
1992, there were 1,730,551 and 1,589,634 shares, respectively,
allocated to participants.
The LESOP is designed to fund the Company's contributions to the
Clark Savings and Investment Plan and the Clark Retirement Program
for Salaried Employees. Currently, the Plan is only being used to
fund the salaried retirement program.
The outstanding balance of the loan from Clark to the LESOP is
repayable in semi-annual installments of $2.6 million, with the
aggregate amount then remaining unpaid to be paid on July 1, 2001.
Interest is payable quarterly at a rate equal to the LIBOR rate plus
.25% for the period October 1, 1992, through final maturity. The
outstanding balance under the loan as of December 31, 1993, was $42.8
million.
At the time the LESOP was established, the value of shares purchased
and not allocated to participants was established as an offset to
Clark's equity. This offset is reduced as shares are allocated to
participants in conjunction with Clark's annual contributions to the
LESOP.
Contingencies
Environmental
The Company is involved in environmental clean-up activities or
litigation in connection with nine former waste disposal sites and
five former plant locations.
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At each of the nine 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 December
31, 1993, the Company had reserves of approximately $16.4 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 1993 expenditures relating to
environmental compliance and clean-up activities approximate $2.6
million.
Sale of 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 operation,
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
approximately $88 million at December 31, 1993. 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.
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2) Third Party Guarantees
The Company has guaranteed approximately $27 million of obligations
of third parties relating to the CMHC operation. Approximately $18
million of these guarantees relate to national account rental
arrangements with a number of large creditworthy customers.
Approximately $9 million relate to capital loans given by a finance
company to independent CMHC dealers, which are secured by a lien on
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 on 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 the latest report on file with the Securities and Exchange
Commission, Terex reported that it was continuing to incur operating
losses and had a deficit stockholders' investment. In their 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 December 1993,
Terex announced that it had issued $30 million of preferred stock in
a private placement arrangement.
Other
The Company is self-insured with respect to product liability risk,
although insurance coverage is obtained for catastrophic losses. The
Company has pending approximately 65 claims, with respect to which
approximately 43 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 December 31, 1993, the Company
had reserves of approximately $11.6 million related to product
liability exposures.
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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, antitrust, and
other issues. The ultimate results of these claims and proceedings
at December 31, 1993, 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 have 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 December 31, 1993, guarantees are
approximately $20 million and repurchase arrangements relating to
product financing by an independent finance company approximate $64
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 assumes the assets of the prior dealer and
any related financial obligation. Accordingly, the risk of loss to
the required repurchaser is minimal, and historically Clark has
incurred only immaterial losses relating to these arrangements.
The Company enters into forward exchange contracts to protect margins
on projected future sales denominated in foreign currencies.
Settlement dates on executed contracts are generally not more than 18
months in advance of the original execution date. At December 31,
1993, forward exchange contracts of approximately $95 million were
outstanding. Maximum risk of loss on these contracts is limited to
the amount of the difference between the spot rate at the date of
contract delivery and the contracted rate. The Company believes that
future sales revenue will generate sufficient foreign currency to
meet these commitments.
Business Segment Information
The Company's continuing operations business is the design,
manufacture, and sale of skid-steer loaders, construction machinery,
and axles and transmissions for off-highway equipment. Sales to the
U.S. government account for less than 1% of total sales.
The Company operates as one industry segment, that being "off-
highway" products in the capital goods industry. Melroe and Clark-
Hurth Components business units compose the off-highway segment.
Melroe produces skid-steer loaders, compact excavators, and a limited
number of agricultural products. Clark-Hurth Components produces
off-highway axles and transmissions used principally in construction,
mining, and material handling applications.
- 27 -
<PAGE>
<PAGE>
Sales and operating profit (loss) reflect amounts sourced from the
identified geographic area.
Identifiable assets are those that are used in the Company's
operations in each geographic area. Corporate assets are principally
cash, short-term investments, certain assets of previously sold
businesses that are held for sale, deferred tax assets, and fixed
assets maintained for general corporate purposes.
Unallocated corporate and other expenses include certain continuing
costs related to previously disposed businesses. These are
principally the "time-value-of-money" costs related to discounted
retiree health care liabilities.
There was no single customer from which at least 10% of total revenue
was derived during 1991-1993. Export sales of U.S.-manufactured
products and parts sold to customers and dealers located outside of
the United States were $160.0 million, $178.6 million, and $151.1
million in 1993, 1992, and 1991, respectively.
- 28 -
<PAGE>
<PAGE>
<TABLE>
G E O G R A P H I C S E G M E N T S
<CAPTION>
Amounts in millions
Sales Operating Profit(Loss) Identifiable Assets
1993 1992 1991 1993 1992 1991 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
North America . . . . . . $562.3 $501.4 $436.5 $64.9 $55.5 $11.8 $251.5 $228.7 $174.3
Europe . . . . . . . . . 129.7 157.1 152.7 4.2 3.9 (12.1) 200.5 238.4 278.8
Transfers between
areas:
North America . . . . 16.3 15.0 12.6
Europe . . . . . . . . 12.0 10.9 10.0
Eliminations . . . . . (28.3) (25.9) (22.6) - - - (7.9) (6.8) (4.0)
692.0 658.5 589.2 69.1 59.4 (0.3) 444.1 460.3 449.1
Unallocated corporate
and other . . . . . . (21.9) (18.1) (11.4) 339.8 269.4 217.9
Interest expense . . . . (21.4) (23.5) (23.8)
Consolidated
operations. . . . . . $692.0 $658.5 $589.2 25.8 17.8 (35.5) 783.9 729.7 667.0
Equity investments . . . 7.8 (48.1) (23.1) 122.1 121.3 135.6
Total continuing
operations * . . . . . $33.6 ($30.3) ($58.6) 906.0 851.0 802.6
Discontinued operations . 95.9 107.7 317.4
Total . . . . . . . . . . $1,001.9 $958.7 $1,120.0
<FN>
* Pre-tax income (loss) and assets from continuing operations.
</TABLE>
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<PAGE>
<PAGE>
Subsequent Events
On February 23, 1994, Clark Automotive Products Corporation (which
includes its two wholly owned subsidiaries, CAPCO do Brasil
Empreendimentos e Participacoes Ltda. and Equipamentos Clark Ltda, which
are engaged primarily in the manufacture of on-highway transmissions in
Brazil for sale in the Brazilian and U.S. markets) filed a Registration
Statement with the Securities and Exchange Commission for an initial
public offering of 10,000,000 shares of its common stock. Of these
10,000,000 shares, 9,174,194 were to be sold by the Company,
representing 91 percent of its interest in CAPCO, and 825,806 by CAPCO.
On May 6, 1994, the Offerings were underwritten by CS First Boston
Corporation, Merrill, Lynch, Pierce, Fenner and Smith Incorporated
and a syndicate of other investment banks. On May 13, 1994, the
Company received net proceeds from its portion of the Offerings of
approximately $103 million, resulting in a gain of approximately $33
million. The impact of this transaction has been reflected in the
Company's financial statements in the second quarter of 1994 and the
prior year results presented in these financial statements have been
deconsolidated to reflect this segment as a discontinued operation in
the Statement of Income for all periods presented. The notes
pertaining to the Statement of Income do not include the results of
CAPCO.
On May 13, 1994, the Company also 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 $144
million. The purchase price is subject to final adjustment pursuant
to the terms of the Agreement of Purchase and Sale between WCI and
Clark.
- 30 -
<PAGE>
<PAGE>
<TABLE>
C H A N G E S I N S T O C K H O L D E R S ' E Q U I T Y
<CAPTION>
Amounts in millions, except share data
Retained Cumulative
Capital in Earnings Value of Translation
Capital Excess of (Accumulated LESOP Treasury and Other
Stock Par Value Deficit) Shares Stock Adjustments Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1990 . . . . . . . . . . . . .$ 143.9 $ 179.0 $ 316.6 $ (48.8)$ (53.7)$ 43.2 $ 580.2
Net loss . . . . . . . . . . . . . . . . . . . . (337.5) (337.5)
LESOP shares allocated to employees. . . . . . . 8.2 8.2
Pension liability in excess of --
unrecognized prior service cost . . . . . . . (6.1) (6.1)
Shares issued-treasury (61,196 shares) . . . . . 1.7 1.7
Shares issued on stock options (1,115 shares). . --
Effect of exchange rates and other changes (9.0) (9.0)
Balance, December 31, 1991 . . . . . . . . . . . . . 143.9 179.0 (20.9) (40.6) (52.0) 28.1 237.5
Net income. . . . . . . . . . . . . . . . . . . . 66.0 66.0
LESOP shares allocated to employees. . . . . . . 4.9 4.9
Pension liability in excess of unrecognized --
prior service cost, net of tax. . . . . . . . (0.5) (0.5)
Shares issued-treasury (39,647 shares) . . . . . (0.2) 1.1 0.9
Amortization of unearned restricted stock . . . . 0.2 0.2
Effect of exchange rates and other changes . . . (56.4) (56.4)
Balance, December 31, 1992 . . . . . . . . . . . . . 143.9 179.2 44.9 (35.7) (50.9) (28.8) 252.6
Net income . . . . . . . . . . . . . . . . . . . 48.0 48.0
LESOP shares allocated to employees. . . . . . . 4.4 4.4
Pension liability in excess of unrecognized --
prior service cost, net of tax . . . . . . . . (6.8) (6.8)
Shares issued-treasury (48,164 shares) . . . . . 0.1 0.3 (0.2) 1.2 1.4
Amortization of unearned restricted stock . . . 0.1 0.1
Effect of exchange rates and other changes . . . (31.5) (31.5)
Balance, December 31, 1993 $ 144.0 $ 179.6 $ 92.7 $ (31.3)$ (49.7)$ (67.1)$ 268.2
</TABLE>
-31-
<PAGE>
<PAGE>
<TABLE>
Q U A R T E R L Y I N F O R M A T I O N ( U N A U D I T E D )
<CAPTION>
Amounts in millions, except per share data
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
1993 1992 1993 1992 1993 1992 1993 1992 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . $163.0 $162.1 $187.4 $175.2 $167.1 $163.6 $174.5 $157.6 $692.0 $658.5
Gross profit . . . . . . . . . . . 33.8 29.6 40.3 30.1 30.7 27.0 30.1 27.5 134.9 114.2
Income (loss) before effect
of a change in accounting
principles. . . . . . . . . . . 2.5 (9.3) 10.8 (9.9) 10.1 (4.0) 18.4 (2.8) 41.8 (26.0)
Effect of accounting changes. . . . 6.2 92.0 - - - - - - 6.2 92.0
Net income (loss). . . . . . . . 8.7 82.7 10.8 (9.9) 10.1 (4.0) 18.4 (2.8) 48.0 66.0
Information per share of
Common Stock:
Income (loss) before effect
of a change in accounting
principles. . . . . . . . . . $.15 $(.54) $.62 $(.57) $.58 $(.23) $1.06 $(.16) $2.41 $(1.50)
Effect of accounting
changes .35 5.31 - - - - - - .35 5.31
Net income (loss). . . . . . . . .50 4.77 .62 (.57) .58 (.23) 1.06 (.16) 2.76 3.81
Common Stock prices:
High . . . . . . . . . . . . 24 1/8 27 1/2 34 3/4 28 7/8 48 1/2 26 53 3/4 21 53 3/4 28 7/8
Low . . . . . . . . . . . . . 19 5/8 22 1/4 22 1/2 23 34 1/4 19 45 1/8 16 1/2 19 5/8 16 1/2
<FN>
The principal market on which the Company's Common Stock is traded is the New York Stock Exchange. The high and low sales
prices of the Common Stock shown in the preceding table are prices as reported in the Composite Transaction Reporting System.
The approximate number of stockholders totaled 2,331 and 2,627 at December 31, 1993 and 1992, respectively. No cash dividends
were paid on the Company's Common Stock during 1993 and 1992.
</TABLE>
- 32 -
<PAGE>
<PAGE>
Report of Independent Accountants
Price Waterhouse
Stockholders and Board of Directors
Clark Equipment Company
South Bend, Indiana
In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of income and of cash flows
present fairly, in all material respects, the financial position
of Clark Equipment Company and its subsidiaries at December 31,
1993 and 1992, and the results of their operations and their cash
flows for each of the three years in the period ended December
31, 1993, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
generally accepted auditing standards, which require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed
above.
As further discussed in the Notes to the Consolidated
Financial Statements, effective January 1, 1992, the Company
changed its method of accounting for income taxes by adopting
Statement of Financial Accounting Standards (FAS) No. 109,
"Accounting for Income Taxes." Furthermore, effective January 1,
1991, the Company changed its method of accounting for
postretirement health care and life insurance benefits by
adopting FAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions."
As further discussed in the Notes to the Consolidated
Financial Statements, effective January 1, 1993, the Company's
50%-owned joint venture, VME Group, N.V., changed its methods of
accounting for income taxes and postretirement health care and
life insurance benefits by also adopting the provisions of FAS
No. 109 and FAS No. 106.
Price Waterhouse
South Bend, Indiana
February 14, 1994, except as
to the Subsequent Events Note
appearing on page 30, which is
as of May 13, 1994
- 33 -
<PAGE>
<PAGE>
Report by Management
The preceding financial statements have been prepared by
management in conformity with generally accepted accounting
principles appropriate in the circumstances. In the preparation
of this report, some estimates are necessary and they are made
based on currently available information and judgement of current
conditions and circumstances. Management is also responsible for
all other information contained in this report.
Management maintains and depends upon the Company's system
of internal controls in meeting its responsibilities for reliable
financial statements. This system is designed to provide
reasonable assurance that assets are safeguarded and that
transactions are properly recorded and executed in accordance
with management's authorization. Judgements are required to
assess and balance the relative cost and expected benefits of
these controls.
The financial statements have been audited by the
independent accounting firm, Price Waterhouse. Their role is to
render an independent professional opinion on management's
financial statements to the extent required by generally accepted
auditing standards. In addition to the use of independent
accountants, the Company also utilizes an independent
professional staff of internal auditors who conduct operational
and special audits.
The Board of Directors elects an Audit Committee from among
its members, no member of which is an employee of the Company.
The Audit Committee is responsible to the Board for reviewing the
accounting and auditing procedures and financial practices of the
Company and for recommending appointment of the independent
accountants. The Audit Committee meets periodically with
management, professional internal auditors, and the independent
accountants to review the work of each and satisfy itself that
they are properly discharging their responsibilities. Both the
independent accountants and the independent professional internal
auditors have free access to the Committee, without the presence
of management, to discuss their observations on internal controls
and to review the quality of financial reporting.
- 34 -
<PAGE>
<PAGE>
<TABLE>
F I N A N C I A L R E V I E W
The following are certain selected financial data of Clark Equipment Company and its
consolidated subsidiaries for the five years ended December 31, 1993. (Dollars in
thousands, except per share data.)
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
NET SALES . . . . . . . . . . . . . . . . .$ 692,022 $ 658,535 $ 589,186 $ 673,198 $ 671,534
OPERATING COSTS AND EXPENSES:
Cost of goods sold . . . . . . . . . . . 557,138 544,294 524,740 555,247 545,152
Selling, general and
administrative expenses . . . . . . . 102,699 87,905 88,249 89,931 94,353
659,837 632,199 612,989 645,178 639,505
Operating income (loss). . . . . . . . . . . 32,185 26,336 (23,803) 28,020 32,029
Other income, net . . . . . . . . . . . . . 15,016 14,934 12,196 15,721 23,429
Interest expense . . . . . . . . . . . . . . (21,426) (23,481) (23,841) (18,880) (23,194)
Pre-tax income (loss) from
consolidated operations . . . . . . . . 25,775 17,789 (35,448) 24,861 32,264
Provision (credit) for income taxes . . . . 4,196 5,773 (4,988) 12,166 26,667
Income (loss) from consolidated
operations . . . . . . . . . . . . . . . 21,579 12,016 (30,460) 12,695 5,597
Equity in net income (loss) of
associated companies . . . . . . . . . . 7,840 (48,083) (23,129) 21,576 22,411
Income (loss) from continuing
operations. . . . . . . . . . . . . . . 29,419 (36,067) (53,589) 34,271 28,008
Discontinued operations:
Income (loss) - insurance subsidiaries . -- 355 (61) (62) 116
Income (loss) - material handling
operations . . . . . . . . . . . . . . -- (7,056) (40,723) 9,580 14,579
Gain on sale - material handling . . . . -- 8,519 -- -- --
Income - automotive operations . . . . . 12,450 8,207 1,035 5,673 22,153
Income (loss) from discontinued
operations . . . . . . . . . . . . . . 12,450 10,025 (39,749) 15,191 36,848
Income (loss) before extraordinary
credit and effect of changes in
accounting principles . . . . . . . . . . 41,869 (26,042) (93,338) 49,462 64,856
Income tax benefit from loss
carryforward . . . . . . . . . . . . . . -- -- 718 10,837 4,057
Effect of accounting changes:
Postretirement benefits . . . . . . . . . -- -- (244,900) -- --
Income taxes . . . . . . . . . . . . . . 6,150 92,000 -- -- --
NET INCOME (LOSS) . . . . . . . . . . . . .$ 48,019 $ 65,958 $ (337,520) $ 60,299 $ 68,913
INCOME (LOSS) PER SHARE:
From continuing operations . . . . . . .$ 1.69 $ (2.08) $ (3.10) $ 1.99 $ 1.63
From discontinued operations . . . . . 0.72 0.58 (2.30) 0.88 2.15
Extraordinary credit . . . . . . . . . . -- -- 0.04 0.63 0.24
From effect of accounting changes . . 0.35 5.31 (14.16) -- --
Net income (loss) . . . . . . . . . . . $ 2.76 $ 3.81 $ (19.52) $ 3.50 $ 4.02
Cash dividends per share . . . . . . . . . . -- -- -- -- --
Average number of shares used to compute
net income(loss) per share . . . . . . 17,421,013 17,333,516 17,292,945 17,237,448 17,161,808
Total assets . . . . . . . . . . . . . . . $ 1,001,935 $ 958,691 $ 1,119,950 $ 1,100,274 $ 1,012,055
Long-term debt . . . . . . . . . . . . . . . 204,770 186,629 216,949 129,562 160,988
</TABLE>
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