<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 1-13086
EVI, INC.
---------
(Exact name of Registrant as specified in its Charter)
Delaware 04-2515019
-------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Post Oak Park, Houston, Texas 77027-3415
---------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(713) 297-8400
--------------------------------------------------
(Registrant's telephone number, include area code)
NONE
---------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
<TABLE>
<CAPTION>
Title of Class Outstanding at August 4, 1997
----------------------------- -----------------------------
<S> <C>
Common Stock, par value $1.00 46,159,613
</TABLE>
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EVI, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents............................................ $ 54,973 $223,966
Accounts Receivable, Net of Allowance for Uncollectible
Accounts of $1,058 at June 30, 1997 and $583 at December 31, 1996... 161,138 119,152
Inventories.......................................................... 228,092 157,631
Marketable Securities................................................ -- 23,841
Other Current Assets................................................. 34,425 34,091
--------- --------
478,628 558,681
--------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST,
NET OF ACCUMULATED DEPRECIATION...................................... 230,761 172,724
GOODWILL, NET......................................................... 154,179 102,474
OTHER ASSETS.......................................................... 32,777 18,964
--------- --------
$ 896,345 $852,843
========= ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-Term Borrowings, Primarily Under Revolving Lines of Credit..... $ 7,400 $4,451
Current Maturities of Long-Term Debt................................. 7,774 3,622
Accounts Payable..................................................... 117,702 80,783
Current Tax Liabilities.............................................. 17,583 81,916
Other Accrued Liabilities............................................ 69,191 62,354
--------- --------
219,650 233,126
--------- --------
LONG-TERM DEBT........................................................ 138,468 126,710
DEFERRED INCOME TAXES................................................. 27,343 16,920
OTHER LONG-TERM LIABILITIES........................................... 25,044 22,003
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' INVESTMENT:
Common Stock......................................................... 50,614 45,930
Capital in Excess of Par Value....................................... 404,254 258,721
Treasury Stock, at Cost.............................................. (151,940) (2,569)
Retained Earnings.................................................... 191,740 158,333
Cumulative Foreign Currency Translation Adjustment................... (8,828) (8,712)
Unrealized Gain on Marketable Securities............................. -- 2,381
--------- --------
485,840 454,084
--------- --------
$ 896,345 $852,843
========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.
(All share and per share amounts adjusted for 1997 stock split)
2
<PAGE> 3
EVI, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
----------------- -------------------
1997 1996 1997 1996
-------- ------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
REVENUES......................................... $211,468 $98,937 $376,108 $189,263
-------- ------- -------- --------
COSTS AND EXPENSES:
Cost of Sales................................... 158,305 74,893 281,318 144,183
Selling, General and Administrative Attributable
to Segments.................................... 21,761 12,085 39,072 23,580
Corporate General and Administrative............ 1,788 1,674 3,509 3,038
-------- ------- -------- --------
OPERATING INCOME................................. 29,614 10,285 52,209 18,462
-------- ------- -------- --------
OTHER INCOME (EXPENSE):
Interest Income................................. 829 62 3,408 91
Interest Expense................................ (4,497) (4,292) (8,166) (8,120)
Gain on Sale of Marketable Securities........... 3,352 -- 3,352 --
Other, Net...................................... 28 171 763 17
-------- ------- -------- --------
INCOME BEFORE INCOME TAXES....................... 29,326 6,226 51,566 10,450
PROVISION FOR INCOME TAXES....................... 10,264 2,180 18,159 3,657
-------- ------- -------- --------
INCOME FROM CONTINUING OPERATIONS................ 19,062 4,046 33,407 6,793
INCOME FROM DISCONTINUED OPERATIONS,
NET OF TAXES.................................... -- 1,748 -- 3,348
EXTRAORDINARY CHARGE, NET OF TAXES............... -- (731) -- (731)
-------- ------- -------- --------
NET INCOME....................................... $ 19,062 $ 5,063 $ 33,407 $ 9,410
======== ======= ======== ========
EARNINGS PER SHARE:
Income From Continuing Operations............... $ 0.42 $ 0.11 $ 0.73 $ 0.18
Income From Discontinued Operations............. -- 0.05 -- 0.09
Extraordinary Charge............................ -- (0.02) -- (0.02)
-------- ------- -------- --------
Net Income...................................... $ 0.42 $ 0.14 $ 0.73 $ 0.25
======== ======= ======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING....... 45,751 37,256 45,711 37,050
======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.
(All share and per share amounts adjusted for 1997 stock split)
3
<PAGE> 4
EVI, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
-------------------
1997 1996
---- ----
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................. $ 33,407 $ 9,410
Adjustments to Reconcile Net Income to Net Cash
Used by Operating Activities:
Depreciation and Amortization............................. 12,498 7,091
Net Income from Discontinued Operations................... -- (3,348)
Oil Country Tubular Ltd. Deposit.......................... -- (8,000)
Extraordinary Charge on Prepayment of Debt, Net........... -- 731
Gain on Sale of Marketable Securities..................... (3,352) --
Deferred Income Tax Provision from Continuing Operations.. 5,415 909
Change in Operating Assets and Liabilities, Net of Effects
of Businesses Acquired................................... (76,523) (13,710)
--------- -------
Net Cash Used by Continuing Operations................... (28,555) (6,917)
Net Cash Provided by Discontinued Operations............. -- 2,548
--------- -------
Net Cash Used by Operating Activities.................... (28,555) (4,369)
--------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Income Taxes Paid on Gain on Disposal of Discontinued
Operations................................................ (62,808) --
Proceeds from Sale of Marketable Securities, Net........... 23,352 --
Capital Expenditures of Discontinued Operations............ -- (9,197)
Acquisition of Businesses, Net of Cash Acquired............ (73,309) (3,740)
Capital Expenditures for Property, Plant and Equipment..... (23,710) (8,054)
Other, Net................................................. 166 1,068
--------- -------
Net Cash Used by Investing Activities..................... (136,309) (19,923)
--------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Termination Costs on Retirement of Debt.................... -- (1,125)
Debt Issuance Costs........................................ -- (1,472)
Borrowings Under Revolving Lines of Credit, Net............ 4,476 39,603
Repayments on Term Debt, Net............................... (7,836) (5,846)
Proceeds from Exercise of Stock Options.................... 1,437 672
Acquisitions of Treasury Stock............................. (2,112) (505)
Other, Net................................................. (94) --
--------- -------
Net Cash (Used) Provided by Financing Activities.......... (4,129) 31,327
--------- -------
EFFECT OF TRANSLATION ADJUSTMENT ON CASH.................... -- (314)
--------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................................ (168,993) 6,721
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 223,966 2,885
--------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 54,973 $ 9,606
========= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest Paid.............................................. $ 7,495 $ 7,789
Income Taxes Paid, Net of Refunds.......................... $ 77,777 $ 846
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.
4
<PAGE> 5
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(1) General
The unaudited consolidated condensed financial statements included herein
have been prepared by EVI, Inc., formerly Energy Ventures, Inc., (the
"Company") pursuant to the rules and regulations of the Securities and Exchange
Commission. These financial statements reflect all adjustments, consisting
only of normal recurring adjustments, which the Company considers necessary for
the fair presentation of such financial statements for the interim periods
presented. Although the Company believes that the disclosures in these
financial statements are adequate to make the interim information presented not
misleading, certain information relating to the Company's organization and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles has been condensed or
omitted in this Form 10-Q pursuant to such rules and regulations. These
financial statements should be read in conjunction with the audited financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1996. The results of operations for the
six month period ended June 30, 1997 are not necessarily indicative of the
results expected for the full year.
(2) Inventories
<TABLE>
<CAPTION>
Inventories by category are as follows:
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and components $135,308 $ 97,613
Work in process......................... 36,420 20,889
Finished goods.......................... 56,364 39,129
-------- --------
$228,092 $157,631
======== ========
</TABLE>
Work in process and finished goods inventories include the cost of
material, labor and plant overhead.
(3) Marketable Securities
In April 1997, the Company sold its investment in Parker Drilling Company
("Parker") pursuant to a public offering effected by Parker. As a result, the
Company received net proceeds of approximately $23 million and recognized a
pre-tax gain of approximately $3.4 million.
(4) Acquisitions
On May 1, 1997, the Company acquired GulfMark International, Inc.
("GulfMark") pursuant to a merger in which approximately 4.4 million shares
(pre-split 2.2 million shares) of the Company's Common Stock were issued to the
stockholders of GulfMark. Prior to the merger, GulfMark effected a spin-off to
its stockholders of its marine transportation services business. The retained
assets of GulfMark that were acquired by the Company in this transaction
consisted of approximately 4.4 million shares (pre-split 2.2 million shares) of
the Company's Common Stock, an erosion control company and certain other
miscellaneous assets.
On April 14, 1997, the Company acquired TA Industries, Inc. ("TA"), a
manufacturer of premium couplings and premium accessories, for total
consideration, including assumed debt, of approximately $64 million.
On March 14, 1997, the Company acquired the assets of Griffin Legrand
("Griffin") for total cash consideration of approximately $21 million.
Griffin, based in Calgary, Canada, designs, manufactures and markets
progressing cavity pumps and conventional pumping units.
On February 13, 1997, the Company acquired Anbert Cilindros S.A.I.C.
("Anbert"), an Argentina based sucker rod business, for total consideration of
approximately $8 million.
5
<PAGE> 6
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
(4) Acquisitions - (Continued)
The allocations of the purchase price to the fair market values of the net
assets acquired in the 1997 acquisitions are based on preliminary estimates of
the fair market value and may be revised when additional information concerning
asset and liability valuations is obtained.
On December 10, 1996, the Company acquired the assets of Arrow Completion
Systems ("Arrow") for total cash consideration of approximately $21 million.
The allocation of the purchase price to the fair market value of the net assets
acquired in the Arrow acquisition is subject to revision as the purchase price
is subject to adjustment pending the resolution of certain asset valuations
which must be agreed to by the buyer and seller. The Company believes the
ultimate resolution to the cost of the acquisition will not have a material
impact on the assets acquired or the Company's results of operations.
On August 5, 1996, the Company acquired Tubular Corporation of America,
Inc. ("TCA") for approximately 500,000 shares of Common Stock, $14.35 million
in cash, a $650,000 note and assumed debt of approximately $15 million.
The acquisitions discussed above were accounted for using the purchase
method of accounting, and their results of operations are included in the
Consolidated Condensed Statements of Income from the respective dates of
acquisition.
The following presents the consolidated financial information for the
Company on a pro forma basis assuming the TCA acquisition and the July 1996
equity offering of 6.9 million shares (pre-split 3.45 million shares) of Common
Stock had occurred on January 1, 1996. The pro forma information presented
also includes the May 1, 1997 acquisition of GulfMark as if this acquisition
had occurred on January 1, 1996. All other 1996 and 1997 acquisitions are not
material individually nor in the aggregate with same year acquisitions,
therefore, pro forma information is not presented. The pro forma information
set forth below is not necessarily indicative of the results that actually
would have been achieved had such transactions been consummated as of January
1, 1996, or that may be achieved in the future.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------- -----------------
1997 1996 1997 1996
-------- ----- ----- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<C> <C> <C> <C> <C>
Revenues........................................ $211,716 $115,842 $377,174 $219,170
Net income from continuing operations........... $ 19,036 $ 5,134 $ 33,265 $ 8,607
Net income...................................... $ 19,036 $ 6,151 $ 33,265 $ 11,224
Earnings per common share from
continuing operations........................... $ 0.42 $ 0.11 $ 0.73 $ 0.19
</TABLE>
(5) Long-Term Debt
On March 24, 1994, the Company sold pursuant to a private placement $120
million of 10.25% Senior Notes due 2004. In July 1994, substantially all of
these notes were exchanged for a substantially identical series of 10.25%
Senior Notes due 2004 with semi-annual interest payments in March and
September. Both issues of Senior Notes were issued pursuant to the terms of an
Indenture dated March 15, 1994. Certain subsidiaries of the Company have
unconditionally guaranteed the Company's obligations under the Senior Notes.
See Note 12.
6
<PAGE> 7
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
(6) Stockholders' Investment
Stock Split and Name Change
At the Company's annual shareholders meeting on May 6, 1997, the
shareholders approved a two-for-one stock split of the Company's common stock,
$1.00 par value (the "Common Stock"), through a stock dividend and related
amendment to the Company's Restated Certificate of Incorporation that increased
the number of authorized shares of the Company's Common Stock from 40 million
shares to 80 million shares. The record date for the two-for-one stock split
was May 12, 1997. As a result of the stock split, all stock and per share data
contained herein have been restated to reflect the effect of the two-for-one
stock split. The shareholders of the Company also approved the proposed
amendment to the Company's Restated Certificate of Incorporation to change the
name of the Company to "EVI, Inc."
GulfMark Acquisition
The Company acquired 4.4 million shares (pre-split 2.2 million shares) of
the Company's Common Stock as a result of the May 1997 acquisition of GulfMark
(see Note 4). The fair market value of these shares as of the date of
acquisition are included in the accompanying Consolidated Condensed Balance
Sheet as "Treasury Stock, at Cost".
(7) Plant Closures
As of June 30, 1997, the Company had substantially completed the closing
of its Bastrop, Texas tool joint manufacturing facility. In the fourth quarter
of 1996, the Company had accrued $1.5 million for exit costs to be incurred in
1997. As of June 30, 1997, the Company incurred substantially all charges
related to the closing of this facility.
As of June 30, 1997, the Company had substantially completed the closing
of its Arlington, Texas packer manufacturing facility. In the fourth quarter
of 1996, the Company had accrued $0.5 million for exit costs to be incurred in
1997. As of June 30, 1997, the Company incurred substantially all charges
related to the closing of this facility.
(8) Discontinued Operations
On November 11, 1996, the Company completed the sale of its contract
drilling segment which was comprised of the Mallard contract drilling division
("Mallard Division") to Parker.
The results of operations for the Mallard Division are reflected in the
accompanying Consolidated Condensed Statements of Income as "Discontinued
Operations, Net of Taxes" and the Company's consolidated condensed financial
statements for prior periods have been restated. Condensed results of the
Mallard Division discontinued operations were as follows:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1996 JUNE 30, 1996
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Revenues........................ $20,949 $40,665
------- -------
Income before income taxes...... 2,690 5,152
Provision for income taxes...... 942 1,804
------- -------
Net income...................... $ 1,748 $3,348
======= =======
</TABLE>
7
<PAGE> 8
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
(9) Planned Accounting Change
In 1996 the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard No. 128 ("SFAS No. 128"), Earnings per Share
("EPS"), which replaces primary earnings per share with basic earnings per
share and requires dual presentation of basic and diluted earnings per share.
The Company will adopt SFAS No. 128 in the fourth quarter of fiscal 1997. Pro
forma basic and diluted net income per share is set forth below:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- -----
<S> <C> <C> <C> <C>
Pro forma basic EPS............... $0.42 $0.14 $0.73 $0.25
Pro forma diluted EPS............. $0.41 $0.13 $0.71 $0.25
</TABLE>
(10) Reclassifications and Restatements
Certain reclassifications of prior period balances have been made to
conform such amounts to corresponding June 30, 1997 classifications. The
consolidated condensed financial statements have been restated to reflect the
sale of the Company's Mallard Division on November 11, 1996.
(11) Subsequent Events
On July 16, 1997, the Company entered into a definitive agreement to
acquire XL Systems, Inc. ("XLS") for approximately $45 million in Common
Stock. XLS designs, manufactures and markets high performance connectors for
marine applications such as conductors, risers and offshore structural
components. The acquisition is expected to close in late August 1997 and is
subject to various conditions, including the receipt of all required regulatory
approvals and expiration of all waiting periods.
(12) Condensed Consolidating Financial Statements
The $120 million Senior Notes which are described in Note 5 are
unconditionally guaranteed on a joint and several basis by certain subsidiaries
of the Company. Accordingly, the following Condensed Consolidating Balance
Sheets as of June 30, 1997 and December 31, 1996, and the related Condensed
Consolidating Statements of Income for the three and six month periods ended
June 30, 1997 and 1996, and the Condensed Consolidating Statement of Cash Flows
for the six month periods ended June 30, 1997 and 1996 have been provided. The
Condensed Consolidating Financial Statements herein are followed by notes which
are an integral part of these statements.
8
<PAGE> 9
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
(12) Condensed Consolidating Financial Statements - (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents................. $ 40,440 $ 9,010 $ 5,523 $ -- $ 54,973
Other Current Assets...................... 10,923 259,325 153,407 -- 423,655
-------- -------- -------- --------- --------
51,363 268,335 158,930 -- 478,628
-------- -------- -------- --------- --------
PROPERTY, PLANT AND EQUIPMENT,
AT COST, NET OF ACCUMULATED
DEPRECIATION............................. 284 127,232 103,245 -- 230,761
INTERCOMPANY AND INVESTMENT
IN SUBSIDIARIES, NET...................... 575,208 (199,115) (111,654) (264,439) --
OTHER ASSETS............................... 3,980 93,350 89,626 -- 186,956
-------- -------- -------- --------- --------
$630,835 $289,802 $240,147 $(264,439) $896,345
======== ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS'
INVESTMENT
CURRENT LIABILITIES:
Short-Term Borrowings..................... $ -- $ -- $ 7,400 $ -- $ 7,400
Current Maturities of Long-Term Debt...... -- 1,368 6,406 -- 7,774
Accounts Payable and Other Accrued
Liabilities.............................. 17,848 106,458 80,170 -- 204,476
-------- -------- -------- --------- --------
17,848 107,826 93,976 -- 219,650
-------- -------- -------- --------- --------
LONG-TERM DEBT............................. 120,000 3,651 14,817 -- 138,468
DEFERRED INCOME TAXES AND OTHER............ 7,147 21,719 23,521 -- 52,387
-------- -------- -------- --------- --------
STOCKHOLDERS' INVESTMENT................... 485,840 156,606 107,833 (264,439) 485,840
-------- -------- -------- --------- --------
$630,835 $289,802 $240,147 $(264,439) $896,345
======== ======== ======== ========= ========
</TABLE>
9
<PAGE> 10
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
(12) Condensed Consolidating Financial Statements - (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents.............. $221,275 $ 1,625 $ 1,066 $ -- $223,966
Other Current Assets................... 40,694 233,862 60,159 -- 334,715
-------- -------- -------- -------- --------
261,969 235,487 61,225 -- 558,681
-------- -------- -------- -------- --------
PROPERTY, PLANT AND EQUIPMENT,
AT COST, NET OF ACCUMULATED
DEPRECIATION.......................... 144 124,804 47,776 -- 172,724
INTERCOMPANY AND INVESTMENT
IN SUBSIDIARIES, NET................... 412,287 (241,456) (87,064) (83,767) --
OTHER ASSETS............................ 5,850 84,322 31,266 -- 121,438
-------- --------- --------- -------- --------
$680,250 $ 203,157 $ 53,203 $(83,767) $852,843
======== ========= ========= ======== ========
LIABILITIES AND STOCKHOLDERS'
INVESTMENT
CURRENT LIABILITIES:
Short-Term Borrowings.................. $ -- $ -- $ 4,451 $ -- $ 4,451
Current Maturities of Long-Term Debt... -- 1,883 1,739 -- 3,622
Accounts Payable and Other Accrued
Liabilities........................... 89,692 107,712 27,649 -- 225,053
-------- --------- --------- -------- --------
89,692 109,595 33,839 -- 233,126
-------- --------- --------- -------- --------
LONG-TERM DEBT.......................... 120,000 3,895 2,815 -- 126,710
DEFERRED INCOME TAXES AND OTHER......... 16,474 18,707 3,742 -- 38,923
-------- --------- --------- -------- --------
STOCKHOLDERS' INVESTMENT................ 454,084 70,960 12,807 (83,767) 454,084
-------- --------- --------- -------- --------
$680,250 $ 203,157 $ 53,203 $(83,767) $852,843
======== ========= ========= ======== ========
</TABLE>
10
<PAGE> 11
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
(12) Condensed Consolidating Financial Statements - (Continued)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES................................ $ -- $123,936 $87,532 $ -- $211,468
COSTS AND EXPENSES...................... 1,788 106,903 73,163 -- 181,854
------- -------- ------- -------- --------
OPERATING INCOME (LOSS)................. (1,788) 17,033 14,369 -- 29,614
------- -------- ------- -------- --------
OTHER INCOME (EXPENSE)
Interest Expense....................... (1,035) 343 (3,805) -- (4,497)
Equity in Subsidiaries, Net of Taxes... 18,031 -- -- (18,031) --
Other, Net............................. 4,353 (434) 290 -- 4,209
------- -------- ------- -------- --------
INCOME BEFORE INCOME TAXES.............. 19,561 16,942 10,854 (18,031) 29,326
PROVISION FOR INCOME TAXES.............. 499 5,892 3,873 -- 10,264
------- -------- ------- -------- --------
NET INCOME.............................. $19,062 $ 11,050 $ 6,981 $(18,031) $ 19,062
======= ======== ======= ======== ========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES................................ $ -- $74,120 $24,817 $ -- $98,937
COSTS AND EXPENSES...................... 1,674 68,223 18,755 -- 88,652
------- ------- ------- ------- -------
OPERATING INCOME (LOSS)................. (1,674) 5,897 6,062 -- 10,285
------- ------- ------- ------- -------
OTHER INCOME (EXPENSE)
Interest Expense....................... 4,760 (9,230) 178 -- (4,292)
Equity in Subsidiaries, Net of Taxes... 3,521 -- -- (3,521) --
Other, Net............................. (2) 142 93 -- 233
------- ------- ------- ------- -------
INCOME BEFORE INCOME TAXES.............. 6,605 (3,191) 6,333 (3,521) 6,226
PROVISION (BENEFIT) FOR INCOME TAXES.... 1,448 (1,447) 2,179 -- 2,180
------- ------- ------- ------- -------
INCOME FROM CONTINUING OPERATIONS....... 5,157 (1,744) 4,154 (3,521) 4,046
INCOME FROM DISCONTINUED OPERATIONS,
NET OF TAXES........................... -- 1,783 (35) -- 1,748
EXTRAORDINARY CHARGE, NET OF TAXES...... (94) (637) -- -- (731)
------- ------- ------- ------- -------
NET INCOME.............................. $ 5,063 $ (598) $ 4,119 $(3,521) $ 5,063
======= ======= ======= ======= =======
</TABLE>
11
<PAGE> 12
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
(12) Condensed Consolidating Financial Statements - (Continued)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES................................ $ -- $240,656 $135,452 $ -- $376,108
COSTS AND EXPENSES...................... 3,509 209,190 111,200 -- 323,899
------- -------- -------- -------- --------
OPERATING INCOME (LOSS)................. (3,509) 31,466 24,252 -- 52,209
------- -------- -------- -------- --------
OTHER INCOME (EXPENSE)
Interest Expense....................... (2,940) (255) (4,971) -- (8,166)
Equity in Subsidiaries, Net of Taxes... 32,541 -- -- (32,541) --
Other, Net............................. 7,725 126 (328) -- 7,523
------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES.............. 33,817 31,337 18,953 (32,541) 51,566
PROVISION FOR INCOME TAXES.............. 410 11,165 6,584 -- 18,159
------- -------- -------- -------- --------
NET INCOME.............................. $33,407 $ 20,172 $ 12,369 $(32,541) $ 33,407
======= ======== ======== ======== ========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES.................................. $ -- $144,956 $ 44,307 $ -- $189,263
COSTS AND EXPENSES........................ 3,038 134,101 33,662 -- 170,801
------- -------- --------- ------- --------
OPERATING INCOME (LOSS)................... (3,038) 10,855 10,645 -- 18,462
------- -------- --------- ------- --------
OTHER INCOME (EXPENSE)
Interest Expense......................... 1,431 (9,731) 180 -- (8,120)
Equity in Subsidiaries, Net of Taxes..... 9,914 -- -- (9,914) --
Other, Net............................... 7 104 (3) -- 108
------- -------- --------- ------- --------
INCOME BEFORE INCOME TAXES................ 8,314 1,228 10,822 (9,914) 10,450
PROVISION (BENEFIT) FOR INCOME TAXES...... (1,190) 1,022 3,825 -- 3,657
------- -------- --------- ------- --------
INCOME FROM CONTINUING OPERATIONS......... 9,504 206 6,997 (9,914) 6,793
INCOME FROM DISCONTINUED OPERATIONS,
NET OF TAXES............................. -- 3,385 (37) -- 3,348
EXTRAORDINARY CHARGE, NET OF TAXES........ (94) (637) -- -- (731)
------- -------- --------- ------- --------
NET INCOME................................ $ 9,410 $ 2,954 $ 6,960 $(9,914) $9,410
======= ======== ========= ======= ========
</TABLE>
12
<PAGE> 13
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
(12) Condensed Consolidating Financial Statements - (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income...................................... $ 33,407 $ 20,172 $ 12,369 $(32,541) $ 33,407
Equity in Earnings of Subsidiaries.............. (32,541) -- -- 32,541 --
Other Adjustments and Changes................... (22,046) (13,408) (26,508) -- (61,962)
--------- --------- --------- -------- ---------
Net Cash Used by Operating Activities.......... (21,180) 6,764 (14,139) -- (28,555)
--------- --------- --------- -------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Income Taxes Paid on Disposal of Discontinued
Operations..................................... (62,808) -- -- -- (62,808)
Proceeds from Sale of Marketable Securities..... 23,352 -- -- -- 23,352
Acquisition of Businesses, Net of Cash
Acquired....................................... -- 335 (73,644) -- (73,309)
Capital Expenditures for Property, Plant
and Equipment.................................. (180) (11,356) (12,174) -- (23,710)
Other, Net...................................... -- (200) 366 -- 166
--------- --------- --------- -------- ---------
Net Cash Used by Investing Activities.......... (39,636) (11,221) (85,452) -- (136,309)
--------- --------- --------- -------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings Under Revolving Lines of
Credit, Net.................................... -- -- 4,476 -- 4,476
Repayments on Term Debt, Net.................... -- (1,103) (6,733) -- (7,836)
(Increase) Decrease in Amounts Due to and
From Subsidiaries, Net........................ (119,250) 12,945 106,305 -- --
Other, Net...................................... (769) -- -- -- (769)
--------- --------- --------- -------- ---------
Net Cash Provided (Used) by Financing
Activities.................................... (120,019) 11,842 104,048 -- (4,129)
--------- --------- --------- -------- ---------
Effect of Translation Adjustment on Cash......... -- -- -- -- --
--------- --------- --------- -------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents..................................... (180,835) 7,385 4,457 -- (168,993)
Cash and Cash Equivalents at Beginning of
Period.......................................... 221,275 1,625 1,066 -- 223,966
--------- --------- --------- -------- ---------
Cash and Cash Equivalents at End of Period...... $ 40,440 $ 9,010 $ 5,523 $ -- $54,973
========= ========= ========= ======== =========
</TABLE>
13
<PAGE> 14
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
(12) Condensed Consolidating Financial Statements - (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income........................................ $ 9,410 $ 2,954 $ 6,960 $(9,914) $ 9,410
Net (Income) Loss from Discontinued
Operations....................................... -- (3,385) 37 -- (3,348)
Equity in Earnings of Subsidiaries................ (9,914) -- -- 9,914 --
Other Adjustments and Changes..................... (1,539) 7,885 (19,325) -- (12,979)
--------- -------- -------- ------- --------
Net Cash Provided (Used) by Continuing
Operations...................................... (2,043) 7,454 (12,328) -- (6,917)
Net Cash Provided by Discontinued
Operations...................................... -- 2,262 286 -- 2,548
-------- -------- -------- ------- --------
Net Cash Provided (Used) by Operating
Activities...................................... (2,043) 9,716 (12,042) -- (4,369)
-------- -------- -------- ------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital Expenditures of Discontinued Operations -- (9,138) (59) -- (9,197)
Acquisition of Businesses, Net of Cash
Acquired......................................... -- (627) (3,113) -- (3,740)
Capital Expenditures for Property, Plant
and Equipment.................................... (39) (2,788) (5,227) -- (8,054)
Other, Net........................................ -- 436 632 -- 1,068
-------- -------- -------- ------- --------
Net Cash Used by Investing Activities............ (39) (12,117) (7,767) -- (19,923)
-------- -------- -------- ------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings (Repayments) Under Revolving
Lines of Credit, Net............................. 40,000 (546) 149 -- 39,603
Repayments on Term Debt, Net...................... -- (5,634) (212) -- (5,846)
(Increase) Decrease in Amounts Due to and
From Subsidiaries, Net........................... (33,498) 10,500 22,998 -- --
Other, Net........................................ 1,604 (1,125) (2,909) -- (2,430)
-------- -------- -------- ------- --------
Net Cash Provided by Financing Activities........ 8,106 3,195 20,026 -- 31,327
-------- -------- -------- ------- --------
Effect of Translation Adjustment on Cash........... -- -- (314) -- (314)
-------- -------- -------- ------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents....................................... 6,024 794 (97) -- 6,721
Cash and Cash Equivalents at Beginning of
Period............................................ 532 1,492 861 -- 2,885
-------- -------- -------- ------- --------
Cash and Cash Equivalents at End of Period......... $ 6,556 $ 2,286 $ 764 $ -- $ 9,606
======== ======== ======== ======= ========
</TABLE>
14
<PAGE> 15
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
(12) Condensed Consolidating Financial Statements - (Continued)
A. SIGNIFICANT ACCOUNTING POLICIES
Reclassifications and Restatements
Certain reclassifications of prior year balances have been made to conform
such amounts to corresponding June 30, 1997 classifications. The Condensed
Consolidating Financial Statements have been restated to reflect the sale of
the Company's Mallard Division on November 11, 1996.
Elimination Entries
Revenues and related Cost of Sales by individual category have been
presented net of intercompany transactions.
B. OTHER
Notes 1 through 11 should be read in conjunction with the Condensed
Consolidating Financial Statements.
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
EVI, Inc., formerly Energy Ventures Inc. (the "Company"), is an
international manufacturer and supplier of oilfield equipment. The Company
manufactures and markets drill pipe and premium tubular products through its
tubular products segment and manufactures and markets a complete line of
artificial lift and production equipment through its production equipment
segment. The Company's products are used in the exploration and production of
oil and natural gas. In recent periods, the Company has benefited from
improved market conditions, a continuing consolidation in the markets in which
it competes and a decline in excess inventories of used drill pipe.
At the Company's annual shareholders meeting on May 6, 1997, the
shareholders approved a two-for-one stock split of the Company's common stock,
$1.00 par value (the "Common Stock"), effected through a stock dividend and a
related amendment to the Company's Restated Certificate of Incorporation that
increased the number of authorized shares of the Company's Common Stock from 40
million shares to 80 million shares. The record date for the two-for-one stock
split was May 12, 1997. As a result of the stock split, all stock and per
share data contained herein have been restated to reflect the effect of the
two-for-one stock split.
Income from continuing operations for the second quarter of 1997 was $19.1
million, or $0.42 per share, on revenues of $211.5 million compared to income
from continuing operations for the second quarter of 1996 of $4.0 million, or
$0.11 per share, on revenues of $98.9 million. Income from continuing
operations for the six months ended June 30, 1997, was $33.4 million, or $0.73
per share, on revenues of $376.1 million compared to income from continuing
operations for the six months ended June 30, 1996, of $6.8 million, or $0.18
per share, on revenues of $189.3 million. The increases in income from
continuing operations for the three and six month periods ended June 30, 1997,
were primarily attributable to increased sales and margins for drill pipe and
premium tubular products and the impact of 1996 and 1997 acquisitions,
including the Company's 1997 acquisitions of TA Industries, Inc. ("TA") and
Griffin Legrand ("Griffin"), and the 1996 acquisitions of Tubular Corporation
of America ("TCA"), ENERPRO International, Inc. ("ENERPRO"), Superior Tube Ltd.
("Superior"), Irmaos Geremia Ltd. ("Geremia"), and Arrow Completion Systems
("Arrow").
Results for the 1997 periods also included a one-time pre-tax gain of $3.4
million from the second quarter sale of the Parker Drilling Company ("Parker")
common stock received in the Company's November 1996 disposition of its
contract drilling division to Parker.
Net income for the second quarter of 1997 was $19.1 million, or $0.42 per
share, compared to $5.1 million, or $0.14 per share for the second quarter of
1996. Included in net income for the second quarter of 1996 is $1.7 million,
$0.05 per share, from discontinued operations relating to the Company's Mallard
contract drilling division that was sold in November 1996. Net income for the
six months ended June 30, 1997 was $33.4 million, or $0.73 per share, compared
to $9.4 million, or $0.25 per share, for the six months ended June 30, 1996
which included $3.3 million, $0.09 per share, relating to the Company's
discontinued operations of the Mallard division.
On July 16, 1997, the Company entered into a definitive agreement to
acquire XL Systems, Inc. ("XLS") for approximately $45 million in Common
Stock. XLS designs, manufactures and markets high performance connectors for
marine applications such as conductors, risers and offshore structural
components. The acquisition is expected to close in late August 1997 and is
subject to various conditions, including the receipt of all required regulatory
approvals and expiration of all waiting periods.
The demand for the Company's tubular products is particularly affected by
the price of natural gas and the level of oil and gas exploration activity,
while the demand for the Company's production equipment is directly dependent
on oil production activity. Exploration and production activity is also
affected by worldwide economic conditions, supply and demand for oil and
natural gas, seasonal trends and the political stability of oil producing
countries. The Company increased its presence in new and complementary phases
of the premium tubulars market through the April 1997 acquisition of TA, a U.S.
manufacturer of casing and premium couplings and accessories.
Sales of the Company's production equipment products are primarily
concentrated in North America. As a continuation of the Company's expansion of
its production equipment products, the Company acquired Griffin, a
16
<PAGE> 17
Canadian based manufacturer of progressing cavity pumps and conventional pumps,
in March 1997. The Company has also expanded its production equipment
operations in South America with its October 1996 acquisition of Geremia, a
manufacturer of progressing cavity pumps, and the early 1997 acquisition of
Anbert Cilindros S.A.I.C. ("Anbert"), a manufacturer of rod pumps in Argentina.
The foreign sales for the Company's production equipment segment were $64.8
million for the six months ended June 30, 1997 as compared to $28 million for
the six months ended June 30, 1996.
The Company currently expects that 1997 results will continue to benefit
from strong tubular products sales and favorable operating results from the
1996 and 1997 acquisitions. Results, however, will be dependent on market
conditions and demand for drill pipe and other tubular products. Accordingly,
there can be no assurance as to future results or profitability.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30,
1996
Tubular Products Segment
Sales of tubular products for the second quarter of 1997 were $152.1
million compared to $69.5 million in the second quarter of 1996, representing
an increase of 119% as compared to the second quarter in 1996. The increased
sales were attributable to a combination of increased demand and volume and
higher sales prices of drill pipe and premium tubular products. The continued
increase in demand for drill pipe reflected higher domestic and international
drilling activity, in particular offshore drilling. The increase in sales of
premium tubular products was primarily attributable to improved market
conditions in deep offshore exploration and production activity, the operating
results of TA from April 1997 and the operating results of TCA, ENERPRO and
Superior, which were acquired during 1996.
Operating income at the Company's tubular products segment increased to
$26.6 million in the current quarter from $10.0 million in the second quarter
of 1996. Results for the second quarter of 1997 benefited from increased sales
volume and increased pricing of drill pipe and premium tubular products. The
Company also benefited from reduced costs associated with the expansion of the
Company's Mexico tool joint facility.
As of June 30, 1997, the Company had substantially completed the closing
of its Bastrop, Texas tool joint manufacturing facility. In the fourth quarter
of 1996, the Company had accrued $1.5 million for exit costs to be incurred in
1997. As of June 30, 1997, the Company incurred substantially all charges
related to the closing of this facility.
Production Equipment Segment
Sales and operating income for the Company's production equipment segment
were $59.4 million and $4.8 million, respectively, for the 1997 second quarter
as compared to $29.5 million and $2.0 million, respectively, for the 1996
second quarter. The increase in sales and operating income for the current
period were primarily attributable to the acquisitions of Geremia and Arrow in
1996 and of Anbert and Griffin in 1997 and the increased sales of the Company's
Corod and progressing cavity pump product lines, particularly in Canada and
South America.
As of June 30, 1997, the Company had substantially completed the closing
of its Arlington, Texas packer manufacturing facility. In the fourth quarter
of 1996, the Company had accrued $0.5 million for exit costs to be incurred in
1997. As of June 30, 1997, the Company incurred substantially all charges
related to the closing of this facility.
Further earnings improvements are expected in the production equipment
segment throughout the balance of the year as the segment completes the
integration of Arrow completion systems business acquired in December 1996.
The full integration of Arrow is not expected to occur until the first quarter
of 1998.
17
<PAGE> 18
General
Selling, general and administrative expenses increased approximately 70%
to approximately $23.5 million in the second quarter of 1997 from approximately
$13.8 million in the second quarter of 1996. The increase in 1997 was
primarily attributable to the Company's significant internal growth and the
1997 and 1996 acquisitions. Selling, general and administrative expenses as a
percent of revenues, however, declined from 13.9% to 11.1%
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Tubular Products Segment
Sales of tubular products for the six months ended June 30, 1997 were
$269.9 million compared to $129.4 million for the six months ended June 30,
1996, representing an increase of 109% as compared to the 1996 period. The
increased sales were attributable to a combination of increased demand and
volume and higher sales prices of drill pipe and its premium tubular
operations. Sales for the 1997 period also benefited from the 1996 and 1997
acquisitions.
Operating income at the Company's tubular products segment increased to
$47.4 million for the six months of 1997 from $17.8 million for the six months
of 1996. Results for the first half of 1997 benefited from pricing increases
on the Company's products as well as reduced costs associated with the
expansion of the Company's Mexico facility.
Production Equipment Segment
Sales and operating income for the Company's production equipment segment
were $106.2 million and $8.4 million, respectively, for the first half of 1997
as compared to $59.8 million and $3.7 million, respectively, for the first half
of 1996. The increase in sales and operating income for the current period
were primarily attributable to 1996 and 1997 acquisitions and increased sales
of the Company's Corod and progressing cavity pump product lines.
General
Selling, general and administrative expenses increased approximately 60%
to approximately $42.6 million in the first half of 1997 from approximately
$26.6 million in the first half of 1996. The increase in 1997 was primarily
attributable to the Company's internal growth and the 1997 and 1996
acquisitions. Selling, general and administrative expenses as a percent of
revenues, however, declined from 14.1% to 11.3%.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had cash and cash equivalents of
approximately $55.0 million compared to $224.0 million at December 31, 1996.
The reduction in cash and cash equivalents since December 31, 1996, was
primarily attributable to the payment by the Company of taxes on the 1996 sale
of its Mallard contract drilling division and the reinvestment by the Company
of the net proceeds from the sale of acquired businesses and assets, including
additional working capital associated with such businesses and increased
business activity.
In April 1997, the Company sold its investment in Parker common stock
pursuant to a public offering effected by Parker. The net proceeds received by
the Company were approximately $23 million.
The Company currently has available to it working capital facilities
providing for up to $130.9 million in borrowings. At June 30, 1997, the
Company had outstanding $7.4 million in borrowings under these facilities
compared to $2.9 million at December 31, 1996. In addition, the Company had
outstanding approximately $7.1 million and $10.1 million in letters of credit
at June 30, 1997, and December 31, 1996, respectively. Borrowings under these
facilities are subject to certain borrowing base requirements relating to the
Company's accounts receivable and inventory securing the borrowings.
Borrowings bear interest at variable rates and are secured by accounts
receivables, inventory and stock of various of the Company's domestic and
foreign subsidiaries. These facilities contain customary affirmative and
negative covenants relating to working capital, earnings and net worth. These
facilities also impose limitations on the Company's and its subsidiaries' use
of funds for future acquisitions
18
<PAGE> 19
and capital expenditures, the incurrence of additional debt and other
operational matters and certain expenditures, as well as prohibitions on the
declaration and payment of cash dividends by the Company.
The Company currently has outstanding $120 million of 10 1/4% Senior Notes
due 2004 (the "Senior Notes") with semi-annual interest payments in March and
September. The Senior Notes were issued pursuant to the terms of an Indenture
dated March 15, 1994. Certain subsidiaries of the Company have unconditionally
guaranteed the Company's obligations under the Senior Notes. The Indenture
relating to the Senior Notes contains various customary affirmative and
negative covenants. The Indenture also limits, based on a specific formula,
the ability of the Company and certain of its subsidiaries to pay dividends and
make other distributions.
The Company's current sources of capital are its current cash, cash
generated from operations and borrowings under its working capital lines of
credit. The Company believes that current reserves of cash and short-term
investments, access to existing credit lines and internally generated cash from
operations are sufficient to finance the projected cash requirements of its
current and future operations.
ACQUISITIONS
On April 14, 1997, the Company acquired TA for a total consideration,
including assumed debt, of approximately $64 million.
On March 14, 1997, the Company acquired Griffin for total cash
consideration of approximately $21 million.
On February 13, 1997, the Company acquired Anbert for approximately $8
million.
The Company has also effected various acquisitions subsequent to June 30,
1997, for a total consideration of approximately $8 million.
Further, in addition to the proposed XLS transaction, the Company is
pursuing various acquisitions in both of its business segments, which, if
completed, would require the use of its available capital resources.
GULFMARK MERGER
On May 1, 1997, the Company acquired GulfMark International, Inc.,
("GulfMark") pursuant to a merger in which approximately 4.4 million shares
(pre-split 2.2 million shares) of Common Stock were issued to the stockholders
of GulfMark. Prior to the merger, GulfMark effected a spin-off to its
stockholders of its marine transportation services business. The retained
assets of GulfMark that were acquired by the Company in the transaction
consisted of approximately 4.4 million shares (pre-split 2.2 million shares) of
the Company's Common Stock, an erosion control company and certain other
miscellaneous assets. Because the number of shares of Common Stock issued in
the GulfMark acquisition approximated the number of shares of Common Stock held
by GulfMark prior to the acquisition, GulfMark acquisition had no material
effect on the outstanding number of shares of Common Stock or equity of the
Company.
CAPITAL EXPENDITURES
Capital expenditures by the Company during the six months ended June 30,
1997, totaled approximately $23.7 million and were primarily related to plant
expansions in Canada, equipment upgrades and Corig purchases. Ongoing routine
capital expenditures for the remainder of 1997 are estimated to be
approximately $15 million. Capital expenditures are expected to be funded with
available cash, cash flow from operations and, if desirable, borrowings under
existing lines of credit and other facilities.
OTHER MATTERS
Certain statements made herein and in other public filings and releases by
the Company contain "forward-looking" information (as defined in the Private
Securities Litigation Reform Act of 1995) that involve risk and uncertainty.
These forward-looking statements may include, but are not limited to, future
sales, earnings, margins, production levels and costs, expected savings from
acquisitions, demand for products, product deliveries, market trends in the oil
and gas industry and the oilfield service sector thereof, research and
development, environmental
19
<PAGE> 20
and other expenditures, currency fluctuations and various business trends.
Forward-looking statements may be made by management orally or in writing
including, but not limited to, this Management's Discussion and Analysis of
Financial Condition and Results of Operations section and other sections of the
Company's filings with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 and the Securities Act of 1933.
Actual results and trends in the future may differ materially depending on
a variety of factors including, but not limited to, changes in the price of oil
and gas, changes in the domestic and international rig count, global trade
policies, domestic and international drilling activities, world-wide political
stability and economic growth, including currency fluctuations, government
export and import policies, technological advances involving the Company's
products, the Company's successful execution of internal operating plans and
manufacturing consolidations and restructurings, performance issues with key
suppliers and subcontractors, the ability of the Company to maintain price
increases and market shares, raw material costs changes, collective bargaining
labor disputes, regulatory uncertainties and legal proceedings. Future results
will also be dependent upon the ability of the Company to continue to identify
and complete successful acquisitions at acceptable prices, integrate those
acquisitions with the Company's other operations and penetrate existing and new
markets. Many of these factors are described in greater detail in the
Company's Form 10-K for the year ended December 31, 1996.
20
<PAGE> 21
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
At the Company's annual stockholders meeting on May 6, 1997, the
stockholders approved a two-for-one stock split of the Company's common stock,
$1.00 par value (the "Common Stock"), through a stock dividend and a related
amendment to the Company's Restated Certificate of Incorporation that increased
the number of authorized shares of the Company's Common Stock from 40 million
shares to 80 million shares. The record date for the two-for-one stock split
was May 12, 1997. As a result of the stock split, all stock and per share data
contained herein have been restated to reflect the effect of the two-for-one
stock split.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's special meeting of stockholders held on April 30, 1997,
the stockholders of the Company approved the acquisition of GulfMark
International, Inc. ("GulfMark") pursuant to a merger in which approximately
4.4 million shares (pre-split 2.2 million shares) of the Company's Common Stock
were issued to the stockholders of GulfMark. The following sets forth the
results of the voting. There were zero broker non-votes.
<TABLE>
<CAPTION>
Withheld/
For Against Abstained
---------- --------- ---------
<S> <C> <C> <C>
Acquisition of GulfMark 14,849,408 6,737 22,564
</TABLE>
At the Company's Annual Meeting of Stockholders held on May 6, 1997, the
stockholders of the Company approved: (i) the election of eight directors to
serve until the next Annual Meeting of Stockholders, (ii) the amendment of the
Company's Restated Certificate of Incorporation to change the Company's name to
"EVI, Inc." and (iii) a two-for-one stock split through a related amendment of
the Company's Restated Certificate of Incorporation to increase the number of
authorized shares of the Company's Common Stock from 40,000,000 shares to
80,000,000 shares. The following sets forth the results of the voting with
respect to each such matter. There were no broker non-votes.
<TABLE>
<CAPTION>
Withheld/
ELECTION OF DIRECTORS For Against Abstained
---------- --------- ---------
<S> <C> <C> <C>
David J. Butters 15,816,317 25,637 --
Bernard J. Duroc-Danner 15,816,317 25,637 --
Uriel E. Dutton 15,816,305 25,649 --
Eliot M. Fried 15,816,317 25,637 --
Sheldon S. Gordon 15,816,317 25,637 --
Sheldon B. Lubar 15,816,317 25,637 --
Robert B. Millard 15,816,305 25,649 --
Robert A. Rayne 15,816,317 25,637 --
Amendment to the Company's Restated Certificate of
Incorporation to change the Company's name
to EVI, Inc. 15,818,958 829 22,167
Two-for-one stock split and related amendment to the
Company's Restated Certificate of Incorporation 15,816,228 3,117 22,609
</TABLE>
21
<PAGE> 22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
2.1 First Amendment to Agreement and Plan of
Merger dated March 27, 1997 (incorporated by
reference to Exhibit No. 2.3 to the Registration
Statement on Form S-4 (Reg. No. 333-24133)).
3.1 Restated Certificate of Incorporation of
the Company, as amended on May 6, 1997
(incorporated by reference to Exhibit 3.1 to
Form 8-K, File 1-13086, dated May 13, 1997).
27.1 Financial Data Schedule............................ 25
(b) Reports on Form 8-K:
(1) Current Report on Form 8-K dated April
25, 1997, reporting the acquisition of TA
Industries, Inc. on April 14, 1997.
(2) Current Report on Form 8-K dated May 13,
1997, reporting (i) the approval by the
stockholders of the Company at the Annual
Meeting of Stockholders held on May 6, 1997 of a
two-for-one stock split and the related
amendment to the Company's Restated Certificate
of Incorporation to increase the number of
authorized shares of Common Stock from 40
million to 80 million, (ii) the approval by the
stockholders of the Company at the Annual
Meeting of Stockholders held on May 6, 1997 of
the amendment to the Company's Restated
Certificate of Incorporation to change the name
of the Company to "EVI, Inc.", and (iii) the
acquisition of GulfMark on May 1, 1997. The
Current Report on Form 8-K also incorporated by
reference the financial statements and pro forma
financial information of GulfMark and GulfMark
Retained Assets pursuant to Rule 3-05(b) and
Article 11 of Regulation S-X.
</TABLE>
22
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EVI, INC.
By: /s/ James G. Kiley
------------------------------------------
James G. Kiley
Vice President and Chief Financial Officer
(Principal Financial Officer)
By: /s/ Frances R. Powell
------------------------------------------
Frances R. Powell
Vice President, Accounting and Controller
(Principal Accounting Officer)
Date: August 13, 1997
---------------
<PAGE> 24
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED CONDENSED BALANCE SHEETS AND CONSOLIDATED CONDENSED
STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 54,973
<SECURITIES> 0
<RECEIVABLES> 162,196
<ALLOWANCES> 1,058
<INVENTORY> 228,092
<CURRENT-ASSETS> 478,628
<PP&E> 230,761
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 896,345
<CURRENT-LIABILITIES> 219,650
<BONDS> 138,468
0
0
<COMMON> 50,614
<OTHER-SE> 435,226
<TOTAL-LIABILITY-AND-EQUITY> 896,345
<SALES> 376,108<F2>
<TOTAL-REVENUES> 376,108
<CGS> 281,318<F2>
<TOTAL-COSTS> 281,318
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,166
<INCOME-PRETAX> 51,566
<INCOME-TAX> 18,159
<INCOME-CONTINUING> 33,407
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,407
<EPS-PRIMARY> 0.73
<EPS-DILUTED> 0.73
<FN>
<F1>This amount is not disclosed in the financial statements and thus a value of
zero has been shown for purposes of this financial data schedule.
<F2>These line items include certain amounts related to non-tangible products
(i.e.,) services, however, since the amounts related to services are not
disclosed in the financial statements, the total revenue and CGS figures,
respectively, have been shown on these line items for purposes of this
financial data schedule.
</FN>
</TABLE>
