SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________
Form 10-Q
QUARTERLY REPORT
PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1995
Commission File Number: 1-871
__________________________________________
BUCYRUS-ERIE COMPANY
DELAWARE 39-0188050
P. O. BOX 500
1100 MILWAUKEE AVENUE
SOUTH MILWAUKEE, WISCONSIN 53172
(414) 768-4000
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 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding August 4, 1995
Common Stock, par value $.01 per share 10,234,574
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BUCYRUS-ERIE COMPANY AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information:
Consolidated Condensed Balance Sheets -
June 30, 1995 and December 31, 1994 3-4
Consolidated Condensed Statements of Operations -
Quarters and six months ended June 30, 1995
and 1994 5-6
Consolidated Condensed Statements of Cash Flows -
Six months ended June 30, 1995 and 1994 7-8
Notes to Consolidated Condensed Financial Statements 9-11
Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-16
Part II. Other Information 17-18
Signature Page 19
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BUCYRUS-ERIE COMPANY AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars In Thousands, Except Per Share Amounts)
June 30, December 31, June 30, December 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C> <C>
ASSETS LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash Accounts payable and
equivalents $ 7,404 $ 16,209 accrued expenses $ 34,747 $ 32,703
Receivables 34,091 26,220 Liabilities to customers
Inventories 79,858 82,393 on uncompleted contracts
Prepaid expenses and and warranties 6,171 6,239
other current assets 1,820 1,856 Income taxes 2,065 2,820
________ ________ Short-term obligations 1,347 -
Total Current Assets 123,173 126,678 Current maturities of
long-term debt 3,761 7,123
OTHER ASSETS: ________ ________
Restricted funds Total Current
on deposit 3,676 3,675 Liabilities 48,091 48,885
Intangible assets - net 9,259 9,497
Other assets 2,482 2,414 DEFERRED LIABILITIES:
________ ________ Income taxes 263 122
15,417 15,586 Liabilities to customers on
uncompleted contracts
PROPERTY, PLANT AND EQUIPMENT: and warranties 3,237 3,261
Cost 37,665 35,897 Postretirement benefits 11,754 11,828
Less accumulated Deferred plant closing
depreciation (1,937) (207) expenses and other 6,544 7,071
________ ________ ________ ________
35,728 35,690 21,798 22,282
LONG-TERM DEBT, less
current maturities 55,892 53,170
COMMON SHAREHOLDERS' INVESTMENT:
Common stock - par value
$.01 per share, authorized
20,000,000 shares, issued
and outstanding 10,234,574
shares in 1995 and 10,170,417
shares in 1994 102 102
Additional paid-in capital $ 54,259 $ 53,898
Accumulated deficit (5,596) (552)
Cumulative foreign
currency translation
adjustments (228) 169
________ ________
48,537 53,617
________ ________ ________ ________
$174,318 $177,954 $174,318 $177,954
See accompanying notes to consolidated condensed financial statements.
</TABLE>
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<TABLE>
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BUCYRUS-ERIE COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars In Thousands, Except Per Share Amounts)
Quarter Ended June 30, Six Months Ended June 30,
1995 1994 1995 1994
(Predecessor (Predecessor
Company) Company)
<S> <C> <C> <C> <C>
Revenues:
Net shipments $ 55,709 $ 50,608 $112,582 $ 93,963
Interest, royalties and
miscellaneous 289 1,510 619 1,861
________ ________ ________ ________
55,998 52,118 113,201 95,824
________ ________ ________ ________
Costs and Expenses:
Cost of products sold 47,923 42,468 97,649 79,033
Product development, selling,
administrative, and
miscellaneous expenses 8,549 7,845 16,255 15,368
Interest expense (Predecessor
Company contractual interest
not recognized in 1994 -
$6,783 and $9,849, respectively) 1,509 2,438 3,016 8,650
Reorganization items 473 2,193 473 5,129
________ ________ ________ ________
58,454 54,944 117,393 108,180
________ ________ ________ ________
Loss before income taxes (2,456) (2,826) (4,192) (12,356)
Income taxes 529 272 852 738
________ ________ ________ ________
Net loss (2,985) (3,098) (5,044) (13,094)
Redeemable preferred stock
accretion - - - (106)
Redeemable preferred stock
dividends - - - (40)
Redeemable preferred stock
reorganization item - - - (40,555)
________ ________ ________ ________
Net loss attributable to
common shareholders $ (2,985) $ (3,098) $ (5,044) $(53,795)
Weighted average number of
common shares outstanding 10,173,237 9,269,859 10,171,835 9,267,497
Net loss per share of
common stock:
Net loss $ (.29) $ (.33) $ (.50) $ (1.41)
Redeemable preferred stock
dividends, accretion and
reorganization item - - - (4.39)
__________ __________ __________ __________
Net loss per share attributable
to common shareholders $ (.29) $ (.33) $ (.50) $ (5.80)
See accompanying notes to consolidated condensed financial statements.
</TABLE>
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<TABLE>
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BUCYRUS-ERIE COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
Six Months Ended June 30,
1995 1994
(Predecessor
Company)
<S> <C> <C>
Cash Flows From Operating Activities
Net loss $ (5,044) $ (13,094)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation 1,820 3,972
Amortization of goodwill, intangible
assets and other items 597 1,969
Deferred rent (interest) on sale and
leaseback financing arrangement - 3,341
Payment in kind interest on the
Secured Notes due December 14,
1999 2,735 -
Amortization of debt discount - 71
Gain on sale of property,
plant and equipment (28) (12)
Non-cash reorganization items - 1,080
Changes in assets and liabilities:
Increase in receivables (8,009) (7,014)
Decrease (increase) in
inventories 1,966 (5,987)
Decrease (increase) in other
current assets 56 (456)
(Increase) decrease in
other assets (62) 103
Increase in current liabilities
other than income taxes
and current maturities
of long-term debt 2,609 16,998
(Decrease) increase in
income taxes (594) 368
Decrease in deferred liabilities
other than income taxes (1,213) (572)
_________ _________
Net cash (used in) provided by
operating activities (5,167) 767
_________ _________
Cash Flows From Investing Activities
Decrease in restricted funds
on deposit - 949
Purchases of property, plant
and equipment (1,584) (1,525)
Proceeds from sale of property, plant
and equipment 49 65
_________ _________
Net cash used in investing
activities (1,535) (511)
_________ _________
Cash Flows From Financing Activities
Payments of current maturities of
long-term debt (30) (28)
Net increase (decrease) in short-term
obligations 1,347 (183)
Proceeds from issuance of long-term
project financing obligations 880 5,367
Reduction of long-term project
financing obligations (4,260) (2,029)
_________ _________
Net cash (used in) provided by
financing activities (2,063) 3,127
_________ _________
Effect of exchange rate
changes on cash (40) (208)
_________ _________
Net (decrease) increase in cash
and cash equivalents (8,805) 3,175
Cash and cash equivalents at
beginning of period 16,209 13,696
_________ _________
Cash and cash equivalents at
end of period $ 7,404 $ 16,871
</TABLE>
Supplemental Disclosures of Cash Flow Information
1995 1994
Cash paid (received) during
the period for:
Interest on long-term debt
and bank borrowings $ 117 $ 173
Income taxes - net of refunds 1,250 (43)
Supplemental Schedule of Non-Cash Investing and Financing Activities
(A) On June 27, 1995, the Company issued 64,157 shares of common stock as
payment in full of $362 of liabilities for certain legal and professional
fees incurred in connection with the Company's reorganization under
chapter 11 of the Bankruptcy Code.
(B) Prior to February 18, 1994 (the "Petition Date"), the Predecessor Company
increased the carrying amount of the Series A redeemable preferred stock
by amounts representing the estimated fair value of the pre-petition
dividends not declared or paid, but which were payable under mandatory
redemption features. The Predecessor Company also recorded preferred
stock discount accretion on these securities prior to the Petition Date.
As of the Petition Date, the Predecessor Company increased the carrying
amount of the Series A redeemable preferred stock to the amount of the
allowed claim in the Amended Plan. The amounts as reflected in the
consolidated condensed financial statements were as follows:
1994
Redeemable preferred stock dividends at
net book value $ 129
Redeemable preferred stock accretion 106
Write-up of redeemable preferred stock issued
at a discount to amount of allowed claim
in the Amended Plan 40,555
________
$ 40,790
See accompanying notes to consolidated condensed financial statements.
<PAGE>
BUCYRUS-ERIE COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars In Thousands, Except Per Share Amounts)
1. In the opinion of Bucyrus-Erie Company (the "Company"), the accompanying
consolidated condensed financial statements contain all adjustments
(consisting of normal recurring accruals and other adjustments as stated
in Note 3) necessary to present fairly the financial results for the
interim periods. Certain items are included in these statements based on
estimates for the entire year. Also, certain reclassifications have been
made to the 1994 consolidated condensed financial statements to present
them on a basis consistent with the current year.
2. Certain notes and other information have been condensed or omitted from
these interim consolidated condensed financial statements. Therefore,
these statements should be read in conjunction with the Company's 1994
annual report on Form 10-K filed with the Securities and Exchange
Commission on April 17, 1995.
3. On February 18, 1994 (the "Petition Date"), B-E Holdings, Inc.
("Holdings" or the "Predecessor Company") and the Company, which at such
time was a wholly-owned subsidiary of Holdings, commenced voluntary
petitions under chapter 11 of the Bankruptcy Code and filed a prepackaged
joint plan of reorganization in the United States Bankruptcy Court,
Eastern District of Wisconsin (the "Bankruptcy Court"). On December 1,
1994, the Bankruptcy Court entered an order confirming the Second Amended
Joint Plan of Reorganization of Holdings and the Company as modified on
December 1, 1994 (the "Amended Plan"). The Amended Plan was effective on
December 14, 1994 (the "Effective Date") and on such date Holdings was
merged with and into the Company.
The Company and Holdings accounted for the reorganization by using the
principles of fresh start reporting as required by AICPA Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code". Accordingly, the consolidated financial statements
of the Company for periods subsequent to the Effective Date are not
comparable to the consolidated financial statements of prior periods.
The Predecessor Company consolidated financial statements are those of
Holdings which include the accounts and operating results of the Company.
The acquisition of the Company by the Predecessor Company on February 4,
1988 was accounted for as a purchase and, accordingly, the assets and
liabilities were recorded at their estimated fair values as of the
acquisition date. The excess of the related purchase cost over the fair
value of identifiable net assets was allocated to goodwill. The
Predecessor Company consolidated financial statements for periods
subsequent to the date of the acquisition included the related
depreciation and amortization charges associated with the fair value
adjustments.
Reorganization items included in the Consolidated Condensed Statements of
Operations consist of the following:
Quarter Ended June 30, Six Months Ended June 30,
1995 1994 1995 1994
(Predecessor (Predecessor
Company) Company)
Legal and
professional
fees $ 473 $2,274 $ 473 $ 4,168
Net adjustment of
debt to amount of
allowed claim in
the Amended Plan - - - (33)
Interest income - (81) - (119)
Write-off
previously
recorded
capitalized
financing costs - - - 1,113
______ ______ ______ _______
$ 473 $2,193 $ 473 $ 5,129
Write-up of
redeemable
preferred stock
issued at a
discount to
amount of allowed
claim in the
Amended Plan $ - $ - $ - $40,555
4. Inventories are summarized as follows:
June 30, December 31,
1995 1994
Raw materials and parts $ 10,390 $ 13,529
Inventoried costs relating to
uncompleted contracts 7,394 6,525
Customers' advances offset
against costs incurred on
uncompleted contracts (3,492) (2,619)
Work in process 15,989 13,069
Finished products (primarily
replacement parts) 49,577 51,889
________ ________
$ 79,858 $ 82,393
The remaining fair value adjustment included in inventory as of June 30,
1995 and December 31, 1994 was $4,348 and $10,065, respectively.
5. Net loss per share of common stock is based on the weighted average
number of common shares outstanding during the period. Net loss
attributable to common shareholders for the Predecessor Company includes
redeemable preferred stock dividends earned but not declared.
6. On March 7, 1995, Jackson National Life Insurance Company ("JNL"),
currently the holder of approximately 41.31% of the Company's common
stock, amended a complaint (the "JNL Complaint") previously filed in a
civil action (the "JNL Suit") in the United States District Court,
Southern District of New York, to name as defendants certain of the
Company's current and/or former officers and directors (the "Management
Defendants") and others (collectively with the Management Defendants, the
"Defendants"). The JNL Complaint sought unspecified money damages and
other equitable relief from the Management Defendants in connection with
(i) JNL's purchase of the Predecessor Company's Resettable Senior Notes
and (ii) certain of the Defendants' alleged orchestration of a series of
financings for the Predecessor Company which are alleged to have had the
effect of rendering the Predecessor Company insolvent, incapable of
competing in its markets and unable to pay its creditors, including JNL.
The Management Defendants have rights to indemnification from the Company
for any costs and expenses incurred by them in connection with the JNL
Complaint pursuant to the Amended Plan and the Company's Restated Bylaws.
As previously reported in the Company's Report on Form 8-K dated May 31,
1995 (the "May 31, 1995 8-K"), the Company and JNL entered into a
Settlement Agreement (the "Settlement Agreement") dated May 23, 1995,
pursuant to which JNL agreed: (a) to execute general releases of all
claims, known or unknown, arising at any time through the date of such
releases, in favor of the Management Defendants, and (b) to discontinue
with prejudice, and without costs as against any party, the JNL Suit as
it relates to the Management Defendants. On June 8, 1995, JNL executed
releases in favor of the Management Defendants. A Stipulation and Order
of Dismissal, with prejudice and without costs and attorneys' fees to any
party, was entered by the judge in the JNL Suit on June 13, 1995.
In addition, JNL has filed a claim (the "JNL 503(b) Claim") against the
Company for reimbursement of approximately $3,300 for professional fees
and disbursements incurred in connection with the Company's chapter 11
proceedings pursuant to Section 503(b) of the Bankruptcy Code. As
previously reported in the May 31, 1995 8-K, pursuant to the Settlement
Agreement JNL agreed that, in the event that the JNL 503(b) Claim is
allowed in whole or in part by the Bankruptcy Court, in lieu of requiring
payment of any award in cash JNL will accept payment in common stock of
the Company at a price equal to $5.6375 per share (the average closing
price of such stock on the Nasdaq National Market on June 20, 21, 22, 23
and 26, 1995). The Company has filed an objection to the JNL 503(b)
Claim and a trial has been scheduled by the Bankruptcy Court to begin on
November 29, 1995. The Company has been advised by legal counsel that in
said counsel's opinion the JNL 503(b) Claim is without merit; however,
the ultimate outcome of this matter cannot presently be determined.
Accordingly, no provision for any loss that may result upon resolution of
this matter has been made in the accompanying consolidated financial
statements.
<PAGE>
BUCYRUS-ERIE COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars In Thousands)
The following information is provided to assist in the understanding of
Bucyrus-Erie Company's (the "Company") operations for the quarter and six
months ended June 30, 1995.
The reorganization of the Company under chapter 11 of the Bankruptcy Code
was effective December 14, 1994 (the "Effective Date"). The reorganization
was accounted for using the principles of fresh start reporting, as required
by AICPA Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code". Under the principles of fresh
start reporting, total assets were recorded at their assumed reorganization
value, with the reorganization value allocated to identifiable tangible and
intangible assets on the basis of their estimated fair value, and liabilities
were adjusted to the present values of amounts to be paid where appropriate.
The consolidated financial statements for periods subsequent to the Effective
Date include the related amortization charges associated with the fair value
adjustments.
As a result of the implementation of fresh start reporting, the
consolidated financial statements of the Company for periods subsequent to the
Effective Date are not comparable to the consolidated financial statements of
prior periods. The consolidated financial statements presented for prior
periods are not the Company's, but instead are those of B-E Holdings, Inc.
(the "Predecessor Company"), the former parent of the Company which was merged
with and into the Company on the Effective Date.
The acquisition of the Company by the Predecessor Company on February 4,
1988 was accounted for as a purchase and, accordingly, the assets and
liabilities were recorded at their estimated fair values as of the acquisition
date. The excess of the related purchase cost over the fair value of
identifiable net assets was allocated to goodwill. The Predecessor Company
consolidated financial statements for periods subsequent to the date of the
acquisition included the related depreciation and amortization charges
associated with the fair value adjustments.
Net Shipments and Net Loss
Net shipments for the quarter and six months ended June 30, 1995 were
$55,709 and $112,582, respectively, compared with $50,608 and $93,963 for the
quarter and six months ended June 30, 1994, respectively. Shipments of repair
parts and services for the quarter ended June 30, 1995 increased 3.6% from the
quarter ended June 30, 1994 and for the six months ended June 30, 1995
increased 10.2% from the six months ended June 30, 1994. Both increases were
due to increased shipments at foreign locations. Machine shipments for the
quarter ended June 30, 1995 increased 29.4% from the quarter ended June 30,
1994 and for the six months ended June 30, 1995 increased 48.9% from the six
months ended June 30, 1994. Both increases were due to increased blast hole
drill shipments, primarily in coal and copper markets. The pricing for
machines and repair parts has continued to remain steady with the changes
primarily related to increased sales volume.
Net loss for the quarter and six months ended June 30, 1995 was $2,985
and $5,044, respectively, compared with a net loss of $3,098 and $13,094 for
the quarter and six months ended June 30, 1994. The decrease in net loss for
the six months ended June 30, 1995 was primarily due to increased sales
volume, reduced interest expense of $5,634 and reduced reorganization items of
$4,656. Net loss for the quarter and six months ended June 30, 1995 includes
charges of $2,912 and $5,717, respectively, which were charged to cost of
products sold reflecting the effects of fresh start reporting for inventories
which were written up by $10,427 on the Effective Date. Non-cash depreciation
and amortization charges included in the net loss for the quarter and six
months ended June 30, 1995 were $1,224 and $2,417, respectively, compared with
$2,894 and $5,941, respectively, for the quarter and six months ended June 30,
1994.
The Company's consolidated backlog on June 30, 1995 was $71,576 compared
with $72,346 on December 31, 1994 and $80,372 on June 30, 1994. Machine
backlog decreased 33.1% from December 31, 1994 and decreased 40.5% from
June 30, 1994. Both decreases were primarily in electric mining shovel volume
and reflect the shipment of a portion of the eight machine order received from
Mitsubishi Corporation for Anshan Iron & Steel Company in China. Repair parts
and service backlog increased 16.5% from December 31, 1994 and increased 5.6%
from June 30, 1994. The increase from December 31, 1994 was primarily at
foreign locations.
New orders for the quarter ended June 30, 1995 increased 2.7% from the
quarter ended June 30, 1994 and for the six months ended June 30, 1995
increased 11.5% from the six months ended June 30, 1994. New machine orders
for the quarter ended June 30, 1995 decreased 80.3% from the quarter ended
June 30, 1994 and for the six months ended June 30, 1995 remained constant
when compared to the six months ended June 30, 1994. The decrease for the
quarter ended June 30, 1995 was both in electric mining shovel and blast hole
drill volume and represents normal fluctuation in machine sales activity. New
repair parts and service orders for the quarter ended June 30, 1995 increased
30.4% from the quarter ended June 30, 1994 and for the six months ended June
30, 1995 increased 15.7% from the six months ended June 30, 1994. Both
increases were at foreign locations. The Company believes expansion of coal
and iron ore production in China and coal production in India, new copper
projects in South America and replacement of old equipment in iron ore mines
in the United States and Canada should provide near term machine sales
potential. Inquiry levels for blast hole drills and electric mining shovels
are currently at a strong level. Continued upgrading of existing machines
along with movement of existing large draglines by operators to new mine sites
and normal blast hole drill and electric mining shovel parts demand should
result in steady shipments of repair parts worldwide in the next twelve
months. Although the movement and upgrading of existing draglines should
positively impact parts sales, these options continue to further reduce the
worldwide demand for new draglines. In addition, the United States coal
market continues to be negatively impacted by the effects of The Clean Air
Act.
On July 25, 1995, the Company entered into separation agreements with three of
its executive officers who resigned their positions with the Company.
Pursuant to the separation agreements, the Company is obligated to make
monthly payments to such individuals over a fixed number of months. It is
anticipated that, in accordance with generally accepted accounting principles,
the Company will record an expense of approximately $1,500 in the quarter
ending September 30, 1995 to reflect its obligation for these payments.
Interest, Royalties and Miscellaneous
Interest, royalties and miscellaneous for the quarter and six months ended
June 30, 1995 were $289 and $619, respectively, compared with $1,510 and
$1,861 for the quarter and six months ended June 30, 1994. Included in the
1994 amounts was an insurance settlement of $1,350 received in the second
quarter of 1994.
Cost of Products Sold
Cost of products sold for the quarter ended June 30, 1995 was $47,923 or
86.0% of net shipments compared with $42,468 or 83.9% of net shipments for the
quarter ended June 30, 1994. For the six months ended June 30, 1995, cost of
products sold was $97,649 or 86.7% of net shipments compared with $79,033 or
84.1% of net shipments for the six months ended June 30, 1994. Included in
cost of products sold for the quarter and six months ended June 30, 1995 was
$2,912 and $5,717, respectively, as a result of the fair value adjustment to
inventory. This adjustment was made in accordance with the principles of
fresh start reporting and is being charged to cost of products sold as the
inventory is sold. The Company expects the remaining adjustment of $4,348 to
be charged to cost of products sold during the remainder of 1995. Without
this charge, cost of products sold would have been 80.8% for the quarter ended
June 30, 1995 and 81.7% for the six months ended June 30, 1995. The changes
in these percentages from 1994 were primarily the result of the mix of
products sold.
Product Development, Selling, Administrative, and Miscellaneous Expenses
Product development, selling, administrative and miscellaneous expenses
for the quarter ended June 30, 1995 were $8,549 or 15.3% of net shipments
compared with $7,845 or 15.5% of net shipments for the quarter ended June 30,
1994. The amounts for the six months ended June 30, 1995 and 1994 were
$16,255 or 14.4% of net shipments and $15,368 or 16.4% of net shipments,
respectively. The percentage decreases were primarily due to the increase in
net shipments.
Interest Expense
Interest expense for the quarter and six months ended June 30, 1995 was
$1,509 and $3,016, respectively, compared with $2,438 and $8,650 for the
quarter and six months ended June 30, 1994, respectively. The decrease was
primarily due to the exchange of unsecured debt securities of the Predecessor
Company and the Company for shares of the Company's common stock in connection
with the Company's reorganization pursuant to the Amended Plan.
Income Taxes
Income tax expense for the quarter and six months ended June 30, 1995 and
1994 consists primarily of the recognition of foreign tax expense at
applicable statutory rates. Domestic income tax expense is recorded in
accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes".
Capitalization
The long-term debt to equity ratio as of June 30, 1995 and December 31,
1994 was 1.2 to 1 and 1.0 to 1, respectively.
Liquidity and Capital Resources
Working capital and current ratio are two financial measurements which
provide an indication of the Company's ability to meet its short-term
obligations. These measurements at June 30, 1995 and December 31, 1994 were
as follows:
June 30, December 31,
1995 1994
Working capital $ 75,082 $ 77,793
Current ratio 2.6 to 1 2.6 to 1
The table below summarizes the Company's cash position at June 30, 1995:
Restricted Unrestricted
Location Cash Cash Total
United States $ - $ 1,043 $ 1,043
Foreign Subsidiaries 20 5,526 5,546
Equipment Assurance Limited 3,656 835 4,491
________ ________ ________
$ 3,676 $ 7,404 $ 11,080
The decrease in the Company's cash balances from December 31, 1994 was
primarily due to the payment of reorganization items and an increase in
receivables.
Approximately $1,475 of cash is required for payment of expenses that
were incurred in connection with the reorganization (primarily legal and
professional fees) and approximately $2,700 is required to be refunded to the
Internal Revenue Service for an excess refund received in 1993. Most of these
amounts are expected to be paid in the fourth quarter of 1995. A portion of
the unrestricted cash at the foreign subsidiaries and Equipment Assurance
Limited ("EAL"), an off-shore insurance subsidiary of the Company, is not
readily repatriatable because it is required for working capital purposes at
these respective locations.
Pursuant to the Amended Plan, the Company entered into a Credit Agreement
dated as of December 14, 1994 (the "Credit Agreement"), with Bank One,
Milwaukee, National Association ("Bank One"). The Credit Agreement contains a
credit facility for working capital and general corporate purposes (the "Loan
Facility") and a letter of credit facility (the "L/C Facility"). Under the
Loan Facility, the Company may borrow up to $5,000,000 through December 31,
1995, and from January 1, 1996 through December 31, 1996, the Company may
borrow up to $2,500,000, provided that it meets certain earnings before
interest, taxes, depreciation and amortization tests, as defined. Borrowings
under the Loan Facility mature on December 31, 1996 and interest is payable at
the Company's option either at a rate equal to Bank One's reference rate plus
0.75% per annum or an adjusted LIBOR rate plus 2.75% per annum. Under the L/C
Facility, Bank One has agreed to issue letters of credit for the benefit of
the Company through December 31, 1996 in an aggregate amount not in excess of
$15,000,000 minus the then outstanding aggregate borrowings by the Company
under the Loan Facility, provided that no letter of credit may expire after
December 31, 1997. As of June 30, 1995, the Company did not have any
borrowings outstanding under the Loan Facility and $3,837 of the L/C Facility
was being used.
The agreements relating to the Company's Secured Notes due December 14,
1999 and the Credit Agreement permit project financing which enables the
Company to borrow money to pay costs associated with the manufacture of mining
machinery or other products pursuant to binding purchase contracts. Project
financing borrowings are secured by the inventory being financed and any
accounts receivable relating to such inventory. Project financing borrowings
mature not later than the date of the final payment by the customer under the
applicable purchase contract. As of June 30, 1995, the Company had $2,857 of
outstanding project financing borrowings.
The Company believes that, as a result of the reorganization, current and
projected levels of liquidity, together with funds generated by operations,
will be sufficient to permit the Company to satisfy its debt service
requirements and fund operating activities for the foreseeable future. The
Company is subject to significant business, economic and competitive
uncertainties that are beyond its control. Accordingly, there can be no
assurance that the Company's financial resources will be sufficient for the
Company to satisfy its debt service obligations and fund operating activities
under all circumstances.
As required under various agreements, EAL has pledged $3,656 of its cash
to secure its reimbursement obligations for outstanding letters of credit and
an affiliate's bank debt at June 30, 1995. This collateral amount is
classified as Restricted Funds on Deposit in the Consolidated Condensed
Balance Sheets.
At June 30, 1995, the Company had approximately $1,726 of open approved
capital appropriations. The Company does not anticipate any substantial
increase in the level of capital expenditures for the remainder of 1995.
The following table reconciles Loss Before Income Taxes to earnings
before reorganization items, inventory fair value adjustment charged to cost
of products sold, interest, taxes, depreciation and amortization ("Adjusted
EBITDA"):
Quarter Ended June 30, Six Months Ended June 30,
1995 1994 1995 1994
(Predecessor (Predecessor
Company) Company)
Loss before income
taxes $ (2,456) $ (2,826) $ (4,192) $(12,356)
Reorganization items 473 2,193 473 5,129
Inventory fair value
adjustment charged
to cost of products
sold 2,912 - 5,717 -
Non-cash expenses:
Depreciation 926 1,951 1,820 3,972
Amortization of
goodwill, intangible
assets and other
items 298 943 597 1,969
Deferred rent
(interest) on sale
and leaseback
financing
arrangement - 1,671 - 3,341
Payment in kind
interest on the
Secured Notes due
December 14, 1999 1,368 - 2,735 -
Amortization of
debt discount - - - 71
________ ________ ________ ________
Cash available for
use before non-cash
interest expense
and income taxes 3,521 3,932 7,150 2,126
Cash interest
expense (1) 141 767 281 5,238
________ ________ ________ ________
Adjusted EBITDA $ 3,662 $ 4,699 $ 7,431 $ 7,364
(1) Cash interest expense for the Predecessor Company includes all
accrued but unpaid interest prior to the Petition Date. Contractual interest
for the quarter and six months ended June 30, 1994 of $6,783 and $9,849,
respectively, on the unsecured debt of the Predecessor Company did not accrue
subsequent to the Petition Date. Excludes amortization of debt discount,
deferred rent (interest) on the sale and leaseback financing arrangement and
interest on the Company's Secured Notes due December 14, 1999 that will be
paid in kind.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
As previously reported in the Company's Report on Form 10-K for the
year ended December 31, 1994, (the "December 31, 1994 10-K") Jackson
National Life Insurance Company ("JNL"), currently the holder of
approximately 41.31% of the Company's common stock, has filed a claim
(the "JNL 503(b) Claim") against the Company for reimbursement of
professional fees and disbursements incurred in connection with the
Company's chapter 11 proceedings pursuant to Section 503(b) of the
Bankruptcy Code in the amount of approximately $3,300,000, and the
Company, at the direction of a Special Committee of its Board of
Directors, has filed an objection to the JNL 503(b) Claim. As
previously reported in the Company's Report on Form 8-K dated May 31,
1995 (the "May 31, 1995 8-K"), the Company and JNL entered into a
Settlement Agreement dated May 23, 1995 (the "Settlement Agreement"),
pursuant to which JNL agreed that, in the event that the JNL 503(b)
Claim is allowed in whole or in part by the Bankruptcy Court, in lieu
of requiring payment of any award in cash JNL will accept payment in
common stock of the Company at a price equal to the average closing
price of such stock on the Nasdaq National Market for the five
trading days prior to a date, not earlier than June 12, 1995 and not
later than June 30, 1995, to be determined by the Company on or
before June 5, 1995 in its sole discretion (such trading days having
been selected by the Company on June 5, 1995 to be June 20, 21, 22,
23 and 26, 1995, and such average closing price having thus been
determined to be $5.6375 per share). The Bankruptcy Court has
scheduled a November 29, 1995 trial date. The Company and the
Special Committee have been advised by counsel to the Company that in
such counsel's opinion the JNL 503(b) Claim is without merit;
however, the outcome of this matter cannot presently be determined.
As previously reported in the December 31, 1994 10-K, JNL and First
Trust National Association are the plaintiffs in a suit in the United
States District Court, Southern District of New York, which, upon the
filing of a Third Amended Complaint on March 7, 1995, was pending
against Greycliff Partners, Greycliff Partners, Ltd., Mikael
Salovaara, Alfred C. Eckert III, South Street Corporate Recovery Fund
I, L.P., South Street Leveraged Corporate Recovery Fund, L.P., South
Street Corporate Recovery Fund I (International), L.P., State Street
Bank and Trust Company of Connecticut, National Association, as
trustee, William B. Winter, the former Chairman of the Board of the
Company, Norbert J. Verville, then the Company's Vice President -
Finance and Treasurer and a former Director, Ray G. Olander, the
Company's former Vice Chairman and Director, David M. Goelzer, then
the Company's Vice President, Secretary and General Counsel (Messrs.
Winter, Verville, Olander and Goelzer are herein referred to as the
"Management Defendants"), and Does 1-100. The Management Defendants
have rights to indemnification from the Company for any costs and
expenses incurred by them in connection with the JNL Complaint
pursuant to the Amended Plan and the Company's Restated Bylaws. As
previously reported in the May 31, 1995 8-K, pursuant to the
Settlement Agreement JNL agreed: (a) to execute general releases of
all claims, known or unknown, arising at any time through the date of
such releases, in favor of the Management Defendants, and (b) to
discontinue with prejudice, and without costs as against any party,
the JNL Suit as it relates to the Management Defendants. On June 8,
1995, JNL executed releases in favor of the Management Defendants. A
Stipulation and Order of Dismissal, with prejudice and without costs
and attorneys' fees to any party, was entered by the judge in the JNL
Suit on June 13, 1995.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
See Exhibit Index on last page of this report, which is
incorporated herein by reference.
(b) Report on Form 8-K
1. Items Reported:
A. Announcement by the Company of the dismissal of
Deloitte & Touche LLP as its independent accountants
and the engagement of Arthur Andersen LLP as its new
independent accountants
B. Announcement by the Company of the Settlement Agreement
referred to herein. See Part II, Item 1, "Legal
Proceedings".
2. Financial Statements: None.
3. Date: May 31, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUCYRUS-ERIE COMPANY
(Registrant)
Date August 11, 1995 /s/Craig R. Mackus
Craig R. Mackus
Controller
Principal Accounting Officer
Date August 11, 1995 /s/Frank W. Miller
Frank W. Miller
Interim President and CEO
<PAGE>
BUCYRUS-ERIE COMPANY
EXHIBIT INDEX
TO
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1995
Incorporated Sequential
Exhibit Herein By Filed Page
Number Description Reference Herewith Number
27 Financial Data Schedule X
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 7,404
<SECURITIES> 0
<RECEIVABLES> 34,770
<ALLOWANCES> (679)
<INVENTORY> 79,858
<CURRENT-ASSETS> 123,173
<PP&E> 37,665
<DEPRECIATION> (1,937)
<TOTAL-ASSETS> 174,318
<CURRENT-LIABILITIES> 48,091
<BONDS> 55,892
<COMMON> 102
0
0
<OTHER-SE> 48,435
<TOTAL-LIABILITY-AND-EQUITY> 174,318
<SALES> 112,582
<TOTAL-REVENUES> 113,201
<CGS> 97,649
<TOTAL-COSTS> 97,649
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,016
<INCOME-PRETAX> (4,192)
<INCOME-TAX> 852
<INCOME-CONTINUING> (5,044)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,044)
<EPS-PRIMARY> (.50)
<EPS-DILUTED> (.50)
</TABLE>
