FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
[ ] 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 1-2199
ALLIS-CHALMERS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 39-0126090
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Box 512, Milwaukee, Wisconsin 53201-0512
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (414)475-2000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock - $.15 Par Value
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 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. Yes No X
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of
the Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. Yes X No
At March 1, 1996 there were 1,003,028 shares of Common Stock
outstanding.
DOCUMENT INCORPORATED BY REFERENCE
Parts of Form 10-K Into Which
Portions of Document are
Document Incorporated by Reference
Annual Report to Shareholders Parts I and II
for fiscal year ended
December 31, 1995
<PAGE>
Page 2
1995 FORM 10-K CONTENTS
PART I
Item Page
1. Business. 3
2. Properties. 5
3. Legal Proceedings. 5
4. Submission of Matters to a Vote of
Security Holders. 7
PART II
5. Market for Registrant's Common Equity
and Related Stockholder Matters. 8
6. Selected Financial Data. 8
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 8
8. Financial Statements and Supplementary Data. 8
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. 8
PART III
10. Directors and Executive Officers
of the Registrant. 9
11. Executive Compensation. 12
12. Security Ownership of Certain Beneficial
Owners and Management. 14
13. Certain Relationships and Related Transactions. 15
PART IV
14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K. 16
Signatures. 21
<PAGE>
Page 3
PART I
ITEM 1. BUSINESS.
(a) Development of the Business
GENERAL
Allis-Chalmers Corporation ("Allis-Chalmers" or the "Company") was
incorporated in 1913 under Delaware law. The Company sold its major
operating businesses in 1988 in accordance with its First Amended and
Restated Joint Plan of Reorganization (Plan of Reorganization) under
Chapter 11 of the United States Bankruptcy Code. The Plan of
Reorganization was confirmed by the Bankruptcy Court on October 31, 1988
after acceptance by creditors and shareholders and was consummated on
December 2, 1988. See Item 3. LEGAL PROCEEDINGS for a discussion of such
proceedings.
The Company has its principal executive office in West Allis, Wisconsin
and it maintains three wholly-owned subsidiaries. One subsidiary, Houston
Dynamic Service, Inc., operates a machine repair business in Houston,
Texas; the other two subsidiaries, KILnGAS R&D, Inc. and U.S. Fluidcarbon
Inc., are inactive.
On September 22, 1994, the Company sold its B.R.B. Industries division.
B.R.B. Industries, which was acquired by the Company on December 20, 1989
in a purchase of assets, is a Hoboken, New Jersey manufacturer of molded
fabric products serving the apparel and lingerie markets and the home
sewing and notions industries.
(b) Financial Information About Industry Segments
The Company operates in a single industry segment -- the repair and
service of mechanical rotating equipment for the industrial, utility and
governmental aftermarkets.
(c) Narrative Description of Business
The principal business activities of the Company are as follows:
MACHINE REPAIR
Sales of the machine repair business operated by Houston Dynamic Service,
Inc. (HDS), a wholly-owned subsidiary of the Company, were $3,190,000 in
1995, $3,580,000 in 1994 and $3,298,000 in 1993. The decrease in sales
from 1994 was primarily the result of a weakened market for machinery
repair and services.
HDS services and repairs various types of mechanical equipment, including
compressors (centrifugal, rotary, axial and reciprocating), pumps,
turbines, engines, heat exchangers, centrifuges, rollers, gears, valves,
blowers, kilns, crushers and mills. Services provided include
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emergency repair, disassembly, inspection, repair testing, parts
duplication, machining, balancing, metalizing, milling, grinding, boring,
welding, modification, reassembly, field machining, maintenance,
alignment, field service, installation, startup and training.
HDS employed 30 people on December 31, 1995. It operates out of a
facility in Houston, Texas which was purchased by HDS in 1990. The
facility includes repair shop and office space.
HDS serves various industrial customers, including those in the
petrochemical, chemical, refinery, utility, waste and waste treatment,
minerals processing, power generation, pulp and paper and irrigation
industries.
OTHER DATA
Competition in the Company's machine repair business consists of nine
major original equipment manufacturers (OEM) and numerous smaller
independent competitors. Many of these competitors have special strengths
in certain product areas because of customer preferences for OEM suppliers
or because specialized patented technologies are offered. The principal
methods of competition are price, quality, delivery, customer service and
warranty.
The principal raw materials and purchased components used in the machine
repair business are alloy and stainless steels, castings and forgings,
aluminum, copper, gears and other basic materials. Alternative sources of
supply exist or could be developed for all of these raw materials and
components. This business is highly labor intensive.
Some of the Company's products, processes and systems are covered by
patents owned by or licensed to the Company. No particular product,
process or system is dependent on a single fundamental patent, the loss of
which would jeopardize the Company's businesses. The Company licenses the
use of a number of its trademarks, from which it receives income.
In 1995, the Company recorded sales to one customer which accounted for
10% or more of total sales -- Amoco Chemical generated 26% of 1995 sales,
19% of 1994 sales and 22% of 1993 sales. In 1994 the Company, had two
customers which accounted for 10% or more of total sales. Amoco Chemical
(detailed above) and Chevron Corporation generated 15% of 1994 sales. In
1993 sales of 10% or more of the total sales were made to two customers --
Amoco Chemical (detailed above) and Siemens Corporation at 11% of 1993
sales.
Expenditures relating to compliance with federal, state and local
environmental protection laws are not expected to have a material effect
on the Company's capital expenditures, results of operations, financial
condition or competitive position. The Company is not aware of any
present statutory requirements concerning environmental quality that would
necessitate capital outlays which would materially affect the Company. In
conjunction with consummation of the Plan of Reorganization, the Company
settled all known environmental claims asserted by the United States
Environmental Protection Agency (EPA) as well as claims asserted by
certain state agencies. However, the EPA and eight third parties have
claimed that Allis-Chalmers is liable for cleanup costs associated with
certain hazardous waste disposal sites in which products
Page 5
manufactured and sold by Allis-Chalmers before consummation of the Plan of
Reorganization were ultimately disposed of by others. Since Allis-
Chalmers manufactured and sold the products disposed of in these sites
before consummation of the Plan of Reorganization, Allis-Chalmers has
taken the position that all cleanup costs or other liabilities related to
these sites were discharged in the bankruptcy. See Item 3. LEGAL
PROCEEDINGS.
The Company's employment was 34, 41 and 136 at December 31, 1995, 1994 and
1993 respectively.
For more detailed information, the 1995 Consolidated Financial Statements,
Notes to Consolidated Financial Statements and Management's Discussion and
Analysis should be read in their entirety.
(d) Financial Information About Foreign and
Domestic Operations and Export Sales
The Company has no foreign operations or significant export sales.
ITEM 2. PROPERTIES.
The Company's principal operating facility is a repair shop and office
building in Houston, Texas which is owned by HDS. Allis-Chalmers leases
its administrative offices in West Allis, Wisconsin on a short-term basis.
The facilities are considered adequate and suitable for the Company's
principal business.
ITEM 3. LEGAL PROCEEDINGS.
REORGANIZATION PROCEEDINGS UNDER CHAPTER 11
OF THE UNITED STATES BANKRUPTCY CODE
On June 29, 1987 Allis-Chalmers and 17 of its domestic subsidiaries filed
separate voluntary petitions for reorganization under Chapter 11 of the
United States Bankruptcy Code. The Plan of Reorganization was confirmed
by the Bankruptcy Court on October 31, 1988 after acceptance by creditors
and shareholders, and the Plan of Reorganization was consummated on
December 2, 1988.
At confirmation, the Bankruptcy Court approved the establishment of the A-
C Reorganization Trust as the primary vehicle for distributions under the
Plan of Reorganization, two trust funds to service health care and life
insurance programs for retired employees and a trust fund to process and
liquidate future product liability claims. Cash of approximately $400
million and other assets with a net book value of $38 million were
distributed to creditors or transferred to the trusts, and the trusts
assumed responsibility for substantially all remaining cash distributions
to be made to holders of claims and interests pursuant to the Plan of
Reorganization. The Company was thereby discharged of all debts that
arose before confirmation of the Plan of Reorganization,
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and all of its capital stock was canceled and made eligible for exchange
for shares of the reorganized Company.
The Company does not administer any of the aforementioned trusts and
retains no responsibility for the assets transferred to or distributions
to be made by such trusts pursuant to the Plan of Reorganization.
For a description of restrictions on the transfer of the common stock of
the reorganized Company (Common Stock), see Item 5. MARKET FOR
REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
ENVIRONMENTAL PROCEEDINGS
As part of the Plan of Reorganization the Company made a cash payment of
$4.5 million to the EPA in settlement of the EPA's claims for cleanup
costs at all sites where the Company was alleged to have disposed of
hazardous waste. The EPA settlement included both past and future cleanup
costs at these sites and released the Company of liability for claims of
contribution or indemnity which may be asserted by other potentially
responsible parties against Allis-Chalmers in connection with these
specific sites.
In addition to the EPA settlement, the Company negotiated settlements of
various environmental claims which had been asserted by certain state
environmental protection agencies. These settlements, totaling
approximately $200,000, were approved by the Bankruptcy Court.
Since consummation of the Plan of Reorganization on December 2, 1988, a
number of parties, including the EPA, have asserted that the Company is
responsible for the cleanup of hazardous waste sites. These assertions
have been made only with respect to the Company's prebankruptcy
activities. No claims have been asserted against the Company involving
its postbankruptcy operations.
Before the settlement with the EPA in the bankruptcy proceedings, an
attempt was made by the parties to identify all possible hazardous waste
disposal sites and to settle all liabilities relating to those sites.
Notwithstanding the breadth of the settlement, various EPA regional
offices have continued to assert cleanup claims against Allis-Chalmers
with respect to six sites. Apparently, not all offices of the EPA are
aware of the settlement agreement, since at least two of these claims
involve sites with respect to which the EPA specifically agreed not to
sue.
Eight other parties have asserted that the Company is responsible for
environmental cleanup costs or associated EPA fines in connection with
seven additional sites. In each instance the Company activities
complained of occurred prior to the Company's bankruptcy proceedings and
the third parties did not file proofs of claim in the bankruptcy
proceedings. The filing of such proofs of claim is required by the
Bankruptcy Code to effect a claim against a Chapter 11 debtor. A
bankruptcy discharge defense has been asserted by the Company in each
instance.
Page 7
Although the law in this area is still somewhat unsettled, three Federal
Courts of Appeal have held that a debtor can be discharged of
environmental cleanup liabilities related to its prebankruptcy activities.
The Company believes it will prevail in its position that its liability to
the EPA and third parties for prebankruptcy environmental cleanup costs
has been fully discharged. In one particular site, the EPA's Region III
has concurred with the Company's position that claims for environmental
cleanup were discharged pursuant to the bankruptcy. While each site is
unique with different circumstances, the Company has notified other
Regional Offices of the EPA of this determination associated with the
Region III site. The Company has not received responses from the other
Regional offices.
The EPA and certain state agencies also continue to request information in
connection with various waste disposal sites in which products
manufactured by Allis-Chalmers before consummation of the Plan of
Reorganization were ultimately disposed of by other parties. Although the
Company has been discharged of liabilities with respect to hazardous waste
sites, it is under a continuing obligation to provide information with
respect to its products to federal and state agencies. The A-C
Reorganization Trust, under its mandate to provide Plan of Reorganization
implementation services to the Company, has responded to these
informational requests because prebankruptcy activities are involved.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
Page 8
PART II
The information required by Items 5, 6, 7 and 8 of Part II is incorporated
by reference to the Company's 1995 Annual Report to Shareholders as
follows:
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS - page 4 of 1995 Annual Report to
Shareholders.
Item 6. SELECTED FINANCIAL DATA - page 5 of 1995 Annual Report to
Shareholders.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - pages 6 through 11 of
1995 Annual Report to Shareholders.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - pages 12
through 28 of 1995 Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Page 9
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) Identification of Directors
The following individuals were elected as directors of the Company at
the meeting of shareholders on October 25, 1989 (or have been
appointed to fill vacancies caused by the resignation of two such
directors) to serve until the next meeting of shareholders.
John R. Collins, age 68, a director since December 1988. Mr. Collins
retired in 1989 after serving since 1985 as Administrative Assistant
to the Secretary-Treasurer of International Union, United Automobile,
Aerospace & Agricultural Implement Workers of America -- UAW.
John T. Grigsby, Jr., age 55, a director since December 1988.
Mr. Grigsby has been a Vice Chairman of the Board of the Company
since May 1989, an Executive Vice President since October 1989 and
Chief Financial Officer since January 1996, having previously served
since December 1988 as the Company's Chairman and Chief Executive
Officer. Prior to that time and since July 1987, Mr. Grigsby was
employed by the Company as Managing Director, Restructure Project.
Mr. Grigsby also serves as the A-C Reorganization Trustee, as
President of Thomson McKinnon Securities, Inc. during winddown and
liquidation of its affairs and President and Chief Executive Officer
of Nationwise Automotive, Inc., an automotive replacement parts
retailer. He has been a director of 1st Southern Bank of Boca Raton,
Florida since September 1987 and First Florida Industries, Inc. since
July 1985.
H. Sean Mathis, age 49, a director since December 1988. Mr. Mathis
was elected as Chairman and Chief Executive Officer of the Company on
January 16, 1996 and prior thereto, Mr. Mathis served as a Vice
President of the Company since July, 1989. Mr. Mathis acted as the
Federal Court Appointed Trustee for International Wire News Service
Liquidation Corp., formerly United Press International (UPI) from
August 1992 to May 1994. From November 1991 to July 1992, he served
as Vice Chairman and a Director of UPI (then a news syndication
service). Mr. Mathis was President and Chief Operating Officer of
Ameriscribe Corporation, New York from May 1990 to October 1993 and
is currently President and a Director of Gulfstream Capital Partners,
Inc. From 1993 to 1995 Mr. Mathis was President and a Director of
RCL Capital Corporation. He is also a Director of USTrails Inc. and
Allied Digital Technologies Corp.
Claude D. Montgomery, age 43, a director since December 1988. Since
June 1993 Mr. Montgomery has been a director and shareholder in
Marcus Montgomery P.C., a law firm, formerly known as Marcus
Montgomery Wolfson P.C. Mr. Montgomery was a director and
shareholder in Varet, Marcus & Fink P.C., formerly known as Milgrim,
Thomajan & Lee P.C., attorneys, New York August 1989 through June
1993. Mr. Montgomery was a founding partner of Myerson & Kuhn,
attorneys, New York, from January 1988 to July 1989. Prior to that
time and since 1984, he was a founding partner of Booth, Marcus &
Page 10
Pierce, attorneys, New York.
Robert E. Nederlander, age 62, a director since May 1989.
Mr. Nederlander was elected by the Board of Directors on November 16,
1993 to serve as a Vice Chairman of the Board, having previously
served as Chairman of the Board and Chief Executive Officer of the
Company since May 1989. He is also President and director of
Nederlander Organization, Inc., New York, an owner and operator of
one of the world's largest chains of theaters since November 1981;
President of Nederlander Television and Film Productions, Inc. since
October 1985; Partner in New York Yankees Baseball Club since 1973
and Managing General Partner from September 13, 1990 through December
31, 1991; director and Chairman of the Board of Riddell Sports, Inc.
since April 1988; Chairman of the Board of MEGO Corporation, since
January 1988; and a director of HFS Incorporated since 1995.
John E. Sundman, age 69, a director since December 1988. Mr. Sundman
retired in December 1991 as Vice President of Corcap, Inc., Hartford,
Connecticut, a position which he held since July 1988, when Corcap
was spun off by Lydall, Inc., Manchester, Connecticut. Prior to that
time and since April 1978, he was Vice President, Chief Financial
Officer and a director of Lydall, Inc. He remains a director of
Corcap, Inc.
Allan R. Tessler, age 59, a director since September 1992. Mr.
Tessler served as Chairman of the Board and Chief Executive Officer
of the Company from November 1993 until January 1996. Mr. Tessler
is Chairman of the Board and Chief Executive Officer of International
Financial Group, Inc. since 1987; and Co-Chief Executive Officer of
Data Broadcasting Corporation since June 1992. Mr. Tessler is also
Chairman of the Board of Great Dane Holdings, Inc., Enhance Financial
Services Group, Inc. and Jackpot Enterprises, Inc. and director of
The Limited, Inc.
Leonard Toboroff, age 62, a director since May 1989. Mr. Toboroff
has been a Vice Chairman of the Board and an Executive Vice President
of the Company since May 1989; a director and Vice Chairman of
Riddell Sports, Inc. from April 1988 to the present; a practicing
attorney continuously since 1961 to the present; a director since
August 1987 and former Chairman and Chief Executive Officer from
December 1987 to May 1988 of Ameriscribe Corporation; and formerly a
director, Chairman and Chief Executive Officer from May 1982 through
June 1982 and Vice Chairman June 1982 through September 1988 of
American Bakeries Company. Mr. Toboroff is also a director of Banner
Aerospace, Inc. and Saratoga Beverage, Inc.
(b) Identification of Executive Officers
Name, Age as of March 1,
1996, and Position Business Experience
H. Sean Mathis, 49, See Item 10, subsection (a) above.
Chairman of the Board and
Chief Executive Officer
Page 11
Leonard Toboroff, 62, See Item 10, subsection (a) above.
Vice Chairman of the Board
and Executive Vice
President
John T. Grigsby, Jr., 55, See Item 10, subsection (a) above.
Vice Chairman of the Board,
Executive Vice President and
Chief Financial Officer
Robert E. Nederlander, 62, See Item 10, subsection (a) above.
Vice Chairman of the Board
Jeffrey I. Lehman, 46, Mr. Lehman commenced his
Treasurer employment with Allis-Chalmers and
was elected to his current
position in February, 1996. Since
1991, Mr. Lehman has been employed
by the A-C Reorganization Trust
and Thomson McKinnon Securities
during winddown and liquidation of
their affairs. He has also
provided financial consultation
since 1985.
(c) Identification of Certain Significant Employees
None
(d) Family Relationships
None
(e) Business Experience
See this Item 10, subsections (a) and (b) above.
(f) Involvement in Certain Legal Proceedings
None
(g) Promoters and Control Persons
Not applicable
Page 12
ITEM 11. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
paid to or earned by the Company's only executive officer who earned more
than $100,000 during the fiscal year ended December 31, 1995. Allan R.
Tessler, Chairman of the Board and Chief Executive Officer received no
compensation during 1995. Mr. Tessler resigned from these positions on
January 16, 1996.
Summary Compensation Table
Annual Compensation
Other
Name and Principal Position Salary Bonus Compensation
Robert M. Qualls
Vice President and 1995 $160,546* $ - $ -
Chief Financial
Officer, Treasurer 1994 $114,048 $ - $ -
and Secretary
1993 $113,541 $ - $ -
*Mr. Qualls resigned as Vice President and Chief Financial Officer,
Treasurer and Secretary effective November 1, 1995 and received severance
pay equal to six months salary in accordance with Company employee benefit
programs. Pursuant to the Plan of Reorganization, the Company was
reimbursed for severance paid to Mr. Qualls.
LONG-TERM STOCK INCENTIVE PLAN
The Company's Long-Term Stock Incentive Plan (1989), adopted by the
shareholders at the 1989 shareholders meeting, provides for grants to
officers and key employees of stock options, stock appreciation rights,
performance shares, restricted stock, restricted stock units and other
stock-based awards. The maximum number of shares which may be granted
with respect to stock-based awards is 50,000. Options to purchase shares
may be granted at prices equal to not less than the fair market value at
the date of grant, except that options to purchase up to 13,333 shares may
be granted at a price which is not less than the fair market value on
October 25, 1989, the date on which the Stock Incentive Plan was approved
by shareholders. Options are exercisable within a period not to exceed 10
years from date of grant. Stock appreciation rights allow the holder to
receive the difference between the exercise price and the fair market
value of the stock at the date of exercise in cash or shares of common
stock. No stock options or stock appreciation rights have been granted to
date.
Page 13
RETIREMENT PLAN
The Allis-Chalmers Consolidated Pension Plan covers 5 active employees at
the beginning of 1996. The Retirement Plan is a tax qualified defined
benefit pension plan whose participants include Mr. Qualls. Effective
March 31, 1987 the Retirement Plan was capped and frozen, without further
increase in benefits provided by the Company after that date.
The approximate annual retirement benefits which will commence to Mr.
Qualls upon attaining age 65 will be $5,900. The amount is before any
adjustment for a surviving spouse's pension and is not subject to Social
Security offset or other deductions.
SAVINGS PLAN
The Company's Savings Plan was initiated in 1968. The Savings Plan
permits the Company to contribute in its discretion cash or stock to
participants' accounts. However, on June 1, 1985 the Company discontinued
contributions to the Savings Plan. Employees may terminate voluntary
participation in certain portions of the Savings Plan and withdraw their
voluntary contributions at any time. However, there are restrictions on
withdrawals of the Company matching contributions.
Upon retirement, death or other termination of employment, employee
account balances generally may be withdrawn in lump sum or in
installments. Withdrawal of contributions is also permitted for defined
hardships.
During 1995 contributions by Company participants to the Savings Plan
under Section 401(k) of the Internal Revenue Code totaled $59,400. At
December 31, 1995 there were a total of 290 participants in the Savings
Plan, of whom 17 were active employees of the Company.
COMPENSATION OF DIRECTORS
Since December 1, 1990, the annual retainer for services as a director
(previously $13,500 per year) has been suspended, the attendance fee for
each Board meeting attended was reduced from $425 to $100 and the
attendance fee for each Committee meeting was suspended.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENT
Robert M. Qualls, Vice President and Chief Financial Officer, Treasurer
and Secretary resigned from the Company effective November 1, 1995.
Allan R. Tessler, a current director, resigned as Chairman of the Board
and Chief Executive Officer effective January 16, 1996.
H. Sean Mathis became Chairman of the Board and Chief Executive Officer,
effective January 16, 1996, in addition to his position as Director.
Page 14
John T. Grigsby, Jr. became Chief Financial Officer, effective January 16,
1996 in addition to being Vice Chairman, Executive Vice President and a
Director.
Jeffrey I. Lehman became Treasurer, effective February 16, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.
(a) Security Ownership of Certain Beneficial Owners
The following table lists the beneficial ownership with respect to
all persons known to the Company to be the beneficial owner of more
than 5% of the Company's Common Stock as of March 1, 1996.
Amount and Nature Percent of
Name and Address of Ownership Class
AL-CH Company, L.P., 810 Seventh
Avenue, New York, NY 10019
(includes shares held by Messrs.
Nederlander and Toboroff
as described below) 407,251(1) 40.6%
Wells Fargo Bank, P.O. Box 60347,
Los Angeles, CA 90060, Trustee
under that certain Amended and
Restated Retiree Health Trust
Agreement for UAW Retired
Employees of Allis-Chalmers
Corporation 136,406 13.6%
Firstar Trust Company,
777 East Wisconsin Avenue,
Milwaukee, WI 53202, Trustee
under that certain Amended and
Restated Retiree Health Trust
Agreement for Non-UAW Retired
Employees of Allis-Chalmers
Corporation 101,977 10.2%
(1) Messrs. Nederlander and Toboroff are beneficial owners of and
have shared voting power and shared dispositive power over the
407,251 shares of common stock held by AL-CH Company, L.P., a
Delaware limited partnership, of which the general partners are
Q.E.N., Inc., a Michigan corporation controlled by Mr.
Nederlander, and Lenny Corp., a Delaware corporation controlled
by Mr. Toboroff. Mr. Allan R. Tessler is a limited partner in
AL-CH Company, L.P.
Page 15
(b) Security Ownership of Management
The following table sets forth the number of shares of common stock
of the Company beneficially owned as of March 1, 1996 by directors,
the executive officers named in the Summary Compensation Table and
all directors and executive officers as a group. Except as otherwise
noted in the footnotes, the persons listed have sole voting and
investment power over the shares beneficially owned.
Amount and Nature Percent of
Name of Ownership Class
John R. Collins 0 *
John T. Grigsby, Jr. 9,535 1.0%
H. Sean Mathis 0 *
Claude D. Montgomery 533 (1) *
Robert E. Nederlander 407,251 (2) 40.6% (2)
John E. Sundman 3,333 *
Allan R. Tessler 0 *
Leonard Toboroff 407,251 (2) 40.6% (2)
All directors and officers as
a group (including the above) 420,652 41.9%
*less than 1%
(1) Shares are owned beneficially by Mr. Montgomery's spouse as to
which he disclaims beneficial ownership.
(2) Messrs. Nederlander and Toboroff are beneficial owners of and
have shared voting power and shared dispositive power over the
407,251 shares of common stock held by AL-CH Company, L.P., a
Delaware limited partnership, of which the general partners are
Q.E.N., Inc., a Michigan corporation controlled by Mr.
Nederlander, and Lenny Corp., a Delaware corporation controlled
by Mr. Toboroff. Mr. Allan R. Tessler is a limited partner in
AL-CH Company, L.P.
(c) Changes in Control
None
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) Transactions with Management and Others
None
(b) Certain Business Relationships
None
(c) Indebtedness of Management
None
(d) Transactions with Promoters
Not applicable
Page 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.
Page
(a) The Selected Financial Data, Management's Discussion and
Analysis and the Company's financial statements, together
with the report thereon of Price Waterhouse LLP, appearing
on pages 5 through 28 of the Company's 1995 Annual Report
to Shareholders, are incorporated by reference in this
Form 10-K Annual Report. With the exception of the
aforementioned information, the 1995 Annual Report to
Shareholders is not deemed to be filed as part of this
report. The schedule to the financial statements listed
below should be read in conjunction with the financial
statements in such 1995 Annual Report to Shareholders.
Financial statement schedules not included in this Form
10-K Annual Report have been omitted because they are not
applicable or the required information is shown in the
financial statements or notes thereto.
Allis-Chalmers Corporation and Consolidated Subsidiaries -
Schedule to Financial Statements:
VIII. Valuation and Qualifying Accounts. 19
Report of Independent Accountants on Financial
Statement Schedule. 20
(b) Reports on Form 8-K. There were no reports on Form 8-K
filed by the Company during the fourth quarter of 1995.
(c) Exhibits:
2.1. First Amended Disclosure Statement pursuant to
Section 1125 of the Bankruptcy Code, which includes the
First Amended and Restated Joint Plan of Reorganization
dated September 14, 1988 (incorporated by reference to the
Company's Report on Form 8-K dated December 1, 1988).
3.1. Amended and Restated Certificate of Incorporation
of Allis-Chalmers Corporation (incorporated by reference
to the Company's Report on Form 8-A dated August 12,
1992).
3.2. By-laws of Allis-Chalmers Corporation
(incorporated by reference to the Company's Report on Form
8-A dated August 12, 1992).
Page 17
10.1. Amended and Restated Retiree Health Trust Agreement
between Allis-Chalmers Corporation and Wells Fargo Bank
(incorporated by reference to Exhibit C-1 of the First
Amended and Restated Joint Plan of Reorganization dated
September 14, 1988 included in the Company's Report on
Form 8-K dated December 1, 1988).
10.2. Amended and Restated Retiree Health Trust Agreement
between Allis-Chalmers Corporation and Firstar Trust
Company (incorporated by reference to Exhibit C-2 of the
First Amended and Restated Joint Plan of Reorganization
dated September 14, 1988 included in the Company's Report
on Form 8-K dated December 1, 1988).
10.3. Reorganization Trust Agreement between Allis-
Chalmers Corporation and John T. Grigsby, Jr., Trustee
(incorporated by reference to Exhibit D of the First
Amended and Restated Joint Plan of Reorganization dated
September 14, 1988 included in the Company's Report on
Form 8-K dated December 1, 1988).
10.4. Product Liability Trust Agreement between Allis-
Chalmers Corporation and Bruce W. Strausberg, Trustee
(incorporated by reference to Exhibit E of the First
Amended and Restated Joint Plan of Reorganization dated
September 14, 1988 included in the Company's Report on
Form 8-K dated December 1, 1988).
10.5.* Allis-Chalmers Corporation Long-Term Stock
Incentive Plan (1989) (incorporated by reference to the
Company's Report on Form 10-Q for the three months ended
September 30, 1989).
10.6. Subscription and Shareholder Agreement between
Allis-Chalmers Corporation and AL-CH Company, L.P. dated
May 18, 1989 (incorporated by reference to the Company's
Report on Form 8-K dated May 24, 1989).
10.7. Commercial Installment Loan Agreement by and
between Allis-Chalmers Corporation and Marine Midland
Bank, N.A., dated as of December 20, 1989 (incorporated by
reference to the Company's Report on Form 8-K dated
December 20, 1989).
10.8.* Employment Agreement between Allis-Chalmers
Corporation and John T. Grigsby, Jr. (incorporated by
reference to the Company's Report on Form 10-Q for the
three months ended September 30, 1989).
Page 18
10.9. Asset Purchase Agreement by and between
Allis-Chalmers Corporation, B.R.B. Industries, Inc., Jack
Ehrenhaus and Fredric Allen dated as of November 7, 1989
(incorporated by reference to the Company's Report on Form
8-K dated December 20, 1989).
10.10.* Allis-Chalmers Savings Plan (incorporated by
reference to the Company's Report on Form 10-K for the
year ended December 31, 1988).
10.11.* Allis-Chalmers Consolidated Pension Plan
(incorporated by reference to the Company's Report on Form
10-K for the year ended December 31, 1988).
10.12. Asset Purchase Agreement by and between Allis-
Chalmers Corporation and BRB Industries Corp. dated as of
August 4, 1994, and amended by and among Allis-Chalmers
Corporation, BRB Industries Corp. and Power Manufacturing,
Inc. as of September 22, 1994 (incorporated by reference
to the Company's Report on Form 8-K dated September 22,
1994.
13.1. 1995 Annual Report to Shareholders of Allis-
Chalmers Corporation (only those portions of such Annual
Report that are incorporated by reference in this Report
on Form 10-K are deemed filed herewith).
21.1. Subsidiaries of Allis-Chalmers Corporation.
27.1. Financial Data Schedule.
* A management contract or compensatory plan or arrangement.
Page 19
ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(thousands)
Balance at Balance
Year Ended Beginning at Close
December 31, 1993 of Period Additions Deductions of Period
Doubtful receivables $ 367 $ 130 $ 248(a) $ 249
Plant rearrangement $ 68 $ 0 $ 0 $ 68
Restructure costs 161 0 113 48
------- ------- ------ -------
$ 229 $ 0 $ 113 $ 116
======= ======= ====== =======
Balance at Balance
Year Ended Beginning at Close
December 31, 1994 of Period Additions Deductions of Period
Doubtful receivables $ 249 $ 73 $ 3 $ 319
Plant rearrangement $ 68 $ 0 $ 0 $ 68
Restructure costs 48 0 48 0
------- ------- ------ -------
$ 116 $ 0 $ 48 $ 68
======= ======= ====== =======
Balance at Balance
Year Ended Beginning at Close
December 31, 1995 of Period Additions Deductions of Period
Doubtful receivables $ 319 $ 0 $ 13 $ 306
Plant rearrangement $ 68 $ 0 $ 0 $ 68
Restructure costs 0 0 0 0
------- ------- ------ -------
$ 68 $ 0 $ 0 $ 68
======= ======= ====== =======
(a) Includes writeoff of uncollectible receivables, less recoveries.
<PAGE>
Page 20
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Allis-Chalmers Corporation
Our audits of the consolidated financial statements referred to in our
report dated February 27, 1996 appearing on page 12 of the 1995 Annual
Report to Shareholders of Allis-Chalmers Corporation (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 Schedule listed in Item 14(a) of this Form 10-K. In our
opinion, this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
Price Waterhouse LLP
Milwaukee, Wisconsin
February 27, 1996
<PAGE>
Page 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Allis-Chalmers Corporation
/s/John T. Grigsby, Jr.
John T. Grigsby, Jr.
Vice Chairman, Executive Vice
President and Chief Financial Officer
Date: March 15, 1996
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, this report has been signed on March 15,
1996 by the following persons on behalf of the registrant and in the
capacities indicated.
/s/H. Sean Mathis /s/Robert E. Nederlander
H. Sean Mathis Robert E. Nederlander, Director
Chairman of the Board,
Chief Executive Officer
and Director
/s/ John R. Collins /s/John E. Sundman
John R. Collins, Director John E. Sundman, Director
/s/John T. Grigsby, Jr. /s/Allan R. Tessler
John T. Grigsby, Jr. Director Allan R. Tessler, Director
/s/Claude D. Montgomery /s/Leonard Toboroff
Claude D. Montgomery, Director Leonard Toboroff, Director
<PAGE>
Page 22
EXHIBIT INDEX
Exhibit No. Description
13.1 1995 Annual Report to Shareholders of
Allis-Chalmers Corporation (only those
portions of such Annual Report that are
incorporated by reference in this Report
on Form 10-K are deemed filed herewith)
21.1 Subsidiaries of Allis-Chalmers Corporation
27.1 Financial Data Schedule
Page 1
THE BUSINESS OF ALLIS-CHALMERS
Houston Dynamic Service, Inc., a Company subsidiary, operates a business
in Houston, Texas which services and repairs mechanical equipment,
including compressors, pumps, turbines, engines, heat exchangers,
centrifuges, rollers, gears, valves, blowers, kilns, crushers and mills.
It serves various industrial customers, including those in the
petrochemical, chemical, refinery, utility, waste and waste treatment,
minerals processing, power generation, pulp and paper and irrigation
industries.
On March 1, 1996 Allis-Chalmers had 38 employees and 7,309 shareholders of
record.
Headquarters
Allis-Chalmers Corporation
Box 512
Milwaukee, WI 53201-0512
Contents
The Business of Allis-Chalmers 1
Report to Our Shareholders 2
Market for Common Stock and
Related Shareholder Matters 4
Selected Financial Data 5
Management's Discussion and Analysis 6
Report of Independent Accountants 12
Consolidated Financial Statements 13
Notes to Consolidated Financial Statements 16
Officers and Directors 29
Board Committees 30
Page 2
REPORT TO OUR SHAREHOLDERS
H. Sean Mathis
Chairman of the Board
and Chief Executive Officer
Dear Fellow Shareholders:
I am pleased to report that on January 16, 1996 I was elected as
Chairman and Chief Executive Officer of the Company.
Allis-Chalmers continued to experience tough times in 1995. Even
though our operating results remained profitable at Houston Dynamics
Services, Inc. (HDS), they were down from 1994. In addition, the
continued unsuccessful search for an acquisition or a financing partner
along with the major underfunding in the pension plan continue to strain
cash resources and jeopardize the future of the Company. This becomes
more critical in 1996 as scheduled funding payments become due to the
Allis-Chalmers Consolidated Pension Plan.
Financial Results
With the sale of the B.R.B. Industries division (BRB) in 1994, the
Company's continuing operation consists of HDS a machinery repair and
service business.
Sales from continuing operations totaled $3.2 million in 1995, down
from $3.6 million in 1994. The decrease is primarily the result of a
weakened market for machine repairs and services.
Gross margin as a percentage of sales decreased to 26% in 1995
compared with 28% in 1994 as a result of decreased sales and a decrease in
sales of more profitable services at HDS.
Marketing and administrative expense of $1.3 million in 1995 was
reduced slightly from the 1994 level of $1.4 million. The decrease was
due primarily to the continued cost reduction effort and the absence of
any significant expenses incurred in connection with an acquisition
search. As a percentage of sales, marketing and administrative expense
increased slightly to 41% in 1995 compared with 40% in 1994.
The Company reported a loss from continuing operations of $1.4
million (including recognition of pension liability of $1.1 million), or
$1.44 per common share, in 1995 compared with a loss of $1.1 million, or
$1.08 per common share, in 1994. In 1994, a loss from discontinued
operations of $0.2 million or $.23 per common share was incurred along
with a loss on the sale of BRB of $2.9 million or $2.82 per common share.
Altogether, there was a net loss in 1994 of $4.2 million, or $4.13 per
common share.
Acquisition Environment
The Company continued to attempt to identify and evaluate acquisition
candidates and financing partners during 1995. The Company's environment
for these transactions was and remains very difficult. The Company's lack
of cash for investment, restrictions on debt financing and the uncertainty
associated with the Company's exposure for the underfunding of the
Allis-Chalmers Consolidated Pension Plan all contribute to the Company's
inability to consummate an acquisition or financing.
Given the present financial condition of the Company, a meaningful
acquisition will be very difficult to identify and complete. The Company
continues to believe, however, that it should investigate suitable
acquisition or financing opportunities and attempt to
Page 3
develop an alliance with a strategic partner in order to increase its
operating base and generate positive cash flow. The Company recognizes
that any acquisition would have to be financed by additional borrowing,
new equity financing or a capital infusion by a new partner. The current
financial condition of the Company is a significant impediment to
additional borrowing or an equity investment.
Pension Plan
The Company is the plan sponsor for the Allis-Chalmers Consolidated
Pension Plan (Consolidated Plan). For the years 1989 through 1993,
retirees covered by the Consolidated Plan outlived the assumptions of
mortality used in 1988 to calculate the additional funding needed to fund
fully the Consolidated Plan. Given this continued experience, the
Company's independent actuaries revised the mortality assumptions used to
calculate future liabilities effective January 1, 1994 to reflect this
decrease in mortality. As a result, the Company has a greater future
pension liability as its retirees continue to receive monthly pensions
throughout their longer-projected lives. This change in mortality
assumptions, along with a slight increase in the assumption for future
administrative costs, resulted in an underfunding on a present value basis
of $11.9 million as of December 31, 1995.
This underfunded condition requires the Company to make significant
cash contributions to the Consolidated Plan pursuant to ERISA minimum
funding requirements starting in 1996. In 1994, the Retirement Protection
Act of 1994 (Act) was enacted as part of the General Agreement on Tariffs
and Trade legislation. This Act requires faster funding of underfunded
pension plans. While the first cash contribution to the Consolidated Plan
has been made in 1996, the Act requires additional cash contributions in
1996, 1997 and 1998.
Based on the Company's limited financial resources to make
contributions, this requirement for contributions will have a material
adverse effect on the Company. The Company is not optimistic that in its
current condition it will be able to raise additional capital to meet its
obligations under the Consolidated Plan. Given the inability of the
Company to fund such an obligation with its current financial resources, a
termination of the Consolidated Plan is likely to occur, with the
consequence of a liability to the Pension Benefit Guaranty Corporation
(PBGC) in excess of the current net worth of the Company. If the Company
is unable to reach an acceptable arrangement with the PBGC or to raise
additional capital, it will have to evaluate its alternatives, which
include, among others, another bankruptcy filing.
Outlook
The challenges for 1996 are significant. In particular, the pension plan
underfunding issue and the continued search for an acquisition or a
financing partner are matters on which we must focus. Limited financial
resources and the uncertainty of available financing will make these
challenges most difficult.
On behalf of the directors and officers of Allis-Chalmers, I request
the support of you, the shareholders, as we address these difficult
challenges.
Page 4
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's First Amended and Restated Joint Plan of Reorganization
(Plan of Reorganization) provided for cancelling the old common stock of
Allis-Chalmers on December 2, 1988 and issuing new common stock of the
reorganized Company (Common Stock) to certain holders of claims and
interests, including holders of old common stock.
After receiving approval of a majority of shareholders of Common Stock,
the Company amended its Amended and Restated Certificate of Incorporation
(Amendment), effective as of July 8, 1992, to effect a 1-for-15 reverse
stock split of the Common Stock pursuant to which each 15 shares of Common
Stock, $.01 par value per share, were combined into one share of new
Common Stock, $.15 par value per share. In lieu of the issuance of
fractional shares of Common Stock, the Amendment provided that
shareholders owning less than 15 shares of Common Stock were entitled to
receive a cash payment at the rate of $8.85 per share of Common Stock
(equivalent to $0.59 per share of the presplit Common Stock). This
action, as of July 8, 1992, decreased the number of outstanding shares of
Common Stock to 1,003,596 from 15,164,195 shares immediately prior to the
reverse stock split and decreased the number of shareholders to 7,408 from
17,799 prior to the reverse stock split. Per share amounts in the
accompanying financial statements have been restated to reflect the
reverse stock split.
Pursuant to the Stock Sales Escrow Agreement which was established in
conjunction with the Plan of Reorganization, the Company's stock transfer
agent, Continental Stock Transfer & Trust Company, completed the first
release of shares of Common Stock from escrow in July 1992. Stock
certificates, representing approximately 40% of the outstanding shares of
Common Stock held in escrow, were distributed to shareholders of record as
of the close of business on July 8, 1992. The balance of the outstanding
shares of Common Stock were released from escrow on August 1, 1995.
The Common Stock is subject to trading restrictions that are set forth in
its Amended and Restated Certificate of Incorporation. The trading
restrictions are designed to maximize the likelihood of preserving the
Company's substantial net operating loss carryforwards. There is no
established public trading market for the Common Stock. It is not certain
when or if trading in the Common Stock will commence or on which
registered stock exchange or quotation system, if any, the Common Stock
may eventually be listed or quoted. At the present time, the Company does
not intend to file a listing application to any registered national stock
exchange or Nasdaq for trading or quotation of the Common Stock.
No dividends were declared or paid during 1995, 1994 or 1993.
<PAGE>
Page 5
SELECTED FINANCIAL DATA/1
1995 1994 1993 1992 1991
(millions, except per share data)
Statement of Operations Data:
Sales $3.2 $3.6 $3.3 $3.8 $5.8
Income (loss) from:
Continuing Operations (1.4) (1.1) (1.3) (1.7) (0.3)
Discontinued Operations - (0.2) 0.2 0.9 0.7
Sale of molded fabric
products division - (2.9) - - -
Cumulative effect of
accounting change - - (1.0) - -
Net income (loss) (1.4) (4.2) (2.1) (.8) .4
Income (loss) per share from:/2
Continuing Operations (1.44) (1.08) (1.31) (1.65) (.34)
Discontinued Operations - (.23) .24 .82 .70
Sale of molded fabric
products division - (2.82) - - -
Cumulative effect of
accounting change - - (1.02) - -
Net income (loss) (1.44) (4.13) (2.09) (.83) .36
Statement of Financial
Condition Data:
Total assets 4.1 4.6 11.5 12.9 14.9
Long-term debt classified as:
Current 0.3 - 0.2 1.1 .8
Long-term - 0.3 3.1 2.4 3.5
Shareholders' (deficit)
investment (9.9) (6.9) (3.2) 8.0 8.9
1/ Restated to reflect the results of operation of the Company's BRB
division as discontinued operations. See Note 3 of Notes to
Consolidated Financial Statements.
2/ Restated to reflect the 1-for-15 reverse stock split effected July,
1992.
Page 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This discussion should be read in conjunction with the Report to Our
Shareholders and the Consolidated Financial Statements including the Notes
to Consolidated Financial Statements.
Overview
Allis-Chalmers, after emerging from Chapter 11 under the Company's Plan of
Reorganization which was consummated on December 2, 1988, entered into an
agreement with AL-CH Company, L.P. (Investor) pursuant to which the
Investor agreed to purchase 6.1 million shares of Common Stock (40% of the
outstanding Common Stock) for $3,750,000 in cash. The Investor is a
limited partnership controlled by Messrs. Robert E. Nederlander and
Leonard Toboroff.
The acquisition environment has been unfavorable since the Investor's cash
contribution to the Company and remained very difficult for the Company
during 1995. The problems continued to include the Company's lack of cash
for investment, limited availability of debt financing for acquisitions
and the financial exposure associated with the Consolidated Plan. These
conditions become most critical in 1996 as funding payments become due to
the Consolidated Plan. Therefore, the Company continues to proceed
cautiously with its efforts to identify and evaluate potential candidates
for acquisition. Currently, the Company is not in discussions with any
such potential candidate.
The Company continues its efforts to conserve cash resources. However,
the expenses associated with the ongoing Securities and Exchange
Commission and other governmental reporting as well as legal, accounting
and audit, tax, insurance and costs associated with other corporate
requirements of a publicly held company have made it difficult for the
Company, at its present size, to achieve a positive cash flow.
The Company's independent pension actuaries have changed the assumptions
for mortality and administrative expenses used to determine the
liabilities of the Consolidated Plan. Primarily as a result of the
changes in mortality assumptions to reflect decreased mortality rates of
the Company's retirees, the Consolidated Plan is underfunded on a present
value basis of $11.9 million. The Company has recorded the liability
related to this underfunded position, resulting in the elimination of its
shareholders' equity. In the first quarter of 1996, the Company made its
first cash contribution in the amount of $205,000. The Company currently
does not have the financial resources to make all the required payments
during 1996. In addition, there are substantial payments due in 1997 and
1998. Given the inability of the Company to fund this obligation, a
termination of the Consolidated Plan will likely occur with the
consequence of a liability to the PBGC in excess of the current net worth
of the Company. The Company intends to continue discussions with the PBGC
concerning its obligations under the Consolidated Plan. Although it is
not possible to predict the outcome of such discussions, if the Company is
unable to negotiate a settlement with the PBGC on terms that are
acceptable to the Company, Allis-Chalmers will be required to evaluate its
options, which include attempting to raise additional capital to eliminate
the underfunding or seeking protection from its creditors by commencing
voluntary bankruptcy proceedings under the federal bankruptcy laws. The
Company is not
Page 7
optimistic that in its current condition it will be able to raise
additional capital to meet its obligations under the Consolidated Plan.
Results of Operations
Results of operations for 1995 reflect the sole operation of the business
of Allis-Chalmers: the machine repair business, HDS. The results of
operations for 1994 also included the molded-fabric-product business, BRB,
which was sold in September 1994.
Sales from continuing operations totaled $3.2 million in 1995 compared
with $3.6 million and $3.3 million in 1994 and 1993, respectively. The
decrease in sales from 1994 is primarily the result of a weakened demand
for machine repair services supplied by HDS.
Gross margins, as a percentage of sales, were 25.7%, 28.1% and 23.3% in
1995, 1994 and 1993, respectively. The decrease in the margin percentage
in 1995 compared with 1994 resulted mainly from decreased sales and a
decrease in sales of more profitable services.
Marketing and administrative expense was $1.3 million, $1.4 million and
$2.0 million in 1995, 1994 and 1993, respectively. The decrease in 1995
was primarily due to continued cost reduction efforts and the absence of
any significant expenses relating to the Company's search for and
evaluation of an acquisition candidate in 1995. Marketing and
administrative expense was 41.1% of sales in 1995 compared with 40.0% in
1994 and 60.6% in 1993. Marketing and administrative expense has been
significantly reduced since 1993 as a result of cost reduction activity at
HDS and at the Company's corporate offices. In addition, the 1994
decrease from 1993 resulted from increased sales and non-recurring costs
associated with the 1993 acquisition search. A significant portion of the
Company's administrative expense relates to expenses for Securities and
Exchange Commission and other governmental reporting as well as the legal,
accounting and audit, tax, insurance and other requirements of a publicly
held company.
The Company had a loss from operations of $491,000 in 1995 compared with a
1994 loss of $382,000 and a loss of $1,229,000 in 1993. The drop from
1994 resulted primarily from decreased sales.
Interest income in each of the years resulted mainly from earnings on
short-term investments. However, for the complete year of 1995, interest
income also was derived from a note receivable from the sale of BRB in
September of 1994. This accounted for the increase in 1995. The
reduction in interest income in 1994 compared to 1993 was due to a lower
level of investments. Interest expense relates to a term loan, the
proceeds of which were used for the BRB acquisition and a real estate
loan, the proceeds of which were used to purchase the shop and office
building from which HDS operates. The term loan used for the BRB
acquisition, was paid off in late 1994, thereby significantly reducing the
interest expense in 1995.
Pension expense was $1,067,000 and $639,000 in 1995 and 1994 respectively.
These amounts relate to the recognition of pension liability associated
with the Consolidated Plan and in accordance with the Statement of
Financial Accounting Standards No. 87 "Employers Accounting for Pensions."
Page 8
The Company incurred a loss from continuing operations of $1,448,000
(including recognition of pension liability of $1,067,000), or $1.44 per
common share, in 1995 compared with a loss from continuing operations of
$1,087,000, or $1.08 per common share, in 1994. The Company reported a
loss from discontinued operations of $231,000 or $.23 per common share in
1994. There was no gain or loss from discontinued operation in 1995. The
1994 loss from discontinued operations reflected the continued declining
sales by BRB. The Company incurred a loss on the sale of BRB of
$2,856,000 or $2.82 per common share in 1994. The loss on the sale of BRB
included the write off of $2,076,720 in intangible assets associated with
the Company's acquisition of BRB in 1989.
In 1993, the Company incurred a net loss of $2,107,000, or $2.09 per
common share. The net loss in 1993 included the cumulative effect of a
one-time charge of $1,029,000, or $1.02 per common share, related to
certain postretirement benefits in compliance with an accounting change
required by generally accepted accounting principles.
The Company incurred a net loss of $1,448,000 (including recognition of
pension liability of $1,067,000), or $1.44 per common share, in 1995
compared with a net loss of $4,174,000, or $4.13 per common share, in
1994.
Liquidity and Capital Resources
At December 31, 1995 the Company had cash and short term investments
totaling $1.9 million, a decrease from $2.2 million at December 31, 1994.
This decrease was the result of expenses associated with the ongoing
corporate reporting, as well as legal, accounting, audit, tax and
insurance.
Trade receivables at December 31, 1995 were $265,000, below the level of
$388,000 at December 31, 1994. The decrease is a result of lower sales.
Non-trade receivables were $664,000 at December 31, 1995 a decrease from
$781,000 at December 31, 1994. These receivables represent the proceeds
from the sale of BRB. In 1995, BRB made periodic payments against this
balance, however, it is currently past due under the original terms. This
amount is secured by filings against the assets of BRB, which according to
their latest unaudited statement are more than sufficient to cover this
debt. Management is in the process of pursuing all monies owed including
reviewing its strategic alternatives available.
Inventory at December 31, 1995, was $128,000, up from $94,000 at year end
1994. This increase is due to one in progress job that will not be
completed until early 1996.
The Company had no significant capital expenditure commitments as of
December 31, 1995.
Current maturities of long-term debt at December 31, 1995 were $299,000
compared with $20,000 at year-end 1994. This increase was the result of
the balloon payment due August 20, 1996 from the real estate loan
refinanced by HDS in August, 1993. The proceeds of the original loan were
used in 1990 for the purchase of the land and building in which HDS
operates its business in Houston, Texas. The amount refinanced was
approximately $320,400 and is required to be repaid in monthly
installments of $3,469 through August 20, 1996, when the
Page 9
remaining unpaid balance shall be due. At December 31, 1995, the interest
rate on the note was 10.75%. This rate is subject to adjustments during
the term of the note in accordance with increases or decreases in the
prime rate. The note is secured by the HDS facility having a net book
value of $468,800 at December 31, 1995 and the Company's guaranty.
The Company's principal sources of cash include earnings from operations
and interest income on short term investments. The cash requirements
needed for the administrative expenses associated with being a publicly
held company are significant, and management believes that the Company
will continue to use a substantial portion of its cash balances in 1996.
In addition the Company is liable for contributions of $2.5 million to the
Consolidated Plan in 1996, $205,000 of which was paid in the first quarter
of 1996.
The A-C Reorganization Trust, pursuant to the Plan of Reorganization,
funds all costs incurred by Allis-Chalmers which relate to implementation
of the Plan of Reorganization. Such costs include an allocated share of
certain expenses for Company employees, professional fees and certain
other administrative expenses.
In 1988, the Plan of Reorganization provided for the contribution of $53.8
million to the Company's then-existing 11 salaried and inactive hourly
pension plans. This funding, in addition to the then-existing assets in
the pension plans, was used to establish a high-grade fixed income
securities portfolio. The market value of the portfolio assets was
matched to the present value of the expected pension benefits and
administrative expenses of the plans in a way intended to make the pension
fund immune from interest rate fluctuations, thus substantially
eliminating the need for future Company contributions. Effective January
1, 1989 the 11 remaining Allis-Chalmers pension plans were consolidated
into a single plan, the Consolidated Plan. Pursuant to its obligations
under the Plan of Reorganization, the Company continues as the plan
sponsor for the Consolidated Plan.
For the years 1989 through 1994, retirees eligible for benefits under the
Consolidated Plan have, as a group, outlived the projections based on the
mortality assumptions used in the Plan of Reorganization for funding the
Consolidated Plan. During this period, actual administrative expenses
have been slightly in excess of assumed levels. The Company was advised
by its independent actuaries that effective January 1, 1994 it was
required to reflect such decreased mortality for funding calculation
purposes. This change in the mortality assumptions and an increase in the
assumption for future administrative expenses have created an underfunded
condition in the Consolidated Plan of $11.9 million on a present value
basis.
This underfunded condition in the Consolidated Plan requires the Company
to make significant cash contributions to the Consolidated Plan pursuant
to ERISA funding requirements starting in 1996. Contributions are
projected to be $2.5 million in 1996, then increasing to $3.1 million in
1997 and $8.1 million in 1998.
In 1996, the Company made a payment of $205,000 against the $2.5 million.
Based on the Company's limited financial resources to make contributions,
this requirement for future contributions will have a material adverse
change on the Company. The inability of the Company to fund such an
obligation will likely lead to a termination of the Consolidated Plan with
the consequence of a liability to the Pension Benefit Guaranty Corporation
in excess of the
Page 10
net worth of the Company. If the Company is unable to reach an acceptable
arrangement with the PBGC or to raise additional capital, it will have to
evaluate its alternatives, which include, among others, another bankruptcy
filing.
The Environmental Protection Agency (EPA) and certain state environmental
protection agencies have requested information in connection with eleven
potential hazardous waste disposal sites in which products manufactured by
Allis-Chalmers before consummation of the Plan of Reorganization were
disposed. The EPA has claimed that Allis-Chalmers is liable for cleanup
costs associated with six additional sites. The EPA's claims with respect
to one other site were withdrawn in 1994 based upon settlements reached
with the EPA in the bankruptcy proceeding. In addition, eight third
parties have asserted that Allis-Chalmers is liable for cleanup costs or
associated EPA fines in connection with seven additional sites. In one of
these instances a former site operator has joined Allis-Chalmers and 47
other potentially responsible parties as a third-party defendant in a
lawsuit involving cleanup of one of the sites. In each instance the
environmental claims asserted against the Company involve its
prebankruptcy operations. Accordingly, Allis-Chalmers has taken the
position that all cleanup costs or other liabilities related to these
sites were discharged in the bankruptcy. In one particular site, the
EPA's Region III has concurred with the Company's position that claims for
environmental cleanup were discharged pursuant to the bankruptcy. While
each site is unique with different circumstances, the Company has notified
other Regional offices of the EPA of this determination associated with
the Region III site. The Company has not received responses from the
other Regional offices. No environmental claims have been asserted
against the Company involving its postbankruptcy operations.
Financial Condition
Shareholders' deficit at December 31, 1995 was $9.9 million. A three-year
comparison of shareholders' (deficit) investment follows:
(millions) 1995 1994 1993
January 1 $(6.9) $(3.2) $ 8.0
Net loss (1.4) (4.1) (2.1)
Pension liability adjustment (1.6) 0.4 (9.1)
----- ----- -----
December 31 $(9.9) $(6.9) $(3.2)
===== ===== =====
Accounting Changes
Pursuant to the Plan of Reorganization, the Company assumed the
contractual obligation to Simplicity Manufacturing, Inc. (SMI) to
reimburse SMI for 50% of the actual cost of insurance claims for a select
group of retirees (SMI Retirees) of the prior Simplicity Manufacturing
Division of Allis-Chalmers. In December 1990 the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 106
("FAS No. 106"), "Employers Accounting for Postretirement Benefits Other
Than Pensions." This statement requires the expensing of retiree medical
and life benefit costs on an accrual basis by the beginning of 1993. The
Company's prior policy was to recognize these costs on a cash basis.
During the first quarter
Page 11
of 1993, the Company elected to recognize immediately the entire unfunded
accumulated postretirement benefit obligation rather than to amortize this
transition obligation to expense over 20 years.
In adopting FAS No. 106, the Company recorded, in the first quarter of
1993, a one-time, non-cash charge against earnings of $1,029,000, or $1.02
per common share, using the cumulative catchup method. This adjustment
represents the discounted present value of expected future SMI Retiree
health care benefits. No change in the Company's practice of funding
these benefits on a cash basis is presently anticipated.
<PAGE>
Page 12
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Allis-Chalmers Corporation
In our opinion, the consolidated financial statements appearing on pages
13 through 27 of this report present fairly, in all material respects, the
financial position of Allis-Chalmers Corporation and its subsidiaries at
December 31, 1995 and 1994, and the results of their operations and their
cash flows for each of the three years in the period ended December 31,
1995, 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.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 10 to the
consolidated financial statements, the Company's pension actuary is
currently estimating that significant cash contributions to the Company's
consolidated pension plan will be required in the years 1996 through 1998.
The Company does not currently have the financial resources to make these
estimated cash contributions which raises substantial doubt about the
Company's ability to continue as a going concern. Management's plans in
regard to this matter are described in Note 11. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
As discussed in Note 10 to the consolidated financial statements, the
Company changed its method of accounting for postretirement benefits other
than pensions effective January 1, 1993.
Price Waterhouse LLP
Milwaukee, Wisconsin
February 27, 1996
<PAGE>
Page 13
STATEMENT OF OPERATIONS
Year Ended December 31 1995 1994 1993
(thousands, except per share)
Sales $3,190 $3,580 $3,298
Cost of sales 2,371 2,571 2,528
------ ------ ------
Gross Margin 819 1,009 770
Marketing and administrative expense 1,310 1,434 1,999
Restructuring costs - (43) -
------ ------ ------
Loss from Operations (491) (382) (1,229)
Other income (expense)
Interest income 136 99 124
Interest expense (46) (187) (241)
Pension expense (1,067) (639) -
Other 20 22 18
------ ------ ------
Loss from Continuing Operations
Before Income Taxes (1,448) (1,087) (1,328)
Charge in lieu of income taxes - - -
Loss from Continuing ------ ------ ------
Operations Before Cumulative
Effect of Accounting Changes (1,448) (1,087) (1,328)
Discontinued Operations:
(Loss) income from Operations of
molded fabric products division - (231) 250
Loss on sale of molded fabric
products division - (2,856) -
------ ------ ------
Loss Before Cumulative
Effect of Accounting Changes (1,448) (4,174) (1,078)
Cumulative effect of accounting changes - - (1,029)
------ ------ ------
Net Loss $(1,448) $(4,174) $(2,107)
======= ======= =======
(Loss) Income per Common Share
Before cumulative effect of
accounting changes:
Continuing Operations $ (1.44) $ (1.08) $ (1.31)
Discontinued Operations - (3.05) .24
Cumulative effect of accounting
changes - - (1.02)
------ ------ ------
Net Loss per Common Share $ (1.44) $ (4.13) $ (2.09)
======= ======= =======
STATEMENT OF ACCUMULATED DEFICIT
Year Ended December 31 1995 1994 1993
(thousands)
Accumulated deficit beginning of year $(6,570) $(2,396) $ (289)
Net loss (1,448) (4,174) (2,107)
------- ------- -------
Accumulated deficit end of year $(8,018) $(6,570) $(2,396)
======= ======= =======
The accompanying Notes are an integral part of the Financial Statements.
<PAGE>
Page 14
STATEMENT OF FINANCIAL CONDITION
December 31 1995 1994
(thousands)
Assets
Cash and short-term investments $ 1,881 $ 2,225
Trade receivables, net (Note 4) 265 388
Non-trade receivables (Note 3) 664 781
Inventories, net 128 94
Other current assets 206 185
------ ------
Total Current Assets 3,144 3,673
Net property, plant and equipment (Note 5) 907 923
------ ------
Total Assets $ 4,051 $ 4,596
======= =======
Liabilities and Shareholders' Deficit
Current maturities of long-term debt $ 299 $ 20
Trade accounts payable 73 201
Accrued employee benefits 80 121
Reserve for legal expenses 275 275
Accrued pension liability (Note 10) 2,493 -
Other current liabilities 324 325
------ ------
Total Current Liabilities 3,544 942
Accrued pension liability (Note 10) 9,374 9,228
Accrued postretirement benefit obligations (Note 10) 1,020 1,046
Long-term debt (Note 7) 33 279
Shareholders' deficit (Note 8)
Common stock ($.15 par value, authorized
2,000,000 shares, outstanding 1,003,028
at December 31, 1995 and December 31, 1994) 152 152
Capital in excess of par value 8,155 8,155
Accumulated deficit (accumulated deficit of
$424,208 eliminated on December 2, 1988) (8,018) (6,570)
Pension liability adjustment (10,209) (8,636)
------ ------
Total Shareholders' Deficit (9,920) (6,899)
Commitments and contingent liabilities (Note 11) ------ -------
Total Liabilities and Shareholders'
Deficit $ 4,051 $ 4,596
======= =======
The accompanying Notes are an integral part of the Financial Statements.
<PAGE>
Page 15
STATEMENT OF CASH FLOWS
Year Ended December 31 1995 1994 1993
(thousands)
Cash flows from operating activities:
Net loss $ (1,448) $ (4,174) $ (2,107)
Adjustments to reconcile net loss
to net cash (used) provided by
operating activities:
Depreciation and amortization 112 126 133
Loss (income) from discontinued
operations - 3,087 (250)
Cumulative effect of accounting
changes - - 1,029
Provision for restructuring costs - (48) -
Change in working capital:
Decrease in receivables, net 240 556 4
(Increase) decrease in inventories (34) (35) 72
Decrease (increase) in other
current assets (21) 443 (50)
(Decrease) in trade accounts
payable (128) (103) (50)
(Decrease) increase in other
current liabilities (42) (404) 238
Net change in working capital of
discontinued operations - (20) 836
Pension expense 1,067 639 -
Other (13) 23 136
------ ------ ------
Net cash (used) provided by
operating activities (267) 90 (9)
Cash flows from investing activities:
Capital expenditures (116) (109) (67)
Proceeds from sale of excess equipment 6 20 13
------ ------ ------
Net cash (used) by investing activities (110) (89) (54)
Cash flows from financing activities:
Net proceeds from issuance of
long-term debt 67 - 3,319
Payment of long-term debt (34) (154) (313)
Retirement of long-term debt - (2,795) (3,263)
Proceeds from certificate of deposit - 3,000 -
------ ------ ------
Net cash provided (used) by
financing activities 33 51 (257)
------ ------ ------
Net (decrease) increase in cash and
short-term investments (344) 52 (320)
Cash and short-term investments at
beginning of year 2,225 2,173 2,493
------ ------ ------
Cash and short-term investments at
end of year $ 1,881 $ 2,225 $ 2,173
======== ======= =======
Supplemental information - interest paid $ 46 $ 189 $ 266
======== ======= =======
The accompanying Notes are an integral part of the Financial Statements.
<PAGE>
Page 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. EMERGENCE FROM CHAPTER 11
Allis-Chalmers Corporation ("Allis-Chalmers" or the "Company") emerged
from Chapter 11 proceedings on October 31, 1988 under a plan of
reorganization which was consummated on December 2, 1988. The Company was
thereby discharged of all debts that arose before confirmation of its
First Amended and Restated Joint Plan of Reorganization (Plan of
Reorganization), and all of its capital stock was cancelled and made
eligible for exchange for shares of common stock of the reorganized
Company (Common Stock).
Claims asserted against the Company and allowed by the Bankruptcy Court
beyond those recorded prior to the consummation date amounted to
approximately $483 million. Such amounts were subsequently recorded by
the Company in 1988. Because total recorded liabilities discharged at
consummation exceeded the book value of assets and Common Stock
distributed to creditors and the various trusts at that date,
extraordinary income of $388.1 million was recorded.
See the Plan of Reorganization and the First Amended Disclosure Statement
dated September 14, 1988 for additional information regarding
distributions to holders of claims and interests.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Allis-Chalmers through its wholly-owned subsidiary, Houston Dynamic
Service, Inc., services and repairs various types of mechanical equipment,
including compressors, pumps, turbines, engines, heat exchangers,
centrifuges, rollers, gears, valves, blowers, kilns, crushers and mills.
Principles of Consolidation
The consolidated financial statements include the accounts of Allis-
Chalmers and its subsidiaries. All significant intercompany transactions
have been eliminated.
Short-Term Investments
Short-term investments consist primarily of commercial paper with original
maturities at date of purchase less than three months.
Fair Value of Financial Instruments
The carrying amounts in the Consolidated Balance Sheets for cash and
short-term investments, non-trade receivable and long-term debt
instruments approximate their fair market value.
Page 17
Inventories
Inventories are stated at the lower of cost, determined by the first-in,
first-out method, or market.
Properties and Depreciation
Plant and equipment used in the business are stated at cost and
depreciated on the straight-line basis over the estimated useful lives of
the assets which generally range from 40 years for buildings, 3 to 12
years for machinery and equipment and 3 to 12 years for tools, patterns,
furniture and fixtures. Maintenance and repairs are expensed as incurred.
Expenditures which significantly increase asset values or extend useful
lives are capitalized.
Income Taxes
Deferred income taxes are determined on the liability method in accordance
with Statement of Financial Accounting Standards (FASB) No. 109. Under
FASB 109, certain income and expense items are recognized for financial
statement and income tax purposes in different time periods. Income tax
benefits of loss and tax credit carryforwards are not recognized until
realized. See Note 6. Income Taxes.
(Loss) Income Per Common Share
(Loss) Income per common share is based on the average number of shares of
common stock outstanding and issuable under the Plan of Reorganization.
Statement of Cash Flows
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid debt instruments with a maturity of three months or less at
date of purchase to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Major Customers
In 1995, the Company recorded sales to one customer which accounted for
10% or more of total sales -- Amoco Chemical generated 26% of 1995 sales,
19% of 1994 sales and 22% of 1993 sales. In 1994 the Company, had two
customers which accounted for 10% or more of total sales. Amoco Chemical
(detailed above) and Chevron Corporation generated 15% of 1994 sales. In
1993 sales of 10% or more of the total sales were made to two customers --
Amoco Chemical (detailed above) and Siemens Corporation at 11% of 1993
sales.
Page 18
NOTE 3. SALE OF BRB DIVISION
On September 22, 1994, the Company sold substantially all of the assets,
excluding accounts receivable and certain other assets, and certain
liabilities of its BRB division. Pursuant to the terms and conditions of
an Asset Purchase Agreement, dated as of August 4, 1994 and as amended on
September 22, 1994 (the "Asset Purchase Agreement"), by and between the
Company and BRB Industries Corp., a New Jersey corporation, the purchase
price was $737,343, which consists of $280,000 paid in cash at closing,
$100,000 payable in cash within 120 days after closing and a secured
promissory note in the amount of $357,343.
The Company recorded a loss on the sale of $2,856,000 which included the
write-off of $2,076,720 of intangible assets associated with the Company's
acquisition of BRB in 1989.
The Company did not sell the accounts receivable nor transfer the accounts
payable of the BRB business. Pursuant to the terms of the Asset Purchase
Agreement, the collection of the BRB receivables and payment of BRB
payables will be administered on behalf of the Company by BRB management
and the proceeds from the collection of receivables over the payment of
the accounts payable will be transferred to the Company.
Sales of discontinued operations were $3,676,800 for the nine months ended
September 20, 1994 and $6,455,000 for the twelve months ended December 31,
1993.
NOTE 4. RECEIVABLES
December 31 1995 1994
(thousands)
Trade accounts receivable $ 571 $ 707
Allowance for doubtful receivables (306) (319)
------ ------
$ 265 $ 388
====== ======
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
December 31 1995 1994
(thousands)
Land and buildings $ 522 $ 522
Machinery and equipment 1,302 1,230
Tools, patterns, furniture, fixtures
and leasehold improvements 380 370
------ ------
2,204 2,122
Accumulated depreciation (1,297) (1,199)
------ ------
$ 907 $ 923
====== ======
Page 19
NOTE 6. INCOME TAXES
Temporary differences are differences between the tax basis of assets and
liabilities and their reported amounts in the financial statements that
will result in differences between income for tax purposes and income for
financial statement purposes in future years.
The following table depicts the temporary differences as of December 31,
1995 and 1994:
1995 1994
(Millions)
Net future tax deductible items $ 10 $ 11
Net operating loss carryforwards and
other tax credits 187 178
Valuation allowance (197) (189)
----- -----
Net deferred taxes $ 0 $ 0
===== =====
Net future tax deductible items relate primarily to estimated future
bankruptcy claim payments to be made by the Company's two grantor trusts.
Gross deferred tax liabilities at December 31, 1995 are not material.
Operations are entirely in the United States (U.S.). Due to the losses
before income taxes for 1995, 1994 and 1993 there was no charge in lieu of
taxes in those years.
The Plan of Reorganization established the A-C Reorganization Trust to
settle claims and to make distributions to creditors and certain
shareholders. The Company transferred cash and certain other property to
the A-C Reorganization Trust on December 2, 1988. Payments made by the
Company to the A-C Reorganization Trust do not generate tax deductions for
the Company upon the transfer but generate deductions for the Company as
payments are made by the A-C Reorganization Trust to holders of claims.
The Plan of Reorganization also created a trust to process and liquidate
product liability claims. Payments made by the A-C Reorganization Trust
to the product liability trust do not generate current tax deductions for
the Company. Future deductions should be available to the Company as the
product liability trust makes payments to liquidate claims.
The Company believes the above-named trusts are grantor trusts and
therefore includes the income or loss of these trusts in the Company's
income or loss for tax purposes, resulting in an adjustment of the tax
basis of net operating and capital loss carryforwards. The income or loss
of these trusts is not included in the Company's results of operations for
financial reporting purposes.
Tax carryforwards at December 31, 1995 are estimated to consist of net
operating losses of $506 million expiring 1998 through 2009, capital
losses of $132,000 expiring in 1996, investment tax credits of $7 million
expiring 1997 through 2001 and energy tax credits of $3 million expiring
1997 through 2001. In addition, as discussed above, the net operating
loss carryforwards will be significantly impacted by the future settlement
of claims. Based upon the A-C Reorganization
Page 20
Trust's estimated amount of allowed claims, pending claims and assets
available to settle such claims as of December 31, 1995, the net operating
loss carryforwards will be increased by approximately $8 million. This
net increase will result from future deductions as payments on claims are
made, which will increase net operating loss carryforwards, partially
offset as a result of the discharge of indebtedness, which will decrease
net operating loss carryforwards.
The realization of estimated carryforwards is subject to the occurrence or
nonoccurrence of future events.
During 1990 the Company initiated litigation against the Internal Revenue
Service (IRS) in the United States Bankruptcy Court for the Southern
District of New York, challenging the validity and retroactive
applicability of proposed regulations issued by the IRS on August 13,
1990. On January 2, 1992 the IRS issued final regulations under Sections
269 and 382 of the Internal Revenue Code of 1986 relating to the use of
net operating loss carryforwards following corporate reorganizations under
the Bankruptcy Code.
Following issuance of the final regulations the Company withdrew its
retroactivity challenge because the final regulations were made
retroactive only to August 14, 1990 and are not applicable to a plan of
reorganization that was completed before then. The Company's Plan of
Reorganization was consummated on December 2, 1988. The Company, however,
continued to challenge the validity of other provisions of the
regulations.
On June 8, 1992 the Bankruptcy Court issued a decision denying the
Company's motion for a judgment against the IRS with respect to the
application of Section 269 of the IRS Code to the Company. The Court also
granted the IRS's motion to dismiss the Company's complaint challenging
the regulations. The Court entered judgment pursuant to its decision on
June 29, 1992 and, consistent with the advice of its counsel, the Company
decided not to appeal that judgment.
Although the Company was unable to obtain a judgment that would have
prevented the IRS from applying Section 269 to the Company, the Court's
ruling leaves the Company in substantially the same position it was in
prior to issuance of the final regulations. The possibility of an IRS
challenge under Section 269 of the Internal Revenue Code to the Company's
use of its prepetition net operating loss carryforwards has always existed
and, in light of the Court's ruling, that possibility continues to exist.
The Court, however, stated that, should the IRS ever seek to use its new
Section 269 regulations to limit the Company's use of its net operating
loss carryforwards, nothing in its opinion would prejudice the Company's
right to defend itself by using the Court's confirmation finding that the
primary purpose of the Company's Plan of Reorganization was not tax
avoidance.
Page 21
NOTE 7. LONG-TERM DEBT
December 31 1995 1994
(thousands)
Real estate loan $ 282 $ 299
Other 50 -
------ ------
332 299
Less amounts classified as current 299 20
------ ------
$ 33 $ 279
====== ======
The real estate loan relates to the 1990 purchase of the land and building
in Houston, Texas which had previously been leased by HDS. In August
1993, HDS refinanced this loan. The amount refinanced under the note is
approximately $320,400 and is required to be repaid in monthly
installments of $3,469 through August 20, 1996, when the remaining unpaid
balance shall be due. At December 31, 1995, the interest rate on the note
was 10.75%. This rate will be adjusted during the term of the note in
accordance with increases or decreases in the prime rate. The note is
secured by the HDS facility having a net book value of $469,000 at
December 31, 1995 and the Company's guaranty.
NOTE 8. SHAREHOLDERS' DEFICIT
The components of Shareholders' Deficit are as follows:
December 31 1995 1994
(thousands)
Common stock $ 152 $ 152
Capital in excess of par value
- Common stock transactions 7,715 7,715
- Utilization of tax carryforwards to
offset charge in lieu of taxes 440 440
Retained deficit (8,018) (6,570)
Pension liability adjustment (10,209) (8,636)
-------- --------
Shareholders' Deficit $ (9,920) $ (6,899)
======== ========
Statement of Financial Accounting Standards No. 87, "Employers' Accounting
for Pensions," requires recognition in the Statement of Financial
Condition of a minimum pension liability. The minimum liability that must
be recognized is equal to the excess of the accumulated benefit obligation
over plan assets. As of December 31, 1995 and 1994, $9.4 million and $9.2
million of the obligation was classified as a long-term liability,
respectively. An additional $2.5 million was classified as a current
liability as of December 31, 1995. No current liability existed at
December 31, 1994. A reduction of shareholders' investment in the amount
of approximately $9.1 million was separately reported in 1993 and adjusted
to $8.6 million in 1994 and $10.2 million in 1995.
Page 22
Pursuant to the Stock Sales Escrow Agreement which was established in
conjunction with the Plan of Reorganization, the Company's stock transfer
agent, Continental Stock Transfer & Trust Company, completed the first
release of shares of Common Stock from escrow in July 1992. Stock
certificates, representing approximately 40% of the shares of Common Stock
held in escrow, were distributed to shareholders of record as of the close
of business on July 8, 1992. The balance of outstanding shares of Common
Stock were released from escrow on August 1, 1995.
In conjunction with consummation of the Plan of Reorganization, the
cumulative retained deficit at December 2, 1988 of $424.2 million was
eliminated.
NOTE 9. LONG-TERM STOCK INCENTIVE PLAN
The Company's Long-Term Stock Incentive Plan (1989) provides for the grant
of stock options, stock appreciation rights, performance shares,
restricted stock, restricted stock units and other stock-based awards.
Under the plan the maximum number of shares which may be granted with
respect to stock-based awards is 50,000. Options may be granted at prices
equal to or not less than the fair market value at date of grant, except
that options to purchase up to 13,333 shares may be granted at a price
which is not less than the fair market value on October 25, 1989, the date
on which the plan was approved by shareholders. Options are exercisable
within a period not to exceed 10 years from date of grant. The plan also
provides for the discretionary grant of stock appreciation rights which
allow the holder to receive in cash or shares of common stock the
difference between the exercise price and the fair market value of the
stock at the date of exercise. There have been no grants under the plan.
NOTE 10. POSTRETIREMENT BENEFIT OBLIGATIONS
Pensions
As of the date of the Chapter 11 filings in June 1987 the Company
sponsored 19 defined benefit plans providing pensions for substantially
all U.S. employees. The pension plan for U.S. salaried employees was
capped and frozen effective March 31, 1987, so there have been no further
benefit accruals after that date. As a result of divestitures during the
Chapter 11 proceedings, eight active plans were transferred to the buyers
of the businesses, leaving the Company as sponsor of 11 plans, none of
which permitted additional benefit accruals. Effective January 1, 1989
the 11 remaining plans were consolidated into a single plan, the Allis-
Chalmers Consolidated Pension Plan (Consolidated Plan). The Company
continues as the plan sponsor for the Consolidated Plan.
In accordance with the Plan of Reorganization, the 11 plans received a
Company contribution of $53.8 million in December 1988. As a result of
actions taken in connection with this contribution and the then-existing
securities of the pension plans, the assets of the Consolidated Plan are
invested in a dedicated bond portfolio that consists of high-grade fixed
income securities in which the market value of the assets is matched to
the present value of the
Page 23
anticipated pension benefits and administrative expenses of the
Consolidated Plan in a way intended to make the pension fund immune from
interest rate fluctuations.
Under the Plan of Reorganization, future contributions to the Consolidated
Plan are required if the mortality assumptions used in calculating the
present value of the pension benefits expected to be paid or the
assumptions used in calculating the future administrative expenses prove
inaccurate. For the years 1989 through 1993, retirees eligible for
benefits under the Consolidated Plan, as a group, outlived the projections
of the mortality assumptions used in the Plan of Reorganization for
funding the Consolidated Plan. For the same five years, actual
administrative expenses were slightly in excess of assumed levels.
Effective January 1, 1994, the Company's independent actuaries reflected
such decreased mortality for funding calculation purposes. This change in
assumptions and an increase in the assumption for future administrative
expenses created an underfunded condition in the Consolidated Plan of
approximately $9 million on a present value basis. The recognition of
this $9 million liability by the Company in 1993 caused a corresponding
reduction in equity.
For the year 1994, the mortality experience was negative compared with the
revised assumptions, in an amount in excess of the 1989-1993 average
actuarial loss. This mortality loss was offset, however, by gains in the
asset portfolio. At year end 1995, the Consolidated Plan remained in an
underfunded condition with a recorded liability of $11.9 million.
This underfunded condition requires the Company to make significant cash
contributions to the Consolidated Plan pursuant to ERISA minimum funding
requirements starting in 1996. In 1994, The Retirement Protection Act of
1994 (Act) was enacted into law as part of the General Agreement on
Tariffs and Trade legislation. In general, this Act requires faster
funding of underfunded pension plans. The Act requires accelerated cash
contributions (when compared with prior projections) projected as follows:
Estimated Minimum
Required Contributions
(millions)
1996 $2.5
1997 $3.1
1998 $8.1
These projections are based on various assumptions which may change and,
in turn, alter these estimated minimum required contributions.
Based on the Company's limited financial resources to make contributions,
this requirement for contributions will have a material adverse effect on
the Company. Given the inability of the Company to fund such an
obligation with its current financial resources, a termination of the
Consolidated Plan is likely to occur, with the consequence of a liability
to the Pension Benefit Guaranty Corporation in excess of the current net
worth of the Company.
Page 24
The funded status of the Consolidated Plan is as follows:
December 31, December 31,
1995 1994
(thousands)
Actuarial present value of:
Vested benefit obligation $ (251,292) $ (221,316)
========== ==========
Accumulated benefit obligation $ (251,292) $ (221,316)
========== ==========
Projected benefit obligation $ (251,292) $ (221,316)
Plan assets at fair value 239,425 212,088
---------- ----------
Excess of plan assets (projected benefit
obligation) (11,867) (9,228)
Unrecognized net loss (gain) 10,209 8,636
---------- ----------
(Accrued pension liability)/asset before
adjustment for minimum liability (1,658) (592)
Adjustment required to recognize
minimum liability (10,209)* (8,636)*
---------- ----------
Accrued pension liability recognized in
the statement of financial condition $ (11,867) $ (9,228)
========== ==========
* This adjustment causes a corresponding reduction of equity.
Effective January 1, 1994, the actuaries changed the mortality assumptions
used to calculate future pension liabilities. The Unisex Pension 1984
Table was replaced by a newly created mortality assumption which reflects
the actual mortality experience of the Consolidated Plan from 1989 through
1993. The effect of this change on the Company's statement of financial
condition was material.
The projected benefit obligation as of December 31 was determined using an
assumed discount rate of 6.88% for 1995 and 8.87% for 1994.
Page 25
The components of pension income are as follows:
December 31 1995 1994 1993
(thousands)
Service cost - benefits earned
during the year $ - $ - $ -
Interest cost on projected
benefit obligation 18,451 17,361 18,263
Actual return on plan assets (52,480) 12,064 (35,262)
Net amortization and deferral 35,096 (28,786) 16,999
-------- -------- ---------
Net pension (income) cost $ 1,067 $ 639 $ -
======== ======== =========
The net periodic pension income is based on the assumed long-term rate of
return on plan assets of 8.87% in 1995, 7.09% in 1994, and 8.06% in 1993.
The Consolidated Plan pays premiums to the PBGC based on the number of
participants in the plan (fixed rate premium) and the funded status of the
plan (variable rate premium). Given that the Consolidated Plan is
underfunded, the variable rate portion of the PBGC premium was charged
starting in 1995. The 1995 variable rate premium was approximately
$250,000, and the 1996 variable rate premium is estimated to be
approximately $560,000. As long as the underfunding exists, this variable
rate premium will be an additional demand on the assets of the
Consolidated Plan.
Under the terms of the Plan of Reorganization, the Company had agreed not
to consent to an involuntary termination, deliver a notice of intent to
terminate or take any action having a similar effect in respect of the
Consolidated Plan prior to December 2, 1993. This requirement ended as of
December 3, 1993 and no other provisions of the Plan of Reorganization
prohibit a termination of the Consolidated Plan.
Medical and Life
Pursuant to the Plan of Reorganization, the Company assumed the
contractual obligation to Simplicity Manufacturing, Inc. (SMI) to
reimburse SMI for 50% of the actual cost of medical and life insurance
claims for a select group of retirees (SMI Retirees) of the prior
Simplicity Manufacturing Division of Allis-Chalmers. Prior to 1993, the
cost of these benefits was recognized on a cash basis.
Effective January 1, 1993, the Company adopted Statement of Financial
Standards No. 106 (FAS No. 106), "Employers' Accounting for Postretirement
Benefits Other Than Pensions," which requires employers to account for the
cost of these benefits on an accrual basis. As part of adopting the new
standard, the Company recorded in the first quarter of 1993 a one-time,
non-cash charge against earnings of $1,029,000 using the cumulative
catchup method.
Page 26
Net postretirement benefit expense for the years ended December 31, 1995
and 1994 included the following components (in thousands):
1995 1994
Service cost $ - $ -
Interest cost on accumulated benefit obligation 59 60
Amortization of unrecognized net gain (24) (9)
----- -----
Net postretirement benefit expense $ 35 $ 51
===== =====
Presently, the Company's postretirement benefit obligations are not
funded. The status of the Company's postretirement benefit obligations as
of December 31, 1995 and 1994 was as follows (in thousands):
1995 1994
Actuarial present value of accumulated
postretirement benefit obligation $ 790 $ 754
Unrecognized net gain 230 292
------- -------
Accrued postretirement benefit liability $ 1,020 $ 1,046
======= =======
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 7.75% at December 31, 1995 and 8.0%
at December 31, 1994. The assumed rate in 1995 decreases 1/4% per year
until an ultimate rate of 6.5% is reached at December 31, 2001. The
assumed rate in 1994 decreases 1/4% per year until an ultimate rate of
6.5% is reached at December 31, 2001. The health care cost trend rate has
a significant effect on the amounts reported. For example, a one
percentage point increase in the health care cost trend rate would
increase the accumulated postretirement benefit obligation by $58,000 at
December 31, 1995. The discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% and 8.25% at December 31, 1995
and December 31, 1994, respectively.
NOTE 11. COMMITMENTS AND CONTINGENT LIABILITIES
Substantially all litigation proceedings pending against the Company were
resolved pursuant to emergence from the Chapter 11 proceedings in
1988.Various loans, lease agreements and other commitments and contractual
obligations of the Company were also satisfied pursuant to the Plan of
Reorganization. The Company knows of no significant pre-Plan of
Reorganization lawsuits presently pending against it or its subsidiaries
which have not been assumed by the various trusts or other entities.
The Company is a party to litigation matters and claims which are normal
in the course of its operations, and, while the results of litigation and
claims cannot be predicted with certainty, management believes that the
final outcome of such matters will not have a material adverse effect on
the Company's consolidated financial position.
Page 27
Environmental Matters
The Environmental Protection Agency (EPA) and certain state environmental
protection agencies have requested information in connection with eleven
potential hazardous waste disposal sites in which products manufactured by
Allis-Chalmers before consummation of the Plan of Reorganization were
disposed. The EPA has claimed that Allis-Chalmers is liable for cleanup
costs associated with six additional sites. The EPA's claims with respect
to one other site were withdrawn in 1994 based upon settlements reached
with the EPA in the bankruptcy proceeding. In addition, eight third
parties have asserted that Allis-Chalmers is liable for cleanup costs or
associated EPA fines in connection with seven additional sites. In one of
these instances a former site operator has joined Allis-Chalmers and 47
other potentially responsible parties as a third party defendant in a
lawsuit involving cleanup of one of the sites. In each instance the
environmental claims asserted against the Company involve its
prebankruptcy operations. Accordingly, Allis-Chalmers has taken the
position that all cleanup costs or other liabilities related to these
sites were discharged in the bankruptcy. In one particular site, the
EPA's Region III has concurred with the Company's position that claims for
environmental cleanup were discharged pursuant to the bankruptcy. While
each site is unique with different circumstances, the Company has notified
other Regional offices of the EPA of this determination associated with
the Region III site. The Company has not received responses from the
other Regional offices. No environmental claims have been asserted
against the Company involving its postbankruptcy operations.
Allis-Chalmers Consolidated Pension Plan
Contributions to the Consolidated Plan are required starting in 1996 due
to a change in the mortality assumptions used in calculating the present
value of the pension benefits expected to be paid and the assumptions used
in calculating the future administrative expenses compared with the
projections of the mortality and administrative expense assumptions used
in the Plan of Reorganization for funding the Consolidated Plan.
Contributions are projected to be $2.5 million in 1996, then increasing to
$3.1 million in 1997 and $8.1 million in 1998. These projections are
based on various assumptions which may change and, in turn, alter these
estimated required contributions. The Company currently does not have the
financial resources to make all the required payments. Given the
inability of the Company to fund this obligation, a termination of the
Consolidated Plan will likely occur, with the consequence of a liability
to the Pension Benefit Guaranty Corporation (PBGC) in excess of the
current net worth of the Company. The Company intends to continue
discussions with the PBGC concerning its obligations under the
Consolidated Plan. Although it is not possible to predict the outcome of
such discussions, if the Company is unable to negotiate a settlement with
the PBGC on terms that are acceptable to the Company, Allis-Chalmers will
be required to evaluate its options, which include attempting to raise
additional capital to eliminate the underfunding or seeking protection
from its creditors by commencing voluntary bankruptcy proceedings under
the federal bankruptcy laws. The Company is not optimistic that in its
current condition it will be able to raise additional capital to meet its
obligations under the Consolidated Plan.
Page 28
NOTE 12. QUARTERLY FINANCIAL DATA
(unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter
1995 1994 1995 1994 1995 1994 1995 1994
(thousands, except per share)
Sales $769 $733 $853 $1,041 $770 $ 882 $798 $924
Gross Margin 182 178 261 359 175 262 201 210
(Loss) Income
from:
Continuing
operations (432) (316) (360) (176) (402) (315) (254) (280)
Discontinued
operations - (13) - (137) - (137) - 56
Sale of molded
fabric products
division - - - - - (2,808) - (48)
Net (Loss) (432) (329) (360) (313) (402) (3,260) (254) (272)
Income (Loss)
per Share:
Continuing
operations (.43) (.32) (.35) (.17) (.40) (.31) (.26) (.28)
Discontinued
operations - (.01) - (.14) - (.13) - .06
Sale of molded
fabric products
division - - - - - (2.78) - (.05)
Loss per Share (.43) (.33) (.35) (.31) (.40) (3.22) (.26) (.27)
Page 29
OFFICERS
H. Sean Mathis
chairman of the board and chief executive officer
Leonard Toboroff
vice chairman of the board and executive vice president
John T. Grigsby, Jr.
vice chairman of the board, executive vice president
and chief financial officer
Robert E. Nederlander
vice chairman
Jeffrey I. Lehman
treasurer
DIRECTORS
John R. Collins
retired administrative assistant to the secretary-treasurer, International
Union, United Automobile, Aerospace & Agricultural Implement Workers of
America--UAW
John T. Grigsby, Jr.
trustee, A-C Reorganization Trust; disposition assets trustee; president,
Thomson McKinnon Securities, Inc. during winddown and liquidation of its
affairs; president and chief executive officer, Nationwise Automotive,
Inc. an automotive replacement parts retailer; director, 1st Southern Bank
of Boca Raton, Florida and First Florida Industries, Inc.
H. Sean Mathis
president and director of Gulfstream Capital Partners, Inc.; director,
USTrails Inc. and Allied Digital Technologies Corp.
Claude D. Montgomery
director and shareholder, Marcus Montgomery & Wolfson P.C., attorneys
Robert E. Nederlander
president, director, Nederlander Organization, Inc.; president,
Nederlander Television and Film Productions, Inc.; partner, New York
Yankees Baseball Club; chairman of the board, Riddell Sports, Inc.;
chairman of the board, MEGO Corporation
John E. Sundman
director, retired vice president, Corcap, Inc.
Allan R. Tessler
chairman of the board, chief executive officer, International Financial
Group, Inc.; co-chief executive officer, Data Broadcasting Corporation;
chairman of the board, Great Dane Holdings, Inc., Jackpot Enterprises,
Inc. and Enhance Financial Services Group, Inc.; director, The Limited,
Inc.
Leonard Toboroff
vice chairman, Riddell Sports, Inc.; practicing attorney; director, Banner
Aerospace, Inc. and Saratoga Beverage, Inc.
Page 30
BOARD COMMITTEES
Executive Committee -- The Executive Committee may exercise all the powers
and authority of the Board in the management of the business and affairs
of the Company except those powers specifically reserved for the Board.
Although the Executive Committee has very broad powers, in practice it
meets only when calling a meeting of the Board is impractical. Its
members are Messrs. Nederlander (chairman), Grigsby, Mathis, Tessler and
Toboroff.
Audit Committee -- The Audit Committee is responsible for recommending to
the full Board the engagement and discharge of the independent auditor of
the Company. It reviews financial data published by the Company and the
reports of the independent auditor. It monitors the accounting policies
and practices of the Company's businesses. Its members are Messrs.
Sundman (chairman), Collins and Montgomery.
Officers' Compensation Committee -- The Officers' Compensation Committee
reviews and makes recommendations to the full Board regarding the
compensation and other benefits of officers. Its members are Messrs.
Mathis (chairman) and Sundman.
Director Nominating Committee -- The Director Nominating Committee
investigates and makes recommendations to the Board regarding nominees for
election as directors. Its members are Messrs. Nederlander (chairman),
Collins, Grigsby, Montgomery and Toboroff.
Escrow Agent,
Transfer Agent and
Registrar
Continental Stock Transfer &
Trust Company
2 Broadway
New York, New York 10004
ANNUAL REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K to the Securities and Exchange
Commission will be furnished without charge to shareholders upon written
request to the Secretary, Allis-Chalmers Corporation, Box 512, Milwaukee,
Wisconsin 53201-0512.
ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXHIBIT 21.1.
SUBSIDIARIES
State
in Which
Subsidiary
Organized
Houston Dynamic Service, Inc. Texas
KILnGAS R&D, Inc. Illinois
U.S. Fluidcarbon Inc. Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED FINANCIAL STATEMENTS OF THE ALLIS-CHALMERS
CORPORATION AS OF AND FOR THE PERIOD ENDED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 183
<SECURITIES> 1,698
<RECEIVABLES> 929
<ALLOWANCES> 306
<INVENTORY> 128
<CURRENT-ASSETS> 3,144
<PP&E> 2,204
<DEPRECIATION> 1,297
<TOTAL-ASSETS> 4,051
<CURRENT-LIABILITIES> 3,544
<BONDS> 332
0
0
<COMMON> 8,307
<OTHER-SE> (18,227)
<TOTAL-LIABILITY-AND-EQUITY> (4,051)
<SALES> 0
<TOTAL-REVENUES> 3,190
<CGS> 0
<TOTAL-COSTS> 2,371
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> (1,448)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,448)
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<EXTRAORDINARY> 0
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<NET-INCOME> (1,448)
<EPS-PRIMARY> (1.44)
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