SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31,1993 Commission File Number:1-5646
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 (219) 239-0100
Executive Offices) (Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class: on which registered:
Common Stock, $7.50 Par Value New York Stock Exchange, Inc.
Securities registered pursuant to Section 12 (g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
As of March 14, 1994, the aggregate market value of the voting stock held
by nonaffiliates of the Registrant was $1,114,071,082, based on the
closing price of the stock as reported on the Composite Transaction
Reporting System by the New York Stock Exchange on March 14, 1994.
(Number includes the shares held by the Registrant's Leveraged Employee
Stock Ownership Plan.)
As of March 14, 1994, there were 17,411,016 shares of Registrant's $7.50
Par Value Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Annual Report to Stockholders for the fiscal year
ended December 31, 1993 ("Annual Report") are incorporated by reference in
Parts I and II of this Form 10-K.
Portions of Registrant's Proxy Statement for the 1994 Annual Meeting of
Stockholders ("Proxy Statement") are incorporated by reference into Part
III of this Form 10-K.
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PART I
ITEM 1. BUSINESS
Clark Equipment Company, a Delaware corporation, is the successor
to certain corporations the first of which was organized on December 24,
1902. Unless the context otherwise indicates, the terms "Registrant",
"Clark" and "Company" when used in this Form 10-K refer to Clark Equipment
Company and its consolidated subsidiaries.
Description of Business
Clark's business is the design, manufacture and sale of skid steer
loaders, construction machinery, transmissions for on-highway trucks and
axles and transmissions for off-highway equipment.
Skid steer loaders, compact excavators and a limited line of
agricultural equipment are manufactured by Clark's Melroe Company Business
Unit ("Melroe"). Off-highway axles and transmissions are manufactured by
the Company's Clark-Hurth Components Company Business Unit ("Clark
Hurth"). On-highway transmissions and a limited amount of off-highway
axles and transmissions are manufactured by the Company's Clark Automotive
Products Company Business Unit ("Clark Automotive"). In this Form 10-K,
Melroe and Clark Hurth are included in the Off-Highway Segment, and Clark
Automotive is included in the On-Highway Segment.
In addition, construction machinery is manufactured by VME Group
N.V. ("VME"), a joint venture which is owned 50% by the Company and 50% by
A.B. Volvo. The Company's share of the joint venture's earnings is
included in the Company's financial statements on an equity basis. The
discussion of the Company and its operations in Part I of this Form 10-K
is limited to Melroe, Clark Hurth and Clark Automotive and does not
include VME, unless expressly stated to the contrary.
On July 31, 1992, the Company sold all of the outstanding stock of
Clark Material Handling Company ("CMHC"), and certain other subsidiaries
which comprised its material handling equipment business, to Terex
Corporation ("Terex") for approximately $91 million. A gain of $8.5
million was recognized on the sale which has been included in discontinued
operations. CMHC is reflected as a discontinued operation in the
statements of income which are filed as a part of this Form 10-K. As a
part of the sale, Terex and CMHC assumed substantially all of the
obligations of the Company relating to the CMHC operation. 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. This issue is discussed in more detail in the footnote
captioned "Contingencies" in that portion of the Company's Annual Report
to Stockholders which is attached hereto as Exhibit 13.
2<PAGE>
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Clark Automotive consists of Clark Automotive Products
Corporation, a Michigan corporation ("CAPCO"), and its wholly-owned
subsidiaries CAPCO do Brasil Empreendimentos e Participacoes Ltda. and
Equipamentos Clark Ltda. On February 23, 1994, CAPCO filed a Registration
Statement with the Securities and Exchange Commission for an initial
public offering of 10 million shares of its common stock with an estimated
price range of $14 to $17 per share. Of the total number of shares,
9,174,194 shares will be sold by the Company and 825,806 will be sold by
CAPCO. The Company has also granted the underwriter an option to purchase
an additional one million shares of common stock to cover overallotments.
If the public offering is completed, and assuming that the overallotment
option is fully exercised by the underwriter, the Company will have
disposed of its entire interest in Clark Automotive.
Backlog Orders
For the On-Highway Segment, the approximate dollar backlog of
orders believed to be firm was $25 million at December 31, 1993 and $21
million at December 31, 1992. For the Off-Highway Segment, the
approximate dollar backlog of orders believed to be firm was $124 million
at December 31, 1993 and $102 million at December 31, 1992. Generally,
Clark's customers may cancel their orders without incurring significant
cancellation charges, and, therefore, Clark's backlog is essentially a
report of the recorded intentions to purchase its products, which could
change before the sales are completed. The backlog figures stated above
are based on orders to Clark's factories or warehouses from Clark's
independent dealers and other customers who buy directly from Clark's
factories or warehouses.
Manufacturing
The products of the On-Highway Segment are manufactured by Clark
Automotive in Brazil and are sold primarily to the Brazilian automobile
industry and the North and South American medium-duty truck industry. In
addition, Clark Automotive sells a limited amount of off-highway axles and
transmissions primarily to customers in Brazil.
In the Off-Highway Segment, Melroe products are manufactured in
the United States for sale throughout the world to a wide variety of users
and industries, including the construction and agricultural industries.
These products are distributed under the trademarks "Melroe" and "Bobcat".
In addition, Melroe products are manufactured by a licensee in Australia.
Clark Hurth products are manufactured in the United States, Belgium and
Italy for sale throughout the world primarily to the construction, mining
and material handling equipment industries. In addition, Clark Hurth
products are manufactured by a licensee in South Africa.
Distribution
The products of the On-Highway Segment are sold by Clark directly
to customers by Clark employee sales representatives, and through
manufacturers representatives and independent distributors.
In the Off-Highway Segment, Clark Hurth products are also sold
directly to customers by employee sales representatives and through
manufacturers representatives and independent distributors. Melroe
products are sold by Clark primarily through independent dealers. Clark
maintains a large modern central parts warehouse in Chicago, which, in
3<PAGE>
<PAGE>
conjunction with a communications network and electronic data processing
equipment, provide expeditious shipment of customers' and dealers' orders
for repair and replacement parts for Melroe and VME products.
Operations Outside the United States
Operations outside the United States are subject to, among other
things, the laws and regulations of foreign governments relating to
investments, operations and currency restrictions, import and export
duties and revaluations and fluctuations of currencies. Operations
outside the United States are also subject to changes in governments and
economic policies.
License fees from licensees outside the United States and Canada,
other than from consolidated subsidiaries, and dividends from associated
companies aggregated approximately $0.3 million in 1993, approximately
$0.4 million in 1992 and approximately $5.2 million in 1991.
Raw Materials and Components
The principal raw materials and components purchased by the Off-
Highway Segment are steel; castings; engines and accessories; hydraulic
motors, pumps, valves and cylinders; fabricated metal parts; fabricated
plastic parts; tires and tubes; electrical equipment; drive train
components; brakes and brake components; bearings; forgings; fasteners;
bushings; electric motors; gears and gear blanks; screw machine products;
seals; clutch plates; torque convertors; synchronizer rings; steering
arms; CV joints; cardan shafts; seats; paint; sealants and adhesives;
antifreeze; batteries; radiators; oil coolers; springs; shocks; chain;
sprockets; glass; filters; and rotational and vacuum formed plastics.
The principal raw materials and components purchased by the On-
Highway Segment are steel, castings, pumps, valves, fabricated metal
parts, bearings, forgings, fasteners, screw machine products, seals,
torque converters, synchronizer rings, bushings and fabricated plastic
parts.
For both the Off-Highway and On-Highway Segments, the items
described above are purchased from a number of different suppliers, both
on an individual purchase commitment basis and on a one-year blanket order
basis. Multiple sources for most items are available, but substitution of
engines and accessories, hydraulic motors, electrical equipment, pumps,
and valves, in the event they were to become unavailable from the usual
sources, would in some instances require engineering modifications to the
product in which they are used.
Energy
Clark's manufacturing operations and those of its suppliers depend
to a substantial extent upon the availability of natural gas, fuel oil,
propane, electricity, coal, uranium and generating capacity. Clark
presently expects that its plants will be able to operate with little or
no interruption resulting out of scarcity of energy through 1994.
4<PAGE>
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Engineering and Product Development
An engineering staff is maintained at each of the principal
manufacturing facilities of Clark. These staffs are supplemented by
laboratories which provide technical support for product testing,
materials research and process development. Approximately 277 engineering
employees (engineers, designers, draftsmen and technicians) are presently
engaged full time in engineering and product development activities.
Approximately $19.8 million in 1993, $21.5 million in 1992 and $27.7
million in 1991 was spent on activities relating to the development of new
products and the improvement of existing products. These amounts include
expenditures by Clark Material Handling Company up to the date of the sale
of that company to Terex Corporation on July 31, 1992. Substantially all
of these amounts were sponsored by Clark rather than by customers.
Although Clark owns numerous patents and has patent applications
pending, its business is not materially dependent upon patent protection.
Competition
Clark conducts its domestic and foreign operations under highly
competitive conditions and its business is subject to cyclical influences
and other factors. The customers for most of Clark's products are
commercial, industrial or farm users who use the products in business for
profit. Product performance and parts and service availability are
primary considerations for these customers in the choice among competing
products. Availability of rental and financing programs and warranty
policies are also important considerations. In making a purchase
decision, the above factors, plus the initial selling price, the date on
which delivery can be made, and the general product reputation will be
considered by the purchaser, and the order will normally be placed with
the seller who comes closest to satisfying the purchaser's particular
requirements of all of these factors.
Clark estimates that it has 19 significant competitors in the On-
Highway Segment. In addition, this Segment is subject to potential
competition from its customers, some of whom could elect to make for
themselves the components now purchased from Clark.
In the Off-Highway Segment, Melroe is the leading producer of skid
steer loaders in the United States and has approximately 20 significant
competitors. Clark Hurth has approximately 20 significant competitors and
is also subject to potential competition from its customers.
Customers
The Off-Highway Segment is not dependent upon a single customer or
a few customers, the loss of any one or more of which would have a
material adverse effect on its operations.
During 1993, approximately 32% of the consolidated revenues of the
On-Highway Segment was derived from sales to its largest customer, and
approximately 54% of the Segment's consolidated revenues was derived from
sales to its two largest customers. Loss of any one or both of these
customers could have a material adverse effect on the operations of this
segment.
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Seasonality
Although Clark experiences slight seasonal variations in its
sales, Clark does not consider any material part of its business to be
seasonal.
Environmental Compliance
Clark's facilities are subject to environmental regulation by
federal, state and local authorities. In 1993, the Company spent
approximately $2.6 million in connection with environmental compliance and
cleanup activities. Capital expenditures for environmental control
activities are not expected to be material for the remainder of 1994 and
1995. Clark is also involved in environmental cleanup activities or
litigation in connection with former waste disposal sites and former plant
locations. The Company has and will continue to make provisions for these
cleanup costs as necessary and when the Company's liability can be
reasonably estimated. As of December 31, 1993, the Company had reserves
of $16.4 million for potential future environmental cleanup costs.
Although the Company 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. The Company further 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.
Employees
As of December 31, 1993, Clark employed 2,285 persons in North
America and 3,663 persons outside North America. A portion of Clark's
production, maintenance and warehouse employees in the United States are
represented by local unions affiliated with the Allied Industrial Workers
and the International Brotherhood of Teamsters, which are affiliated with
the AFL-CIO.
Industry Segment and Geographic Area Discussion
Incorporated by reference to pages 27 to 29 of that portion of the
Company's Annual Report which is attached hereto as Exhibit 13.
6<PAGE>
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ITEM 2. PROPERTIES
Clark or a subsidiary of Clark owns the following principal
facilities in fee, except where a lease is indicated:
<TABLE>
<CAPTION>
Total Floor Space Leased Floor Space
Principal Products Approximate Sq.Ft. Approximate Sq. Ft.
Manufactured Plant Office Plant Office
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
On-Highway Segment
Valinhos, Brazil 865 88 - -
Off-Highway Segment
Bismarck, ND 375 48 - -
*Gwinner, ND 427 98 - 53
Fargo, ND - 22 - 22
Lot, Belgium 144 38 144 38
Other Melroe - 4 - 4
Bruges, Belgium 312 19 - -
Statesville, NC 423 60 18 -
Buchanan, MI 52 32 13 -
Arco, Italy 199 78 - -
Valsugana, Italy 83 7 - -
Rovereto, Italy 35 3 35 3
Other Business Locations
Corporate Headquarters- - 36 - 36
South Bend, IN
Records Retention- - 15 - 15
South Bend, IN
Clark Distribution Services-
Chicago, IL 570 61 - -
Bedford Park, IL 63 2 63 2
3,548 611 273 173
<FN>
*112,000 square feet of the Gwinner plant is on property leased from a
railroad for an indefinite term, subject to termination on 30 days notice.
</TABLE>
Clark owns the production equipment and machines at its plants,
except for an insignificant number of items which are leased. All of
Clark's principal plants and warehouse facilities are in good operating
condition. Clark also owns idle facilities in Georgetown, Kentucky,
Atlanta, Georgia and South Bend, Indiana. The Georgetown, Kentucky
facility is classified as an asset held for sale in the Company's balance
sheet incorporated in this Form 10-K.
In 1993 Clark's manufacturing plants operated at approximately 83%
of capacity.
ITEM 3. LEGAL PROCEEDINGS
In the Matter of Industrial Pretreatment Violations at Melroe Company,
Gwinner, North Dakota
On October 5, 1992, the United States Environmental Protection
Agency ("EPA") issued a Finding of Violation and Order for Compliance
("Order") which alleges that the Company has failed to comply with the
pretreatment regulations promulgated pursuant to Section 306 and 307 of
7<PAGE>
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the Clean Water Act. The Order alleges that certain metal finishing
wastewaters generated at the Company's Melroe facility in Gwinner, North
Dakota were discharged into the Publicly Owned Treatment Works operated by
the City of Gwinner in violation of the applicable pretreatment
regulations. The Order also alleges that the Company failed to comply
with certain reporting requirements set forth in the pretreatment
regulations. The Order requires the Company to comply with the discharge
limitations for metal finishing wastewater and all related reporting
requirements. The Company is in the process of taking all actions
required of it under the Order.
On January 31, 1994, the Company received a letter from the U.S.
Department of Justice indicating that it would be willing to settle this
matter without litigation for a civil penalty of $1.9 million. The
Company intends to commence settlement negotiations with the Department of
Justice.
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 alleges
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 seeks compensatory
damages of $40,000,000, James R. Burkeen and Betty F. Burkeen seek
compensatory damages of $5,000,000 and all plaintiffs seek punitive
damages of $90,000,000.
The Registrant has filed an Answer denying liability and a
Counterclaim seeking recovery of certain amounts owed by Burkeen
Manufacturing Company in connection with the sale. The lawsuit is in the
discovery stage. Based on the information available, the Registrant
believes that the lawsuit is without merit and that the ultimate
resolution of the suit will not have a material adverse effect on the
Registrant's financial condition.
The Company is a party to ordinary routine litigation incidental
to its business. The ultimate results of this litigation are subject to a
high degree of estimation and are not determinable 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 of such matters will not materially affect
the consolidated financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
8<PAGE>
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EXECUTIVE OFFICERS OF THE REGISTRANT
Name of Officer and Age as of Principal Occupation
Positions/Offices March 1, Date First and Employment During
Presently Held 1994 Elected Past Five Years
Leo J. McKernan* 56 5/22/86 Chairman, President and
Chairman, President Chief Executive Officer
and Chief Executive Clark Equipment Company.
Officer
Frank M. Sims* 61 3/17/87 Senior Vice President of
Senior Vice President Clark Equipment Company.
Paul R. Bowles 56 9/22/89 Vice President - Corporate
Vice President Development of Clark
Equipment Company. Prior
to September 1989,
President, Edward Lowe
Industries, Inc.- clay
minerals business.
Thomas L. Doepker 50 7/13/84 Vice President and
Vice President and Treasurer of Clark
Treasurer Equipment Company.
William N. Harper 49 12/09/86 Vice President and
Vice President and Controller of Clark
Controller Equipment Company.
Bernard D. Henely 50 7/13/84 Vice President and
Vice President and General Counsel of
General Counsel Clark Equipment Company.
James D. Kertz 57 2/9/93 President, Melroe Company,
Vice President a Business Unit of Clark
Equipment Company. Prior
to September 1992,
Executive Vice President,
Melroe Company.
John J. Reynolds 60 8/13/91 President, Clark-Hurth
Vice President Components Company, a
Business Unit of Clark
Equipment Company. Prior
to April 1991, President,
Cherry-Burrell Corporation-
automatic packaging and
processing equipment.
* Member of the Board of Directors of the Company.
Each officer's term expires at the annual meeting of the Board of
Directors on May 10, 1994.
9<PAGE>
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Incorporated by reference to page 31 of that portion of the
Company's Annual Report which is attached hereto as Exhibit 13.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference to page 34 of that portion of the
Company's Annual Report which is attached hereto as Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Incorporated by reference to pages 1 through 8 of that portion of
the Company's Annual Report which is attached hereto as Exhibit
13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference to pages 9 through 26, 30 and 31 of
that portion of the Company's Annual Report which is attached
hereto as Exhibit 13.
Also see Index to Financial Statements on page 13 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the directors of the Registrant is
incorporated by reference to the section in the Company's Proxy
Statement which is captioned "Identification of Nominees for
Director". Information regarding the executive officers of the
Registrant is set forth in Part I of this report under the
caption "Executive Officers of the Registrant".
10<PAGE>
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ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to the sections in the Company's Proxy
Statement which are captioned "Executive Compensation", "Stock
Option/SAR Tables", "Executive Employment Contracts", "Retirement
Program", "Director Compensation Arrangements", and "Stock
Purchase and Grant Plans for Non-Employee Directors".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the section in the Company's Proxy
Statement which is captioned "Security Ownership of Certain
Beneficial Owners and Management".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
Incorporated by reference to pages 9 through 34 of that
portion of the Company's Annual Report which is attached
hereto as Exhibit 13.
2. Financial Statement Schedules (see index on page 13 of this
report).
3. Exhibits:
See Exhibit List and Index attached. Exhibits numbered
(10)(a) through (10)(r) are management contracts and
compensatory plans or arrangements.
(b) Reports on Form 8-K:
1. The Registrant filed a Form 8-K dated October 22, 1993
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 November 16, 1993
reporting on Item 5, OTHER EVENTS, and Item 7, FINANCIAL
STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
11<PAGE>
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on the
30th day of March 1994.
CLARK EQUIPMENT COMPANY
By /s/ Leo J. McKernan
Leo J. McKernan
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant in the capacities and on the dates indicated. Each person
whose signature appears below hereby authorizes B. D. Henely and John J.
Moran, Jr. and each of them severally, with full power in each to act
without the other and with full power of substitution and resubstitution,
to execute in the name of each such person, and to file any amendments to
this report as the registrant deems appropriate, and appoints such persons
as attorneys-in-fact to sign on his behalf individually, and in each
capacity stated below, and file all amendments to this report.
SIGNATURE TITLE DATE
/s/ Leo J. McKernan Chairman, President, Chief March 30, 1994
Leo J. McKernan Executive Officer and Director
(Principal Executive Officer)
/s/ William N. Harper Vice President and Controller March 30, 1994
William N. Harper (Principal Financial Officer and
Principal Accounting Officer)
Directors
/s/ James C. Chapman
James C. Chapman Director )
/s/ Donald N. Frey
Donald N. Frey Director )
/s/ James A.D. Geier
James A.D. Geier Director )
/s/ Gaynor N. Kelley
Gaynor N. Kelley Director ) March 30, 1994
/s/ Ray B. Mundt
Ray B. Mundt Director )
/s/ Frank M. Sims
Frank M. Sims Director )
/s/ Dieter H. Stinnes
Dieter H. Stinnes Director )
12
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CLARK EQUIPMENT COMPANY
INDEX TO FINANCIAL STATEMENTS
The financial statements of Clark Equipment Company and its
consolidated subsidiaries, together with the report thereon of Price
Waterhouse dated February 14, 1994, appearing on pages 9 through 34 of
that portion of the Company's 1993 Annual Report which is attached hereto
as Exhibit 13, are incorporated by reference in this Form 10-K Annual
Report. The following additional financial data should be read in
conjunction with such financial statements. Schedules not included with
this additional financial data have been omitted because they are not
applicable or the required information is shown in the financial
3statements or notes thereto.
The combined financial statements of VME Group N.V. (VME) and its
subsidiaries have been incorporated beginning on page 19 of this report.
VME is a joint venture owned 50 percent each by Clark Equipment Company
and A.B. Volvo of Sweden.
Financial statements of other unconsolidated majority owned
subsidiaries and 50% or less owned persons have been omitted because the
proportionate share of the pre-tax income and total assets of each such
company is less than 20% of the respective amounts for the registrant and
its consolidated subsidiaries, and the investment in and advances to each
company is less than 20% of total assets of the registrant and its
consolidated subsidiaries.
Additional Information:
Page
Report of Independent Accountants on Financial
Statement Schedules 14
Clark Equipment Company and Consolidated Subsidiaries-
Schedule II 15
Schedules V and VI 16 and 17
Schedule VIII 18
VME Group N.V. and its subsidiaries
Combined Financial Statements and Notes
to Financial Statements 19 through 44
Report of KPMG Bohlins AB on the
Financial Statements of VME Holding Sweden AB 45
13<PAGE>
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REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
Board of Directors
Clark Equipment Company
South Bend, Indiana
Our audits of the consolidated financial statements referred to in our
report dated February 14, 1994 appearing on page 42 of the 1993 Annual
Report to Stockholders of Clark Equipment Company (which report and
consolidated financial statements are incorporated by reference in this
Annual Report on Form 10-K) also included an audit of the Financial
Statement Schedules listed in Item 14(a) of this Form 10-K. In our
opinion, these Financial Statement Schedules present fairly, in all
material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ Price Waterhouse
Price Waterhouse
South Bend, Indiana
February 14, 1994
14<PAGE>
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<TABLE>
CLARK EQUIPMENT COMPANY
AND CONSOLIDATED SUBSIDIARIES
__________
SCHEDULE II - ACCOUNTS RECEIVABLE FROM RELATED PARTIES
UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
<CAPTION>
Balance Deductions Balance
at beginning Amounts at end
Name of Debtor of Period Additions Collected Written-Off of Period
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
None
Year Ended December 31, 1992
G. D. Bello (1) 239,000 36,000 - 275,000 (2) -
$ 239,000 $ 36,000 $ - $ 275,000 (2) $ -
Year Ended December 31, 1991
G. D. Bello (1)$ 185,000 $ 54,000 $ - $ - $ 239,000
$ 185,000 $ 54,000 $ - $ - $ 239,000
<FN>
(1) Interest free loans granted in accordance with executive compensation contract
entered into in 1983.
(2) Repayment of this loan was forgiven pursuant to Mr. Bello's contract upon his
termination of employment with the Company on July 31, 1992.
</TABLE>
15
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<TABLE>
CLARK EQUIPMENT COMPANY
AND CONSOLIDATED SUBSIDIARIES
_________
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
(Amounts in Thousands)
<CAPTION>
Effect of
Balance Disposition Exchange Balance
Beginning Retirements of Rate End of
of Year Additions and Sales Business 1/ Sub-Total Changes Year
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Land and Land Improvements... $ 17,220 $ 411 $ (1,756) $ 0 $ 15,875 $ (594) $ 15,281
Buildings.................... 103,298 1,476 (10,526) 0 94,248 (2,371) 91,877
Machinery and Equipment...... 421,455 27,990 (34,495) 0 414,950 (9,524) 405,426
$ 541,973 $ 29,877 $ (46,777) $ 0 $ 525,073 $ (12,489) $ 512,584
Year Ended December 31, 1992
Land and Land Improvements... $ 26,563 $ 98 $ (673) $ (7,492) $ 18,496 $ (1,276) $ 17,220
Buildings.................... 157,799 1,890 (6,854) (45,763) 107,072 (3,774) 103,298
Machinery and Equipment...... 476,603 35,296 (14,962) (61,781) 435,156 (13,701) 421,455
$ 660,965 $ 37,284 $ (22,489) $(115,036) $ 560,724 $ (18,751) $ 541,973
Year Ended December 31, 1991
Land and Land Improvements... $ 25,919 $ 813 $ 126 $ 0 $ 26,858 $ (295) $ 26,563
Buildings.................... 152,577 5,878 22 0 158,477 (678) 157,799
Machinery and Equipment...... 461,787 41,911 (23,371) 0 480,327 (3,724) 476,603
$ 640,283 $ 48,602 $ (23,223) $ 0 $ 665,662 $ (4,697) $ 660,965
<FN>
1/ This column reflects the effect of the sale of Clark Material Handling Company ("CMHC"). The sale of
CMHC to the Terex Corporation was closed on July 31, 1992. The year-end balances include idle facilities
and properties of CMHC retained by the Company, with a cost basis of $25.3 million, $53.0 million and
$61.2 million in each respective year. The idle properties include approximately 11.5 percent land and land
improvements, 64.4 percent buildings and 24.1 percent machinery and equipment. These assets have been
separately classified as assets held for sale in the Company's balance sheet.
</TABLE>
16<PAGE>
<PAGE>
CLARK EQUIPMENT COMPANY
AND CONSOLIDATED SUBSIDIARIES
<TABLE>
SCHEDULE VI-ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
(Amounts in Thousands)
<CAPTION>
Effect of
Balance Disposition Exchange Balance
Beginning Retirements of Rate End of
of Year Additions and Sales Business 2/ Sub-Total Changes Year
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Land and Land Improvements... $ 5,851 $ 202 $ (619) $ 0 $ 5,434 $ (33) $ 5,401
Buildings.................... 51,111 2,480 (11,633) 0 41,958 (712) 41,246
Machinery and Equipment...... 259,139 33,696 (31,102) 0 261,733 (4,485) 257,248
$ 316,101 $ 36,378 $ (43,354) $ 0 $ 309,125 $ (5,230) $ 303,895
Year Ended December 31, 1992
Land and Land Improvements... $ 8,527 $ 208 $ (622) $ (2,238) $ 5,875 $ (24) $ 5,851
Buildings.................... 68,298 2,779 (7,270) (12,448) 51,359 (248) 51,111
1/
Machinery and Equipment...... 284,197 41,133 (14,279) (46,549) 264,502 (5,363) 259,139
$ 361,022 $ 44,120 $ (22,171) $ (61,235) $ 321,736 $ (5,635) $ 316,101
Year Ended December 31, 1991
Land and Land Improvements... $ 8,287 $ 214 $ 58 $ 0 $ 8,559 $ (32) $ 8,527
Buildings.................... 64,938 3,579 (32) 0 68,485 (187) 68,298
Machinery and Equipment...... 263,803 41,979 (21,088) 0 284,694 (497) 284,197
$ 337,028 $ 45,772 $ (21,062) $ 0 $ 361,738 $ (716) $ 361,022
<FN>
1/ Amount includes $6.6 million in 1992 provided for write-down of the idle Georgetown, Kentucky plant.
2/ This column reflects the effect of the sale of Clark Material Handling Company ("CMHC"). The sale of CMHC to the Terex
Corporation was closed on July 31, 1992. The year-end balances include accumulated depreciation and valuation reserves
relative to idle facilities and properties of CMHC retained by the Company in the amount of $18.5 million, $43.3
million and $45.1 million in each respective year. The reserves include approximately 8.1 percent land and land
improvements, 35.7 percent buildings and 56.2 percent machinery and equipment. These assets have been separately
classified as assets held for sale in the Company's balance sheet.
</TABLE>
17
<PAGE>
<PAGE>
CLARK EQUIPMENT COMPANY
AND CONSOLIDATED SUBSIDIARIES
<TABLE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(Amounts in Thousands)
<CAPTION>
Effect of
Balance at Charged to Exchange Balance at
Beginning of Costs and 1/ Rate End of
Period Expenses Deductions Changes Period
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Allowance for Doubtful Accounts $ 4,735 $ 905 $ 23 $ (178) $ 5,485
Year Ended December 31, 1992
Allowance for Doubtful Accounts $ 8,671 $ 1,028 $ (4,754) $ (210) $ 4,735
Year Ended December 31, 1991
Allowance for Doubtful Accounts $ 7,267 $ 3,882 $ (2,485) $ 7 $ 8,671
<FN>
1/ Represents losses incurred on write-offs less amounts recovered. The 1992 amount includes
reductions of $3,472 due to the sale of Clark Material Handling Company to the Terex
Corporation on July 31, 1992.
</TABLE>
18
<PAGE>
<PAGE>
VME GROUP N.V.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993
19<PAGE>
<PAGE>
VME GROUP N.V.
TABLE OF CONTENTS
FINANCIAL STATEMENTS
* Report of Independent Accountants.
* Consolidated Balance Sheet - December 31, 1993 and 1992.
* Consolidated Statement of Operations for the three years ended
December 31, 1993.
* Consolidated Statement of Cash Flows for the three years ended
December 31, 1993.
* Notes to Consolidated Financial Statements.
SUPPLEMENTAL SCHEDULES
VIII Valuation and Qualifying Accounts
IX Short-Term Borrowings
SCHEDULES OMITTED
* Other schedules required by Regulation S-X are omitted because of
absence of the conditions under which they are required or because
information called for is shown in the financial statements and notes
thereto.
20<PAGE>
<PAGE>
BP America Building Telephone 216 781 3700
200 Public Square
27th Floor
Cleveland, Ohio 44114-2301
Price Waterhouse
Report of Independent Accountants
March 4, 1994
To the Board of Directors and
Shareholders of VME Group N.V.
In our opinion, based upon our audits and the report of other auditors,
the accompanying consolidated balance sheet and the related consolidated
statements of operations and of cash flows present fairly, in all material
respects, the financial position of VME Group N.V. 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 in the
United States. Those financial statements are the responsibility of the
Group's management; our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of certain subsidiaries, which statements reflect total assets
of $412,297,000 and $497,778,000 at December 31, 1993 and 1992,
respectively, and total revenues of $510,999,000, $586,784,000 and
$680,736,000 for the years ended December 31, 1993, 1992 and 1991,
respectively. Those statements were audited by other auditors whose
report thereon has been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for these subsidiaries, is
based solely on the reports of the other auditors. 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 and the report of
other auditors provide a reasonable basis for the opinion expressed above.
As discussed in Notes 8 and 19, the Group changed its method of accounting
for income taxes and postretirement benefits effective January 1, 1993.
/s/ Price Waterhouse
21<PAGE>
<PAGE>
<TABLE>
VME GROUP N.V.
CONSOLIDATED BALANCE SHEET
(Amounts in thousands)
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 36,128 $ 101,337
Receivables 167,883 181,399
Inventories 271,206 325,146
Other assets 57,112 40,836
Total current assets 532,329 648,718
Long-term assets:
Property, plant and equipment, net 154,724 196,305
Other assets 17,851 27,380
Goodwill 84,260 97,454
Total assets $ 789,164 $ 969,857
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 90,268 $ 93,128
Short-term debt 52,218 247,433
Current portion of long-term debt 1,519 4,559
Other liabilities 172,506 169,946
Total current liabilities 316,511 515,066
Long-term liabilities:
Debt 88,642 63,036
Subordinated shareholders' loans 70,000 70,000
Pension liability 80,836 85,325
Deferred income taxes 9,587 12,452
Other 45,176 56,724
Total liabilities 610,752 802,603
Commitments and contingencies
Minority interests 20,001 12,443
Shareholders' equity:
Common stock: $516 par value- 25,750 25,750
authorized 600,000 shares;
issued and outstanding 250,000
Additional paid in capital 184,148 184,148
Retained earnings (34,165) (64,188)
Cumulative translation and
other adjustments (17,322) 9,101
Total shareholders' equity 158,411 154,811
Total liabilities and
shareholders' equity $ 789,164 $ 969,857
=========== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
22<PAGE>
<PAGE>
<TABLE>
VME GROUP N.V.
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands except per share amounts)
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Sales $1,239,308 $1,357,275 $1,368,475
Other income (expense) (5,332) (6,561) 800
1,233,976 1,350,714 1,369,275
Costs and expenses:
Cost of sales, excluding
depreciation 931,674 1,131,912 1,087,169
Selling, general and
administrative expense 206,076 232,353 267,079
Depreciation and amortization
expense 31,528 42,476 42,594
Restructuring costs - 18,712 4,377
1,169,278 1,425,453 1,401,219
Operating income (loss) 64,698 (74,739) (31,944)
Financial income and (expense):
Interest income 5,826 8,399 11,579
Interest expense (32,190) (46,930) (49,170)
Income (loss) before taxes
minority interests and effect
of change in accounting 38,334 (113,270) (69,535)
Provision (benefit) for income taxes 17,874 (23,353) (26,817)
Income (loss) before
minority interests and effect
of change in accounting 20,460 (89,917) (42,718)
Minority interests (2,723) (3,700) (1,946)
Income (loss) before effect
of change in accounting
principle 17,737 (93,617) (44,664)
Effect of change in accounting for
income taxes 12,286 - -
Net income (loss) $ 30,023 $ (93,617) $ (44,664)
========== ========== ==========
Net income (loss) per share 120.09 (374.47) (178.66)
========== ========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
23<PAGE>
<PAGE>
<TABLE> VME GROUP N.V.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 30,023 $ (93,617) $ (44,664)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 31,528 42,476 42,594
Effect of change in accounting for
income taxes (12,286) - -
(Gain) loss on sale of fixed assets
and subsidiaries 330 (5,258) (2,029)
Minority interest in net income 2,723 3,700 1,946
Undistributed (earnings) losses
of affiliates 337 248 (33)
Increase (decrease) in cash flow,
excluding consolidation effects
of 1991 acquisitions and non-cash
effects of dispositions of sales subsi-
diaries in 1992, from changes in:
Receivables (32,918) 10,008 46,357
Inventories 20,986 75,782 66,461
Accounts payable 25,553 23,506 (27,616)
Accrued expenses 16,758 (11,430) (62,492)
Pension reserves 5,647 9,830 1,178
Deferred taxes 3,682 (36,107) (25,681)
Other (9,847) 719 (7,130)
Net cash provided by (used in)
operating activities 82,516 19,857 (11,109)
Cash flows from investing activities:
Proceeds from sale of fixed assets 14,064 19,193 3,580
Capital expenditures (21,340) (29,794) (54,453)
Contribution received for joint
venture interest 5,995 - -
(Purchase)/sale of subsidiaries
net of cash acquired - 2,560 (159,162)
Investment in affiliates - - (871)
(Decrease) increase in other assets 7,356 (16,912) 37,110
Net cash provided by (used in)
investing activities 6,075 (24,953) (173,796)
Cash flows from financing activities:
Net borrowings (payments) - loans (178,718) (21,507) 172,530
Proceeds from issuance of debt 72,998 - 82,010
Debt repayment (43,197) (59,527) (63,026)
Proceeds from financing arrangements - 59,131 -
Dividends paid - - (9,468)
Proceeds from subordinated share-
holders' loans - 70,000 -
Capital contribution - 30,000 -
Net cash provided by (used in)
financing activities (148,917) 78,097 182,046
Effect of exchange rate changes on cash (4,883) (4,943) 507
Net increase (decrease) in cash and
cash equivalents (65,209) 68,058 (2,352)
Cash and cash equivalents,
beginning of year 101,337 33,279 35,631
Cash and cash equivalents, end of year $ 36,128 $ 101,337 $ 33,279
========= ========= ========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
24<PAGE>
<PAGE>
VME GROUP N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
Note 1 - Basis of Presentation and Principles of Consolidation
VME Group N.V. (the Company, VME) is a Netherlands holding company formed
on March 28, 1985 to hold, together with Clark Equipment Company (Clark)
and AB Volvo, the common stock of its two significant operating
subsidiaries, VME Americas Inc. (VMEA), a Delaware Corporation, and VME
Holding Sweden AB (VMEHS), a Swedish corporation. AB Volvo and Clark until
December 22, 1993, held equal cross-ownership positions in VMEA and VMEHS.
On December 22, 1993, Clark and AB Volvo contributed their respective
ownership interests in VMEA and VMEHS to VME Group N.V., which resulted in
VMEA and VMEHS becoming wholly-owned subsidiaries of the Company. Such
contributions were accounted for as transactions between entities under
common control. Accordingly, financial statements of the Company have been
prepared on a historical cost basis and reflect such contributions on a
retroactive basis for all periods presented.
The consolidated financial statements have been prepared prior to December
22, 1993, as if the Company and its operating subsidiaries have been
consolidated; the consolidation in years prior to 1993 represents a
combination of VMEA, VMEHS, their respective subsidiaries and other VME
Group N.V. entities.
Investments and results of operations of companies in which the Company
holds more than 50% of the issued capital stock, are included in the
consolidated accounts. Companies in which the Company holds investments
between 20% and 50% are accounted for utilizing the equity method of
accounting and investments below 20% are accounted for at cost. All
material balances and transactions between the entities comprising the
Company have been eliminated.
Note 2 - Description of Business
The Company is engaged in the design, manufacture and marketing of off-
highway construction equipment on a worldwide basis. This equipment is
primarily wheel loaders, articulated haulers, hydraulic excavators and
rigid off-highway haulers. The majority of sales are made to end users
through a worldwide network of affiliated and independent distributors.
The sale of replacement parts is an important component of the Company's
business.
Note 3 - Summary of Significant Accounting Policies
Inventories
Inventories of non-U.S. operations are valued at the lower of cost or
market on the first-in, first-out (FIFO) method. Substantially all U.S.
inventories are valued at the lower of cost or market using the last-in,
first-out (LIFO) method.
25<PAGE>
<PAGE>
Properties and Depreciation
Property, plant and equipment are carried at cost. Expenditures for
maintenance and repairs are charged to income as incurred and expenditures
for major renewals and betterments are capitalized. Depreciation is
provided over the useful lives of the assets using primarily the straight-
line method. Properties retired or sold are removed from the property
accounts with gains or losses on disposal included in income.
The useful lives of the assets are primarily as follows :
Buildings 25 - 50 years
Machinery and equipment 5 - 10 years
Motor vehicles 5 years
Furniture and fixtures 3 years
Goodwill
Goodwill represents the excess of the total costs of businesses acquired
in 1991 over the fair market value of their net assets. Goodwill is being
amortized on the straight-line method over a period of 40 years.
Accumulated amortization expense was $6,298 in 1993 and $4,532 in 1992.
Warranties
Provision is made currently for estimated future costs that are expected
to be incurred under product warranties presently in force.
Pension Plans
The Company accrues the cost of pension and retirement plans which cover
substantially all employees. Benefits are based on employees' years of
service and compensation. Pension costs, which are primarily computed
using the unit credit method, are funded based on the minimum required
contribution under the Employee Retirement Income Security Act of 1974 for
the U.S. plans, and in accordance with local laws and income tax
regulations for the foreign plans. Plans' assets are invested primarily
in listed stocks, guaranteed investment contracts and corporate bonds.
Product Liability
The Company accrues its best estimate of the most likely amount of settle-
ment or claim liability for all asserted claims. For unasserted claims,
the Company records an estimate of liability for incurred but not reported
claims based on historical amounts of claims and settlements and reporting
lag time.
Income Taxes
In January 1993, the Company adopted Statement of Financial Accounting
Standard No. 109 (SFAS 109) "Accounting for Income Taxes". The adoption of
SFAS 109 changes the method of accounting for income taxes from the
deferred method (APB 11) to an asset and liability approach. Previously,
the Company deferred the past tax effects of timing differences between
financial reporting and taxable income. The asset and liability approach
requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences or temporary differences between the
carrying amount and the tax bases of assets and liabilities. The adoption
resulted in the recognition of a net tax benefit of $12,286. No provision
for income taxes is made on $56.3 million of undistributed earnings from
consolidated subsidiaries, which have been or will be reinvested.
26<PAGE>
<PAGE>
Fair Value of Financial Instruments
Pursuant to Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments", the carrying amount of cash, trade
receivables and payables approximates fair value because of the short
maturity of those instruments. The carrying value of the Company's long-
term debt is considered to approximate the fair value of these instruments
based on the borrowing rates currently available to the Company for loans
with similar terms and maturities.
Foreign Currency Translation
Financial statements of subsidiaries and entities operating outside of the
United States are translated into U.S. dollars in accordance with
Statement of Financial Accounting Standard No. 52. For subsidiaries whose
business activities are based mainly on the U.S. dollar or who operate in
a "highly inflationary economy", the financial statements are translated
into U.S. dollars using: (1) current exchange rates at the balance sheet
date for all liabilities and current assets except inventories, (2)
exchange rates at the time of acquisition for inventories and properties,
and (3) weighted average monthly exchange rates for the year for income
and expense amounts, except depreciation and cost of goods sold. The
resulting translation gains and losses are included in income.
Exchange losses included in the Income Statement were $18,754, $15,884 and
$1,093 in 1993, 1992 and 1991, respectively.
Reclassifications
Certain reclassifications have been made for all years presented in the
financial statements to conform to the classifications adopted in 1993.
Note 4 - Acquisitions and Dispositions
During 1993, the Company contributed stock and the book value of specific
assets and liabilities in return for an 80.5% ownership interest in a
company formed to establish a joint venture with Hitachi Construction
Machinery Company, Ltd (HCMC). HCMC contributed cash equal to 19.5% of the
total net assets. The joint venture company, Euclid-Hitachi, is fully
consolidated in the Company's financial statements. Additionally, HCMC may
elect to increase its ownership interest in Euclid-Hitachi by purchasing
additional shares from the Company prior to December 31, 1996.
The Company completed in the beginning of 1991 the acquisition of Akermans
Verkstad AB (VME Excavators), a Swedish manufacturer of hydraulic
excavators. The Company also raised during 1991 its shareholding in
Zettelmeyer Baumaschinen GmbH (Zettelmeyer), a German manufacturer of
construction machinery, primarily wheel loaders, to a majority holding of
70%. Both of the acquisitions have been accounted for as purchases and
included in the income statement from January 1, 1991. The total purchase
price for the two acquisitions amounted to $172 million.
In conjunction with the purchase of Akermans Verkstad AB, a decision was
made to restructure the company's distribution organization and production
facilities to improve cost efficiency and increase the manufacturing
productivity. At December 31, 1993 and 1992, the restructuring reserve
relating to Akermans Verkstad AB aggregated $1.4 million and $4.1 million,
respectively.
27<PAGE>
<PAGE>
The estimated fair values of the Akermans and Zettelmeyer assets acquired
and liabilities assumed, as well as the restructuring reserve established
are summarized (in millions) as follows :
Current assets (includes cash of $20.1) $ 254.4
Property, plant & equipment 67.9
Long-term assets 6.6
Goodwill 115.4
Current liabilities (134.1)
Restructuring liability (46.7)
Long-term liabilities assumed (78.1)
Minority interest (13.4)
$ 172.0
=======
Note 5 - Statement of Cash Flows
VME considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents.
The following payments were made for:
Year Ended December 31,
1993 1992 1991
Interest (net of amount capitalized) $ 35,168 $ 63,747 $ 44,703
Income taxes 6,278 6,415 11,520
Note 6 - Costs and Expenses
Costs and expenses include :
Year Ended December 31,
1993 1992 1991
Research and development $ 38,521 $ 59,941 $ 65,043
Postretirement insurance & healthcare 12,051 6,670 5,090
Maintenance and repairs 21,758 28,013 31,826
Restructuring costs - 18,712 4,377
A charge in 1992 for restructuring costs of $18,712 has been made in costs
and expenses relating to the decision to restructure the Company's
distribution organization and production facilities in North America, to
improve cost efficiency and increase the manufacturing productivity and to
relocate the German distribution company. The remaining restructuring
reserve relating to these activities was $7.9 million at year end 1993 and
$16.0 million at year end 1992. The 1991 restructuring costs of $4,377
relates to the closing of the Landskrona plant in Sweden and to the
relocation of the German distribution company.
28<PAGE>
<PAGE>
Note 7 - Depreciation and Amortization Expense
Depreciation and amortization expense
is allocable as follows:
Year Ended December 31,
1993 1992 1991
Cost of Sales $ 26,317 $ 37,402 $ 33,276
Selling, general and
administrative expense 5,211 5,074 9,318
$ 31,528 $ 42,476 $ 42,594
======== ======== ========
Note 8 - Income Taxes
The provision for income taxes is based on separate tax computations for
each entity. U.S. and non-U.S. income (loss) before income taxes and
minority interests is reported below:
Year Ended December 31,
1993 1992 1991
Income (loss) before income taxes
and minority interests :
U.S. $ 4,109 $ (15,970) $ (12,541)
Non-U.S. 34,225 (97,300) (56,994)
$ 38,334 $(113,270) $ (69,535)
========= ========= =========
The provision (benefit) for income taxes consists of the following:
Year Ended December 31,
Current tax expense: 1993 1992 1991
U.S. $ 7,897 $ - $ -
Non-U.S. 8,151 13,257 1,855
16,048 13,257 1,855
Deferred tax expense (benefit):
U.S. (1,502) - -
Non-U.S. 3,328 (36,610) (28,672)
1,826 (36,610) (28,672)
________ ________ ________
Total income tax expense (benefit) $ 17,874 $ (23,353) $ (26,817)
========= ========= =========
Tax legislation in Sweden and certain other countries allows companies to
reduce their current taxable income through allocations to untaxed
reserves. Such amounts are taxed when the untaxed reserves are reduced,
except when the purpose of the reduction is to cover a loss or to utilize
a tax loss carryforward. Deferred income taxes apply to timing differen-
ces primarily resulting from allocations to untaxed reserves (principally
inventory and fixed assets related) and other differences between income
before income taxes for financial reporting and tax purposes. Deferred
tax benefits in 1992 and 1991 are mainly comprised of results from the
reversal of untaxed reserves, $21,554 and $25,737 in 1992 and 1991,
respectively, in 1992 also sale of property in the amount of $13,252.
29<PAGE>
<PAGE>
Following is a reconciliation of income tax expense (benefit) from the
U.S. statutory rate to the effective tax rate:
Year Ended December 31,
1993 1992 1991
Provision (benefit) for taxes at
US statutory rate $ 13,064 $ (38,512) $ (23,642)
Effect of permanent basis differences
between tax and financial income 1,978 (449) 788
Losses with no available tax benefits 2,019 17,560 11,974
Earnings taxed at other than U.S. rate
and release of untaxed reserves 100 (6,104) (14,968)
Other 713 4,152 (969)
Provision (benefit) for taxes at
effective tax rate $ 17,874 $ (23,353) $ (26,817)
========= ========= =========
Deferred tax assets and liabilities are comprised of the following at
December 31, 1993:
Deferred tax assets relating to :
Accounts receivable $ 303
Inventories 6,037
Fixed assets 7,961
Pension and postretirement benefits 14,703
Expense accruals and reserves 11,522
Other 5,014
Net operating loss and credit carryforwards 16,969
Total deferred tax assets before valuation allowance 62,509
Deferred tax assets valuation allowance (31,044)
Net tax asset $ 31,465
Deferred tax liabilities relating to :
Accounts receivable $ 32
Inventories 8,002
Fixed assets 12,616
Pensions 5,212
Other 5,190
Gross deferred tax liabilities $ 31,052
Net deferred tax asset $ 413
At December 31, 1993, VMEA has $2,959 of tax operating loss carryforwards
in the United States available to reduce future taxable income which
expires in decreasing amounts beginning in 2002 through the year 2006.
Other subsidiaries in the Company also have $14,256 of operating loss
carryforwards available to offset future taxable income, most of which
expire in the year 2002 or thereafter. For Canadian income tax purposes,
VMEA's Canadian subsidiary has $18,344 of loss carryforwards to reduce
future taxable income which expire in 1998. In addition, for Canadian
income tax purposes, the Canadian subsidiary has available certain
depreciation allowances aggregating $19,801, which may be utilized to
reduce future taxable income in succeeding years. The amount of such
depreciation allowance that may be deducted in any one specific year is
subject to certain limitations. Also available in Canada are investment
tax credit carryforwards of $502 which begin to expire in varying amounts
from 1994 through 1998.
30<PAGE>
<PAGE>
VMEA's Brazilian subsidiary has $5,050 loss carryforwards available to
reduce future taxable income of which $735 will expire in 1997 and the
remainder of which has no expiration date. Also available in Brazil is a
$3,398 tax credit that can also be offset against future income up to
1998.
Note 9 - Receivables
December 31,
Receivables consist of the following: 1993 1992
Notes receivable $ 12,365 $ 6,878
Trade receivables 158,812 183,805
Other receivables 6,867 2,946
Less: Allowance for doubtful accounts (10,161) (12,230)
$ 167,883 $ 181,399
========= =========
Note 10 - Inventories
December 31,
Inventories consist of the following: 1993 1992
Sales products $ 187,355 $ 227,315
Raw materials and work in process 116,863 133,867
Reserves (33,012) (36,036)
$ 271,206 $ 325,146
========= =========
FIFO values of U.S. inventories exceeded LIFO values by $6,910 in 1993 and
$6,520 in 1992. The financial statement basis of these inventories
exceeds the tax basis by $19,372 in 1993 and $21,330 in 1992.
Note 11 - Property, Plant and Equipment
Property, plant and equipment consist of the following:
December 31, 1993
Accumulated Net
Cost Depreciation Book Value
Land and land improvements $ 16,242 $ 5,138 $ 11,104
Machinery and equipment 236,137 163,263 72,874
Buildings 116,770 46,024 70,746
$ 369,149 $ 214,425 $ 154,724
========= ========= =========
December 31, 1992
Accumulated Net
Cost Depreciation Book Value
Land and land improvements $ 17,888 $ 5,169 $ 12,719
Machinery and equipment 279,915 181,698 98,217
Buildings 128,912 43,543 85,369
$ 426,715 $ 230,410 $ 196,305
========= ========= =========
Depreciation expense was $29,098, $39,565 and $40,464 for the three years
1993, 1992 and 1991, respectively.
31<PAGE>
<PAGE>
Note 12 - Other Long-term Assets
Other long-term assets consist of December 31,
the following : 1993 1992
Investments $ 5,454 $ 8,854
Intangible pension asset 7,109 4,923
Other assets 5,288 13,603
$ 17,851 $ 27,380
======== ========
Investments consist of interests in affiliated companies, which are
accounted for by the equity or cost methods.
Note 13 - Short-term Debt
Loans consist of the following:
December 31, 1993
Year End Line of
Interest Credit Amount
Rate Available Outstanding
Europe 6.84% $ 83,146 $ 43,604
Brazil 8.06% 21,656 5,055
Australia 5.85% 5,531 3,559
$ 110,333 $ 52,218
========= =========
December 31, 1992
Year End Line of
Interest Credit Amount
Rate Available Outstanding
North America 5.42% $ 52,500 $ 24,500
Europe 11.56% 297,710 204,455
Brazil 12.49% 22,500 9,688
Australia 6.85% 8,289 8,790
$ 380,999 $ 247,433
========= =========
The line of credit arrangements require payment of commitment fees ranging
from zero to 1.50% of the individual line of credit.
The Company, as a service to distributors in selected geographic areas,
has financing agreements with certain financial institutions to assist in
the financing of distributor inventory. In general, these agreements
require the Company to make monthly interest payments to the financial
institutions for a predetermined period or until the inventory is sold by
the distributor, whichever occurs first.
Financing expenses incurred in conjunction with the above agreements were
$5,734, $5,520, and $5,140 in 1993, 1992 and 1991, respectively, and were
reflected in selling expenses. The interest rates charged on the above
agreements are adjusted based on changes in the prime rate. The financial
institutions' aggregate distributor receivable balances were $142,230 and
$105,638 at December 31, 1993 and 1992, respectively.
32<PAGE>
<PAGE>
Note 14 - Other Current Liabilities
Other current liabilities consist of the December 31,
following: 1993 1992
Salaries, wages and other employee costs $ 50,729 $ 42,481
Warranty obligations 28,721 26,873
Dealer discounts 5,347 9,540
Income taxes 18,073 13,849
Accrued expenses and deferred income 24,742 26,917
Restructuring liability 9,356 20,145
Other 35,538 30,141
$ 172,506 $ 169,946
========= =========
Note 15 - Long-Term Debt
December 31,
The following is a summary of long-term debt: 1993 1992
Bank notes with interest rates ranging
from 9.7% to 13.2% payable in annual
installments over a ten-year period $ 5,589 $ 47,976
Revolving Credit Facility Agreement
of $250.0 million with interest rates
ranging from 6.1% to 8.9% and with
a term of three years 44,120 -
Credit Facility Agreement with a German
bank of DEM 45.0 million with an interest
rate of 10.6% and with a term of
three years 26,041 -
Capital lease obligations with
interest rates ranging from 6.8%
to 11.8% payable through 2035 14,411 19,619
Total 90,161 67,595
Less: Current portion of long-term debt (1,519) (4,559)
Total long-term debt $ 88,642 $ 63,036
========= =========
The Company leases buildings and land under capital lease arrangements.
The related net assets of $14,538 are recorded in property, plant and
equipment.
Long-term debt at December 31, 1993 matures as follows:
1994 $ 1,519
1995 1,707
1996 71,923
1997 1,824
1998 1,900
Thereafter 11,288
$ 90,161
=========
33<PAGE>
<PAGE>
In conjunction with the $250.0 million revolving credit facility agree-
ment, certain current assets of VMEA, excluding the current assets of the
Brazilian subsidiary, and certain current assets and production equipment
of the Swedish companies included in the financial statements, have been
pledged as security. In addition other assets (real estate, receivables,
inventories and shares) have been pledged as collateral for outstanding
loans, pension liabilities and long-term debt at December 31, 1993.
In 1992 VMEHS entered into a sale-leaseback transaction involving certain
property. The transaction represents a long-term financing arrangement due
to the continuing involvement VME has in the buyer of the property. Other
long-term liabilities as of December 31, 1993 and 1992 include $38 million
and $49 million, respectively, associated with this transaction. The
initial amount is to be repaid over a 20 year period. The imputed interest
rate was 10.05% at year-end 1993.
Note 16 - Subordinated shareholders' loans
Subordinated shareholders' loans totalling $70.0 million with a term of
three years have been granted by the shareholders to the Company at the
end of 1992. The loans are subordinated to the $250.0 million Revolving
Credit Facility agreement signed on February 22, 1993 and the DEM 45.0
million Credit Facility agreement signed on March 12, 1993. See Note 15.
The loans bear interest of LIBOR plus 1.3% per annum and are due January
31, 1996.
Note 17 - Leases and Commitments
The Company incurred rent expense of $16,992, $22,734 and $28,884 in
1993, 1992 and 1991, respectively. Future minimum rental commitments
under noncancellable operating leases at December 31, 1993 are as follows:
1994 $ 13,951
1995 9,446
1996 7,847
1997 5,545
1998 4,960
Thereafter 35,863
The Company rents equipment to others under operating lease agreements.
In 1993, 1992, and 1991, the Company received rental income of $11,882,
$9,457, and $7,930, respectively. The net book value of property leased to
others aggregated $15,364 and $12,087 at December 31, 1993 and December
31, 1992, respectively. Future minimum rental income under noncancellable
operating leases at December 31, 1993 is as follows:
1994 $ 7,115
1995 1,228
1996 485
1997 333
1998 249
Thereafter 2,986
34<PAGE>
<PAGE>
During 1993, the Company significantly increased the utilization of
foreign currency exchange contracts, foreign exchange options and currency
swap agreements to reduce its exposure to fluctuations in foreign exchange
rates. These instruments were selected to hedge currency risk exposure as
a result of amounts recognized in the consolidated balance sheet and
anticipated cash flows as a result of export and import transactions
expected to occur in 1994. There were no deferred gains or losses on
these contracts and the net unrealized currency gain recognized in 1993
was $2.7 million.
At December 31, 1993, the Company had foreign exchange contracts maturing
during 1994 to purchase approximately $318 million in foreign currency at
contract value corresponding to $321 million at market value.
Note 18 - Pensions
The total pension expense charged to operations for 1993, 1992 and 1991
was $34,558, $47,545 and $48,814, respectively.
In Sweden, most of the VMEHS plans are administered by governmental or
quasi-governmental organizations and actuarial assumptions and methods may
not be influenced by the Company. VMEHS accrues pension costs, but is
only required to fund a portion of these costs. Annual pension costs
include an interest factor on the unfunded obligations. Actuarial
information, as supplied by the governmental agency for the plans they
administer, indicates that the accrued pension costs approximate the
actuarially-computed value of vested and non-vested plan benefits.
Pension expense for the defined contribution plans was $24,884, $37,278,
and $39,633 in 1993, 1992 and 1991, respectively. Certain employees are
also covered by insured plans which supplement the benefits received from
the defined contribution plans.
U.S. and Swedish Plans
Net periodic pension cost consists of the following:
1993 1992 1991
Service cost - benefits earned
during the period $ 1,803 $ 2,017 $ 1,966
Interest cost on projected
benefit obligation 13,566 15,573 14,766
Actual return on plan assets (5,015) (5,161) (5,161)
Net amortization and deferral (680) (2,162) (2,390)
$ 9,674 $ 10,267 $ 9,181
======== ======== =======
Assumptions used to develop the net
periodic pension cost were as follows:
1993 1992 1991
Weighted average discount rate 8.3% 9.7% 9.7%
Weighted average long term rate
of return on plan assets 9.1% 9.4% 9.4%
Rate of increase in compensation
levels 4.6% 5.7% 5.7%
35<PAGE>
<PAGE>
The following table sets forth the funded status of these plans at:
December 31,
1993 1992
Actuarial present value of accumulated
benefit obligation:
Vested benefits $ 146,797 $ 138,972
Non-vested benefits 5,293 2,991
Accumulated benefit obligation $ 152,090 $ 141,963
========= =========
Projected benefit obligation $(156,450) $(147,911)
Plan assets at fair value 69,715 70,294
Projected benefit obligation in excess
of plan assets (86,735) (77,617)
Unrecognized net loss from actuarial experiences 28,987 14,421
Unrecognized prior service cost 64 70
Unamortized net asset existing at date
of adoption of FAS 87 (18) (1,207)
Liability for Swedish early retirement program - (500)
Liabilities for other plans (3,859) (6,463)
Adjustment required to recognize
minimum liability (30,491) (16,293)
Total pension liability (92,052) (87,589)
Less: current portion 11,216 2,264
Total long-term pension liability $ (80,836) $ (85,325)
========= =========
Canadian Plans
Net periodic pension income included the following :
1993 1992 1991
Service cost - benefits earned during
the period $ 176 $ 348 $ 412
Interest cost on projected benefit
obligation 315 964 1,014
Actual return on plan assets (1,061) (1,495) (1,557)
Net amortization and deferral (192) (322) (347)
Net periodic pension income $ (762) $ (505) $ (478)
======= ======= =======
Assumptions used to develop the net
periodic pension income were as follows :
1993 1992 1991
Weighted average discount rate 7.5% 9.5% 9.5%
Weighted average long-term rate of 7.5% 9.5% 9.5%
return on plan assets
Rate of increase in compensation levels 4.0% 5.5% 5.5%
36<PAGE>
<PAGE>
The following table sets forth the Plans' funded status at:
December 31,
Actuarial present value of accumulated 1993 1992
benefit obligation :
Vested benefits $ 4,381 $ 10,086
Non-vested benefits 318 137
Accumulated benefit obligation $ 4,699 $ 10,223
======== ========
Projected benefit obligation $ (4,908) $(10,906)
Plan assets at fair value 8,216 17,020
Plan assets in excess of projected
benefit obligation 3,308 6,114
Unrecognized net gain from actuarial
experiences (1,662) (2,229)
Unrecognized prior service cost 693 1,572
Unamortized net asset existing at date
of adoption of FAS 87 (757) (3,703)
Prepaid pension asset $ 1,582 $ 1,754
======== ========
Other Plans
A non-U.S. subsidiary's pension plans and postretirement benefits are
funded by a government-administered program. Contributions to the program
are based on payroll costs and have been fully provided for through
December 31, 1993.
Note 19 - Postretirement and Postemployment Benefits
The Company adopted Statement of Financial Accounting Standard No. 106
(SFAS 106) "Employers Accounting for Postretirement Benefits other than
Pensions" effective January 1, 1993. This statement requires the Company
to recognize, during the working career of those employees who could
become eligible for such benefits, the estimated cost of providing certain
postretirement benefit costs (other than pensions) for those employees
when they retire.
The Company and its subsidiaries provide certain health care and life
insurance benefits for its U.S. retired employees. Substantially all of
the Company's U.S. employees may become eligible for those benefits if
they reach normal retirement age while still working for the Company.
Those benefits and similar benefits for active employees are provided
through an insurance company whose premiums are based on the benefits paid
during the year. The total postretirement health care and life insurance
expense charged to income was $12,051, $6,670 and $5,090 in 1993, 1992 and
1991, respectively.
Annual net postretirement benefit costs under the Company's benefit plan
are determined on an actuarial basis. The Company's current policy is to
pay these benefits as they become due. The Company has elected to
recognize the transition obligation of $84,858 over a 20-year period.
37<PAGE>
<PAGE>
Net periodic postretirement benefit costs are comprised
as follows:
Service cost $ 664
Interest cost on projected benefit obligations 7,144
Amortization of transition obligation 4,243
Total net periodic pension cost $ 12,051
========
Accumulated postretirement benefit obligation is comprised
as follows:
Retired participants $ 79,349
Fully eligible active plan participants 6,538
Other active plan participants 11,569
Total accumulated postretirement benefit obligation $ 97,456
Less : Unrecognized loss 11,218
Less : Unrecognized transition obligation 80,616
Accrued postretirement benefit cost other than pensions $ 5,622
========
The discount rate used in determining the accumulated benefit obligation
was 7.50%. The assumed health care cost trend rates result in per capita
net incurred medical claims increasing 12% under age 65 and 10% over age
65. These rates decrease to 6% for both over and under age 65 by the year
2006. If the assumed health care cost trend rate were increased by 1%, the
accumulated postretirement benefit obligation as of December 31, 1993,
would increase $11,111.
In November 1992, the Financial Accounting Standard Board issued SFAS No.
112 "Employers' Accounting for Postemployment Benefits". This statement
establishes accounting standards for employers who provide benefits such
as supplemental unemployment compensation, severance benefits, salary
continuation and other benefits to former or inactive employees after
employment but before retirement.
The Company is not required to adopt this Statement until 1994 and mana-
gement has decided not to implement this Statement as of December 31,
1993. Management does not expect the implementation of this Statement to
have a material effect upon the Company's financial position.
Note 20 - Shareholders' Equity
VME Group N.V. acquired from AB Volvo and Clark Equipment Company all out-
standing shares in VMEA and VMEHS in December 1993 in exchange for newly
issued shares in VME Group N.V. Previously 195,000 Class A shares and
195,000 Class B shares of VMEA and VMEHS were authorized and the
outstanding Class A shares were fully held by VME Group NV and the Class B
shares held equally by Clark and AB Volvo.
As discussed in Note 1, the contributions by AB Volvo and Clark to the
Company were accounted for as transactions between entities under common
control. Accordingly, financial statements of the Company have been
prepared at a historical cost basis and reflect such contributions on a
retroactive basis for all periods presented. Shares of common stock in
the amount of 250,000 were reflected as if outstanding for all periods
reported.
38<PAGE>
<PAGE>
Changes in Shareholders' equity are as follows:
(Deficit) Cumulative
Common Paid-In Retained Adjustments
Stock Capital Earnings To Equity Total
January 1, 1991 $ 25,750 $154,148 $ 83,561 $ 46,624 $310,083
Pension liability
in excess of
unrecognized prior
service cost - - - (3,992) (3,992)
Net loss - - (44,664) - (44,664)
Dividends paid - - (9,468) - (9,468)
Cumulative
Translation
Adjustment - - - 1,133 1,133
December 31, 1991 $ 25,750 $154,148 $ 29,429 $ 43,765 $253,092
Capital contribution - 30,000 - - 30,000
Pension liability
in excess of
unrecognized prior
service cost - - - (7,384) (7,384)
Net loss - - (93,617) - (93,617)
Cumulative
Translation
Adjustment - - - (27,280) (27,280)
December 31, 1992 $ 25,750 $184,148 $(64,188) $ 9,101 $154,811
Pension liability
in excess of
unrecognized prior
service cost - - - (12,301) (12,301)
Net income - - 30,023 - 30,023
Cumulative
Translation
Adjustment - - - (14,122) (14,122)
December 31, 1993 $ 25,750 $184,148 $(34,165) $(17,322) $158,411
======== ======== ======== ======== ========
The capital contribution in 1992 of $30,000 was equally contributed by the
two shareholders.
Note 21 - Contingencies
The Company has pending claims with respect to which lawsuits have been
filed alleging damages which in the aggregate would be material to the
Company. Of the foregoing claims and lawsuits, some involve claims for
damages for injury, death or property damage arising from alleged defects
in products of the Company or products of Clark Equipment Company or its
subsidiaries for which the Company assumed responsibility at the time of
its formation. Most of the product-related cases are in varying stages of
pretrial completion.
The ultimate result of these claims and lawsuits at December 31, 1993 is
not determinable, but in the opinion of management, either adequate
provision for any anticipated loss has been made by insurance, accruals or
otherwise, or the ultimate loss resulting therefrom will not materially
affect the financial position or results of operations of the Company.
39<PAGE>
<PAGE>
The Internal Revenue Service (IRS) is in the process of conducting an
examination of VMEA's federal income tax returns for the years 1988-1991.
At this time no final report, assessment or adjustment letter has been
issued by the IRS. Issues which may give rise to examination adjustments
include a worthless stock deduction, acquired inventories and imputed
interest on advances to subsidiaries. The amounts in question are
material for the Company but management continues to believe that VMEA has
meritorious defenses to the items being questioned by the IRS. Management
is unable to estimate a range of liability at this time, but believes the
ultimate loss resulting therefrom will not materially affect the financial
position or results of operations of the Company.
The Company has agreements with selected distributors and customers to
repurchase a limited volume of parts at pre-established prices and
conditions. The Company is also obligated, under certain conditions, to
repurchase some dealer or customer inventory and rental assets funded by
financial institutions aggregating $14,000 at December 31, 1993. In the
opinion of management, adequate provisions have been made for costs which
might be incurred in connection with the agreements.
The Company has guaranteed secured obligations of others and discounted
notes with recourse in an aggregate amount of $54,920 at December 31,
1993.
Note 22 - Segment Information
The Company operates in primarily one industry segment, the manufacturing
and marketing of construction equipment and related parts. Following is
financial information by geographic segment:
Year Ended December 31,
1993 1992 1991
Sales
North America $ 480,032 $ 404,940 $ 316,109
Europe 725,709 881,927 911,047
Other 280,802 255,210 278,101
Eliminations (247,235) (184,802) (136,782)
$1,239,308 $1,357,275 $1,368,475
========== ========== ==========
Year Ended December 31,
1993 1992 1991
Income before taxes
North America $ 8,752 $ (37,025) $ (29,987)
Europe 29,470 (68,307) (34,580)
Other (2,611) (11,638) (6,914)
$ 35,611 $ (116,970) $ (71,481)
========== ========== =========
December 31,
1993 1992 1991
Identifiable assets
North America $ 204,473 $ 209,397 $ 230,303
Europe 982,537 1,042,815 1,250,238
Other 50,072 58,389 68,561
Eliminations (447,918) (340,744) (353,590)
$ 789,164 $ 969,857 $1,195,512
========== ========== ==========
40<PAGE>
<PAGE>
Note 23 - Related Party Transactions (in millions)
The following is a summary of related party transactions:
AB Volvo and Clark and
Subsidiaries Subsidiaries
1993 VME Transactions
Sales $ 20 $ -
Purchased materials 39 19
Parts distribution service fee - 7
Other expense 10 1
Interest expense 2 2
1993 VME Balances
Accounts receivable 6 1
Accounts payable 2 -
1992 VME Transactions
Sales $ 18 $ 2
Purchased materials 51 23
Parts distribution service fee - 9
Other expense 13 -
1992 VME Balances
Accounts receivable 2 1
Accounts payable 2 2
1991 VME Transactions
Sales $ 44 $ 3
Purchased materials 56 25
Parts distribution service fee - 8
Other expense 8 -
1991 VME Balances
Accounts receivable 16 -
Accounts payable 4 4
Note 24 - Subsequent events
As of January 1, 1994, the Company has increased its majority shareholding
in Zettelmeyer from 70% to 100% by acquiring the remaining minority
interest for $33 million.
41<PAGE>
<PAGE>
Report of Independent Accountants
on Financial Statement Schedules
March 4, 1994
To the Board of Directors and
Shareholders of VME Group N.V.
Our audits of the consolidated financial statements referred to in our report
dated March 4, 1994 presented in the first section of this document also
included an audit of the accompanying Financial Statement Schedules. In our
opinion, based upon our audits and the report of other independent accountants
referred to in our report on the financial statements, these Financial Statement
Schedules present fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
/s/ Price Waterhouse
Cleveland, Ohio
42<PAGE>
<PAGE>
<TABLE>
SCHEDULE VIII
VME GROUP N.V.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
<CAPTION>
Balance at Charged to
Beginning of Cost and Other Balance at
Description Period Expenses Add (Deduct) End of Period
<S> <C> <C> <C> <C>
Year ended December 31, 1993:
Allowance for doubtful accounts $ 12,230 $ 2,387 $ (1,454) * $ 10,161
(3,002) **
Year ended December 31, 1992:
Allowance for doubtful accounts $ 15,466 $ (306) $ (2,333) * $ 12,230
(597) **
Year ended December 31, 1991:
Allowance for doubtful accounts $ 12,455 $ 614 $ 852 * $ 15,466
1,545 ***
<FN>
* Primarily represents translation adjustments
** Write-offs and disposals
*** Acquisitions
</TABLE>
43<PAGE>
<PAGE>
<TABLE>
SCHEDULE IX
VME GROUP N.V.
SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
Maximum Amount Average Amount Weighted
Balance Weighted Outstanding Outstanding Average Interest
Short-Term at End of Average Interest During During Rate During
Borrowings Period Rate at Year-End The Period The Period The Period
<S> <C> <C> <C> <C> <C>
Year ended
December 31, $ 52,218 6.9% $ 247,433 $ 97,336 10.1%
1993
Year ended
December 31, $ 247,433 10.8% $ 342,440 $ 313,948 10.1%
1992
Year ended
December 31, $ 319,351 9.5% $ 319,351 $ 228,272 9.8%
1991
</TABLE>
44<PAGE>
<PAGE>
KPMG Bohlins
KPMG Bohlins AB Mail Address Telephone +46(31)61 48 00
Norra hamngatan 22 P.O. Box 11908 Telefax +46(31)15 26 55
Gothenburg S-404 39 Gothenburg Telex 21762 BJGS
Sweden Sweden
Independent Auditors' Report
To the Board of Directors of VME Holding Sweden AB:
We have audited the consolidated balance sheets of VME Holding Sweden AB
and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income (loss) and cash flows for each of the
years in the three year period ended December 31, 1993 (all expressed in
U.S. dollars and not presented separately herein). In connection with our
audit of the aforementioned consolidated financial statements, we also
audited the related consolidated financial statement schedules V, VI,
VIII, IX and X (all expressed in U.S. dollars and not presented separately
herein). These consolidated financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in Sweden which are similar in all material respects with
auditing standards in the United States. Those standards 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 included in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
The consolidated financial statements and financial statement schedules
have been translated in accordance with the standards set forth in
Statement of Financial Accounting Standards No. 52 from Swedish Kronor
(the currency of the country where VME Holding Sweden AB is incorporated
and in which it operates) into U.S. dollars for purposes of inclusion in
the consolidated financial statements of VME Group N.V.
In our opinion, for purposes of inclusion in the consolidated financial
statements of VME Group N.V., the translated financial statements present
fairly, in all material respects, the consolidated financial position of
VME Holding Sweden AB and subsidiaries at December 31, 1993 and 1992 and
the consolidated results of their operations and their cash flows for each
of the years in the three-year period ended December 31, 1993 in
conformity with generally accepted accounting principles in the United
States. Also, in our opinion, the related consolidated financial
statement schedules, when considered in relation to the basic consolidated
financial statements, present fairly in all material respects the
information shown therein.
Gothenburg, Sweden /s/ KPMG Bohlins AB
February 23 1994 KPMG Bohlins AB
Member Firm of Headoffice Mail address Tel +46 8 723 91 00
Klynveld Peat Tegelbacken 4, P.O. Box 16106 Fax +46 8 10 52 58
Marwick Stockholm S-103 23 Stockholm
Goerdeler Sweden Sweden
45
<PAGE>
<PAGE>
EXHIBIT LIST AND INDEX
Filed Herewith Unless
Exhibit Description Otherwise Indicated
(3)(a) Restated Certificate of Incorporated by reference
Incorporation to Exhibit (3)(a) to
Registrant's Form 10-K
for the year 1992
(3)(b) By-laws, as amended Incorporated by reference
to Exhibit (3)(b) to
Registrant's Form 10-K
for the year 1989
(3)(c) Amended and Restated Rights Incorporated by reference
Agreement, dated as of to Exhibit (3)(c) to
August 14, 1990 between Registrant's Form 10-Q
Clark Equipment Company and for the period ended
Harris Trust and Savings Bank September 30, 1990
(4)(a) Indenture dated as of August 1, Incorporated by reference
1983 between Clark Equipment to Exhibit (4)(a) to
Company and Harris Trust and Registrant's Form 10-K
Savings Bank as trustee, as to for the year 1992
which Pittsburgh National Bank
is successor trustee, as
supplemented by a First
Supplemental Indenture dated as
of February 1, 1991
(4)(b) Specimen form of 9-3/4% Note Incorporated by reference
issued pursuant to Exhibit to Exhibit (4)(b) to
(4)(a) Registrant's Form 10-K
for the year 1992
(4)(c) Registrant is a party to several Pursuant to paragraph
other long term debt agreements (4)(iii)(A) of Item
under which, in each case, the 601(b) of Regulation
total amount of securities S-K, Registrant agrees
authorized does not exceed 10% to furnish a copy of
of the assets of Registrant and these instruments to
its consolidated subsidiaries. the Securities and
Exchange Commission
upon request.
(10)(a) Employment contract with Leo Incorporated by reference
J. McKernan, Chairman, President to Exhibit (10)(a) to
and Chief Executive Officer, Registrant's Form 10-K
dated November 12, 1992 for the year 1992
(10)(b) Employment contract with Frank Incorporated by reference
M. Sims, Director and Senior to Exhibit (10)(b) to
Vice President, dated Registrant's Form 10-K
November 12, 1992 for the year 1992
46<PAGE>
<PAGE>
Filed Herewith Unless
Exhibit Description Otherwise Indicated
(10)(c) Employment contract with Thomas Incorporated by reference
L. Doepker, Vice President and to Exhibit (10)(d) to
Treasurer, dated November 12, Registrant's Form 10-K
1992 for the year 1992
(10)(d) Employment contract with Bernard Incorporated by reference
D. Henely, Vice President and to Exhibit (10)(e) to
General Counsel, dated Registrant's Form 10-K
November 12, 1992 for the year 1992
(10)(e) Employment contract with William Incorporated by reference
N. Harper, Vice President and to Exhibit (10)(f) to
Controller, dated November 12, Registrant's Form 10-K
1992 for the year 1992
(10)(f) Employment contract with Paul Incorporated by reference
R. Bowles, Vice President, to Exhibit (10)(i) to
dated March 13, 1992 Registrant's Form 10-K
for the year 1991
(10)(g) Employment contract with John Incorporated by reference
J. Reynolds, Vice President, to Exhibit 10(i) to
dated November 14, 1991 Registrant's Form 10-K
for the year 1992
(10)(h) 1985 Stock Option Plan Incorporated by reference
to Exhibit 10(j) to
Registrant's Form 10-K
for the year 1991
(10)(i) Stock Purchase Plan (amended Incorporated by reference
and restated effective as of to Exhibit (10)(r) to
August 15, 1991) Registrant's Form 10-K
for the year 1991
(10)(j) Stock Purchase Plan for Non- Incorporated by reference
Employee Directors to Exhibit (19)(a) to
Registrant's Form 10-Q
for the period ended
September 30, 1991
(10)(k) Stock Grant Plan for Non- Incorporated by reference
Employee Directors to Exhibit (19)(b) to
Registrant's Form 10-Q
for the period ended
September 30, 1991
(10)(l) Incentive Compensation Plan Incorporated by reference
for Corporate Office Management to Exhibit (10)(u) to
(adopted February 18, 1992) Registrant's Form 10-K
for the year 1991
(10)(m) Incentive Compensation Plan Incorporated by reference
for Business Unit Management to Exhibit (10)(v) to
(adopted February 18, 1992) Registrant's Form 10-K
for the year 1991
47<PAGE>
<PAGE>
Filed Herewith Unless
Exhibit Description Otherwise Indicated
(10)(n) Performance Unit Plan Incorporated by reference
(effective November 9, 1992) to Exhibit (10)(s) to
Registrant's Form 10-K
for the year 1992
(10)(o) Form of Grant Letter used to Incorporated by reference
award Performance Units to Exhibit (10)(t) to
pursuant to the Performance Registrant's Form 10-K
Unit Plan (effective for the year 1992
November 9, 1992)
(10)(p) Form of Grant Letter used to Incorporated by reference
award Performance Units in to Exhibit (10)(u) to
1991 Registrant's Form 10-K
for the year 1992
(10)(q) Form of Grant Letter used to Incorporated by reference
award Performance Units in to Exhibit (10)(v) to
1989 Registrant's Form 10-K
for the year 1992
(10)(r) Form of Grant Letter used to Incorporated by reference
award Performance Units in to Exhibit (10)(w) to
1988 Registrant's Form 10-K
for the year 1992
(13) Portions of Clark Equipment ---
Company 1993 Annual Report
to Stockholders which are
incorporated by reference
into this Form 10-K
(22) Subsidiaries of Clark Equipment ---
Company
(24)(a) Consent of Independent Accountants- ---
Price Waterhouse
(24)(b) Consent of Independent Accountants- ---
KPMG Bohlins AB
(99) Computation of Ratio of Earnings to ---
Fixed Charges for the twelve
months ended December 31, 1993
48
<PAGE>
<PAGE>
EXHIBIT (13)
PORTIONS OF ANNUAL REPORT TO STOCKHOLDERS
INCORPORATED BY REFERENCE INTO FORM 10-K
Management's Discussion and Analysis
General Overview
The Company sold its Clark Material Handling Company (CMHC) business unit
to Terex Corporation on July 31, 1992. All prior-year income statements
presented reflect CMHC as a discontinued operation.
Clark's net results for consolidated continuing operations, which consist
of Melroe, Clark-Hurth Components, and Clark Automotive Products, improved
approximately 68.3% in 1993 compared with 1992 results, reflecting
increased sales and margins. Sales in 1993 increased 9.0% over 1992 and
Clark reported net income from consolidated continuing operations of $34.0
million compared with $20.2 million for 1992. Included in the results for
1993 were several special events that, in the aggregate, lowered net
income by $8.7 million, or $.50 per share. They were: 1) Clark-Hurth
Components took a $3.3 million after-tax charge for manpower reductions;
2) the increase in the Company's stock price created an after-tax expense
of $9.7 million for stock incentive programs; 3) Clark received an after-
tax refund of $3.5 million from the U.S. Customs Service as settlement of
a disputed duty drawback claim; 4) a $2.2 million after-tax charge to
field retrofit one skid-steer loader model with an additional hydraulic
lock-out system to prevent potential misuse; and 5) the Company's tax
provision was decreased by $3.0 million, reflecting the impact of the
increase in U.S. tax rates on recorded deferred tax assets.
The profitability of VME Group N.V. (VME), Clark's 50%-owned construction
machinery joint venture, improved from 1992 levels, reflecting higher
production, better price realization, and savings from cost-reduction
activities. Clark reported equity income in VME operations of $7.8
million in 1993 compared with a loss of $48.1 million in 1992. The 1992
results included an $8.5 million restructuring charge.
In 1992, Clark's consolidated continuing operations reflected better
results than those reported for 1991. Improved sales volumes and margins
resulted in income of $20.2 million compared with losses of $29.4 million
in 1991. This improvement was offset by Clark's share of the losses of
VME, which were $48.1 million in 1992 and $23.1 million in 1991. VME was
affected by a depression in world construction industry markets and by the
cost of restructuring its operations to improve efficiency and reduce
capacity.
The Company's 1991 results were adversely impacted by special charges
totaling $33.5 million, which consisted of the following:
Amounts in millions
Employment reduction costs in
North America and Europe $21.3
North American rationalization costs 5.5
Environmental clean-up costs 4.0
Clark's share of rationalization costs
at VME, Clark's 50%-owned joint venture 2.7
$33.5
<PAGE>
<PAGE>
In each of the three years ended December 31, 1993, the Company has
reflected accounting changes in its Statement of Income. Effective
January 1, 1991, the Company adopted the provisions of Statement of
Financial Accounting Standards (FAS) No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," giving immediate
recognition to a $244.9 million charge to recognize its postretirement
benefit obligations. Effective January 1, 1992, the Company adopted FAS
No. 109, "Accounting For Income Taxes." This adoption resulted in the
recognition of a cumulative tax benefit of $92 million related to the
recognition of additional net deferred tax assets. Effective January 1,
1993, VME adopted FAS No. 109. Clark's share of the cumulative tax
benefit resulting from this accounting change was $6.2 million. At the
same time, VME also adopted FAS No. 106, and will recognize its estimated
obligation on a transitional basis over 20 years. A charge of $1.4
million, which represents Clark's share, is included in 1993 VME results.
Results of Operations
Continuing Consolidated Operations:
Sales in 1993 totaled $874.9 million, an increase of 9.0% from the 1992
level of $802.7 million. The 1992 sales level increased 11.3% from the
1991 level of $721.4 million.
The 1993 sales increase of $72.2 million over the 1992 level related to
volume and price improvements and offset an unfavorable foreign currency
translation impact of about $29 million. The off-highway segment, which
consists of the Clark-Hurth Components and Melroe businesses, recorded
sales of $690.6 million in 1993 compared with $657.5 million in 1992. In
this segment, North American sales increased $88.4 million, or 24.2%, and
overseas sales decreased $55.3 million, or 19.0%, when comparing the same
periods. The North American increase was mostly volume-related, while
about 53% of the overseas decrease was related to changes in foreign
currency translation rates. The on-highway segment, which consists of the
Brazil-based Clark Automotive Products business, reflected a sales
improvement of $39.1 million from the 1992 sales level, about 87.2% of
which was volume-related. The improvement relates largely to the light
and medium-duty truck transmission business.
In 1992, sales increased $81.4 million compared with 1991. Increases
occurred at all of the Company's businesses. About 11% of the increase
related to changes in foreign currency translation rates. The remaining
increase in sales related to volume and pricing improvements.
Gross margins were 20.0% in 1993 compared with 17.3% and 11.6% in 1992 and
1991, respectively. In 1993 margin levels increased to approximately 20%
for both of the Company's business segments. Margins in the off-highway
segment were 18.8% in 1992 and 12.5% in 1991 while margins in the on-
highway segment were 14.5% in 1992 and 11.8% in 1991. The continued level
of improvement in 1992 and 1993 in both of the segments relates to higher
capacity utilization as a result of higher operating levels and the
realization of benefits of cost containment programs implemented since the
current recessionary period began in 1990.
The financial statements of most of Clark's foreign subsidiaries are
translated at current and average exchange rates. Any resulting
translation adjustment is included in the cumulative translation
adjustment account in stockholders' equity. For Brazil's
hyperinflationary economy and for foreign operations that are an extension
of U.S. manufacturing concerns, financial statements are translated using
a combination of current, average, and historic exchange rates, with the
resulting
-2-<PAGE>
<PAGE>
translation impacts included in income. Transactions carried out in
different currencies resulting in exchange adjustments are also included
in income. The impact of foreign currency and exchange transactions
included in cost of goods sold were gains of $0.2 million in 1993 and
losses of $2.9 million and $3.0 million in 1992 and 1991, respectively.
The Company exports certain products manufactured in the United States,
principally for sale in European countries. In addition, certain products
are manufactured in Europe for export sale, primarily in other European
countries. These sales are typically invoiced in the currency of the
country in which the products are sold and accordingly, the relative
strength or weakness of the currency of country in which the products are
manufactured can significantly impact the profitability of these sales.
Clark periodically hedges these sales to reduce the currency risk,
however, fluctuations in profitability will still result with currency
movements. Throughout 1993, the Company's results were favorably impacted
by currency positions partially secured with hedges.
Research and development expenses of $19.8 million, $16.9 million, and
$16.5 million were included in cost of goods sold in 1993, 1992, and 1991,
respectively. The level of spending reflects the Company's commitment to
develop new products and further enhance the quality of existing products
through use of the latest technologies.
There was no LIFO-related income in 1993. However, due to reductions in
domestic inventory levels, $1.8 million and $2.1 million of LIFO income
was recorded in the fourth quarters of 1992 and 1991, respectively.
Selling, general and administrative expenses were $118.5 million, or 13.5%
of sales, in 1993 compared with $99.8 million, or 12.4% of sales, in 1992
and $103.2 million, or 14.3% of sales in 1991. The 1993 increase in
expenditures from the 1992 level was related to higher sales volume,
retiree health care costs, and compensation-related matters, including
stock incentive programs, which accounted for $15.5 million of the
overall $18.7 million expense increase. The 1992 decrease from 1991
levels resulted from expense control actions and lower interest rates.
Operating income from continuing operations increased about 42.5% to $56.0
million from the 1992 level of $39.3 million, which compared with a 1991
loss of $19.5 million. The 1993 increase is attributable to the effects
of higher sales and higher gross margins, partially offset by increases in
selling, general and administrative expenses. The 1992 increase is
attributable to higher sales, higher gross margins, and lower expense
levels due to cost-reduction actions taken throughout 1991. The 1991
operating loss included $16.9 million of special charges to restructure
operations and $4.0 million for environmental clean-up costs.
Other income was $11.9 million in 1993 compared with $16.9 million in 1992
and $14.6 million in 1991. The 1993 decrease of $5.0 million related
principally to expenses associated with Brazilian monetary correction
procedures. These procedures, which resulted in the reflection of an
expense of $5.8 million, require that tax remittances be indexed from the
date incurred until paid to offset the impacts of inflation. Partially
offsetting this expense was higher interest income, which increased by an
aggregate of $1.5 million despite lower investment rates. The increase
can be attributed to $1.7 million of interest from a duty drawback refund
received from the U.S. Customs Service and an additional $1.8 million of
interest resulting from the settlement of U.S. tax audits for 1989 through
1991.
-3-<PAGE>
<PAGE>
Interest expense was $21.5 million in 1993 compared with $25.6 million in
both 1992 and 1991. The 1993 decrease of $4.1 million from the 1992 level
is due to lower average rates and debt balances outstanding in 1993. The
average rates and debt balances outstanding in 1992 approximated those in
1991.
Pre-tax results from consolidated continuing operations were income of
$46.5 million in 1993 and $30.6 million in 1992, and a loss of $30.5
million in 1991. The year-to-year improvement in results for 1993 and
1992 reflect higher sales, improved gross margins, and the impact of
expense control actions taken in prior years, principally during 1991.
Tax provisions of $12.4 million and $10.4 million were recorded in 1993
and 1992, respectively, and a tax credit of $1.1 million was recorded in
1991. The effective tax rate in 1993 was 26.8%. The U.S. corporate
income tax rate was increased from 34% to 35% retroactive to January 1,
1993. A tax credit of $3.0 million was recorded in the third quarter as
net U.S. deferred tax assets were revalued at the higher tax rate.
Without this item, the effective tax rate would have been 33.2%. The tax
rate on operations in 1993 was lower than the U.S. statutory rate and the
1992 tax provision approximated the U.S. statutory rate. The tax rates in
both years have been reduced by the utilization of capital loss
carryforwards in the United States and net operating loss carryforwards at
certain foreign locations. These impacts reduced the overall tax
provisions by approximately $4.7 million in 1993 and $2.5 million in 1992.
The 1991 overall tax benefit was approximately $1.1 million or 3.5% of the
pre-tax loss. This was lower than the U.S. statutory rate because in
different taxing jurisdictions carryback ability was limited by either
statute or insufficient prior-year income levels.
Equity in Associated Company
Equity in the net results of VME, Clark's 50%-owned joint venture, was
income of $7.8 million in 1993 and losses of $48.1 million in 1992 and
$23.1 million in 1991. VME sales were $1,240 million in 1993, compared
with $1,357 million in 1992 and $1,368 million in 1991. The 1993
improvement in operating performance over 1992 is the result of higher
capacity utilization; improved margins due to better price realization,
partially accounted for by the devaluation of the Swedish krona; and
savings from cost-reduction activities initiated in 1992. Improvements in
the North American market also contributed to the better performance. The
1992 results included the impacts of Swedish currency devaluation of
approximately $2.0 million and a special charge of approximately $8.5
million to close VME's St. Thomas, Ontario, plant and restructure its
North American production operations. The charge encompassed employee
termination costs, the write-down of certain assets, and moving and start-
up costs for production transferred to Asheville, North Carolina, from St.
Thomas. Included in the 1991 results was a reserve VME established for
the permanent shutdown of one of its European operations. This increased
Clark's share of VME's loss by $2.7 million.
During 1992, the Company and AB Volvo each invested $15 million of
additional capital into VME, along with an additional $35 million in
subordinated loans which are repayable in 1996.
On November 17, 1993, VME and Hitachi Construction Machinery Co. Ltd.,
both worldwide suppliers of construction and mining equipment, signed an
agreement to establish a joint venture company in the rigid hauler
business. The joint venture company, named Euclid-Hitachi Heavy Equipment
Inc., became operational on January 1, 1994. Its headquarters is located
in Cleveland, Ohio.
-4-<PAGE>
<PAGE>
Discontinued Operations
Discontinued operations consist primarily of the operations of CMHC, which
reported income of $1.8 million in 1992 and a loss of $40.8 million in
1991. The 1992 results reflect the operating losses of CMHC through June
30, 1992, and include an $8.5 million gain on the sale of that business,
which was completed on July 31, 1992. When compared with 1991, the
improved operating results in 1992 reflect the manpower reductions made in
late 1991 and higher tax benefits available to offset operating losses.
The 1991 results included $9.9 million of special charges to restructure
operations.
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 into 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.
Accounting Changes
Effective January 1, 1991, the Company changed its method of accounting
for postretirement benefits by adopting the accrual method of accounting,
as prescribed by FAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." In making this change, the Company
immediately recognized a $244.9 million provision to accrue the estimated
Accumulated Postretirement Benefit Obligation (APBO). The APBO represents
the present value of estimated future benefits payable to current
retirees, including those from discontinued operations, and the earned
portion of estimated benefits payable to active employees after
retirement. Ongoing additional charges for active employees are accrued
annually to the date of full eligibility.
In 1991, the APBO was accrued without tax benefit, as required under then-
existing accounting pronouncements. With the adoption of FAS No. 109,
"Accounting for Income Taxes," in January 1992, Clark recognized a future
tax benefit with respect to the APBO.
Effective January 1, 1992, the Company adopted FAS No. 109,
"Accounting for Income Taxes." This resulted in the recognition of a
cumulative net tax benefit of $92 million related to the recognition of
additional net deferred tax assets. In adopting FAS No. 109, the Company
considered the cyclicality of its business, the nature of its prior
operating losses, and the probable turnaround of temporary book and tax
differences. Through this assessment, management has concluded that with
the restructuring actions undertaken, including the sale of CMHC, Clark
will be sufficiently profitable in the long-term to realize the tax
benefits related to its temporary differences. In the adoption, Clark
generally did not reflect benefits related to foreign net operating loss
carryforwards or to capital loss carryforwards, due to the limited nature
of the carryforward periods, limitations on use, and the underlying
business conditions surrounding the operations that gave rise to the
carryforwards.
Effective January 1, 1993, VME adopted FAS No. 109; Clark's share of the
cumulative tax benefit resulting from this accounting change was $6.2
million. VME also adopted FAS No. 106, effective January 1, 1993, and
will recognize its estimated obligation on a transitional basis over 20
years. A charge of $1.4 million, which represents Clark's share, is
included in the 1993 VME results.
-5-<PAGE>
<PAGE>
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.
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.
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
(SEC), 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
Clark has certain other contingent liabilities that have arisen in the
normal course of business. These, along with additional details on the
sale of CMHC, are discussed further in the Notes to Consolidated Financial
Statements.
-6-<PAGE>
<PAGE>
Liquidity and Capital Resources
At December 31, 1993, the Company's cash and short-term investments
amounted to $235.8 million compared with $191.9 million at December 31,
1992. At December 31, 1993, the Company's current ratio was 2.2 to 1
compared with 2.1 to 1 at December 31, 1992. The increase in cash is
principally due to cash flow from operations and additional debt.
In the first quarter of 1993, the Company filed a shelf registration
statement with the SEC to register $150 million of medium-term notes. The
Company sold $90.2 million of medium-term notes during the second quarter
of 1993. This includes $50 million of 30-year notes at rates of
approximately 8.20%. The remaining notes have maturities ranging from
June 14, 1995 to July 1, 1998 and 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 debt.
Cash provided by operations was $69.6 million in 1993, compared with $74.5
million in 1992 and $57 million in 1991. At the end of 1993, working
capital increased to $255.0 million from $199.6 million at the end of
1992.
The Company has a line of credit of $66.2 million with seven banks which
expires in October 1994. As of December 31, 1993, there were no
outstanding borrowings under this agreement. The Company is negotiating a
new agreement.
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
Worldwide capital expenditures - including CMHC through the date of
disposition - for facilities, manufacturing equipment, and tooling were as
follows:
Amounts in millions
1993 1992 1991
By Type
Capital facilities and
equipment $25.0 $29.4 $40.9
Tooling 4.9 7.9 7.7
Total expenditures $29.9 $37.3 $48.6
By Location
North America $19.8 $20.6 $26.5
Foreign locations 10.1 16.7 22.1
Total expenditures $29.9 $37.3 $48.6
Depreciation of fixed assets was $36.4 million in 1993, $44.1 million in
1992, and $45.8 million in 1991.
Capitalization
At December 31, debt as a percent of total capitalization (total debt and
stockholders' equity) was 46.9% in 1993, 47.9% in 1992, and 55.4% in 1991.
The improvement in the ratio relates principally to increased
stockholders' equity, partially offset by the increase in debt from the
medium-term notes issued during the second quarter. Total debt increased
to $236.9 million from the December 31, 1992, level of $232 million.
-7-<PAGE>
<PAGE>
Stockholders' equity at year-end was $268.2 million in 1993, $252.6
million in 1992, and $237.5 million in 1991. At December 31,
stockholders' equity per share was $15.41 in 1993, $14.56 in 1992, and
$13.72 in 1991.
Outlook
The backlog at the end of 1993 was $149 million compared with a backlog of
$123 million at December 31, 1992.
Looking ahead, the Company is cautiously optimistic about 1994. First
quarter 1994 results should improve compared to the prior-year period,
with growth coming from an improving North American market. Clark
operations should make performance gains in 1994, even if markets remain
flat. Results are expected to improve as the Company's businesses
continue to benefit from recent cost reduction programs. When the
worldwide markets strengthen, particularly in Europe, the Company expects
further gains in financial performance.
-8-
<PAGE>
<PAGE>
B A L A N C E S H E E T
<TABLE>
<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 -26)
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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<PAGE>
<PAGE>
S T A T E M E N T O F I N C O M E
<TABLE>
<CAPTION>
Amounts in thousands, except per share data
Years ended December 31
1993 1992 1991
<S> <C> <C> <C>
NET SALES . . . . . . . . . . . . . . . . . . . . . . . $ 874,917 $ 802,716 $ 721,350
OPERATING COSTS AND EXPENSES:
Cost of goods sold . . . . . . . . . . . . . . . . . . 700,370 663,565 637,678
Selling, general and administrative expenses . . . . . 118,504 99,821 103,171
818,874 763,386 740,849
Operating income (loss). . . . . . . . . . . . . . . . . 56,043 39,330 (19,499)
Other income. . . . . . . . . . . . . . . . . . . . . . . 11,939 16,885 14,597
Interest expense . . . . . . . . . . . . . . . . . . . . (21,506) (25,631) (25,583)
Pre-tax income (loss) from consolidated operations . . . 46,476 30,584 (30,485)
Provision (credit) for income taxes . . . . . . . . . . . 12,447 10,361 (1,060)
Income (loss) from consolidated operations . . . . . . . 34,029 20,223 (29,425)
Equity in net income (loss) of VME Group N.V. . . . . . . 7,840 (48,083) (23,129)
Income (loss) from continuing operations . . . . . . . . 41,869 (27,860) (52,554)
Discontinued operations:
Income (loss) from operations . . . . . . . . . . . . - (6,701) (40,784)
Gain on sale. . . . . . . . . . . . . . . . . . . . . - 8,519 -
Income (loss) from discontinued operations . . . . . . . - 1,818 (40,784)
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 . . . . . . . . . . . . . $ 2.41 $ (1.60) $ (3.04)
From discontinued operations . . . . . . . . . . . . . - 0.10 (2.36)
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>
-10-
<PAGE>
<PAGE>
S T A T E M E N T O F C A S H F L O W S
<TABLE>
<CAPTION>
Amounts in thousands
Years ended December 31
1993 1992 1991
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
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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<PAGE>
<PAGE>
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.
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. Due to the reporting of CMHC on an equity basis,
the notes pertaining to the Statement of Income do not reflect 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 the 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 $9.5 million from
equity investments), losses of $10.8 million in 1992 (including losses of
$7.9 million from equity investments), and losses of $4.3 million in 1991
(including losses of $1.3 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 cost of this
program is reflected 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 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.
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<PAGE>
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.
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.
-13-<PAGE>
<PAGE>
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.
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
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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<PAGE>
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.
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
-15-<PAGE>
<PAGE>
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 $14.3 $12.8 $10.3
Brazilian monetary correction
- taxes payable (5.8) - -
Sundry items, net 3.4 4.1 4.3
$11.9 $16.9 $14.6
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. The Brazilian monetary correction of $5.8 million relates to a
procedure whereby Brazilian tax remittances require indexing for inflation
from the date of liability until paid.
Supplementary Income Statement Information
Amounts in millions
1993 1992 1991
Maintenance and repairs $26.4 $24.8 $24.3
Taxes, other than payroll and
income taxes 8.0 8.7 6.5
Rents 6.0 6.4 6.9
Advertising costs 6.3 6.8 6.7
Research and development costs 19.8 16.9 16.5
-16-<PAGE>
<PAGE>
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 $39.3 $23.5 $ (2.9)
Foreign 7.2 7.1 (27.6)
$46.5 $30.6 $(30.5)
The elements of the provision (credit) for income taxes are as follows:
Amounts in millions
1993 1992 1991
Current income taxes:
Federal $ 7.2 $ 2.9 $(1.0)
Foreign 5.9 2.8 .9
State .4 .8 .6
Total current 13.5 6.5 .5
Deferred (prepaid) income taxes:
United States -
recurring 4.5 4.5 -
change in tax rates (3.0) - -
Foreign (2.6) (.6) (1.6)
Total deferred (prepaid) (1.1) 3.9 (1.6)
Provision (credit) for income
taxes on consolidated
continuing operations $12.4 $10.4 $(1.1)
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.
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.
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<PAGE>
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. Tax provisions in 1993 and 1992 were
reduced by approximately $3.7 million and $1.8 million, respectively, 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 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. 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.
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<PAGE>
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 (6.5) - -
Utilization of net operating
and capital loss
carryforwards (10.2) (8.0) -
Higher foreign taxes 9.7 4.9 28.8
Foreign distributions, net of
foreign tax credits (.1) 1.8 4.7
Other, net (1.1) 1.3 (3.0)
Net effective tax rate 26.8% 34.0% (3.5)%
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.
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
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<PAGE>
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.
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.
-20-<PAGE>
<PAGE>
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.
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.
-21-<PAGE>
<PAGE>
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:
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
-22-<PAGE>
<PAGE>
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, Italy, and Brazil. Expense relating to these plans totaled $6.5
million, $6.9 million, and $5.9 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. 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
-23-<PAGE>
<PAGE>
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.
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
-24-<PAGE>
<PAGE>
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.
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.
-25-<PAGE>
<PAGE>
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.
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.
-26-<PAGE>
<PAGE>
Business Segment Information
The Company's business is the design, manufacture, and sale of skid-steer
loaders, construction machinery, transmissions for on-highway equipment,
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 in two industry segments, those being "off-highway"
and "on-highway" products in the capital goods industry. The Company has
included its Melroe and Clark-Hurth Components business units in 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. Clark
Automotive Products principally manufactures transmissions for the
Brazilian automobile industry and North and South American medium-duty
truck industries and comprises the entire on-highway segment. Although
the Brazil-based Clark Automotive Products business unit has a limited
amount of off-highway business, the Company has included this entire
operation in the on-highway segment. This classification was selected
because of the insignificance of the off-highway operations to the
business unit, the lack of distinction between the segments in the
operation of the business, and the different economic characteristics of
the Brazilian markets as compared with other off-highway markets.
Intersegment transfers are insignificant. Selling prices on such
transfers, to the extent that they occur, are determined as nearly as
possible on the basis of normal commercial relationships.
Identifiable assets by industry are those that are used in the Company's
operations in each industry. 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.
For geographic segment reporting, sales and operating profit (loss)
reflect amounts sourced from the identified geographic area.
-27-
<PAGE>
<PAGE>
I N D U S T R Y S E G M E N T S
<TABLE>
<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>
Off-highway . . . . . . . . . . $690.6 $657.5 $587.7 $ 69.3 $59.4 ($0.2) $444.7 $461.1 $450.0
On-highway . . . . . . . . . . 184.3 145.2 133.7 18.4 11.2 3.4 96.2 107.7 103.9
874.9 802.7 721.4 87.7 70.6 3.2 540.9 568.8 553.9
Unallocated corporate
& other . . . . . . . . . . (19.7) (14.4) (8.1) 339.8 269.4 217.9
Interest expense . . . . . . . (21.5) (25.6) (25.6)
Eliminations . . . . . . . . . - - - (.9) (.8) (.9)
Consolidated operations . . $874.9 $802.7 $721.4 46.5 30.6 (30.5) 879.8 837.4 770.9
Equity investments . . . . . . 7.8 (48.1) (23.1) 122.1 121.3 135.6
Total continuing
operations * . . . . . . . $ 54.3 $(17.5) $(53.6) $1,001.9 958.7 906.5
Discontinued operations . . - - 213.5
Total . . . . . . . . . . . . . $ 1,001.9 $ 958.7 $1,120.0
* Pre-tax income (loss) and assets from continuing operations.
Depreciation Capital Expenditures
1993 1992 1991 1993 1992 1991
Off-highway . . . . . . . . . . $ 28.0 $29.3 $27.1 $ 25.1 $31.1 $34.1
On-highway . . . . . . . . . . 7.9 9.0 9.6 4.4 3.7 5.4
Other . . . . . . . . . . . . . . . .5 .5 .7 .4 .3 .5
Continuing operations . . $ 36.4 $38.8 $37.4 $ $29.9 $35.1 $40.0
</TABLE>
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<PAGE>
<PAGE>
G E O G R A P H I C S E G M E N T S
<TABLE>
<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 . . . . . . $561.5 $501.0 $435.6 $64.9 $55.5 $11.8 $270.6 $245.3 $177.9
Europe . . . . . . . . . . 129.1 156.5 152.1 4.2 3.9 (12.1) 200.5 238.4 278.8
South America. . . . . . . 184.3 145.2 133.7 18.6 11.2 3.5 92.1 97.0 108.8
Transfers between
areas:
North America . . . . . 17.1 15.4 13.5
Europe . . . . . . . . 12.7 11.5 10.6
South America . . . . . - 0.3 1.2
Eliminations . . . . . (29.8) (27.2) (25.3) - - - (23.2) (12.7) (12.5)
874.9 802.7 721.4 87.7 70.6 3.2 540.0 568.0 553.0
Unallocated corporate
and other . . . . . . . (19.7) (14.4) (8.1) 339.8 269.4 217.9
Interest expense . . . . . (21.5) (25.6) (25.6)
Consolidated
operations. . . . . . $874.9 $802.7 $721.4 46.5 30.6 (30.5) 879.8 837.4 770.9
Equity investments . . . . 7.8 (48.1) (23.1) 122.1 121.3 135.6
Total continuing
operations * . . . . . . $54.3 $(17.5) $(53.6) 1,001.9 958.7 906.5
Discontinued operations . - - 213.5
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>
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
<TABLE>
<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. . . . . . . (.5) (.5)
Shares issued-treasury (39,647 shares) . . . . (.2) 1.1 .9
Amortization of unearned restricted stock . . .2 .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) . . . . .1 .3 (.2) 1.2 1.4
Amortization of unearned restricted stock . . . .1 .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>
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<PAGE>
<PAGE>
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 )
<TABLE>
<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 . . . . . . . . . . . . $199.7 $189.6 $233.4 $212.6 $221.5 $209.2 $220.3 $191.3 $874.9 $802.7
Gross profit . . . . . . . . . . 39.2 33.7 47.4 35.2 47.0 35.9 40.9 34.4 174.5 139.2
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 or 1992.
</TABLE>
-31-
<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
/s/ Price Waterhouse South Bend, Indiana
February 14, 1994
-32-<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.
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<PAGE>
<PAGE>
F I N A N C I A L R E V I E W
<TABLE>
The following are certain selected financial data of Clark Equipment Company
and its consolidated subsidiaries 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 . . . . . . . . . . . . . . . . . . $ 874,917 $ 802,716 $ 721,350 $ 866,584 $ 865,502
OPERATING COSTS AND EXPENSES:
Cost of goods sold . . . . . . . . . . . . . 700,370 663,565 637,678 717,300 677,569
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . 118,504 99,821 103,171 113,371 117,030
818,874 763,386 740,849 830,671 794,599
Operating income (loss). . . . . . . . . . . . 56,043 39,330 (19,499) 35,913 70,903
Other income, net . . . . . . . . . . . . . . . 11,939 16,885 14,597 23,339 26,105
Interest expense . . . . . . . . . . . . . . . (21,506) (25,631) (25,583) (22,188) (24,832)
Pre-tax income (loss) from
consolidated operations . . . . . . . . . . 46,476 30,584 (30,485) 37,064 72,176
Provision (credit) for income taxes . . . . . 12,447 10,361 (1,060) 18,696 44,426
Income (loss) from consolidated
operations . . . . . . . . . . . . . . . . . 34,029 20,223 (29,425) 18,368 27,750
Equity in net income (loss) of
associated companies . . . . . . . . . . . 7,840 (48,083) (23,129) 21,576 22,411
Income (loss) from continuing
operations. . . . . . . . . . . . . . . . . 41,869 (27,860) (52,554) 39,944 50,161
Discontinued operations:
Income (loss) from operations . . . . . . - (6,701) (40,784) 9,518 14,695
Gain on sale . . . . . . . . . . . . . . . . - 8,519 - - -
Income (loss) from discontinued
operations . . . . . . . . . . . . . . . . - 1,818 (40,784) 9,518 14,695
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 . . . . . . . $ 2.41 $ (1.60) $ (3.04) $ 2.32 $ 2.92
From discontinued operations . . . . . - 0.10 (2.36) 0.55 0.86
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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<PAGE>
<PAGE>
EXHIBIT (22)
SUBSIDIARIES OF CLARK EQUIPMENT COMPANY (CLARK)
Except as otherwise indicated below, the following corporations are
wholly owned subsidiaries of Clark.
Jurisdiction of
Name (1) Incorporation
Clark Information Technologies Corporation Michigan
Celfor Services Corporation Michigan
Celfor Insurance Co., Ltd. Bermuda
Celfor Insurance Company, Inc. Illinois
Automotive Products Company Delaware
Clark Automotive Products Corporation Michigan
CAPCO do Brasil Empreendimentos
e Participacoes Ltda. Brazil
Equipamentos Clark Ltda. Brazil
Clark Business Services Corporation Michigan
Clark Distribution Services Inc. Michigan
CDS Midwest, Inc. Michigan
CDS South, Inc. Michigan
Clark Equipment Belgium N.V. Belgium
Clark Equipment of Canada Ltd. Canada
Clark-Hurth Components S.p.A. (2) Italy
Clark-Hurth Components S.A.R.L. (3) France
Clark-Hurth Components Marketing Company Delaware
Clark-Hurth Components Vertriebs GmbH West Germany
Melroe Equipment Limited Canada
Melroe Parts Trading GmbH West Germany
(1) Where the name of a subsidiary is indented, it is wholly owned by its
immediate parent listed at the margin above it, unless otherwise
indicated.
(2) 95.8% owned by Clark Business Services Corporation, 4.2% owned by
Antriebstechnick Ets.
(3) 95% owned by Clark-Hurth Components S.p.A. and 5% owned by Clark
Business Services Corporation.
<PAGE>
<PAGE>
EXHIBIT (24)(a)
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 dated February 14, 1994
appearing on page 42 of the 1993 Annual Report to Stockholders of Clark
Equipment Company which is incorporated by reference in this Annual Report
on Form l0-K. We also consent to the incorporation by reference of our
report on the Financial Statement Schedules of Clark Equipment Company,
which appears on page 14 of this Form 10-K. We also consent to the
incorporation by reference of our reports on the Combined Financial
Statements and the Financial Statement Schedules of VME Group N.V., which
appear on pages 21 and 42 of this Form 10-K.
/s/ Price Waterhouse
Price Waterhouse
South Bend, Indiana
March 30, 1994
<PAGE>
<PAGE>
EXHIBIT (24)(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to incorporation by reference in the Clark Equipment Company
Registration Statements on Form S-3 No. 33-60062 and on Form S-8 (Nos. 33-
28226, 33-13081, 2-99369, 2-77136, 2-67529, 2-61096, 2-53948, 2-39610, 2-
24730, 2-17758, 2-16146, 33-36188 and 33-44275) of our report dated
February 23, 1994 relating to the consolidated financial statements of VME
Holding Sweden AB and subsidiaries and the related financial statement
schedules as of December 31, 1993 and 1992, and for each of the years in
the three-year period ended December 31, 1993, which report is included in
the 1993 Annual Report on Form 10-K of Clark Equipment Company.
Gothenburg, Sweden
March 21, 1994
/s/ KPMG Bohlins AB
KPMG Bohlins AB
<PAGE>
<PAGE>
EXHIBIT (99)
CLARK EQUIPMENT COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
Twelve Months
1993
Earnings (Loss) Before Tax:
Clark-From Continuing Consolidated Operations $ 46,476
Clark's 50% Share of VME (Net of Clark Goodwill
Amortization and Other VME Related Expenses) $ 16,119
Total Pre-Tax Earnings (1) $ 62,595
Fixed Charges:
Clark:
Interest Expense $ 21,506
Interest Portion of Rent Expense $ 1,994
Clark's Share of VME:
Interest Expense $ 16,095
Interest Portion of Rent Expense $ 2,832
Total Fixed Charges (2) $ 42,427
Earnings from Continuing Operations Before
Taxes and Fixed Charges (1 Plus 2) $ 105,022
Ratio of Earnings to Fixed Charges 2.48
=========
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 Tax includes the pre-
tax income from Clark's Consolidated Continuing Operations and Clark's 50%
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% share of VME's interest. Fixed
Charges also includes one-third of Clark Rentals for Consolidated
Continuing Operations and Clark's 50% 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.
