UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to __________
Commission file number 1-871
BUCYRUS INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 39-0188050
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
P. O. BOX 500
1100 MILWAUKEE AVENUE
SOUTH MILWAUKEE, WISCONSIN 53172
(Address of Principal (Zip Code)
Executive Offices)
(414) 768-4000
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.01 par value
(Title of Class)
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. [ ]
<PAGE>
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 7, 1997, was approximately $32,554,000 (based on
the $8 per share closing price of the Company's Common Stock as reported on
The Nasdaq Stock Market on March 7, 1997). In determining who are affiliates
of the Company for purposes of this computation, it is assumed that directors,
officers and any persons filing a Schedule 13D or Schedule 13G are affiliates
of the Company. The characterization of such directors, officers and other
persons as affiliates is for purposes of this computation only and should not
be construed as a determination or admission for any other purpose that any of
such persons are, in fact, affiliates of the Company.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 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 [ ]
As of March 7, 1997 there were 10,534,574 shares of Common Stock issued
and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II and IV incorporate certain information by reference from the
Registrant's Annual Report to Shareholders for the fiscal year ended
December 31, 1996.
Part III incorporates certain information by reference from the
Registrant's definitive Proxy Statement relating to the Registrant's 1997
Annual Meeting of Shareholders.
Certain exhibits are incorporated by reference from the exhibits to:
(i) Registrant's Annual Reports on Form 10-K for the fiscal years ended
December 31, 1988, 1989, 1990, 1993, 1994 and 1995; (ii) Registrant's
Quarterly Reports on Form 10-Q for the quarters ended June 30, 1992, September
30, 1995, and September 30, 1996; and (iii) Registrant's Current Reports on
Form 8-K dated December 1, 1994, December 14, 1994, May 31, 1995 and July 25,
1995. The above mentioned reports for periods prior to December 14, 1994 are
reports of the Registrant's predecessor, B-E Holdings, Inc.
<PAGE>
PART I
ITEM 1. BUSINESS
Bucyrus International, Inc. (the "Company"), formerly known as Bucyrus-
Erie Company, was incorporated in Delaware in 1927 as the successor to a
business which commenced in 1880. The Company was a wholly-owned subsidiary
of B-E Holdings, Inc. ("Holdings") until December 14, 1994 when Holdings was
merged with and into the Company pursuant to the terms of the Second Amended
Joint Plan of Reorganization of B-E Holdings, Inc. and Bucyrus-Erie Company
under chapter 11 of the Bankruptcy Code, as modified December 1, 1994 (the
"Amended Plan"). The Company designs, manufactures and markets large
excavation machinery used for surface mining, and supplies replacement parts
and service for such machines. The Company's principal products are large
walking draglines, electric mining shovels and blast hole drills, which are
used by customers who mine coal, iron ore, copper, phosphate, bauxite and
other minerals throughout the world.
The Reorganization
On February 22, 1993, the Company and Holdings announced their intention
to pursue a reorganization of their capital structures (the "Reorganization")
and commenced negotiations for a prepackaged chapter 11 financial
reorganization with certain of their secured and unsecured creditors. On
February 18, 1994 (the "Petition Date"), Holdings and the Company commenced
voluntary petitions under chapter 11 of the Bankruptcy Code in the U.S.
Bankruptcy Court, Eastern District of Wisconsin (the "Bankruptcy Court"). The
solicitation process for acceptance of the Amended Plan was completed on
October 31, 1994 and on December 1, 1994 the Bankruptcy Court confirmed the
Amended Plan. On December 14, 1994 (the "Effective Date"), the Amended Plan
became effective and the Company and Holdings consummated the Reorganization
through the implementation of the Amended Plan. None of the Company's or
Holdings' subsidiaries were involved in the bankruptcy proceedings. The
Amended Plan provided for payment in full of the allowed claims of the
Company's vendors, suppliers and other trade creditors. The claims of current
and retired employees of the Company were not affected by the Amended Plan.
The purpose of the Reorganization was to improve and enhance the long-
term viability of the Company by adjusting its capitalization to reflect
current and projected operating performance levels. Specifically, the Amended
Plan was designed to reduce the Company's overall indebtedness and its
corresponding debt service obligations by exchanging all outstanding senior
unsecured debt securities for common equity.
On the Effective Date, Holdings merged with and into the Company pursuant
to the Amended Plan and the Agreement and Plan of Merger dated as of
December 14, 1994 between Holdings and the Company (the "Merger Agreement").
Pursuant to the Amended Plan and the Merger Agreement, the Company issued
10,170,417 shares of its common stock, par value $.01 per share (the "Common
Stock"). The Company issued 10,000,004 shares of Common Stock to holders of
Holdings' and the Company's unsecured debt securities and Holdings' equity
securities in exchange for such securities, and 170,413 shares of Common Stock
were issued to Bell Helicopter Textron, Inc. in settlement of a lawsuit
against the Company.
On the Effective Date pursuant to the Amended Plan, the Company issued an
aggregate principal amount of $52.1 million of Secured Notes due December 14,
1999 (the "Secured Notes") to South Street Corporate Recovery Fund I, L.P.,
South Street Leveraged Corporate Recovery Fund, L.P., and South Street
Corporate Recovery Fund I (International), L.P. (collectively, the "South
Street Funds") in exchange for the Company's outstanding Series A 10.65%
Senior Secured Notes due July 1, 1995 and Series B 16.5% Senior Secured Notes
due January 1, 1996 and the Company's obligations under a sale and leaseback
financing arrangement. In 1996, the South Street Funds sold 97.2% of the
Secured Notes to Jackson National Life Insurance Company ("JNL"). Pursuant to
the Amended Plan, the Company entered into a Credit Agreement with Bank One,
Milwaukee, National Association ("Bank One"). See MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - LIQUIDITY AND
CAPITAL RESOURCES on pages 33 through 36 of the Company's 1996 Annual Report.
Markets, Principal Products and Methods of Distribution
The surface mining industry consists of three primary markets: coal
mining, copper and iron ore mining and phosphate production. Coal mining
historically has accounted for a large percentage of industry demand for the
Company's machines and replacement parts. Recently, however, copper and iron
ore mining has accounted for approximately 65% of new machine activity. Steam
coal production for power generation represents approximately 60% of total
world coal mining activity. The demand for steam coal is based largely on the
demand for electric power and the price and availability of competing sources
of power including oil, natural gas and nuclear power. Because steam coal is
mined both in underground and in surface mines, the relative cost of competing
mining methods is an important variable affecting equipment demand.
Prior to the 1973 Arab oil embargo, the mining machinery industry could
have been characterized as a cyclical, long-term growth industry. Its
cyclical characteristic resulted from the cost relationship among competing
fuel alternatives and mineral use and its long-term growth characteristic
resulted from increases in overall energy consumption and mineral use tied to
worldwide economic growth. However, with the oil embargo came an
unprecedented increase in the demand for coal mining equipment. As a result,
mining machinery production capacity was expanded dramatically, reflecting
expectations that oil prices would continue to rise and tend to increase
demand for substitute natural resources, including coal in particular.
Consequently, the industry experienced dramatic growth through the early and
mid-1970's. By the late 1970's, the installed base of mining machinery had
increased substantially. However, at that time, macroeconomic conditions
began to change. The effects of a worldwide recession, escalating interest
rates, energy conservation efforts and an increase in the world's supply of
oil, together with the large installed base of recently manufactured mining
machinery, resulted in a sharp drop in demand for new mining machinery. More
recently, the coal segment of the U.S. market has been severely impacted by
the Clean Air Act causing numerous mid-western higher sulfur coal mines to be
closed or to have outputs drastically curtailed; many machines have been shut
down while a few have been relocated to lower sulfur mines in eastern
Appalachia and Wyoming's Powder River Basin where excess production capacity
and stagnant demand has driven coal prices downward. Recently, demand for
dragline equipment in the Powder River Basin is beginning to increase and
customers are expected to purchase used walking draglines and move them into
this area. This is being done by customers to reduce mine operating costs.
Consequently, meaningful new machine shipments to domestic coal customers
cannot be expected until the late 1990's. Major potential international coal
mining markets for the Company's equipment and replacement parts had been
negatively impacted by the worldwide economic slump as evidenced by Japanese
steelmakers imposing price cuts on Australian coking coal producers as well as
tonnage reductions during negotiations in 1993 and 1994. However, price
increases for hard coking coal in 1995 and 1996 have brought new demand for
machines in western Canada and Australia in recent months. The Energy
Information Administration is forecasting an increase in world coal
consumption to 7.495 billion short tons by the year 2015 and world energy
demand is expected to increase from 164.5 quadrillion BTUs in 1995 to 291.0
quadrillion BTUs in 2015, a 77% total increase during the twenty year period.
Coal is expected to account for 36% of energy consumption for the generation
of electricity in 2015, the largest share for any fuel. The increase in coal
consumption should increase the demand for the Company's machines and
replacement parts.
While iron ore demand decreased with the worldwide recession of 1992 and
1993, and Japanese and European iron ore buyers lowered ore contract prices
significantly in 1992 and again in 1993, there was an increase in iron ore
production in late 1994 that was sustained through 1995 and 1996.
Furthermore, the Company anticipates that some iron ore producers will
continue to replace aged electric mining shovel and blast hole drill fleets
with new machines in an effort to reduce iron ore production costs. Copper
prices have decreased recently from historically high levels. Nevertheless,
copper prices are expected to increase through 1997 which should result in
continued demand from this market segment for electric mining shovels and
blast hole drills.
The Company's line of mining machinery includes a full range of large
walking draglines, electric mining shovels and blast hole drills. Walking
draglines and electric mining shovels are used in a broad range of
applications, including removal of overburden above the coal seams in surface
coal operations, assisting in land reclamation, mining of phosphate and
bauxite, and loading of coal, iron ore, copper, other mineral-bearing
materials, overburden and rock into some form of haulage system such as a
truck or conveyor. Blast hole drills are used for boring holes to be used in
blasting rock and ore in mines.
Draglines have the highest average price per unit of the Company's
machine categories. Draglines are primarily used to remove overburden located
over a coal or mineral deposit. To accomplish this, the machine drags a large
bucket through the overburden and deposits such overburden in a remote spoil
pile. Draglines are typically described in terms of their "bucket size",
which can range from 9 to 220 cubic yards. The Company's draglines weigh from
500 to 7,500 tons. The Company currently offers a full line of models ranging
in price from $10 million to $50 million per dragline.
Electric mining shovels are primarily used to load coal, copper ore, iron
ore, other mineral-bearing materials, overburden and rock into some form of
haulage system such as a truck or conveyor. Shovels are characterized in
terms of their weight and dipper capacity. The Company offers a full line of
electric mining shovels, weighing from 400 to 1,000 tons and having dipper
capacities from 12 to 80 cubic yards. Prices range from $3 million to
$9 million per shovel.
Most surface mines require breakage of rock, overburden or ore by
explosives. To accomplish this, it is necessary to bore out a pattern of
holes into which the explosives are placed. Blast hole drills are used to
drill the holes, and these machines are usually described in terms of the
diameter of the hole which they bore. The Company offers a line of blast hole
drills ranging in hole diameter size from 9.0 inches to 17.5 inches and in
selling price from approximately $1.5 million to $2.8 million per drill,
depending on machine size and variable features.
Because of their size and weight, the Company's mining machines are
shipped in sub-assembled units to the job site where they are assembled for
operation with the assistance of Company technicians. A number of the
Company's smaller dragline products are modular, permitting shortened machine
field assembly time and more economical teardown and movement of machines
between non-contiguous mine sites. The planning and on-site coordination of
machine erection is a critical component of the Company's service to its
customers.
In addition, the Company manufactures and sells replacement parts and
components for its mining machines and supplies comprehensive after-sales
service for its entire line of mining machinery. The average useful life of
the Company's machines is 20 to 30 years for walking draglines and up to
20 years for electric mining shovels and blast hole drills. The Company has a
large installed base of surface mining machinery which has provided a stream
of parts sales. These sales comprise a substantial portion of the Company's
revenues. The Company also provides after-sales service for certain equipment
of other original equipment manufacturers ("OEMs"). In general, the Company
realizes higher margins on sales of parts than it does on sales of new mining
machines. In recent years, gross margins on machines have been low because of
lower prices resulting from overcapacity, although gross margins on
replacement parts have been positive. Accordingly, most or all of the
Company's operating profits are derived from parts sales and service.
In the United States, mining machinery is sold directly by Company
personnel and through a distributor. Outside of the United States, this
equipment is sold by Company personnel, through independent distributors and
through the Company's subsidiaries and offices located in Australia, Brazil,
Canada, Chile, China, England, India, Mauritius and South Africa. Typical
payment terms for large walking draglines and electric mining shovels require
a down payment and periodic progress payments so that a substantial portion of
the price is received by the time shipment is made to the customer. Sales
contracts for machines are predominantly at fixed prices which, where
possible, reflect estimated future cost increases. The primary market for the
Company's replacement parts and service is provided by the owners of the
Company's machines. Most sales of replacement parts call for prices in effect
at the time of order. During 1996, price increases from inflation had a
relatively minor impact on the Company's reported net sales.
A wholly-owned subsidiary of the Company, Minserco, Inc., provides mining
services in the following areas: comprehensive structural and mechanical
engineering, non-destructive testing, repairs and rebuilds of machine
components, product and component upgrades, contract maintenance, turnkey
erections and machine moves.
Another wholly-owned subsidiary of the Company, Boonville Mining
Services, Inc. ("BMSI"), operates as a separate, independent enterprise and
provides replacement parts and repair and rebuild services for surface mining
equipment.
Competition
The Company encounters strong competition from a small number of
manufacturers in the sales of its mining machinery products in both domestic
and foreign markets. Its principal competitors in walking draglines are
Harnischfeger Corporation and Marion Power Shovel Company, a division of
Global Industrial Technologies, Inc. Its principal competitor in electric
mining shovels is Harnischfeger Corporation. The Company has several
competitors in the blast hole drill product line. Methods of competition are
diverse and include product design and performance, service, delivery,
application engineering, pricing, financing terms and other commercial
factors.
For most owners of Company machines, the Company is the primary source
for replacement parts. The Company, however, encounters strong competition in
parts sales in both domestic and foreign markets and intense competition in
some domestic markets. The Company's competition in parts sales consists
primarily of "will-fitters," which are smaller firms that produce copies of
the parts manufactured by the Company and other OEMs, and which generally sell
such parts at prices lower than those of the OEMs. The Company has a variety
of programs to attract large volume customers for its replacement parts.
Although will-fitters engage in significant price competition in parts sales,
the Company believes that it possesses certain non-price advantages over will-
fitters because will-fitters are in many cases unable to duplicate the exact
specifications of genuine Company parts and because the use of parts not
manufactured by the Company can void the warranty on a Company machine. The
Company generally provides a one year warranty on its machines, with certain
components being under warranty for longer periods. The Company also believes
that its engineering and manufacturing technology and marketing expertise
exceeds that of its will-fit competitors.
Customers
The Company's customers include most of the large surface mining
operators around the world. Customers include companies engaged in the
surface mining of coal, iron ore, copper, phosphate, bauxite and other
minerals. In 1996, one customer received approximately 14% of the Company's
consolidated net sales. In 1995 and 1994, a different customer received
approximately 22% and 20%, respectively, of the Company's consolidated net
sales. The Company is not dependent upon any one customer.
Backlog
The backlog of firm orders for the Company was $158.7 million at
December 31, 1996 and $118.0 million at December 31, 1995. Approximately 30%
of the backlog at December 31, 1996 is not expected to be filled during 1997.
Materials
The Company purchases from outside vendors the semi- and fully-processed
materials (principally structural steel, castings and forgings) required for
its manufacturing operations, and other items, such as electrical equipment,
which are incorporated directly into the end product. The Company's foreign
subsidiaries purchase components and manufacturing services from local
subcontractors and some components from the Company. Certain additional
components are sometimes purchased from subcontractors, either to improve
deliveries in times of high demand or to reduce costs. Because of numerous
factors resulting in preference for local content in certain countries, local
subcontractors are normally used to manufacture a substantial portion of the
components required in the Company's foreign manufacturing operations. The
Company believes that its competitors are subject to the same conditions as
the Company.
Inventories
Inventories of the Company at December 31, 1996 were $70.9 million (27%
of net sales) compared with $73.6 million (32% of net sales) at December 31,
1995. At December 31, 1996 and December 31, 1995, $44.1 million and $44.5
million, respectively, were held as finished goods inventory (primarily
replacement parts) to meet delivery requirements of customers.
Patents, Licenses and Franchises
The Company has a number of United States and foreign patents, patent
applications and patent licensing agreements. It does not consider its
business to be materially dependent upon any patent, patent application,
patent license agreement or group thereof.
Research and Development
Expenditures by the Company for design and development of new products
and improvements of existing mining machinery products, including overhead,
aggregated $6.9 million in 1996, $5.7 million in 1995 and $4.2 million in
1994. All engineering and product development costs are charged to Product
Development Expense as incurred.
Environmental Factors
Environmental problems have not interfered in any material respect with
the Company's manufacturing operations. The Company believes that its
compliance with statutory requirements respecting environmental quality will
not materially affect its capital expenditures, earnings or competitive
position. The Company has an ongoing program to address any potential
environmental problems.
Current federal and state legislation regulating surface mining and
reclamation may affect some of the Company's customers, principally with
respect to the cost of complying with, and delays resulting from, reclamation
and environmental requirements. The Company's products are used for
reclamation as well as for mining, which has a positive effect on the demand
for such products and replacement parts therefor.
Employees
At December 31, 1996, the Company employed 1,384 persons. Three-year
contracts with unions representing hourly workers at the South Milwaukee,
Wisconsin and Memphis, Tennessee facilities expire in August, 1997 and August,
1998, respectively.
Seasonal Factors
The Company does not consider a material portion of its business to be
seasonal.
Foreign Operations
The Company's products are manufactured by subcontractors and licensees
in seven countries other than the United States and are sold internationally
by the Company's and its subsidiaries' sales personnel, manufacturers'
representatives and distributors. A substantial portion of the Company's
consolidated net sales and operating earnings is attributable to operations
located abroad. In recent years, approximately 65% to 75% of the Company's
consolidated net sales were to customers located outside the United States.
Foreign operations are subject to special risks that can materially affect
sales and earnings of the Company, including currency exchange rate
fluctuations, government expropriation, exchange controls, political
instability and other risks.
In 1981, the Company entered into a licensing agreement with Mitsui
Engineering and Shipbuilding Co., Ltd. ("M.E.S."), a leading Japanese
shipbuilder and manufacturer of steel structures, heavy machinery and chemical
plants, for the manufacture and sale by M.E.S. of Company designed electric
mining shovels. In recent years, there has been no activity with M.E.S. under
this agreement. In December, 1985, the Company entered into a licensing
agreement with China National Non-Ferrous Metals Industry Corporation
("C.N.N.C.") which provides for the manufacture and sale by C.N.N.C. of the
Company's 195-BI electric mining shovel. This agreement was amended in April,
1994 to include certain components of the 195-BII model.
In 1996, the Company's foreign sales in all segments, consisting of
exports from the United States and sales by consolidated foreign subsidiaries,
totaled $191.9 million. The corresponding figures in 1995 and in 1994 were
$169.1 million and $131.8 million, respectively. Approximately $133.1 million
of the Company's backlog of firm orders on December 31, 1996 represented
orders for export sales, compared with $94.6 million at December 31, 1995 and
$60.3 million at December 31, 1994. The Company and its U.S. subsidiaries
normally price their products in U.S. dollars. Foreign subsidiaries normally
procure and price their products in their local currency. Accordingly, in the
usual case there are no material foreign currency transaction gains and losses
borne by the Company. The value, in U.S. dollars, of the Company's
investments in its foreign subsidiaries and of dividends paid to the Company
by those subsidiaries will be affected by changes in exchange rates. Further
information regarding foreign operations is contained in Note N of the Notes
to Consolidated Financial Statements on pages 27 through 28 of the Company's
1996 Annual Report and such information is incorporated herein by reference.
Executive Officers of the Company
Set forth below are the names and ages of all executive officers of the
Company, the period of service of each with the Company, positions and offices
with the Company presently held by each, the period during which each officer
has served in his present office and the business experience of each.
WILLARD R. HILDEBRAND, 57, Director, President and Chief Executive
Officer of the Company since March 11, 1996. Mr. Hildebrand was President and
Chief Executive Officer of Great Dane Trailers, Inc. (a privately held
manufacturer of a variety of truck trailers) from 1991 to 1996. Prior to
1991, Mr. Hildebrand held a variety of sales and marketing positions with
Fiat-Allis North America, Inc. and was President and Chief Operating Officer
from 1985 to 1991.
CRAIG R. MACKUS, 44, Secretary of the Company since May 23, 1996 and
Controller since February 4, 1988. Mr. Mackus was Division Controller and
Assistant Corporate Controller from 1985 to February 4, 1988, Manager of
Corporate Accounting from 1981 to 1982 and 1984 to 1985, and Assistant
Corporate Controller of Western Gear Corporation from 1982 to 1984. Mr.
Mackus joined the Company in 1974.
MICHAEL G. ONSAGER, 42, Vice President - Engineering of the Company since
September 1, 1996. Mr. Onsager was Chief Engineer - Advanced Technology
Development from 1995 to September, 1996, Assistant Chief Engineer from 1990
to 1993 and 1994 to 1995, and Parts Product Manager from 1993 to 1994. Mr.
Onsager joined the Company in 1976.
THOMAS B. PHILLIPS, 51, Vice President - Materials since March 1, 1996.
Mr. Phillips was Director of Materials from November, 1986 to February 29,
1996, Manufacturing Manager from June, 1986 to October, 1986, and Materials
Manager from 1983 to 1986. Mr. Phillips joined the Company in 1970.
DANIEL J. SMOKE, 47, Vice President and Chief Financial Officer of the
Company since November 7, 1996. Mr. Smoke was Vice President Finance and
Chief Financial Officer of Folger Adam Company from 1995 to 1996. From 1986
to 1994, Mr. Smoke held a variety of financial and operating positions with
Eagle Industries, Inc.
TIMOTHY W. SULLIVAN, 43, Vice President - Marketing of the Company since
April 1, 1995. Mr. Sullivan was the Director of Business Development in 1994,
Director of Parts Sales and Subsidiary Operations from 1990 to 1994, and
Product Manager of Electric Mining Shovels and International Sales from 1986
to 1990. Mr. Sullivan joined the Company in 1976.
Except with regard to Mr. Hildebrand and Mr. Smoke, all of the above-
named executive officers are elected annually and serve at the pleasure of the
Board of Directors. Mr. Hildebrand is employed under a three-year employment
agreement, which automatically renews for additional one-year terms subject to
the provisions of the agreement. Mr. Smoke is employed under a one-year
employment agreement, which automatically renews for additional one-year terms
subject to the provisions of the agreement.
ITEM 2. PROPERTIES
The Company's principal manufacturing plant in the United States is
located in South Milwaukee, Wisconsin and is owned in fee. This plant
comprises approximately 1,038,000 square feet of floor space. A portion of
this facility houses the corporate offices of the Company. The major
buildings at this facility are constructed principally of structural steel,
concrete and brick and have sprinkler systems and other devices for protection
against fire. The buildings and equipment therein, which include machine
tools and equipment for fabrication and assembly of the Company's mining
machinery, including walking draglines, electric mining shovels and blast hole
drills, are well maintained, in good condition and in regular use.
The Company leases a facility in Memphis, Tennessee, which has
approximately 110,000 square feet of floor space and is used as a central
parts warehouse. The current lease is for five years commencing in July, 1996
and contains an option to renew for an additional five years.
BMSI leases a facility in Boonville, Indiana which has approximately
60,000 square feet of floor space on a 5.84 acre parcel of land. The facility
has the manufacturing capability of large machining, gear cutting, heavy
fabricating, rebuilding, and stress relieving. The major manufacturing
buildings are constructed principally of structural steel with metal siding.
The Company also has repair facilities at certain of its foreign
locations.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS AND OTHER CONTINGENCIES
Chapter 11 Plan of Reorganization
On February 18, 1994, the Company and Holdings commenced voluntary
petitions under chapter 11 of the Bankruptcy Code in the Bankruptcy Court. On
December 1, 1994, the Bankruptcy Court issued an order confirming the Amended
Plan, and on December 14, 1994, the Amended Plan became effective and the
Company and Holdings consummated the Reorganization contemplated by the
Amended Plan.
Bankruptcy Code Section 503(b) Claim for Reimbursement of Professional Fees
JNL, the holder of approximately 40.14% of the outstanding Common Stock
and 97.2% of the Secured Notes, has filed a claim (the "JNL 503(b) Claim")
against the Company for reimbursement of approximately $3.3 million of
professional fees and disbursements incurred in connection with the Company's
chapter 11 proceedings pursuant to Section 503(b) of the Bankruptcy Code.
Pursuant to a Settlement Agreement dated May 23, 1995, 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 at a price equal to $5.6375 per share. By
order dated June 3, 1996, the Bankruptcy Court ruled that JNL would be awarded
the sum of $500. JNL has appealed the decision. The Company has been advised
by its reorganization 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 Company's
consolidated financial statements.
Contingent Liabilities Relating to Sales of Assets and Subsidiaries and
Product Liability
The Company has assumed or retained certain liabilities relating to
divested assets and subsidiaries, including, among others, product liability
claims relating to Brad Foote Gear Works, Inc., Western Gear Machinery Co.,
Sky Climber, Inc. and its former construction machinery business.
The Company is normally subject to numerous product liability claims,
many of which relate to products no longer manufactured by the Company or its
subsidiaries, and other claims arising in the ordinary course of business.
The Company has insurance covering most of said claims, subject to varying
deductibles ranging from $300,000 to $3 million, and has various limits of
liability depending on the insurance policy year in question. It is the view
of management that the final resolution of said claims and other similar
claims which are likely to arise in the future will not individually or in the
aggregate have a material effect on the Company's financial position or
results of operations, although no assurance to that effect can be given.
Contingent Environmental Claims
The Company was one of 53 entities who were named by the U.S.
Environmental Protection Agency ("EPA") as potentially responsible parties
("PRPs") with regard to the Millcreek dumpsite, Erie County, Pennsylvania,
which is on the National Priorities List of sites for cleanup under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended ("CERCLA"). The Company was so named as a result of allegations
that it disposed of foundry sand at said site in the 1970's. The U.S.
Department of Justice ("DOJ") filed suit in the U.S. District Court for the
Western District of Pennsylvania (the "Court") in October, 1989, against the
Millcreek site owners and the haulers who allegedly transported waste to the
site for recovery of past cleanup costs incurred at the site. In May, 1996,
the Company paid the United States government $600,000 in settlement of the
aforementioned cost recovery action. In addition, thirty-seven PRPs,
including the Company, have received Administrative Orders issued by the EPA
pursuant to Section 106(a) of CERCLA to perform the soil capping portion of
the remediation at the Millcreek site. The anticipated remediation costs to
be incurred by the Company are included in liabilities in the Company's
consolidated balance sheet.
In December, 1990, the Wisconsin Department of Natural Resources ("WDNR")
conducted a pre-remedial screening site inspection on property owned by the
Company located at 1100 Milwaukee Avenue in South Milwaukee, Wisconsin.
Approximately 35 acres of this site were allegedly used as a landfill by the
Company until approximately 1983. The Company disposed of certain
manufacturing wastes at the site, including primarily foundry sand. The
results of the site inspection did not indicate that the site presented a
substantial threat to health, safety or to the environment. To date, the
Company has received no further communications from the WDNR regarding this
site and is not aware of any initiative by the WDNR to require any further
action with respect to this site. Consequently, the Company has not regarded,
and does not regard, this site as presenting a material contingent liability.
There can be no assurance, however, that additional investigation by the WDNR
will not be conducted with respect to this site at some later date or that
this site will not in the future require removal or remedial actions to be
performed by the Company, the costs of which could, depending on the
circumstances, be significant.
Dresser Industries Lawsuit
BMSI was a defendant in an amended complaint filed in the Marion County
Common Pleas Court, Marion County, Ohio on September 24, 1992 by Dresser
Industries, Inc. and Global Industrial Technologies, Inc. (the "Plaintiffs"),
alleging that BMSI's purchase of drawings and other assets of C&M of Indiana,
a division of Construction and Mining Services, Inc., and BMSI's use of these
and other drawings allegedly acquired subsequently, constituted a
misappropriation of the Plaintiffs' trade secrets relating to Marion Power
Shovel Company, a division of Global Industrial Technologies, Inc. BMSI had
denied these claims. On June 17, 1996, BMSI settled the litigation which
resulted in an immaterial effect on earnings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information required by Item 5 is incorporated herein by reference
from "Stock Information" on page 39 of the Company's 1996 Annual Report.
The Credit Agreement, as defined on page 16 of the Company's 1996 Annual
Report, prohibits the Company from making any dividends or other distributions
upon the Common Stock, other than dividends payable solely in Common Stock or
other equity securities of the Company. The Indenture relating to the Secured
Notes prohibits the Company from declaring or paying any dividend or making
any distribution in respect of Common Stock (other than dividends or
distributions payable solely in shares of Common Stock or in options, warrants
or other rights to acquire Common Stock), if at the time thereof an Event of
Default (as defined in such Indenture) or an event that with the lapse of time
or the giving of notice, or both, would constitute an Event of Default (as
defined in such Indenture) shall have occurred and be continuing.
ITEM 6. SELECTED FINANCIAL DATA
The information required by Item 6 is incorporated herein by reference
from page 39 of the Company's 1996 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by Item 7 is incorporated herein by reference
from pages 33 through 38 of the Company's 1996 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 is incorporated herein by reference
from pages 5 through 32 of the Company's 1996 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The information required by Item 9 is not applicable since it has been
"previously reported" as that term is defined in Rule 12b-2 under the
Securities Exchange Act of 1934.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information required by Item 10 (with respect to the directors of the
Company) and the information required under Rule 405 of Regulation S-K with
respect to executive officers are incorporated herein by reference from the
Company's definitive Proxy Statement involving the election of directors filed
or to be filed pursuant to Regulation 14A not later than 120 days after
December 31, 1996. In accordance with General Instruction G (3) to Form 10-K,
the information with respect to executive officers of the Company required by
Item 10 (other than required pursuant to Rule 405 of Regulation S-K) has been
included in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by reference
from the Company's definitive Proxy Statement involving the election of
directors filed or to be filed pursuant to Regulation 14A not later than 120
days after December 31, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated herein by reference
from the Company's definitive Proxy Statement involving the election of
directors filed or to be filed pursuant to Regulation 14A not later than 120
days after December 31, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated herein by reference
from the Company's definitive Proxy Statement involving the election of
directors filed or to be filed pursuant to Regulation 14A not later than 120
days after December 31, 1996.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Page
Annual Report
Form 10-K to Shareholders
(a) 1. FINANCIAL STATEMENTS
The following consolidated financial
statements of the Company are
incorporated herein by reference
from pages 5 through 32 of the
Company's 1996 Annual Report.
Consolidated Statements of
Operations for the years ended
December 31, 1996 and 1995 and
periods ended December 31, 1994
and December 13, 1994. - 5
Consolidated Balance Sheets as
of December 31, 1996 and 1995. - 6
Consolidated Statements of
Common Shareholders' Investment
(Deficiency in Assets) for the
years ended December 31, 1996
and 1995 and periods ended
December 31, 1994 and
December 13, 1994. - 7
Consolidated Statements of
Cash Flows for the years ended
December 31, 1996 and 1995 and
periods ended December 31, 1994
and December 13, 1994. - 9
Notes to Consolidated Financial
Statements for the years ended
December 31, 1996 and 1995 and
periods ended December 31, 1994
and December 13, 1994. - 11
Report of Arthur Andersen LLP - 31
Report of Deloitte & Touche LLP - 32
2. FINANCIAL STATEMENT SCHEDULE
Report of Arthur Andersen LLP 17 -
Report of Deloitte & Touche LLP 18 -
Schedule II - Valuation and Qualifying
Accounts and Reserves 19 -
All other schedules are omitted because they are inapplicable, not
required by the instructions or the information is included in the
consolidated financial statements or notes thereto.
3. EXHIBITS
The exhibits listed in the accompanying Exhibit Index are filed as a
part of this Annual Report on Form 10-K.
<PAGE>
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during or relating to the fourth
quarter of 1996.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
SUPPLEMENTARY SCHEDULE
To the Board of Directors and
Shareholders of Bucyrus International, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in the Bucyrus International, Inc.
annual report to shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated January 31, 1997. Our audit was made for
the purpose of forming an opinion on those statements taken as a whole. The
schedule listed in the index at item 14(a)(2) is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule for the years ended December
31, 1996 and 1995, have been subjected to the auditing procedures applied in
the audit of the basic consolidated financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic consolidated financial statements taken
as a whole.
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
January 31, 1997.
<PAGE>
Deloitte &
Touche LLP _______________________________________________________
411 East Wisconsin Avenue Telephone: (414) 271-3000
Milwaukee, Wisconsin 53202-4496
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Bucyrus International, Inc.:
We have audited the consolidated financial statements of Bucyrus
International, Inc. (formerly Bucyrus-Erie Company) and subsidiaries for the
period from December 14, 1994 to December 31, 1994 and the period from
January 1, 1994 to December 13, 1994 (Predecessor Company operations) and have
issued our report thereon dated April 10, 1995; such consolidated financial
statements and report are included in your 1996 Annual Report to Shareholders
and are incorporated herein by reference. Our audits also included the
information for the period from December 14, 1994 to December 31, 1994 and the
period from January 1, 1994 to December 13, 1994 (Predecessor Company
operations) included in the consolidated financial statement schedule of
Bucyrus International, Inc. and subsidiaries, listed in Item 14(a)2. This
consolidated financial statement schedule is the responsibility of Company
management. Our responsibility is to express an opinion on the 1994
information included in the schedule based on our audits. In our opinion,
such 1994 information included in the consolidated financial statement
schedule, when considered in relation to the basic 1994 consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
April 10, 1995
_______________
Deloitte Touche
Tohmatsu
International
_______________
<PAGE>
<TABLE>
Bucyrus International, Inc. and Subsidiaries
Schedule II - Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 1996 and 1995 and Periods
Ended December 31, 1994 and December 13, 1994
<CAPTION>
Charges
Balance At (Credits) (Charges) Balance At
Beginning To Costs Credits End
Of Period And Expenses To Reserves* Of Period
<S> <C> <C> <C> <C>
Allowance for possible losses:
Year ended December 31, 1996:
Notes and accounts receivable - current $ 667,000 $ (19,000) $ (109,000) $ 539,000
Year ended December 31, 1995:
Notes and accounts receivable - current $ 691,000 $ (4,000) $ (20,000) $ 667,000
Period December 14 to December 31, 1994:
Notes and accounts receivable - current $ 703,000 $ - $ (12,000) $ 691,000
Predecessor Company
Period January 1 to December 13, 1994:
Notes and accounts receivable - current $ 803,000 $ 40,000 $ (140,000) $ 703,000
* Uncollected receivables written off, net of recoveries, and translation adjustments
at the foreign subsidiaries.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BUCYRUS INTERNATIONAL, INC.
(Registrant)
By /s/W. R. Hildebrand March 11, 1997
Willard R. Hildebrand, President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints C. Scott Bartlett, Jr. and
F. John Stark, III, and each of them, his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments to this report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature and Title Date
/s/ C. SCOTT BARTLETT, JR. March 15, 1997
C. Scott Bartlett, Jr., Director
/s/ W. R. HILDEBRAND March 11, 1997
Willard R. Hildebrand, President,
Chief Executive Officer and Director
/s/ CHARLES S. MACALUSO March 15, 1997
Charles S. Macaluso, Director
/s/ FRANK W. MILLER March 13, 1997
Frank W. Miller, Director
/s/ GEORGE A. POOLE, JR. March 14, 1997
George A. Poole, Jr., Director
/s/ JOSEPH J. RADECKI, JR. March 18, 1997
Joseph J. Radecki, Jr., Director
/s/ F. JOHN STARK, III March 17, 1997
F. John Stark, III, Director
/s/ RUSSELL W. SWANSEN March 17, 1997
Russell W. Swansen, Director
/s/ SAMUEL VICTOR March 11, 1997
Samuel M. Victor, Director
/s/ DANIEL J. SMOKE March 14, 1997
Daniel J. Smoke, Vice President
and Chief Financial Officer
(Principal Financial Officer)
/s/ CRAIG R. MACKUS March 14, 1997
Craig R. Mackus, Secretary
and Controller
(Principal Accounting Officer)
<PAGE>
BUCYRUS INTERNATIONAL, INC.
EXHIBIT INDEX
TO
1996 ANNUAL REPORT ON FORM 10-K
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
2.1 Second Amended Joint Plan Exhibit 2.1 to
of Reorganization of B-E Registrant's
Holdings, Inc. and Bucyrus- Current Report
Erie Company under chapter on Form 8-K,
11 of the Bankruptcy Code, dated December 1,
as modified December 1, 1994 ("Registrant's
1994, including Exhibits. December 1, 1994
8-K").
2.2 Order dated December 1, Exhibit 2.2 to
1994 of the U.S. Bankruptcy Registrant's
Court, Eastern District of December 1,
Wisconsin, confirming the 1994 8-K.
Second Amended Joint Plan
of Reorganization of B-E
Holdings, Inc. and Bucyrus-
Erie Company under chapter
11 of the Bankruptcy Code,
as modified December 1, 1994.
2.3 Agreement and Plan of Exhibit 2.3 to
Merger, dated as of Registrant's
December 14, 1994, Current Report
between B-E Holdings, on Form 8-K,
Inc. and Bucyrus-Erie dated December 14,
Company. 1994 ("Registrant's
December 14, 1994
8-K").
3.1 Restated Certificate of Exhibit 3.1 to
Incorporation of Bucyrus- Registrant's
Erie Company. December 14, 1994
8-K.
EI-1
<PAGE>
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
3.2 Restated Bylaws of Bucyrus- Exhibit 3.2 to
Erie Company, as amended Registrant's
on August 1 and 2, 1995. Quarterly Report
on Form 10-Q for
quarter ended
September 30, 1995
("Registrant's
September 30, 1995
10-Q").
(a) Amendment to Section Exhibit 3.2(a) to
5.3 and 5.4 of Article V Registrant's
of the Restated Bylaws September 30, 1995
of Bucyrus-Erie Company 10-Q.
adopted by Board of
Directors at its meeting
of August 1-2, 1995.
(b) Amendment to Section 4.2 Exhibit 3.2(b) to
of Article IV of the Restated Registrant's
Bylaws of Bucyrus-Erie Company Annual Report on
adopted by Board of Directors Form 10-K dated
at its meeting of March 11, March 25, 1996.
1996. ("Registrant's
1995 10-K")
(c) Amendment to Section 4.10 X
of Article IV of the Restated
Bylaws of Bucyrus International,
Inc. adopted by Board of
Directors at its meeting of
December 18, 1996.
4.1 Specimen certificate of Exhibit 4.1 to
Common Stock, par value $.01 Registrant's
per share, of Bucyrus-Erie December 14, 1994
Company. 8-K.
4.2 Registration Rights Exhibit 4.2 to
Agreement, dated as of Registrant's
December 14, 1994, executed December 14, 1994
by Bucyrus-Erie Company. 8-K.
EI-2
<PAGE>
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
4.3 Indenture, dated as of Exhibit 4.3 to
December 14, 1994, between Registrant's
Bucyrus-Erie Company and December 14, 1994
Harris Trust and Savings 8-K.
Bank, as Trustee relating
to Bucyrus-Erie Company's
Secured Notes due
December 14, 1999.
4.4 Form of Bucyrus-Erie Exhibit 4.4 to
Company's Secured Notes Registrant's
due December 14, 1999. December 14, 1994
8-K.
4.5 Security Agreement, dated Exhibit 4.5 to
as of December 14, 1994, Registrant's
between Bucyrus-Erie December 14, 1994
Company and Harris Trust 8-K.
and Savings Bank, as
Collateral Agent.
10.1 Credit Agreement, dated Exhibit 10.1 to
as of December 14, 1994, Registrant's
between Bank One, Milwaukee, December 14, 1994
National Association and 8-K.
Bucyrus-Erie Company
("Credit Agreement").
10.2 Amendment No. 1 to Exhibit 10.1(a)
Credit Agreement dated to Registrant's
June 22, 1995. September 30, 1995
10-Q.
10.3 Amendment No. 2 to Exhibit 10.1(b)
Credit Agreement dated to Registrant's
August 31, 1995. September 30, 1995
10-Q.
10.4 Amendment No. 3 to Exhibit 10.4 to
Credit Agreement dated Registrant's
October 27, 1995. 1995 10-K.
EI-3
<PAGE>
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
10.5 Amendment No. 4 to Exhibit 10.5 to
Credit Agreement dated Registrant's
December 29, 1995. 1995 10-K.
10.6 Amendment No. 5 to Exhibit 10.6 to
Credit Agreement dated Registrant's
December 29, 1995. 1995 10-K.
10.7 Amendment No. 6 to Exhibit 10.7 to
Credit Agreement dated Registrant's
February 1, 1996. 1995 10-K.
10.8 Amendment No. 7 to Exhibit 10.8 to
Credit Agreement dated Registrant's
February 8, 1996. 1995 10-K.
10.9 Amendment No. 8 to X
Credit Agreement dated
May 17, 1996.
10.10 Amendment No. 9 to X
Credit Agreement dated
May 20, 1996.
10.11 Amendment No. 10 to X
Credit Agreement dated
May 20, 1996.
10.12 Amendment No. 11 to X
Credit Agreement dated
December 31, 1996.
10.13 Security Agreement, dated Exhibit 10.2 to
as of December 14, 1994, Registrant's
between Bucyrus-Erie December 14, 1994
Company and Bank One, 8-K.
Milwaukee, National
Association.
EI-4
<PAGE>
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
10.14 Pledge Agreement, dated Exhibit 10.3 to
as of December 14, 1994, Registrant's
between Bucyrus-Erie December 14, 1994
Company and Bank One, 8-K.
Milwaukee, National
Association.
10.15 Intercreditor Agreement, Exhibit 10.4 to
dated as of December 14, Registrant's
1994, between Bank One, December 14, 1994
Milwaukee, National 8-K.
Association and Harris
Trust and Savings Bank, as
Collateral Agent.
10.16 Pledge Agreement, dated X
as of May 20, 1996,
between Bucyrus-Erie
Company and Bank One,
Milwaukee, National
Association.
10.17 Indemnification Agreement, Exhibit 10.5 to
dated as of November 30, Registrant's
1994, among Jackson December 14, 1994
National Life Insurance 8-K.
Company, B-E Holdings, Inc.
and Bucyrus-Erie Company.
10.18 Bucyrus-Erie Company's Exhibit 10.13 to
1995 Management Registrant's
Incentive Plan, adopted 1995 10-K.
by Bucyrus-Erie Company's
Board of Directors on
May 3, 1995.
EI-5
<PAGE>
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
*10.19 (a) Becor Western Salaried Exhibit 10.4 (a)
Employees' Savings Plan to Registrant's
("1984 Savings Plan") as Annual Report on
amended and restated Form 10-K dated
effective January 1, April 14, 1994.
1984. ("Registrant's
1993 10-K")
* (b) Amendments to 1984 Exhibit 10.5(b)
Savings Plan, Sections to Registrant's
3.3 and 4.4. Annual Report on
Form 10-K dated
March 29, 1990.
("Registrant's
1989 10-K")
* (c) Amendments to 1984 Exhibit 10.5(c)
Savings Plan per U.S. to Registrant's
Internal Revenue Service 1989 10-K.
Notice 88-131.
* (d) Amendments to 1984 Exhibit 10.5(d)
Savings Plan, Sections to Registrant's
1.23, 5.1, 5.2, 5.6, 1989 10-K.
5.9 and 6.2.
* (e) Amendment to 1984 Exhibit 10.5(e)
Savings Plan, Section 1.5. to Registrant's
Annual Report on
Form 10-K dated
March 27, 1991.
("Registrant's
1990 10-K")
*10.20 (a) Becor Western Salaried Exhibit 10.11 to
Employees' Retirement Plan B-E Holdings, Inc.
("BSERP"), as restated Annual Report on
through June 4, 1987. Form 10-K dated
March 29, 1988.
_________________________
*A management contract or compensatory plan or arrangement.
EI-6
<PAGE>
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
* (b) Amendment to BSERP, Exhibit 10.6(b)
Section 13.01(iii). to Registrant's
1989 10-K.
* (c) Amendments to BSERP, Exhibit 10.6(c)
Sections 1.23 and new to Registrant's
Supplements No. 6 and 10. 1989 10-K.
* (d) Amendment to BSERP Exhibit 10.6(d)
per U.S. Internal Revenue to Registrant's
Service Notice 88-131. 1989 10-K.
* (e) Amendment to BSERP, Exhibit 10.6(e)
Section 1.06. to Registrant's
1990 10-K.
*10.21 (a) Bucyrus-Erie Company Exhibit 10.8(a)
1988 Supplementary to Registrant's
Retirement Benefit Plan 1989 10-K.
("1988 Supplementary
Retirement Plan") adopted
by Board of Directors
March 21, 1988.
* (b) Amendments to 1988 Exhibit 10.8(b)
Supplementary Retirement to Registrant's
Plan adopted by Board of 1989 10-K.
Directors September 13,
1988.
* (c) Amendments to 1988 Exhibit 10.8(c)
Supplementary Retirement to Registrant's
Plan adopted by Board 1990 10-K.
of Directors October 2,
1990.
_________________________
*A management contract or compensatory plan or arrangement.
EI-7
<PAGE>
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
10.22 Letter Agreement dated Exhibit 10.17 to
June 14, 1995 among Registrant's
Jefferies & Company, 1995 10-K.
Chanin and Company
and Bucyrus-Erie Company.
(a) Amendment to Letter Exhibit 10.17(a)
Agreement dated to Registrant's
August 9, 1995 with 1995 10-K.
Jefferies & Company and
Chanin and Company,
dated June 14, 1995.
10.23 Settlement Agreement Exhibit 10 to
between Bucyrus-Erie Registrant's Current
Company and Jackson Report on Form 8-K,
National Life dated May 31, 1995.
Insurance Company,
dated May 23, 1995.
*10.24 Form of Employment and Exhibit 19.4(a)
Consulting Agreement to Registrant's
between Bucyrus-Erie Quarterly Report
Company as Employer on Form 10-Q for
and P. W. Mork quarter ended
and N. J. Verville, June 30, 1992.
respectively, as ("Registrant's
Employees dated as of June 30, 1992
July 1, 1992. 10-Q")
* (a) Amendment No. 1, Exhibit 10.11(a)
dated November 28, 1994, to Registrant's
to Employment and 1994 10-K.
Consulting Agreement
between Bucyrus-Erie
Company as Employer
and P. W. Mork
and N. J. Verville,
respectively, as Employees
dated as of July 1, 1992.
_________________________
*A management contract or compensatory plan or arrangement.
EI-8
<PAGE>
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
*10.25 Form of Employment and Exhibit 19.4(b)
Consulting Agreement to Registrant's
between Bucyrus-Erie June 30, 1992
Company as Employer 10-Q.
and J. H. Westerman,
E. F. Schweitzer,
D. M. Goelzer,
C. R. Mackus,
G. R. Noel, and
T. W. Sullivan,
respectively, as
Employees dated as
of July 1, 1992.
* (a) Amendment No. 1, Exhibit 10.12(a)
dated November 28, 1994 to Registrant's
(except for Mr. Westerman's 1994 10-K.
which was dated November 23,
1994), to Employment and
Consulting Agreement between
Bucyrus-Erie Company as
Employer and J. H. Westerman,
E. F. Schweitzer, D. M.
Goelzer, C. R. Mackus,
G. R. Noel, and T. W. Sullivan,
respectively, as Employees
dated as of July 1, 1992.
*10.26 Senior Executive Exhibit 10.21 to
Termination Benefits Registrant's
Agreement, dated as 1995 10-K.
of December 7, 1995
between Bucyrus-Erie
Company as Employer
and Craig R. Mackus
as Employee.
_________________________
*A management contract or compensatory plan or arrangement.
EI-9
<PAGE>
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
*10.27 Senior Executive Exhibit 10.22 to
Termination Benefits Registrant's
Agreement, dated as 1995 10-K.
of December 7, 1995
between Bucyrus-Erie
Company as Employer
and Timothy W. Sullivan
as Employee.
*10.28 Senior Executive Exhibit 10.23 to
Termination Benefits Registrant's
Agreement, dated as 1995 10-K.
of December 7, 1995
between Bucyrus-Erie
Company as Employer
and Thomas B. Phillips
as Employee.
*10.29 Separation Agreement Exhibit 10.2 to
and Mutual Release Registrant's
between Bucyrus-Erie September 30, 1995
Company and P. W. Mork 10-Q.
dated July 25, 1995.
*10.30 Separation Agreement Exhibit 10.3 to
and Mutual Release Registrant's
between Bucyrus-Erie September 30, 1995
Company and 10-Q.
N. J. Verville dated
July 25, 1995.
*10.31 Separation Agreement Exhibit 10.4 to
and Mutual Release Registrant's
between Bucyrus-Erie September 30, 1995
Company and D. M. Goelzer 10-Q.
dated July 25, 1995.
_________________________
*A management contract or compensatory plan or arrangement.
EI-10
<PAGE>
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
*10.32 Employment Agreement Exhibit 10.27 to
between Bucyrus-Erie Registrant's
Company and 1995 10-K.
W. R. Hildebrand, as
Employee, dated March 11,
1996.
*10.33 Non-Qualified Stock Exhibit 10.28 to
Option Agreement between Registrant's
Bucyrus-Erie Company 1995 10-K.
and W. R. Hildebrand, as
Employee, dated March 11,
1996.
*10.34 Restricted Stock Agreement Exhibit 10.29 to
between Bucyrus-Erie Registrant's
Company and 1995 10-K.
W. R. Hildebrand, as
Employee, dated March 11,
1996.
*10.35 Time Accelerated Restricted Exhibit 10.30 to
Stock Agreement between Registrant's
Bucyrus-Erie Company and 1995 10-K.
W. R. Hildebrand, as Employee,
dated March 11, 1996.
*10.36 Bucyrus-Erie Company Exhibit 10.31 to
1996 Employees' Stock Registrant's
Incentive Plan. 1995 10-K.
*10.37 Bucyrus-Erie Company Exhibit 10.32 to
Non-Employee Directors' Registrant's
Stock Option Plan. 1995 10-K.
_________________________
*A management contract or compensatory plan or arrangement.
EI-11
<PAGE>
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
*10.38 Employment Agreement X
between Bucyrus
International, Inc.
and D. J. Smoke, as
Employee, dated
November 7, 1996.
*10.39 Non-Qualified Stock X
Option Agreement between
Bucyrus International,
Inc. and D. J. Smoke,
as Employee, dated
November 7, 1996.
*10.40 Stock Appreciation Rights X
Agreement between Bucyrus
International, Inc. and
D. J. Smoke, as Employee,
dated November 7, 1996.
*10.41 Annual Management Incentive X
Plan for 1996, adopted by
Board of Directors
February 29, 1996.
13 1996 Annual Report. X
16 Letter of Deloitte and Exhibit 16 to
Touche LLP to the SEC. Registrant's
Current Report on
Form 8-K, dated
May 31, 1995.
21 List of Subsidiaries. Exhibit 21
to Registrant's
1994 10-K.
_________________________
*A management contract or compensatory plan or arrangement.
EI-12
<PAGE>
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
27 Financial Data Schedule. X
(EDGAR filing only.)
99.1 Settlement Agreement and Exhibit 99.5 to
Release entered into Registrant's 1993
effective as of 10-K.
December 23, 1993
between Bell Helicopter
Textron, Inc., BWC Gear,
Inc., Bucyrus-Erie
Company and B-E Holdings,
Inc. relating to
settlement of the Bell
Helicopter Claim.
99.2 Management Agreement, Exhibit 99.2 to
dated July 21, 1995, Registrant's
between Bucyrus-Erie Current Report on
Company and Miller Form 8-K, dated
Associates. July 25, 1995.
(a) Amendment dated Exhibit 99.2(a)
December 21, 1995 to to Registrant's
Management Agreement 1995 10-K.
with Miller Associates
dated July 21, 1995.
99.3 Press Release dated Exhibit 99 to
November 12, 1996 Registrant's
Quarterly Report
on Form 10-Q for
quarter ended
September 30, 1996.
("Registrant's
September 30, 1996
10-Q")
EI-13
EXHIBIT 3.2(c)
1996 FORM 10-K
AMENDMENT TO SECTION 4.10 OF ARTICLE IV
OF THE RESTATED BYLAWS OF BUCYRUS INTERNATIONAL, INC.
ADOPTED BY BOARD OF DIRECTORS
AT ITS MEETING OF DECEMBER 18, 1996
Section 4.10. Action By Consent of Board of Directors. Any action
required or permitted to be taken at any meeting of the Board of Directors
or any committee thereof may be taken without a meeting if all members of
the Board of Directors or committee, as the case may be, consent thereto
in writing and the writing or writings are filed with the minutes of
proceedings of the Board of Directors or committee. Any copy, facsimile
telecommunication or other reliable reproduction of the executed writing
or transmission created pursuant to this Section 4.10 may be substituted
or used in lieu of the original writing or transmission for any and all
purposes for which the original writing or transmission could be used,
provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original writing or
transmission. Any such written consent may be executed in counterparts by
a director or directors.
EXHIBIT 10.9
1996 FORM 10-K
EIGHTH AMENDMENT TO
CREDIT AGREEMENT
THIS EIGHTH AMENDMENT TO CREDIT AGREEMENT dated
as of May 17th, 1996, amends and supplements the Credit Agreement dated as
of December 14, 1994, as amended (the "Credit Agreement") between BUCYRUS-ERIE
COMPANY (the "Company") and BANK ONE, MILWAUKEE, NATIONAL ASSOCIATION (the
"Bank").
RECITAL
The Company and the Bank desire to amend and supplement the Credit
Agreement as provided below.
AGREEMENTS
In consideration of the promises and agreements set forth in the
Credit Agreement, as amended hereby, the Company and the Bank agree as follows:
1. Definition and References. Capitalized terms not defined
herein have the meanings assigned in the Credit Agreement. Upon the fulfillment
of the conditions set forth in section 3 below, all references to the Credit
Agreement contained in the Loan Documents shall mean the Credit Agreement as
amended by this Eighth Amendment to Credit Agreement.
2. Amendments.
(a) Subsection (a) of the definition of "Debt Service
Coverage Ratio" contained in section 1 of the Credit Agreement is amended to
read as follows:
(a) Net Earnings plus interest expenses plus
depreciation, amortization and similar noncash charges (including noncash
charges incurred with respect to compensation paid in stock, or options to
acquire stock, of the Company) plus foreign currency translation loss to
the extent deducted in determining Net Earnings minus foreign currency
translation gain to the extent included in determining Net Earnings minus
$1,000,000 minus the greater of (i) total capital expenditures minus
capital expenditures financed by Foreign Subsidiaries and (ii) $2,500,000;
and
(b) The definition of "Debt Service Coverage Ratio" contained
in section 1 of the Credit Agreement is amended by inserting the following
proviso at the end of such definition:
; provided, however, that in computing the Debt Service Coverage Ratio on
March 31, June 30 and September 30, 1996, the current maturities of the
Funded Debt of Bucyrus Europe Holdings Limited shall be disregarded.
(c) The definition of "Final Issuance Date" in section 1 of
the Credit Agreement is amended by deleting "April 30, 1997" and inserting
"April 30, 1998" in its place.
(d) The definition of "Revolving Note Maturity Date" in
section 1 of the Credit Agreement is amended by deleting "December 31, 1996" and
inserting "April 30, 1998" in its place.
(e) The table in section 2.1(b) of the Credit Agreement is
amended by deleting "December 31, 1996" and inserting "Revolving Note Maturity
Date" in its place.
<PAGE>
(f) The table in section 2.2(a)(ii) of the Credit Agreement
is amended by deleting "December 31, 1996" and inserting "Revolving Note
Maturity Date" in its place.
(g) The second sentence of section 2.8 of the Credit
Agreement is amended by deleting "April 30, 1998" and inserting "April 30, 1999"
in its place.
(h) Section 5.2 of the Credit Agreement is amended in its
entirety to read as follows:
5.2 Interim Financial Statements. Furnish to the Bank
within 30 days after the end of each month (a) a balance sheet of the
Company as of the end of such month and related statements of income,
retained earnings and cash flows for the period from the beginning of the
fiscal year to the end of such month, prepared in the manner set forth in
section 5.1 hereof for the annual statements certified, subject to audit
and normal year-end adjustments, by an authorized financial officer of the
Company, (b) a computation showing whether the Company is in compliance
with the financial covenant contained in section 6.10, (c) a statement, in
such detail as the Bank may reasonably request, of the Guaranties of the
Company of obligations of Domestic Subsidiaries and Foreign Subsidiaries
and (d) the certificate of an authorized financial officer to the effect
that there exists no Default or Event of Default or, if any Default or
Event of Default exists, specifying the nature thereof, the period of
existence thereof and what action the Company proposes to take with
respect thereto.
3. Closing Conditions. This Eighth Amendment to Credit Agreement
shall be effective upon its execution and delivery by the Company and the Bank.
4. Representations and Warranties. The Company represents and
warrants to the Bank that:
(a) The execution and delivery of this Eighth Amendment are
within the Company's corporate power and corporate authority, have been duly
authorized by all necessary corporate action on the part of the Company, are not
in violation of any existing law, rule or regulation of any governmental agency
or authority, any order or decision of any court, the certification of
incorporation or by-laws of the Company or the terms of any agreement,
restriction or undertaking to which the Company is a party or by which it is
bound, do not require the approval or consent of the shareholders of the
Company, any governmental body, agency or authority or any other person or
entity.
(b) The representations and warranties set forth in section 3
of the Credit Agreement are true and correct in all material respects as of the
date of this Eighth Amendment to Credit Agreement and no Default or Event of
Default has occurred and is continuing.
5. Waiver. The Bank hereby waives the failure by the Company to
comply with the Debt Service Coverage Ratio required under section 6.10 of the
Credit Agreement as of December 31, 1995. This waiver does not extent to any
other Default or Event of Default under the Credit Agreement and is not a waiver
of any violation of section 6.10 of the Credit Agreement which may occur after
December 31, 1995.
6. Costs and Expenses. The Company agreements to pay all costs
and expenses (including reasonable attorneys' fees) paid or incurred by the Bank
in connection with the execution and delivery of this Eighth Amendment and the
consummation of the transactions contemplated hereby.
<PAGE>
7. Full Force and Effect. The Company and the Bank confirm that
the Credit Agreement, as amended hereby, remains in full force and effect.
BANK ONE, MILWAUKEE,
NATIONAL ASSOCIATION
BY /s/William E. Shaw VP
William E. Shaw, Vice President
BUCYRUS-ERIE COMPANY
BY /s/James D. Annand
Its Interim CFO
EXHIBIT 10.10
1996 FORM 10-K
NINTH AMENDMENT TO
CREDIT AGREEMENT
THIS NINTH AMENDMENT TO CREDIT AGREEMENT dated as of May 20, 1996,
amends and supplements the Credit Agreement dated as of December 14, 1994, as
amended (the "Credit Agreement"), between BUCYRUS-ERIE COMPANY (the "Company")
and BANK ONE, MILWAUKEE, NATIONAL ASSOCIATION (the "Bank").
RECITAL
The Company and the Bank desire to amend and supplement the Credit
Agreement as provided below.
AGREEMENTS
In consideration of the promises and agreements set forth in the
Credit Agreement, as amended hereby, the Company and the Bank agree as follows:
1. Definition and References. Capitalized terms not defined
herein have the meanings assigned in the Credit Agreement. Upon the fulfillment
of the conditions set forth in section 3 below, all references to the Credit
Agreement contained in the Loan Documents shall mean the Credit Agreement as
amended by this Ninth Amendment to Credit Agreement.
2. Amendments.
(a) The following definitions are inserted, in appropriate
alphabetical order, into section 1 of the Credit Agreement:
"Change in Control" means, with respect to the Company, that (a)
Jackson National Life Insurance Company shall fail to hold at least 20%,
on a fully diluted basis, of the total voting power of all capital stock
of the Company, of any class or classes, ordinarily (and apart from rights
accruing under special circumstances) having the right to elect directors
("Voting Stock") or (b) any person (other than Jackson National Life
Insurance Company) holds 50% or more of the total voting power of all
Voting Stock of the Company.
"Supplemental Debt Service Coverage Ratio" shall mean the Debt
Service Coverage Ratio as adjusted by including (without duplication) in
interest expense interest at the rate of 10.5% per annum on the
outstanding principal amount of the Senior Notes during the period of
calculation. The Supplemental Debt Service Coverage Ratio shall be
calculated as of September 30, 1996 on the basis of the preceding 9-month
period and at the end of each subsequent fiscal quarter on the basis of
the preceding 12-month period.
"Tangible Net Worth" means, as of the date of determination, the sum
of (a) the capital stock (excluding treasury shares) and (b) surplus
(including retained earnings, additional paid-in-capital and the
cumulative translation adjustment) of the Company and its Consolidated
Subsidiaries as of such date determined in accordance with GAAP (provided,
however, that any increase or decrease in the cumulative translation
adjustment from the amount shown on the balance sheet of the Company and
its Consolidated Subsidiaries at December 31, 1995 shall be disregarded)
minus the book value of all assets which would be treated as intangibles
under GAAP.
(b) Section 2.16(b)(iv) of the Credit Agreement is created
to read as follows:
(iv) Project Financing Loan No. 4. The Bank agrees to make
advances, subject to the terms and conditions set forth in this Agreement,
to finance the construction of five Model 495-B electric mining shovels
and four or five Model 49R blast hole drills and related equipment and
accessories ("Project No. 4") to be sold by the Company to Minbridge Ltd.,
or permitted assigns (the "Buyer") pursuant to Purchase Order Nos. K-6001-
A-MG and K-6002-A-MG, each dated as of March 22, 1996 (collectively, the
"Collahuasi Contract"), on the following terms and conditions:
(a) Maximum Loan Amount: $14,000,000 (provided,
however, that upon a Change in Control the Bank may, in its discretion, by
written notice to the Company, reduce the Maximum Loan Amount to
$7,000,000); loans may be made, repaid and made again with each advance in
the minimum amount of $250,000.
(b) Limitation on Advances: The outstanding principal
balance of Project Financing Note No. 4 shall not exceed the lesser of (i)
the Maximum Loan Amount or (ii) the sum of [a] 90% of the Qualified
Collahuasi Accounts (as defined below), [b] 60% of the cost (determined in
accordance with GAAP in a manner consistent with the Company's historical
accounting practices) of the work-in-process inventory comprising Project
No. 4 and [c] the Project Financing Reserve established from time to time
pursuant to subsection (h) below.
"Qualified Collahuasi Accounts" means the
aggregate amount of all accounts owing to the Company by the Buyer which
arose out of the sale of goods comprising Project No. 4 under the
Collahuasi Contract and which have been shipped by the Company in
accordance with the applicable provisions of the Collahuasi Contract;
provided that if any of such accounts are more than 30 days past due from
the due date of the original invoice, then the Qualified Collahuasi
Accounts shall be $0.
(c) Borrowing Procedure. The Company may obtain
advances only one time each calendar month. At the time of requesting an
advance, the Company shall certify to the Bank the value of the work-in-
process inventory comprising Project No. 4 and of the Qualified Collahuasi
Accounts as of the last day of the preceding month and shall notify the
Bank of the amount of the requested advance. Provided that the sum of (i)
the Project Financing Reserve established under subsection (h) below, (ii)
the outstanding principal balance of the Revolving Note and (iii) the LOC
Exposure does not exceed $15,000,000, and the applicable conditions in
section 4.2 are satisfied, the Bank will make the requested advance to the
Company promptly thereafter.
(d) Maturity Date: The outstanding principal amount
of Project Note No. 4 and all accrued interest shall be due upon the first
to occur of (i) the receipt by the Company of the final payment (excluding
retention amounts) on the Collahuasi Contract or (ii) July 31, 1997.
(e) Interest Rate: Reference Rate, adjusted daily, or
the Adjusted Libor Rate with the Applicable Libor Margin being 2.75%; only
one-month Interest Periods may be selected.
(f) Commitment Fee. As consideration for the
commitment of the Bank to provide this Project Financing to the Company,
the Company agrees to pay to the Bank on the last Business Day of each
month, commencing May 31, 1996, and on the Maturity Date a commitment fee
equal to 1/2 of 1% per year (provided, however, that until the first to
occur of (i) the date of the first advance under this subsection, (ii) the
date on which a Collahuasi Project Letter of Credit is issued by the Bank
or (iii) the date on which an outstanding Letter of Credit becomes a
Collahuasi Project Letter of Credit pursuant to section 2.17 below, the
commitment fee shall be calculated using 1/4 of 1% per year) on the
difference between the Maximum Loan Amount and the daily average
outstanding principal balance of Project Financing Note No. 4 during such
month or other applicable period. Commitment fees shall be calculated for
the actual number of days elapsed on the basis of a 360-day year. The
commitment fee shall begin to accrue on the date the conditions specified
in section 3 are satisfied.
(g) Prepayment of Project Financing Note No. 4. The
Company may prepay Project Financing Note No. 4 in whole or in part at any
time upon two Business Days prior notice to the Bank. The Company shall
prepay Project Financing Note No. 4 immediately upon receipt from the Bank
of (i) a notice (containing calculations in reasonable detail) to the
effect that the outstanding principal balance of Project Financing Note
No. 4 exceeds the limits set forth in subsection (b) above in an amount
equal to such excess and (ii) a notice that, due to the occurrence of a
Change in Control, the Maximum Loan Amount is to be reduced, by an amount
equal to 50% of the unpaid principal balance of Project Financing Note
No. 4 together with accrued interest on the amount prepaid and 50% of the
accrued and unpaid commitment fee under subsection 2.16(b)(iv)(f). Any
principal prepayment shall first be applied to the amount, if any, of
Project Financing Note No. 4 consisting of Reference Rate Loans and the
balance to Libor Rate Loans. Upon any principal prepayment of a Libor
Rate Loan the Company shall also pay accrued interest thereon and any
amount due under section 2.14(c).
(h) Project Financing Reserve: The Project Financing
Reserve shall be established once each month at the time of a requested
advance under subsection (c) above and shall equal the greater of (i) the
difference between [a] the outstanding principal balance of Project
Financing Note No. 4 after giving effect to the requested borrowing and
[b] the amount determined pursuant to subsections (b)(ii)[a] and [b] of
this section 2.16(b)(iv) and (ii) the Minimum Project Financing Reserve
(as defined below).
"Minimum Project Financing Reserve" means, at the time of
determination, an amount equal to (a) $0 during the period ending on the
Maturity Date of Project Notes No. 3 and (b) thereafter, $5,000,000.
(i) Facility Fee: $80,000.
(j) Use of Proceeds. The Company shall use the
proceeds of Project Loan No. 4 solely to pay costs associated with Project
No. 4 and may obtain advances in anticipation of such costs which the
Company reasonably expects it will pay within 30 days of the applicable
Borrowing Date.
(k) Right to Accelerate. Upon the occurrence of any
of the following:
(i) The Buyer imposes a late shipment penalty
exceeding $25,000 on the Company due to the Company's failure to ship
goods within four weeks of the applicable shipment date specified in the
Collahuasi Contract and the Company fails to provide satisfactory evidence
to the Bank within 15 days of the imposition of such penalty to the effect
that the cause for the late shipment has been resolved and that no
additional late shipments similar to the above will occur; or
(ii) the Buyer sends the Company a written notice
of termination of the Collahuasi Contract; or
(iii) a material adverse change, as determined by
the Bank in its reasonable discretion, shall occur in the business
condition (financial or otherwise), operations or properties of the
Company;
the Bank may, at its option, terminate its commitment under
section 2.16(b)(iv) or exercise any right under section 7.2 of the Credit
Agreement including, without limitation, the acceleration of the maturity
of Project Financing Note No. 4.
(l) Restriction on Use of Collahuasi Contract
Proceeds. Until the date on which the principal of, interest on and all
fees with respect to Project Financing Note No. 4 are paid in full, all
Collahuasi Project Letters of Credit have expired and all Reimbursement
Obligations with respect thereto have been paid in full, the Company
agrees that all amounts received by the Company under the Collahuasi
Contract (whether advance payments, payment on accounts or otherwise and
including all amounts constituting Collateral under the Pledge Agreement
referred to in section 2.17 which are released to the Company) shall be
used by the Company for the following purposes:
(i) Payment of the costs of Project No. 4;
(ii) Payment of the principal of, interest on and
fees with respect to Project Financing Note No. 4;
(iii) Payment of Reimbursement Obligations and
fees with respect to Collahuasi Project Letters of Credit;
(iv) Deposit of collateral under the Pledge
Agreement referred to in section 2.17; or
(v) Reimburse the Company for expenditures by
the Company for the purposes described in clauses (i) through (iv) which
was made with Company funds obtained from a source other than under the
Collahuasi Contract.
(c) Section 2.17 of the Credit Agreement is created to read as
follows:
2.17 Collahuasi Project Letters of Credit. From time to time prior
to July 1, 1997 the Bank shall, upon fulfillment of the conditions
specified herein, issue letters of credit (each a "Collahuasi Project
Letter of Credit") for the account and at the request of the Company,
naming the Buyer as the beneficiary, for the purpose of supporting advance
payments made to the Company under the Collahuasi Contract, provided that:
(a) Each Collahuasi Project Letter of Credit shall be in
form and content satisfactory to the Bank and have an expiry date no later
than July 31, 1997; and
(b) The aggregate amount available for drawing under all
outstanding Collahuasi Project Letters of Credit shall not exceed the
lesser of (i) $11,000,000 or (ii) the aggregate principal amount of all
certificates of deposit issued by the Bank to the Company and in which the
Bank has a perfected, first priority security interest pursuant to the
Collateral Pledge Agreement dated as of May 20, 1996 (the "Pledge
Agreement") from the Company to the Bank.
The Company agrees to pay (a) a commission, in arrears
on the last Business Day of each month, equal to the sum of (i) 1/4 of 1%
per annum multiplied by 6/11ths of the daily average amount available for
drawing under all Collahuasi Project Letters of Credit during the
preceding month plus (ii) 3/8 of 1% per annum multiplied by 5/11ths of the
daily average amount available for drawing under all Collahuasi Project
Letters of Credit during the preceding month and (b) the Bank's customary
amendment and negotiation fees for standby letters of credit.
The Company agrees to pay to the Bank, immediately upon
receiving notice that the Bank has honored a drawing under a Collahuasi
Project Letter of Credit, an amount equal to the amount so paid plus
interest at the Default Rate from the date the Bank honored such drawing
to the date the Bank is reimbursed in full. The Company further agrees
that the Bank may, at its option and without notice to the Company, apply
collateral provided to the Bank pursuant to the Pledge Agreement to
satisfy the Company's payment obligations under the preceding sentence.
The obligations of the Company under each Collahuasi
Project Letter of Credit shall be governed by the applicable Letter of
Credit Agreement except to the extent the provisions thereof are
inconsistent with the provisions of this Agreement in which case the
provisions of this Agreement shall control. The Collahuasi Project
Letters of Credit shall not be deemed to be "Letters of Credit" for any
provision of this Agreement other than sections 2.12, 2.13, 4.2(a)-(c) and
(f), 7.1, 7.2, 8.2 and 8.6.
The Company may, at its option and subject to the terms
and conditions of this Credit Agreement, request the Bank to issue Letters
of Credit under section 2.8 in favor of the Buyer. Such Letters of Credit
shall only become Collahuasi Project Letters of Credit at such time as the
Company delivers a written notice to that effect to the Bank together with
certificates of deposit comprising collateral under the Pledge Agreement
in such amount as is required to comply with subsection (b) above.
(d) Section 5.2 of the Credit Agreement is amended in its entirety
to read as follows:
5.2 Interim Financial Statements. Furnish to the Bank
within 30 days after the end of each month (a) a balance sheet of the
Company as of the end of such month and related statements of income,
retained earnings and cash flows for the period from the beginning of the
fiscal year to the end of such month, prepared in the manner set forth in
section 5.1 hereof for the annual statements, certified to have been so
prepared, subject to audit and normal year-end adjustments, by an
authorized financial officer of the Company, (b) a computation showing
whether the Company is in compliance with the financial covenants
contained in sections 6.10, 6.13 and 6.14, (c) a statement, in such detail
as the Bank may reasonably request, of the Guaranties of the Company of
obligations of Domestic Subsidiaries and Foreign Subsidiaries and (d) the
certificate of an authorized financial officer to the effect that there
exists no Default or Event of Default or, if any Default or Event of
Default exists, specifying the nature thereof, the period of existence
thereof and what action the Company proposes to take with respect thereto.
(e) Section 5.4 of the Credit Agreement is amended in its entirety
to read as follows:
5.4 Other Financial Information. Furnish to the Bank (a)
copies of all reports generally provided to the shareholders of the
Company concurrently with the delivery thereof to the shareholders, (b)
copies of all reports, including without limitation 10-Q and 8-K reports,
filed with the Securities and Exchange Commission concurrently with the
filing thereof, (c) within 20 days after the end of each month a statement
specifying the Gross Domestic Accounts Receivable and Gross Domestic
Finished Goods Inventory as of the last day of such month, (d) within 15
days after the end of each month until the Maturity Date of Project
Financing Loan No. 4, a statement summarizing the work-in-process
inventory for Project No. 4 and the Qualified Collahuasi Accounts, (e)
within 60 days after the end of each fiscal year of the Company
projections, in form and detail satisfactory to the Bank, of the cash
flows of the Company and its Consolidated Subsidiaries for such fiscal
year and (f) such other financial information as the Bank may from time to
time reasonably request.
(f) The following sentence is added at the end of section 5.12 of
the Credit Agreement:
Notwithstanding the foregoing and the provisions of section 2.2, the
Company shall provide such borrowing base certificate to the Bank on a
monthly basis until the Maturity Date of Project Financing Note No. 4.
(g) Section 5.13 of the Credit Agreement is amended by deleting the
word "and" immediately prior to subsection (e) and adding the following
subsection:
; (f) immediately upon receipt of any written notice or other
communication to the effect that the Company is not in compliance with its
obligations under the Collahuasi Contract, or terminating or threatening
to terminate the Collahuasi Contract, a copy of such notice and a
description of what action the Company is taking or proposes to take with
respect thereto; and (g) promptly (and in any event within 10 days) after
the Company receives notice of the occurrence of a Change in Control, a
notice to that effect.
(h) Sections 6.13 and 6.14 of the Credit Agreement are created to
read as follows:
6.13 Tangible Net Worth. Permit Tangible Net Worth as of any of
the following dates to be less than the following amounts:
Date Amount
March 31, 1996 $25,750,000
June 30, 1996 25,750,000
September 30, 1996 26,550,000
December 31, 1996 27,550,000
March 31, 1997 28,750,000
6.14 Supplemental Debt Service Coverage Ratio. Permit the
Supplemental Debt Service Coverage Ratio to be less than 1:1 as of the
last day of any fiscal quarter of the Company during the period from
September 30, 1996 through July 31, 1997.
3. Closing Conditions. This Ninth Amendment to Credit Agreement
shall be effective upon its execution and delivery by the Company and the Bank
and the receipt by the Bank of:
(a) Project Financing Note No. 4, duly executed by the
Company;
(b) A Collateral Pledge Agreement, in form and content
satisfactory to the Bank, pursuant to which the Company grants the Bank a
security interest in the collateral described therein;
(c) A Participation Agreement (the "Participation
Agreement"), in form and content satisfactory to the Bank, pursuant to which a
participating interest in Project Note No. 4 and the Collahuasi Project Letters
of Credit is sold by the Bank to The Bank of Nova Scotia, duly executed by The
Bank of Nova Scotia and acknowledged by the Company;
(d) The $80,000 facility fee for Project Financing Loan
No. 4;
(e) An opinion of counsel to the Company satisfactory to the
Bank; and
(f) Such other documents as the Bank or the Bank of Nova
Scotia may reasonably request relating to this Ninth Amendment including without
limitation the documents described in section 2(b) of the Participation
Agreement.
4. Representations and Warranties. The Company represents and
warrants to the Bank that:
(a) The execution and delivery of this Ninth Amendment,
Project Financing Note No. 4 and the Collateral Pledge Agreement are within the
Company's corporate power and corporate authority, have been duly authorized by
all necessary corporate action on the part of the Company, are not in violation
of any existing law, rule or regulation of any governmental agency or authority,
any order or decision of any court, the certification of incorporation or
by-laws of the Company or the terms of any agreement, restriction or undertaking
to which the Company is a party or by which it is bound, do not require the
approval or consent of the shareholders of the Company, any governmental body,
agency or authority or any other person or entity.
(b) The representations and warranties set forth in section 3
of the Credit Agreement are true and correct in all material respects as of the
date of this Ninth Amendment to Credit Agreement and no Default or Event of
Default has occurred and is continuing.
5. Costs and Expenses. The Company agrees to pay all costs and
expenses (including reasonable attorneys' fees) paid or incurred by the Bank or
The Bank of Nova Scotia in connection with the execution and delivery of this
Ninth Amendment and the consummation of the transactions contemplated hereby.
6. Full Force and Effect. The Company and the Bank confirm that
the Credit Agreement, as amended hereby, remains in full force and effect.
BANK ONE, MILWAUKEE,
NATIONAL ASSOCIATION
BY /s/William E. Shaw
William E. Shaw, Vice President
BUCYRUS-ERIE COMPANY
BY /s/T. W. Sullivan
Its Vice President - Marketing
EXHIBIT 10.11
1996 FORM 10-K
TENTH AMENDMENT TO CREDIT AGREEMENT
THIS TENTH AMENDMENT TO CREDIT AGREEMENT, dated as of May 20, 1996,
amends and supplements the Credit Agreement dated as of December 14, 1994, as
amended (the "Credit Agreement"), between Bucyrus-Erie Company (the "Company")
and Bank One, Milwaukee, National Association (the "Bank").
RECITAL
The Company and the Bank desire to amend and supplement the Credit
Agreement as provided below.
AGREEMENTS
In consideration of the promises and agreements set forth in the
Credit Agreement, as amended hereby, the Company and the Bank agree as follows:
1. Definitions and References. Capitalized terms not defined herein
have the meanings assigned in the Credit Agreement. Upon the fulfillment of the
conditions set forth in section 3 below, all references to the Credit Agreement
contained in the Loan Documents shall mean the Credit Agreement as amended by
this Tenth Amendment to Credit Agreement.
2. Amendment to Credit Agreement. Section 2.16(b)(v) of the Credit
Agreement is created to read as follows:
(v) Project Financing Loan No. 5. The Bank agrees to make
advances, subject to the terms and conditions set forth in this Agreement,
to the Company to finance the construction of three Model 49R111 Drills
and related equipment and accessories ("Project No. 5") to be sold by the
Company to Iscor Limited pursuant to Contract No. 3219/71 (the "Iscor
Contract") dated March 6, 1996 as follows:
(a) Maximum Loan Amount: $4,500,000.
(b) Limitations on Advances: The total unpaid
principal amount of Project Financing Loan No. 5 shall not at any time
exceed the lesser of the Maximum Loan Amount or the sum of (i) 75% of the
cost (determined in accordance with GAAP in a manner consistent with the
Company's historical accounting practices) of the work-in-process and
finished goods inventory comprising Project No. 5 plus (ii) 80% of the
"Eligible Iscor Receivables".
"Eligible Iscor Receivables" means the aggregate
amount (after deducting all down payments and retainage amounts) owed by
Iscor Limited to the Company which arose out of the sale of goods
comprising Project No. 5 and which have been shipped by the Company in
accordance with the applicable provisions of the Iscor Contract on sale
terms of open account not to exceed 180 days from invoice date shipment.
(c) Maturity Date: The aggregate principal amount of
Project Loan No. 5 and all accrued interest shall be due upon the first to
occur of (a) the receipt by the Company of the final payment (excluding
retention amounts) for the third drill or (b) October 31, 1996.
<PAGE>
(d) Interest Rate: Reference Rate or the Adjusted
Libor Rate with the Applicable Libor Margin being 1.25%; only one month
Interest Periods may be selected for Libor Rate Loans comprising Project
Loan No. 5.
(e) Interest Payment Dates: Last Business Day of each
month and the Maturity Date.
(f) Project Financing Reserve: 0% of the Maximum Loan
Amount.
(g) Facility Fee: $38,750 (which includes $33,750 to
be paid by the Bank to the Export-Import Bank of the United States ("Ex-Im
Bank")).
(h) Reporting: The Company shall submit to the Bank
a written progress report on the status of work completed on the Iscor
Contract on a monthly basis until the completion of the Iscor Contract.
3. Conditions for Effectiveness. This Tenth Amendment shall be
effective upon its execution and delivery by the Company and the Bank and the
receipt by the Bank of:
(a) Project Financing Note No. 5, duly executed by the Company;
(b) The satisfaction of all conditions in the Loan Authorization
Agreement between the Bank and the Ex-Im Bank relating to Project Loan No. 5;
(c) the $38,750 facility fee, and
(d) such other documents as the Bank may reasonably request
relating to this Tenth Amendment.
4. Representations and Warranties. The Company represents and warrants
to the Bank that:
(a) The execution and delivery of this Tenth Amendment and Project
Financing Note No. 5 are within the Company's corporate power and corporate
authority, have been duly authorized by all necessary corporate action on the
part of the Company, are not in violation of any existing law, rule or
regulation of any governmental agency or authority, any order or decision of
any court, the Certificate of Incorporation or By-Laws of the Company or the
terms of any agreement, restriction or undertaking to which the Company is a
party or which it is bound, and do not require the approval or consent of the
shareholders of the Company, any governmental body, agency or authority or
any other person or entity.
(b) The representations and warranties set forth in section 3 of
the Credit Agreement are true and correct in all material respects as of the
date of this Tenth Amendment and no Default or Event of Default has occurred
and is continuing.
5. Costs and Expenses. The Company agrees to pay all costs and expenses
(including reasonable attorneys' fees) paid or incurred by the Bank in
connection with the execution and delivery of this Tenth Amendment and the
consummation of the transactions contemplated hereby.
<PAGE>
6. Full Force and Effect. The Company and the Bank confirm that the
Credit Agreement, as amended hereby, remains in full force and effect.
BANK ONE, MILWAUKEE,
NATIONAL ASSOCIATION
BY /s/William E. Shaw
Its Vice President
BUCYRUS-ERIE COMPANY
BY /s/James D. Annand
Its Interim CFO
EXHIBIT 10.12
1996 FORM 10-K
ELEVENTH AMENDMENT
TO CREDIT AGREEMENT
THIS ELEVENTH AMENDMENT TO CREDIT AGREEMENT, dated as of December 31,
1996, amends and supplements the Credit Agreement dated as of December 14, 1994,
as amended (the "Credit Agreement"), between BUCYRUS INTERNATIONAL, INC. (f/k/a
Bucyrus-Erie Company) (the "Company") and BANK ONE, MILWAUKEE, NATIONAL
ASSOCIATION (the "Bank").
RECITAL
The Company and the Bank desire to amend and supplement the Credit
Agreement as provided below:
AGREEMENTS
In consideration of the promises and agreements set forth in the
Credit Agreement as amended hereby, the Company and the Bank agree as follows:
1. Definitions and References. Capitalized terms not defined
herein have the meanings assigned in the Credit Agreement. Upon the fulfillment
of the conditions set forth in section 3 below, all references to the Credit
Agreement contained in the Loan Documents shall mean the Credit Agreement as
amended by this Eleventh Amendment to Credit Agreement.
2. Amendments.
(a) Section 2.16(b)(iv)(a) of the Credit Agreement is amended
by deleting "$250,000" and replacing it with "$25,000".
(b) Section 2.6(b)(iv)(b) of the Credit Agreement is amended
by inserting the following sentence at the end of such section:
The Company shall furnish to the Bank, within 21 days after the end of
each month, a certificate as to the value of the work-in-process inventory
comprising Project No. 4 and of the Qualified Collahuasi Accounts as of
the last date of the preceding month.
(c) The first sentence of section 2.16(b)(iv)(c) of the
Credit Agreement is amended to read as follows:
The Company shall provide written or telephonic notice (and if telephonic,
confirmed in writing promptly thereafter) of a requested borrowing by 1:00
PM, Milwaukee time, on the date of the requested advance, specifying the
amount thereof.
(d) Section 2.16(b)(iv)(e) of the Credit Agreement is amended
to read as follows:
(e) Interest Rate: Prior to maturity, the outstanding
principal balance of Project Financing Note No. 4, to the extent comprised
of Reference Rate Loans, shall bear interest at the Reference Rate plus
1/4 of one percent (and such rate shall change on each day on which the
Reference Rate changes) and, to the extent comprised of Libor Rate Loans,
shall bear interest at the adjusted Libor Rate during the applicable Loan
Period with the applicable Libor Margin being 2.75%. After maturity, the
unpaid principal balance of Project Financing Note No. 4 and all accrued
interest shall bear interest at the Reference Rate in effect from time to
time plus 2.25%.
(e) The parenthetical contained in the first sentence of
section 2.16(b)(iv)(f) is amended to read as follows:
(provided, however, that [a] during the period from May 20, 1996 to
Maturity Date, 1996 the commitment fee shall be calculated using 3/8 of 1%
per year and [b] thereafter, until the first to occur of (i) the date on
which the outstanding principal balance of Project Financing Note No. 4
equals or exceeds $7,000,000, (ii) the date on which a Collahuasi Project
Letter of Credit is issued by the Bank or (iii) the date on which an
outstanding Letter of Credit becomes a Collahuasi Project Letter of Credit
pursuant to section 2.17 below, the commitment fee shall be calculated
using 3/8 of 1% per year)
(f) The definition of "Minimum Project Financing Reserve"
contained in section 2.16(b)(iv)(h) of the Credit Agreement is amended to read
as follows:
"Minimum Project Financing Reserve" means (a) $0 at all
times that the outstanding principal balance of Project Financing Note
No. 4 is less than $7,000,000 and (b) $5,000,000 at all other times.
(g) Section 6.11 of the Credit Agreement is amended by
deleting the phrase "prior to July 1, 1996" and replacing it with "prior to the
date the Bank's commitment to provide Project Financing under section
2.16(b)(iv) has expired and Project Financing Note No. 4 has been paid in
full (unless the prior written consent of the Bank and The Bank of Nova
Scotia is obtained)".
3. Closing Conditions. This Eleventh Amendment to Credit
Agreement shall be effective upon its execution and delivery by the Company and
the Bank and the receipt by the Bank of:
(a) written consent of The Bank of Nova Scotia to the
execution and delivery of this Eleventh Amendment by the Bank; and
(b) such other documents as the Bank may reasonably request
relating hereto.
4. Representations and Warranties. The Company represents and
warrants to the Bank that:
(a) The execution and delivery of this Eleventh Amendment are
within the Company's corporate power and corporate authority, have been duly
authorized by all necessary corporation action on the part of the Company, are
not in violation of any existing law, rule or regulation of any governmental
agency or authority, any order or decision of any court, the Certificate of
Incorporation or By-Laws of the Company or the terms of any agreement,
restriction or undertaking to which the Company is a party or by which it is
bound and do not require the approval or consent of the shareholders of the
Company, any governmental body agency or authority or any other person or
entity.
(b) The representations and warranties set forth in section 3
of the Credit Agreement are true and correct in all material respects as of the
date of this Eleventh Amendment and no Default or Event of Default has occurred
and is continuing.
5. Costs and Expenses. The Company agrees to pay all costs and
expenses (including reasonable attorneys' fees) paid or incurred by the Bank in
connection with the execution and delivery of this Eleventh Amendment.
6. Effective Date. Upon fulfillment of the conditions set forth
in section 3, this Eleventh Amendment shall be effective as if entered into on
May 20, 1996.
<PAGE>
7. Full Force and Effect. The Company and the Bank confirm that
the Credit Agreement, as amended hereby remains in full force and effect.
BANK ONE, MILWAUKEE,
NATIONAL ASSOCIATION
BY /s/William E. Shaw VP
William E. Shaw, Vice President
BUCYRUS INTERNATIONAL, INC.
BY /s/J. F. Bosbous
Its Assistant Treasurer
EXHIBIT 10.16
1996 FORM 10-K
COLLATERAL PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of May 20, 1996, is from BUCYRUS-
ERIE COMPANY, a Delaware corporation ("Pledgor"), to BANK ONE, MILWAUKEE,
NATIONAL ASSOCIATION ("Secured Party"), and is given pursuant to that certain
Credit Agreement dated as of December 14, 1994, as amended, between Pledgor
and Secured Party (the "Credit Agreement"). All terms not otherwise defined
herein have the meanings assigned to them in the Credit Agreement.
In consideration of credit to be extended by Secured Party
pursuant to the Credit Agreement, Pledgor agrees as follows:
1. Grant of Security Interest. Pledgor hereby assigns, pledges
and grants to Secured Party all of its right, title and interest in and to the
property described in paragraph 2 below (the "Collateral") to secure payment
and performance of the obligations of Pledgor to Secured Party described in
paragraph 3 below (the "Obligations").
2. Collateral. The Collateral shall consist of the following:
(a) All certificates of deposit issued by Secured Party
(whether or not evidenced by a written instrument) from time to time now or
hereafter in the possession or control of Secured Party for collateral
purposes; and
(b) All proceeds of the foregoing.
For purposes of this Pledge Agreement, the term "proceeds" includes whatever
is receivable or received when Collateral is sold, collected, exchanged or
otherwise disposed of, whether such disposition is voluntary or involuntary,
and includes, without limitation, all rights to payment, including return
premiums, with respect to any insurance relating thereto.
3. Obligations. The Obligations of Pledgor secured by this
Pledge Agreement shall consist of all debts, obligations and liabilities of
Pledgor to reimburse the Secured Party for drawings honored by the Secured
Party under the Letters of Credit and the Collahuasi Project Letters of Credit
issued by the Bank pursuant to the Credit Agreement.
4. Representations and Warranties. In addition to all
representations and warranties of Pledgor set forth in the Credit Agreement,
Pledgor represents and warrants that Pledgor is the owner of the Collateral
(or, in the case of after-acquired Collateral, at the time Pledgor acquires
rights in the Collateral, will be the owner thereof) and that other than as
permitted in the Credit Agreement no other person has (or, in the case of
after-acquired Collateral, will have) any right, title, claim or interest (by
way of security interest or other lien or charge or otherwise) in, against or
to the Collateral.
5. Covenants of Pledgor. In addition to all covenants and
agreements of Pledgor set forth in the Credit Agreement, Pledgor hereby agrees
(a) to do all acts that may be necessary to maintain, preserve and protect the
Collateral; (b) not to use or permit any Collateral to be used unlawfully or
in violation of any provision of the Credit Agreement, this Pledge Agreement
or any applicable statute, regulation or ordinance, the noncompliance with
which could materially and adversely affect the use or value of the
Collateral; (c) to procure, execute and deliver from time to time any
endorsements, assignments, financing statements and other writings deemed
necessary or appropriate by Secured Party to perfect, maintain or protect its
security interest hereunder and the priority thereof and to deliver promptly
to Secured Party all originals of the Collateral or proceeds consisting of
instruments, duly endorsed or assigned to Secured Party; (d) to appear in and
defend any action or proceeding which may affect his or her title to or
Secured Party's interest in the Collateral; (e) to keep separate, accurate and
complete records of the Collateral and to provide Secured Party with such
records and such other reports and information relating to the Collateral as
Secured Party may reasonably request from time to time; and (f) not to
surrender or lose possession of (other than to Secured Party), sell, encumber,
lease, rent or otherwise dispose of or transfer any Collateral or right or
interest therein except as permitted herein or as hereinafter provided, and to
keep the Collateral free of all levies and security interest and other liens
or charges.
6. Preservation of Collateral. Secured Party shall use
reasonable care in the custody and preservation of the Collateral in its
possession, but this standard does not include (a) insuring or taking any
steps to collect or realize upon the Collateral or any distribution of
interest or principal; (b) informing Pledgor of any decline in the value of
the Collateral; (c) sending notices, performing services or taking any other
action in connection with the management of the Collateral; or (d)
ascertaining or informing Pledgor with respect to any maturities, calls,
conversions, exchanges, offers, tenders, or similar matters relating to the
Collateral, or preserving rights in it against prior parties whether or not
Secured Party has or is deemed to have knowledge of it. Any requests
concerning disposition of the Collateral must be in writing and be received by
Secured Party.
7. Default and Remedies. Pledgor shall be deemed in default
under this Pledge Agreement upon the occurrence and continuance of an Event of
Default. Upon the occurrence of any Event of Default, Secured Party may,
without notice to or demand on Pledgor, and in addition to all rights and
remedies available to Secured Party as provided in this Pledge Agreement, do
any one or more of the following:
(a) Foreclose or otherwise enforce Secured Party's
security interest in any manner permitted by law or provided for in this
Pledge Agreement.
(b) Set off the principal amount of the Collateral issued
by Secured Party, whether or not such Collateral has matured, against any of
the Obligations, whether due or not.
(c) Recover from Pledgor all costs and expenses,
including, without limitation, reasonable attorneys' fees, incurred or paid by
Secured Party in exercising any right, power or remedy provided by this Pledge
Agreement or by law.
(d) Recover from Pledgor any deficiency remaining
following such disposition.
Pledgor and Secured Party agree that the Collateral is "of a type customarily
sold on a recognized market" and is "of a type which is the subject of widely
distributed standard price quotations," as those phrases are used in section
409.504(3) of the Wisconsin Uniform Commercial Code and that, therefore,
Secured Party need not give Pledgor reasonable notification of the time and
place of any public sale or of the time after which any private sale or other
disposition of the Collateral is to be made and that the Secured Party may
purchase the Collateral at any private sale. In the event that notice is
nonetheless required by applicable law, written notice sent at least ten
calendar days (counting the day of sending) before the date of a proposed
disposition of the Collateral is reasonable notice. The notice (if any) of
such sale required by this section 7 shall (a) in case of a public sale, state
the time and place fixed for such sale, (b) in case of sale at a broker's
board or on a securities exchange, state the board or exchange at which such
sale is to be made and the day on which the Collateral, or the portion thereof
so being sold, will first be offered for sale at such board or exchange, and
(c) in the case of a private sale, state the day after which such sale may be
consummated. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as Secured Party may fix
in the notice of such sale. At any such sale the Collateral may be sold in
one lost as an entirety or in separate parcels, as Secured Party may
determine. Secured Party shall not be obligated to make any such sale
pursuant to any such notice. Secured Party may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
the sale, and such sale may be made at any time or place to which the same may
be so adjourned. In case of any sale of all or any part of the Collateral on
credit or for future delivery, the Collateral so sold may be retained by
Secured Party until the selling price is paid by the purchaser thereof, but
Secured Party shall not incur any liability in case of the failure of such
purchaser to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may again be sold upon like notice.
8. Authorized Action by Secured Party. Effective upon the
occurrence and during the continuance of an Event of Default, Pledgor hereby
irrevocably appoints Secured Party as attorney-in-fact to do (but Secured
Party shall not be obligated to and shall incur no liability to Pledgor or any
third party for failure to do) any act which Pledgor is obligated by this
Pledge Agreement to do, and to exercise such rights and powers as Pledgor
might exercise with respect to the Collateral, including, without limitation,
the right to (a) collect by legal proceedings or otherwise and endorse,
receive and receipt for all dividends, interest, payments, proceeds and other
sums and property now or hereafter payable on or on account of the Collateral;
(b) enter into any extension, reorganization, deposit, merger, consolidation
or other agreement pertaining to, or deposit, surrender, accept, hold or apply
other property in exchange for, any Collateral; (c) protect and preserve the
Collateral; (d) transfer the Collateral to its own or its nominee's name; (e)
sign or endorse Pledgor's name on the Collateral; (f) notify obligors on or
issuers of any Collateral to make payment or delivery to Secured Party of any
amounts, securities or rights due or distributable on the Collateral or
notices given in connection therewith; and (g) make any compromise or
settlement, and take any action it deems advisable, with respect to any
Collateral. Pledgor agrees to reimburse Secured Party upon demand for any
costs and expenses, including, without limitation, reasonable attorneys' fees,
which Secured Party may incur while properly acting as said Pledgor's
attorney-in-fact hereunder, all of which costs and expenses are included in
the Obligations secured hereby. Secured Party shall not be required to make
any presentment, demand or protest, or give any notice and need not take any
action to preserve any rights against any prior party or any other person in
connection with the Obligations or with respect to the Collateral.
9. Cumulative Rights. The rights, powers and remedies of
Secured Party under this Pledge Agreement shall be in addition to all rights,
powers and remedies given to Secured Party by virtue of any statute or rule of
law, the Credit Agreement or any other agreement, all of which rights, powers
and remedies shall be cumulative and may be exercised successively or
concurrently without impairing Secure Party's security interest in the
Collateral.
10. Waiver. Any forbearance by Secured Party in exercising any
right, power or remedy shall not preclude the further exercise thereof.
Pledgor waives any right to require Secured Party to proceed against any
person or to exhaust any Collateral or to pursue any remedy in Secured Party's
power.
11. Binding upon Successors. All rights of Secured Party under
this Pledge Agreement shall inure to the benefit of Secured Party, its
successors and assigns and shall be binding upon Pledgor, its successors and
assigns.
12. Severability. If any of the provisions of this Pledge
Agreement shall be held invalid or unenforceable, this Pledge Agreement shall
be construed as if not containing those provisions and the rights and
obligations of the parties hereto shall be construed and enforced accordingly.
13. Choice of Law. This Pledge Agreement shall be construed in
accordance with and governed by the laws of the State of Wisconsin, and, where
applicable and except as otherwise defined herein, terms used herein shall
have the meanings given them in the Wisconsin Uniform Commercial Code.
14. Notices. All demands, notices and other communications
provided for herein shall be transmitted in accordance with provisions of
section 8.4 of the Credit Agreement and shall be effective at the times
provided therein.
BUCYRUS-ERIE COMPANY
BY /s/T. W. Sullivan
Title: Vice President - Marketing
EXHIBIT 10.38
1996 FORM 10-K
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of this 7th day of
November, 1996, by and between Bucyrus International, Inc., a Delaware
corporation (the "Company"), and Daniel J. Smoke (the "Executive").
WITNESSETH:
WHEREAS, the Company desires to employ Executive as Chief Financial
Officer; and
WHEREAS, Executive desires to accept the employment offered by the
Company.
NOW, THEREFORE, in consideration of the premises and for the mutual
consideration hereinafter set forth, the parties hereto do covenant and agree
as follows:
1. Employment. The Company hereby offers and Executive hereby
accepts employment as Chief Financial Officer of the Company upon the terms
and conditions contained herein.
2. Duties.
(a) Executive shall perform all duties consistent with the
position of Chief Financial Officer of the Company, as well as any other
duties on behalf of the Company as the President of the Company may reasonably
direct. Executive shall report to and be responsible to the President of the
Company. Executive will devote his full time and reasonable best efforts to
faithfully, responsibly and satisfactorily fulfill those duties and to further
the Company's best interests.
(b) During his employment, Executive shall not engage in any
business activities which are in any way in competition with the activities of
the Company, or which may in any way interfere in any material respect with
the performance of his duties or responsibilities to the Company.
(c) In the performance of his duties, Executive shall be bound
by and comply with any and all obligations imposed by Company policy and those
imposed by law, regulation and ordinance, orders and decrees of any court, and
any other lawful restriction of any kind.
3. Base Salary and Bonuses. In exchange for Executive's promises
contained herein, the Company shall compensate him in the following manner:
(a) Base Salary. The Company shall compensate Executive at the
base salary rate of One Hundred Seventy-Five Thousand Dollars ($175,000) per
annum, payable in equal monthly installments or on the same basis as other
senior salaried officers of the Company (the "Base Salary"). The Base Salary
may be increased in the future by such amounts and at such times as the Board
of Directors of the Company ("Board") shall deem appropriate.
(b) Annual Bonus. Commencing with calendar year 1997, Executive
shall be eligible to participate in the Company's bonus program for management
as approved annually by the Board ("Bonus Plan"), such program to provide for
an annual cash incentive bonus equal to (i) 35% of Base Salary in the event of
achievement of targeted performance, as defined in the Bonus Plan, and (ii) a
maximum of 70% of Base Salary in the event of exceptional performance, as
determined in accordance with the Bonus Plan.
(c) The amounts set forth herein are subject to appropriate
deductions required by law.
4. Relocation Allowance; Temporary Housing and Travel Expenses.
Within ninety (90) days of the date of this Agreement, Executive shall
relocate his permanent residence from Holland, Michigan to a location within
reasonable daily commuting distance of the Company's headquarters. The
Company shall reimburse Executive for reasonable costs incurred by him in
connection with such relocation to the extent provided under the Company's
Relocation of Salaried Employees Policy, except that the relocation allowance
provided under Paragraph V(A) of such policy shall be two (2) months Base
Salary instead of one (1) month.
5. Stock Options. Pursuant to the terms of the Company's 1996
Employees' Stock Incentive Plan (the "Stock Incentive Plan"), Executive shall
be granted options to purchase an aggregate of Thirty Thousand (30,000) shares
of the Company's common stock at an exercise price equal to one hundred
percent (100%) of the last sale price for the Company's common stock ("Common
Stock") on the Nasdaq National Market System on the date immediately prior to
the date that Executive commences employment with the Company, or if such date
is not a trading date, then at the last sale price on the next preceding date
on which the Common Stock is traded. Such stock options shall be evidenced by
the Non-Qualified Stock Option Agreement attached hereto as Exhibit A ("Stock
Option Agreement"), and the grant of such stock options shall be subject to
approval (which approval will not be unreasonably withheld or delayed) of the
Committee ("Committee") designated by the Board of Directors to administer the
Stock Incentive Plan. Executive may receive such future grants of stock
options under the Stock Incentive Plan or any other similar plan involving
Common Stock as the Company's Board of Directors, or the Committee, shall
award, in its sole discretion, consistent with the terms of the Stock
Incentive Plan or such similar plan.
6. Stock Appreciation Rights. Pursuant to the terms of the Stock
Incentive Plan, Executive will be granted Stock Appreciation Rights (as
defined in the Stock Incentive Plan) to Fifty Thousand (50,000) shares. Such
Stock Appreciation Rights shall be evidenced by the Stock Appreciation Rights
Agreement attached hereto as Exhibit B ("Stock Appreciation Rights
Agreement"), and the grant of such Stock Appreciation Rights shall be subject
to approval of the Committee. Executive may receive such future grants of
stock appreciation rights under the Stock Incentive Plan or any similar plan
as the Company's Board of Directors, or the Committee, shall award, in is sole
discretion, consistent with the terms of the Stock Incentive Plan or such
similar plan.
7. Benefit Plans. During the Term of this Employment Agreement,
Executive shall be entitled to participate in such employee benefits and
fringe benefits plans of the Company as the Company shall provide during the
term hereof for its senior executives. Insurance benefits shall commence on
date of employment.
8. Other Benefits. Executive shall be provided the following
additional benefits:
(a) Club Membership. The Company agrees to reimburse Executive
for the cost of his non-refundable initiation fee in one country club in the
Milwaukee, Wisconsin area or other area in which Executive's new permanent
residence described in Paragraph 4 hereof is located (but not in excess of
$12,500) and the annual dues for such club (but not in excess of $5,000).
(b) Vacation. Executive shall be entitled to four (4) weeks
vacation each year of this Employment Agreement, without reduction in salary.
(c) Car. In accordance with the provisions of the Company's
executive auto program, Executive shall be entitled to the use of a Company
car.
9. Duration and Termination.
(a) Duration and Termination by Company. The term ("Initial
Term") of this Employment Agreement and the term of employment shall begin on
the date hereof and continue until the first anniversary of the date hereof
unless sooner terminated as herein provided. At the end of the Initial Term,
this Agreement shall automatically renew, for additional one year terms (each,
"Additional Terms") unless the Company gives at least two months' written
notice to Executive that his employment under this Agreement shall terminate
on the last day of the Initial Term or any Additional Term, as the case may
be. The Initial Term and any Additional Terms are sometimes herein
collectively referred to as the "Term" of this Employment Agreement. In
addition to the foregoing, the Company shall have the right to terminate
Executive's employment under this Employment Agreement at any time without
"Cause" (as defined in Paragraph 9(e) hereof) during the Initial Term or any
Additional Term by giving at least two months' written notice to Executive
that his employment under this Agreement shall terminate on the date specified
in such notice, in which event such termination shall be considered a
termination other than for "Cause."
(b) Termination by Executive. Executive may terminate his
employment under this Employment Agreement at any time upon giving at least
ninety (90) days' written notice to the Company of his intent to do so. Upon
giving such notice, Executive shall continue in employment with the Company
for the full ninety (90) days of the notice period, or at the discretion of
the Company, Executive's period of employment may be shortened provided that
Executive shall in such event, be paid his salary and have his benefits
hereunder continued for such ninety (90) day period, or any part thereof, in
lieu of continued employment. In the event such 90 day period is shortened by
the Company in its discretion, Executive shall make himself available to the
Company for advice and assistance during the remaining portion of such 90 day
period. At the end of the ninety (90) day period, all rights of Executive
under this Agreement shall terminate except as otherwise expressly provided
herein. Failure of Executive to provide the full ninety (90) day notice shall
permit the Company to immediately cease the compensation and benefits provided
for herein.
(c) Termination Upon Death or Disability of Executive.
Executive's employment under this Employment Agreement shall immediately
terminate in the event of Executive's death or Disability (as hereinafter
defined). For purposes of this Agreement, Executive shall be deemed to have
suffered a "Disability" in the event that a physician selected by the Company
determines that Executive, due to a physical or mental condition, is unable to
substantially perform his duties hereunder for a period of either (i) three
consecutive months or (ii) an aggregate of six (6) months in any twelve (12)
month period. Upon the termination of Executive's employment by reason of
death, the Executive's estate shall be entitled to receive Executive's Base
Salary to the date of Executive's death, or, by reason of Executive's
Disability, Executive shall be entitled to receive Base Salary and employee
benefits until the earlier to occur of (i) six months after the commencement
of such Disability or, (ii) the date of eligibility for long term disability
benefits, if any.
(d) Compensation upon Termination. In the event of termination
of Executive's employment under this Agreement for any reason, all of the
Company's obligation to pay Executive compensation and provide benefits under
this Agreement shall terminate, except that in the event of termination of
Executive's employment by the Company pursuant to Paragraph 9(a), Executive
shall be entitled to continuation of his Base Salary and insurance benefits
(to the extent coverage terms permit) for a period of one (1) year from the
date of such termination. Such period is hereinafter called the "Severance
Period." The amount payable pursuant to this Paragraph 9(d) shall be payable
in the manner and at such times as such Base Salary would have been paid
during the Severance Period but for the termination of Executive's employment.
The Company's obligation to provide the payments described in this Paragraph
9(d) is conditioned upon the Executive's compliance with the restrictions
contained in Paragraph 11 hereof. The Company shall have the right to
discontinue such payments in the event the Executive breaches the restrictions
in Paragraph 11 or a court determines any such restriction is unenforceable in
any respect.
(e) Termination by the Company for Cause. The Company, by
notice from the President of the Company or the Board to Executive, shall have
the right to terminate Executive's employment under this Employment Agreement
in the event of any of the following (which shall constitute "Cause"): (i)
Executive's willful failure to perform his duties under this Agreement, if
such failure continues unremedied to the reasonable satisfaction of the
President of the Company for thirty (30) days after written notice thereof has
been sent from the President of the Company to Executive specifying the acts
constituting the willful failure to perform and requesting that they be
remedied; (ii) Executive engaging in an act of fraud, dishonesty or gross
misconduct in connection with the business of the Company; (iii) Executive is
convicted by a court of law having jurisdiction over Executive of a felony or
criminal misconduct against the Company or others; or (iv) Conduct by
Executive constituting a material breach of this Agreement. Upon a
termination for Cause: (w) the Company shall pay Executive the Base Salary due
up to the date of termination; (x) Executive shall forfeit all unexercised
stock options, whether or not vested, granted to him by the Company, with
respect to the Company's Common Stock; (y) Executive shall forfeit all Stock
Appreciation Rights, whether or not vested, granted to him under the Stock
Incentive Plan; and (z) except as otherwise expressly provided herein, all
rights of Executive of any kind to any other compensation, benefits or other
payments for periods subsequent to such termination shall cease.
(f) No provision of this Agreement governing the effects of any
termination of Executive's employment hereunder shall limit or eliminate any
benefit under any employee benefit plan of the Company in which Executive
participates, if such benefit, by the terms of the applicable plan, continues
after a termination of Executive's employment.
10. Change of Control.
(a) Definitions. For purposes of this Paragraph 10:
(i) "Act" shall mean the Securities Act of 1934.
(ii) A "Change of Control" of the Company shall be deemed
to have occurred when:
(A) Securities of the Company representing 20% or
more of the combined voting power of the Company's then
outstanding voting securities are acquired, directly or
indirectly, by any Person who did not on the date of this
Agreement own, directly or indirectly, 5% or more of the combined
voting power of the Company's voting securities outstanding on the
date of this Agreement.
(B) The shareholders of the Company approve a merger
or consolidation of the Company with any other corporation as a
result of which less than 50% of the outstanding voting securities
of the surviving or resulting entity are owned by the former
shareholders of the Company (other than a shareholder who is an
"affiliate," as defined in the Act, of any party to such
consolidation or merger).
(C) The shareholders of the Company approve the sale
of substantially all of the Company's assets to a corporation
which is not a wholly-owned subsidiary of the Company.
(D) During any period of two consecutive years,
individuals who, at the beginning of such period, constituted the
Board of Directors of the Company cease, for any reason, to
constitute at least a majority thereof, unless the election or
nomination for election of each new director was approved by the
vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.
(E) Jackson National Life Insurance Company ("JNL")
or any "affiliate" of JNL as defined in the Act, shall sell,
exchange, transfer or otherwise dispose of more than sixty-six
percent (66%) of the shares of Common Stock of the Company owned
by JNL on the date of this Agreement other than to JNL or any such
affiliate of JNL.
(F) The Company shall become eligible, pursuant to
Section 12(g)(4) of the Act, to terminate the registration under
the Act of any class of its securities then registered under the
Act.
(iii) "Person" shall have the meaning used in Section
3(a)(9) of the Act.
(iv) "Effective Date" shall mean the date a Change of
Control becomes effective.
(v) "Good Reason" shall mean the occurrence of any one or
more of the following events without the Executive's express written
consent:
(A) (1) The assignment of the Executive to duties
materially inconsistent with the Executive's authorities, duties,
responsibilities, and status (including offices, titles, and
reporting requirements) as the Chief Financial Officer of the
Company, (2) a material reduction or material alteration in the
nature or status of the Executive' authorities, duties, or
responsibilities from those in effect during the immediately
preceding fiscal year, or (3) being required to relocate his
permanent residence.
(B) A reduction by the Company in the Executive's
Base Salary as in effect on the Effective Date.
(C) A material reduction in the Executive's level of
participation in any of the Company's short- and/or long-term
incentive compensation plans, or employee benefit or retirement
plans, policies, practices, or arrangements in which the Executive
participates as of the Effective Date.
(vi) "Qualifying Termination" shall mean any termination of
the Executive's employment other than: (A) by the Company for Cause (as
defined in Paragraph 9(e) hereof); (B) by reason of death, Disability
(as defined in Paragraph 9(c) hereof), or Retirement (as such term is
then defined in the Company's tax qualified defined benefit retirement
plan); or (C) by the Executive without Good Reason, including without
limitation, termination by Executive upon expiration of the Initial Term
or any Additional Term pursuant to Paragraph 9(a) hereof. In the event
the Executive shall terminate this Agreement for Good Reason, his notice
of termination required pursuant to Paragraph 9(b) shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis
for such termination.
(b) Employment Termination in Connection with a Change of
Control. In the event of a Qualifying Termination on, or within six (6)
months after, the Effective Date, then in lieu of all other compensation or
benefits provided to Executive under the provisions of this Agreement, the
Company shall, as a severance benefit, continue Executive's Base Salary and
insurance benefits (to the extent coverage terms permit) for a period of
eighteen (18) months ("Severance Benefit").
(c) Limitation on Termination Payment.
(i) Notwithstanding any other provision of this Paragraph
10, if any portion of the Severance Benefit or any other payment or
transfer of property under this Agreement, or under any other agreement
with or plan of the Company, including but not limited to the vesting of
the Stock Options and Stock Appreciation Rights granted to Executive
under the Stock Incentive Plan ("Options and SARs"), which payment or
transfer of property is contingent upon a Change of Control of the
Company, (in the aggregate "Total Payments") and would constitute an
"excess parachute payment," then the payments to be made to the
Executive under this Paragraph 10 shall be reduced and, if necessary,
transferred property forfeited (including, without limitation,
forfeiture of Options and SARs) such that the value of the aggregate
Total Payments that the Executive is entitled to receive shall be one
dollar ($l) less than the maximum amount which the Executive may receive
without becoming subject to the tax imposed by Section 4999 of the
Internal Revenue Code of 1986 ("Code") or any successor provision, or
which the Company may pay without loss of deduction under Section
280G(a) of the Code or any successor provision; provided, however, that
the payments to be made to the Executive under this Agreement shall be
reduced and, if necessary, other transferred property forfeited, if and
only if so reducing the payments and forfeiting transferred property
results in the Executive receiving a greater net benefit than he would
have received had a reduction not occurred and an excise tax been paid
pursuant to Code Section 4999 or any successor provision. For purposes
of this Paragraph 10, the terms "excess parachute payment" and
"parachute payments" shall have the meanings assigned to them in Section
280G of the Code and any successor provision, and such "parachute
payments" shall be valued as provided therein.
(ii) Within sixty (60) days following delivery of the
notice of termination (as described in Paragraph 9 hereof) or notice by
the Company to the Executive of its belief that there is a payment or
benefit due the Executive which will result in an "excess parachute
payment" as defined in Section 280G of the Code or any successor
provision, the Executive and the Company, at the Company's expense,
shall obtain the opinion of such legal counsel, which need not be
unqualified, as the Executive may choose, which sets forth: (A) the
amount of the Executive's "annualized includible compensation for the
base period" (as defined in Code Section 280G(d)(1) or any successor
provision); (B) the present value of the Total Payments; and (C) the
amount and present value of any "excess parachute payment." The opinion
of such legal counsel shall be supported by the opinion of a certified
public accounting firm and, if necessary in the opinion of the Company,
a firm of recognized executive compensation consultants. Such opinion
shall be binding upon the Company and the Executive. Subject to the
proviso in second last sentence of subparagraph 10(c)(i) hereof, in the
event that such opinion determines that there would be an "excess
parachute payment," the Severance Benefits hereunder, and any other
payment or transferred property determined by such counsel to be
includible in Total Payments, shall be reduced, eliminated or forfeited
as specified by the Executive in writing delivered to the Company within
thirty (30) days of his receipt of such opinion, or, if the Executive
fails to so notify the Company, then as the Company shall reasonably
determine, so that under the basis of calculations set forth in such
opinion, there will be no "excess parachute payment." The provisions of
this Paragraph 10(c), including the calculations, notices, and opinion
provided for herein shall be based upon the conclusive presumption that:
(x) the compensation and benefits provided for in Paragraphs 3-8 herein;
and (y) any other compensation earned prior to the effective date of
termination of the Executive's employment hereunder pursuant to the
Company's compensation programs (if such payments would have been made
in the future in any event, even though the timing of such payment is
triggered by the Change of Control), are reasonable.
(d) Vesting of Options and SARs on Change of Control. In the
event of a Change of Control, all unvested Stock Options and Stock
Appreciation Rights shall automatically be fully vested and exercisable as of
the Effective Date, subject to forfeiture as provided in Paragraph 10(c)
hereof.
11. Executive Covenants; Covenant Not to Compete. In order to induce
the Company to enter into this Employment Agreement, Executive hereby agrees
as follows:
(a) Except when it is in the interest of the Company, or with
the consent of or as directed by the President of the Company or the Board,
Executive will keep confidential and shall not divulge to any other person or
entity, during the term of employment or thereafter, any Confidential
Information. For purposes hereof "Confidential Information" shall mean any of
the business secrets, policies, methods, or other confidential information
regarding the Company except for (i) information which was in the public
domain on the date of this Agreement or (ii) information which came into the
public domain through no direct or indirect act or omission of the Executive
after the date of this Agreement.
(b) All papers, books and records and other property of every
kind and description relating to the business and affairs of the Company,
whether or not prepared by Executive, shall be the sole and exclusive property
of the Company, and Executive shall surrender them to the Company, as
applicable, at any time upon request by the Company.
(c) During the Term of this Employment Agreement and for a
period of one (1) year thereafter (exclusive of any period of breach),
Executive will not, without the prior written consent of the Board: (i)
participate, directly or indirectly, either individually or as an employee,
agent, partner, shareholder, consultant or in any other capacity, or have any
direct or indirect material financial interest as a creditor, in any
corporation, partnership or other entity that engages in a business
competitive with the business of manufacturing, marketing, distributing or
selling any surface mining equipment that the Company or any of its
subsidiaries or affiliates manufactures, markets, distributes or sells at the
time Executive ceases to be employed by the Company (such business being the
"Bucyrus Business"); provided, however, that this paragraph shall not restrict
Executive from holding up to two (2%) percent of the outstanding capital stock
or other securities of any publicly traded entity; or (ii) directly or
indirectly solicit or cause to be solicited for employment or consultation,
for or on behalf of himself or third parties, any person who was at the time
of the cessation of Executive's employment hereunder, an executive of the
Company.
(d) Executive acknowledges and agrees that the geographic scope
of the Bucyrus Business for purposes of the foregoing covenants includes each
State and every other country where the Company has done any material amount
of Bucyrus Business within the one-year period immediately preceding the
termination of Executive's employment. The Company agrees to provide to
Executive a list of all such states and countries within thirty (30) days
following receipt of a written request from Executive.
(e) By his execution of this Agreement, Executive expressly
acknowledges and agrees that (i) the consideration for the covenants contained
in this Paragraph 11 is fair and adequate, (ii) such covenants are fair, just
and reasonable, both as to geographic scope and period of duration; and (iii)
such covenants are reasonably necessary in order to protect the legitimate
business interests of the Company.
(f) The parties agree that the Company shall, in addition to
other remedies provided by law, have the right and remedy to have the
provisions of this Paragraph 11 specifically enforced by any court having
equity jurisdiction by means of injunctive relief, it being acknowledged and
agreed that any breach or threatened breach of the provisions of this
paragraph will cause irreparable injury to the Company and that money damages
will not provide an adequate remedy. Nothing contained herein shall be
construed as prohibiting the Company from pursuing any other remedies
available to it for such breach or threatened breach including any recovery of
damages from Executive. The parties hereto also consent to and direct any
court finding any provision of this Paragraph 11 unenforceable to narrow the
scope of such provision in order to enforce its intent to the broadest extent
permissible. The parties hereto understand and intend that each restriction
agreed to by Executive hereinabove shall be construed as separable and
divisible from every other restriction, and the unenforceability, in whole or
in part, of any such restriction, will not affect the enforceability of the
remaining restrictions and that one or more of all of such restrictions may be
enforced in whole or in part as the circumstances warrant. Notwithstanding
any other provisions contained in this Agreement, the provisions of this
Paragraph 11 shall survive any termination of Executive's employment
hereunder.
12. Conflicting Agreements. Executive hereby represents and warrants
to the Company that his entering into this Employment Agreement, and the
obligations and duties undertaken by him hereunder, will not conflict with,
constitute a breach of, or otherwise violate the terms of, any other
employment or other agreement to which he is a party.
13. Successors and Assigns. The rights of the Company hereunder shall
run in favor of the Company, its successors, assigns, nominees or other legal
representatives. Termination of Executive's employment shall not operate to
relieve him of any remaining obligations hereunder, and all such obligations
are binding upon his heirs, executors, administrators and other legal
representatives. This Agreement shall be binding upon any successor in
accordance with the operation of law and such successor shall be deemed the
"Company" for purposes of this Agreement.
14. Notices. All notices hereunder must be in writing and shall be
delivered by hand, mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, or telecopied, to
the other party, addressed as follows:
(i) if to the Company:
Bucyrus International, Inc.
1100 Milwaukee Avenue
South Milwaukee, Wisconsin 53172
Attention: Corporate Secretary
Telecopy No. (414) 768-5060
(ii) if to Executive:
Daniel J. Smoke
745 Spyglass Hill
Holland, Michigan 49424
Telephone No. (616) 399-7371
All such notices shall be effective (x) if delivered, upon delivery; (y) if
mailed, when received or three (3) business days after being deposited in the
mail, whichever occurs first or (z) if telecopied, when transmitted and
confirmed by telephone. Addresses may be changed by written notice sent to
the other party at the last recorded address of that party.
15. Severability. If any provision of this Employment Agreement shall
be adjudged by any court of competent jurisdiction to be invalid or
unenforceable for any reason, such judgment shall not affect, impair or
invalidate the remainder of this Agreement.
16. Prior Understandings. This Employment Agreement between the
Company and Executive embodies the entire understanding of the parties hereto,
and supersedes all other oral or written agreements or understandings between
them regarding the subject matter hereof. No change, alteration or
modification hereof may be made except in writing, signed by the requisite
representatives of both parties hereto.
17. Headings. The headings in this Employment Agreement are for
convenience and reference only and shall not be construed as part of this
Agreement or to limit or otherwise affect the meaning hereof.
18. Execution in Counterparts. This Employment Agreement may be
executed by the parties hereto in counterparts, each of which shall be deemed
to be an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
19. Choice of Law. Except as provided in Paragraph 11 hereof,
jurisdiction over disputes with regard to this Employment Agreement shall be
exclusively in the courts of the State of Wisconsin. This Employment
Agreement shall be construed in accordance with and governed by the laws of
the State of Wisconsin without giving effect to the principles of conflicts of
laws.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Employment Agreement in Wisconsin as of the day and year first above written.
BUCYRUS INTERNATIONAL, INC.
By: /s/W. R. Hildebrand
Title: President & CEO
/s/Daniel J. Smoke
DANIEL J. SMOKE, Executive
EXHIBIT 10.39
1996 FORM 10-K
BUCYRUS INTERNATIONAL, INC.
1996 EMPLOYEES' STOCK INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into as of this 7th day of November,
1996, by and between BUCYRUS INTERNATIONAL, INC., a Delaware corporation (the
"Company"), and DANIEL J. SMOKE (the "Optionee").
WITNESSETH:
WHEREAS, the Company has adopted the 1996 Employees' Stock Incentive
Plan (the "Plan"), the terms of which, to the extent not stated herein, are
specifically incorporated by reference in this Agreement; and
WHEREAS, one of the purposes of the Plan is to permit the granting of
options to purchase shares of the Company's common Stock, $.01 par value (the
"Common Stock"), to certain key employees of the Company and its affiliates;
and
WHEREAS, the Optionee is now employed by the Company or an affiliate of
the Company in a key capacity, and the Company desires the Optionee to remain
in such employ, and to secure or increase his stock ownership in the Company
in order to increase his incentive and personal interest in the welfare of the
Company.
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements herein set forth, the parties hereby mutually covenant and
agree as follows:
1. Grant of Option. Subject to the terms and conditions of the Plan
and this Agreement, the Company grants to the Optionee an option (the
"Option") to purchase from the Company all or any part of the aggregate amount
of Thirty Thousand (30,000) shares of Common Stock (the "Optioned Shares").
The Option is intended to constitute a non-qualified stock option and shall
not be treated as an incentive stock option within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended.
2. Option Price. The price to be paid for the Optioned Shares shall
be $8.75 per share, which is equal to 100% of the last sale price for the
Common Stock on the Nasdaq National Market System on the trading date next
preceding the date that the Optionee commenced employment with the Company.
3. Exercisability and Termination of Option. Except as otherwise
provided herein, the Option may be exercised only while the Optionee is an
employee of either the Company or an affiliate of the Company and only if the
Optionee has been continuously so employed since the date of grant of the
Option. Subject to the vesting provisions of this Paragraph 3 and Paragraph
6, the Option may be exercised by the Optionee in whole, or in part from time
to time, during the 10-year period beginning on the date hereof, and ending on
November 6th, 2006.
Notwithstanding the above provisions of this Paragraph 3 regarding
the exercisability of the Option, Optionee shall not have the right to
exercise the Option to any extent until the third (3rd) anniversary of the
date of this Agreement, at which time Optionee shall have the fully vested
right to exercise all of the Optioned Shares from and after such third
anniversary date. Such three-year period is hereinafter referred to as the
"Period of Vesting" and each such year during such period is referred to as an
"Employment Year." In the event of a Change of Control (as defined in
Paragraph 10(b) of the Employment Agreement), the Option shall be
automatically fully vested and exercisable, subject to forfeiture to the
extent provided in Paragraph 10(c) of the Employment Agreement.
4. Manner of Exercise and Payment. Subject to the provisions of
Paragraphs 3 and 6 hereof, the Option may be exercised only by written notice
to the Company, served upon the Secretary of the Company at its office at
South Milwaukee, Wisconsin, specifying the number of shares in respect to
which the Option is being exercised. Subject to the provisions of this
Agreement, the notice of exercise must be accompanied by full payment of the
option price of the shares being purchased (a) in cash or by certified check
or bank draft; (b) by tendering previously acquired shares of Common Stock
(valued at their "fair market value" as determined in the manner provided
below); or (c) by any combination of the means of payment set forth in
subparagraphs (a) and (b). For purposes of this Paragraph 4, the "fair market
value" of a share of Common Stock shall be equal to the last per share sale
price of such Common Stock as reflected on the Nasdaq National Market System
on the trading day next preceding the date of exercise; provided, however,
that if the principal market for the shares of Common Stock is then a national
securities exchange, the "fair market value" shall be the closing price per
share for the Common Stock on the principal securities exchange on which the
Common Stock is traded on the trading date next preceding the date of
exercise, or, in either case above, if no trading occurred on the trading date
next preceding the exercise date, then the "fair market value" per share of
Common Stock shall be determined with reference to the next preceding date on
which the Common Stock was traded. For purposes of subparagraphs (b) and (c)
above, the term "previously acquired shares of Common Stock" shall only
include Common Stock owned by the Optionee prior to the exercise of the Option
and shall not include shares of Common Stock which are being acquired pursuant
to the exercise of the Option. No shares shall be issued until full payment
therefor has been made.
5. Nontransferability of the Option. The Option shall not be
assignable, alienable, saleable or transferable by the Optionee other than by
will or the laws of descent and distribution; provided, however, that the
Optionee shall be entitled, in the manner provided in Paragraph 9 hereof, to
designate a beneficiary to exercise his rights, and to receive any shares of
Common Stock issuable, with respect to the Option upon the death of the
Optionee. The Option may be exercised during the lifetime of the Optionee
only by the Optionee or, if permitted by applicable law, the Optionee's
guardian or legal representative.
6. Exercisability After Termination of Employment.
(a) Death or Disability; Retirement. In the event the Optionee dies
while he is in the employ of the Company or any affiliate or if his employment
is terminated by reason of his Retirement (as hereinafter defined) or by
reason of his Disability (as hereinafter defined) the Option, to the extent
not theretofore exercised, may be exercised in full as follows: (i) by the
legal representative of the Optionee (who for purposes of this Agreement may
be the Optionee's beneficiary as designated pursuant to Paragraph 9) at any
time within twelve (12) months after the date of the Optionee's death while in
the employ of the Company or any affiliate; or (ii) by the Optionee or his
legal representative or guardian at any time within twelve months after the
termination of the Optionee's employment by reason of Retirement (as
hereinafter defined) or by reason of his Disability (as hereinafter defined),
but in no event under subparagraphs (i) or (ii) later than ten years after the
date of grant of the Option. For purposes of this Agreement, Optionee's
employment shall be deemed to have been terminated by reason of his
"Retirement" if his employment is terminated voluntarily or involuntarily for
any reason other than Cause (as hereinafter defined) on or after attaining age
65 or, voluntarily by Optionee with the consent of the Board of Directors of
the Company after not less than five (5) years of service with the Company,
which consent will not be unreasonably withheld. For purposes hereof,
"Disability" shall mean "Disability" as defined in Paragraph 9(c) of the
Employment Agreement between Optionee and the Company dated the date hereof
("Employment Agreement").
(b) Change of Control. In the event of a Qualifying Termination of
Optionee's employment in connection with a Change of Control (as defined in
Paragraph 10(b) of the Employment Agreement), the Option shall be
automatically fully vested and Optionee shall have the right at any time
within the three (3) months after the date of Optionee's Qualifying
Termination, but in no event later than ten years after the grant of the
Option, to exercise the Option in whole or in part, provided that the
accelerated vesting of the Option shall be subject to forfeiture to the extent
provided in Paragraph 10(c) of the Employment Agreement.
(c) Termination for Cause. In the event the Optionee's employment is
terminated for Cause (as hereinafter defined), the Option, to the extent not
theretofore exercised, shall immediately terminate upon such termination of
employment. For purposes of this Agreement, the definition of the term Cause
shall mean "Cause" as defined in Section 9(e) of the Employment Agreement.
(d) Other. In the event that the Optionee is discharged or leaves the
employ of the Company and its affiliates for any reason (other than the death
or Disability of the Optionee, the Retirement of the Optionee as defined in
Paragraph 6(a) hereof, a Qualifying Termination in connection with a Change of
Control, or the termination of the Optionee for Cause), the Option, to the
extent not theretofore exercised, may be exercised to the extent vested by the
Optionee or by his legal representative or guardian at any time within three
(3) months after the date of termination of employment upon the tender to the
Company, in cash or its equivalent, of the full purchase price, but in no
event later than ten years after the date of grant of the Option.
7. Tax Withholding. The Company may deduct and withhold from any
cash otherwise payable to the Optionee (whether payable as salary, bonus or
other compensation) such amount as may be required for the purpose of
satisfying the Company's obligation to withhold Federal, state or local taxes.
Further, in the event the amount so withheld is insufficient for such purpose,
the Company may require that the Optionee pay to the Company upon its demand
or otherwise make arrangements satisfactory to the Company for payment of such
amount as may be requested by the Company in order to satisfy its obligation
to withhold any such taxes.
8. Capital Adjustments Affecting the Common Stock. The number of
Optioned Shares subject hereto and the related per share exercise price shall
be subject to adjustment in accordance with Section 4(b) of the Plan.
9. Designation of Beneficiary. (a) The person whose name appears on
the signature page hereof after the caption "Beneficiary" or any successor
designated by the Optionee in accordance herewith (the person who is the
Optionee s beneficiary at the time of his death is herein referred to as the
"Beneficiary") shall be entitled to exercise the Option, to the extent it is
exercisable, after the death of the Optionee. The Optionee may from time to
time revoke or change his beneficiary without the consent of any prior
beneficiary by filing a new designation with the Committee. The last such
designation received by the Committee shall be controlling; provided, however,
that no designation, or change or revocation thereof, shall be effective
unless received by the Committee prior to the Optionee's death, and in no
event shall any designation be effective as of a date prior to such receipt.
(b) If no such Beneficiary designation is in effect at the time of the
Optionee's death, or if no designated Beneficiary survives, the Optionee or if
such designation conflicts with law, the Optionee's estate acting through his
legal representative, shall be entitled to exercise the Option, to the extent
it is exercisable after the death of the Optionee. If the Committee is in
doubt as to the right of any person to exercise the Option, the Company may
refuse to recognize such exercise, without liability for any interest or
dividends on the Optioned Shares, until the Committee determines the person
entitled to exercise the Option, or the Company may apply to any court of
appropriate jurisdiction and such application shall be a complete discharge of
the liability of the Company therefor.
10. Transfer Restriction; Registration. The shares to be acquired
upon exercise of the Option may not be sold or offered for sale except
pursuant to an effective registration statement under the Securities Act of
1933, as amended, or in a transaction which, in the opinion of counsel for the
Company, is exempt from the registration provisions of said Act. The Company
will use its best efforts to file a registration statement on Form S-8 at the
Company's expense for the Optioned Shares within 120 days after the date on
which the shareholders of the Company approve the Plan. In addition to the
limitations described above, the Optionee hereby further agrees that, to the
extent necessary to comply with Rule 16b-3 under the Securities Exchange Act
of 1934, as amended, the Optioned Shares subject to this Agreement may not be
sold or otherwise transferred prior to the date six months after the date on
which the Plan was approved by the Shareholders of the Company.
11. Status of Optionee. The Optionee shall not be deemed for any
purposes to be a shareholder of the Company with respect to any of the
Optioned Shares except to the extent that the Option shall have been exercised
with respect thereto, the shares shall have been fully paid, and a stock
certificate issued therefor. Neither the Plan nor the Option shall confer
upon the Optionee any right to continue in the employ of the Company, nor to
interfere in any way with the right of the Company to terminate the employment
of the Optionee at any time.
12. Powers of the Company Not Affected. The existence of the Option
shall not affect in any way the right or power of the Company or its
shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company s capital structure or its
business, or any merger or consolidation of the Company, or any issuance of
bonds, debentures, preferred or prior preference stock ahead of or affecting
the Common Stock or the rights thereof, or dissolution or liquidation of the
Company, or any sale or transfer of all or any part of the Company's assets or
business or any other corporate act or proceeding, whether of a similar
character or otherwise.
13. Interpretation by Committee. As a condition of the granting of
the Option, the Optionee agrees, for himself and his legal representatives or
guardians, that this Agreement shall be interpreted by the Committee and that
any interpretation by the Committee of the terms of this Agreement and any
determination made by the Committee pursuant to this Agreement shall be final,
binding and conclusive.
14. Execution in Counterparts. This Agreement may be executed by the
parties hereto in counterparts, each of which shall be deemed to be an
original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
day and year first above written.
BUCYRUS INTERNATIONAL, INC.
("Company")
By: /s/W. R. Hildebrand
Title: President & CEO
/s/Daniel J. Smoke
DANIEL J. SMOKE, Optionee
Beneficiary: Mary V. Vincent
Address of Beneficiary:745 Spyglass Hill
Holland, MI 49424
Beneficiary s Tax Identification
No.: ###-##-####
EXHIBIT 10.40
1996 FORM 10-K
BUCYRUS INTERNATIONAL, INC.
1996 EMPLOYEES' STOCK INCENTIVE PLAN
STOCK APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT, made and entered into as of this 7th day of November,
1996, by and between BUCYRUS INTERNATIONAL, INC., a Delaware corporation (the
"Company"), and DANIEL J. SMOKE (the "Grantee").
WITNESSETH:
WHEREAS, the Company has adopted the 1996 Employees' Stock Incentive
Plan (the "Plan"), the terms of which, to the extent not stated herein, are
specifically incorporated by reference in this Agreement; and
WHEREAS, one of the purposes of the Plan is to permit the granting of
stock appreciation rights ("Stock Appreciation Rights") with respect to shares
of the Company's common Stock, $.01 par value (the "Common Stock"), to certain
key employees of the Company and its affiliates; and
WHEREAS, the Grantee is now employed by the Company or an affiliate of
the Company in a key capacity, and the Company desires the Grantee to remain
in such employ, and to receive incentive compensation based on the
appreciation in value of the stock of the Company in order to increase his
incentive and personal interest in the welfare of the Company.
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements herein set forth, the parties hereby mutually covenant and
agree as follows:
1. Grant of Stock Appreciation Rights. Subject to the terms and
conditions of the Plan and this Agreement, the Company grants to the Grantee
Stock Appreciation Rights (as defined in the Plan) with respect to the
aggregate amount of Fifty Thousand (50,000) shares of Common Stock (the "SAR
Shares").
2. Grant Price. The grant price for the SAR Shares shall be $8.75
per share, which is equal to 100% of the last sale price for the Common Stock
on the Nasdaq National Market System on the trading date next preceding the
date Grantee commenced employment with the Company.
3. Exercisability and Termination of Stock Appreciation Rights.
Except as otherwise provided herein, the Stock Appreciation Rights may be
exercised only while the Grantee is an employee of either the Company or an
affiliate of the Company and only if the Grantee has been continuously so
employed since the date of grant of the Stock Appreciation Rights. Subject to
the vesting provisions of this Paragraph 3 and Paragraph 6, the Stock
Appreciation Rights may be exercised by the Grantee in whole, or in part from
time to time, during the 10-year period beginning on the date hereof, and
ending on November 6th, 2006.
Notwithstanding the above provisions of this Paragraph 3 regarding
the exercisability of the Stock Appreciation Rights, Grantee shall not have
the right to exercise the Stock Appreciation Rights hereunder until the sixth
anniversary of the date of this Agreement unless portions of the Stock
Appreciation Rights shall vest sooner based on the Company's achievement of
EBITDA (as hereinafter defined) goals for fiscal years ending prior to the
third, fourth and/or fifth anniversaries of the date of this Agreement,
pursuant to the provisions of this Paragraph 3.
The portion of Stock Appreciation Rights which shall vest sooner
than the sixth anniversary of the date of this Agreement shall be thirty-three
and one-third percent (33 1/3%) of the total number of SAR Shares on each of
the third, fourth and fifth anniversaries of the date of this Agreement if the
Company shall have achieved the EBITDA goal for the fiscal year of the Company
ending immediately prior to such anniversary date, as set forth in Schedule I
attached hereto. Such vesting shall occur if such EBITDA goal is achieved
notwithstanding the termination of Grantee's employment with the Company (i)
on or after the last day of the fiscal year to which such goal relates but
prior to the determination of EBITDA for such year or (ii) as of an
anniversary of the Employment Agreement pursuant to the second sentence of
Section 9(a) of the Employment Agreement. If such EBITDA goal for any fiscal
year is not achieved, the shares of SAR Shares which would otherwise have been
vested shall continue to be unvested until the vesting date hereinafter
specified, notwithstanding that an EBITDA goal may be met for a subsequent
fiscal year within the Period of Vesting (as hereinafter defined). For
purposes hereof, "EBITDA" shall mean the Company's earnings before interest,
taxes, depreciation and amortization determined in accordance with generally
accepted accounting principles in a manner consistent with the Company's past
practice. The determination of EBITDA for any fiscal year shall be made by
the firm of certified public accountants engaged to audit the Company's
financial statements for such fiscal year. In the event the Company shall
fail to achieve the EBITDA goal for any such year and the Board of Directors
of the Company shall determine that such failure was primarily due to
circumstances beyond the control of the Grantee, the Board of Directors shall
direct that the number of SAR Shares which would have vested if such EBITDA
goal had been achieved shall be vested; provided, however, that the
determination of the Board of Directors with respect to the primary cause of
such failure shall be final and nonappealable by the Grantee. To the extent
any SAR Shares have not been previously vested pursuant to the provisions of
this Paragraph 3, such SAR Shares shall be fully vested upon the sixth
anniversary of the date of this Agreement. Such six-year period is herein
referred to as the "Period of Vesting."
In the event of a Change of Control (as defined in Paragraph 10(b)
of the Employment Agreement), the Stock Appreciation Rights shall be
automatically fully vested and exercisable, subject to forfeiture to the
extent provided in Paragraph 10(c) of the Employment Agreement.
4. Manner of Exercise. Subject to the provisions of Paragraphs 3 and
6 hereof, the Stock Appreciation Rights may be exercised only by written
notice to the Company, served upon the Secretary of the Company at its office
at South Milwaukee, Wisconsin, specifying the number of shares in respect to
which the Stock Appreciation Rights are being exercised. In the discretion of
the Company, as determined by the Committee or the Board of Directors at the
time of exercise, the amount payable to Grantee by reason of the exercise of
the Stock Appreciation Rights, determined in accordance with the provisions of
the Plan, may be settled in cash or Common Stock or any combination of them.
5. Nontransferability of the Stock Appreciation Rights. The Stock
Appreciation Rights shall not be assignable, alienable, saleable or
transferable by the Grantee other than by will or the laws of descent and
distribution; provided, however, that the Grantee shall be entitled, in the
manner provided in Paragraph 9 hereof, to designate a beneficiary to exercise
his rights, and to receive any amounts payable with respect to the Stock
Appreciation Rights upon the death of the Grantee. The Stock Appreciation
Rights may be exercised during the lifetime of the Grantee only by the Grantee
or, if permitted by applicable law, the Grantee's guardian or legal
representative.
6. Exercisability After Termination of Employment.
(a) Death or Disability; Retirement. In the event the Grantee dies
while he is in the employ of the Company or any affiliate or if his employment
is terminated by reason of his Retirement (as hereinafter defined) or by
reason of his Disability (as hereinafter defined) the Stock Appreciation
Rights, to the extent not theretofore exercised, may be exercised in full as
follows: (i) by the legal representative of the Grantee (who for purposes of
this Agreement may be the Grantee's beneficiary as designated pursuant to
Paragraph 9) at any time within twelve (12) months after the date of the
Grantee s death while in the employ of the Company or any affiliate; or (ii)
by the Grantee or his legal representative or guardian at any time within
twelve months after the termination of the Grantee's employment by reason of
Retirement (as hereinafter defined) or by reason of his Disability (as
hereinafter defined), but in no event under subparagraphs (i) or (ii) later
than ten years after the date of grant of the Stock Appreciation Rights. For
purposes of this Agreement, Grantee's employment shall be deemed to have been
terminated by reason of his "Retirement" if his employment is terminated
voluntarily or involuntarily for any reason other than Cause (as hereinafter
defined) on or after attaining age 65 or, voluntarily by Employee with the
consent of the Board of Directors of the Company after not less than five (5)
years of service with the Company, which consent will not be unreasonably
withheld. For purposes hereof, "Disability" shall mean "Disability" as
defined in Paragraph 9(c) of the Employment Agreement between Grantee and the
Company dated the date hereof ("Employment Agreement").
(b) Change of Control. In the event of a Qualifying Termination of
Grantee's employment in connection with a Change of Control (as defined in
Paragraph 10(b) of the Employment Agreement), the Stock Appreciation Rights
shall be automatically fully vested and Grantee shall have the right at any
time within the three (3) months after the date of Grantee's Qualifying
Termination, but in no event later than ten years after the grant of the Stock
Appreciation Rights, to exercise the Stock Appreciation Rights, provided that
the accelerated vesting of the Stock Appreciation Rights shall be subject to
forfeiture to the extent provided in Paragraph 10(c) of the Employment
Agreement.
(c) Termination for Cause. In the event the Grantee's employment is
terminated for Cause (as hereinafter defined), the Stock Appreciation Rights,
to the extent not theretofore exercised, shall immediately terminate upon such
termination of employment. For purposes of this Agreement, the definition of
the term Cause shall mean "Cause" as defined in Section 9(e) of the Employment
Agreement.
(d) Other. In the event that the Grantee is discharged or leaves the
employ of the Company and its affiliates for any reason (other than the death
or Disability of the Grantee, the Retirement of the Grantee as defined in
Paragraph 6(a) hereof, a Qualifying Termination in connection with a Change of
Control, or the termination of the Grantee for Cause), the Stock Appreciation
Rights, to the extent not theretofore exercised, may be exercised to the
extent vested by the Grantee or by his legal representative or guardian at any
time within three (3) months after the date of termination of employment, but
in no event later than ten years after the date of grant of the Stock
Appreciation Rights.
7. Tax Withholding. The Company may deduct and withhold from any
cash otherwise payable to the Grantee (whether payable as settlement for the
exercise of the Stock Appreciation Rights, salary, bonus or other
compensation) such amount as may be required for the purpose of satisfying the
Company's obligation to withhold Federal, state or local taxes. Further, in
the event the amount so withheld is insufficient for such purpose, the Company
may require that the Grantee pay to the Company upon its demand or otherwise
make arrangements satisfactory to the Company for payment of such amount as
may be requested by the Company in order to satisfy its obligation to withhold
any such taxes.
8. Capital Adjustments Affecting the Common Stock. The number of SAR
Shares subject hereto and the related per share exercise price shall be
subject to adjustment in accordance with Section 4(b) of the Plan.
9. Designation of Beneficiary. (a) The person whose name appears on
the signature page hereof after the caption "Beneficiary" or any successor
designated by the Grantee in accordance herewith (the person who is the
Grantee's beneficiary at the time of his death is herein referred to as the
"Beneficiary") shall be entitled to exercise the Stock Appreciation Rights to
the extent they are exercisable, after the death of the Grantee. The Grantee
may from time to time revoke or change his beneficiary without the consent of
any prior beneficiary by filing a new designation with the Committee. The
last such designation received by the Committee shall be controlling;
provided, however, that no designation, or change or revocation thereof, shall
be effective unless received by the Committee prior to the Grantee's death,
and in no event shall any designation be effective as of a date prior to such
receipt.
(b) If no such Beneficiary designation is in effect at the time of the
Grantee's death, or if no designated Beneficiary survives, the Grantee or if
such designation conflicts with law, the Grantee's estate acting through his
legal representative, shall be entitled to exercise the Stock Appreciation
Rights, to the extent they are exercisable after the death of the Grantee. If
the Committee is in doubt as to the right of any person to exercise the Stock
Appreciation Rights, the Company may refuse to recognize such exercise,
without liability for any changes in value of the SAR Shares, until the
Committee determines the person entitled to exercise the Stock Appreciation
Rights, or the Company may apply to any court of appropriate jurisdiction and
such application shall be a complete discharge of the liability of the Company
therefor.
10. Restriction Exercise. In addition to other limitations on
exercise of the Stock Appreciation Rights provided hereunder, Grantee further
agrees that, to the extent necessary to comply with Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, the Stock Appreciation Rights
provided in this Agreement may not be exercised prior to the date six months
after the date on which the Plan was approved by the shareholders of the
Company.
11. Status of Grantee. The Grantee shall not be deemed for any
purposes to be a shareholder of the Company with respect to any of the SAR
Shares or the Stock Appreciation Rights. Neither the Plan nor the Stock
Appreciation Rights shall confer upon the Grantee any right to continue in the
employ of the Company, nor to interfere in any way with the right of the
Company to terminate the employment of the Grantee at any time.
12. Powers of the Company Not Affected. The existence of the Stock
Appreciation Rights shall not affect in any way the right or power of the
Company or its shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or
any issuance of bonds, debentures, preferred or prior preference stock ahead
of or affecting the Common Stock or the rights thereof, or dissolution or
liquidation of the Company, or any sale or transfer of all or any part of the
Company's assets or business or any other corporate act or proceeding, whether
of a similar character or otherwise.
13. Interpretation by Committee. As a condition of the granting of
the Stock Appreciation Rights, the Grantee agrees, for himself and his legal
representatives or guardians, that this Agreement shall be interpreted by the
Committee and that any interpretation by the Committee of the terms of this
Agreement and any determination made by the Committee pursuant to this
Agreement shall be final, binding and conclusive.
14. Execution in Counterparts. This Agreement may be executed by the
parties hereto in counterparts, each of which shall be deemed to be an
original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
day and year first above written.
BUCYRUS INTERNATIONAL, INC.
("Company")
By: /s/W. R. Hildebrand
Title: __________________________________
/s/Daniel J. Smoke
DANIEL J. SMOKE, Grantee
Beneficiary: Mary V. Vincent
Address of Beneficiary:745 Splyglass Hill
Holland, MI 49424
Beneficiary's Tax Identification
No.: ###-##-####
<PAGE>
SCHEDULE I
to
STOCK APPRECIATION RIGHTS AGREEMENT
Dated November __, 1996
EBITDA GOALS
Fiscal Year
Ending EBITDA Goal
1998 $23,946,000
1999 $29,203,000
2000 $31,453,000
EXHIBIT 10.41
1996 FORM 10-K
B.O.D. APPROVED: 2/29/96
BY: COMPENSATION COMMITTEE
BUCYRUS-ERIE COMPANY
ANNUAL MANAGEMENT INCENTIVE PLAN SUMMARY
FISCAL 1996
I. OBJECTIVES:
The objectives of the Annual Incentive Plan (the "Plan") are
to:
1) attract, retain and motivate senior executives and other
key management personnel of Bucyrus-Erie Company (the
"Company");
2) provide direct incentives for participants in the planning
process to achieve the Company's strategic and financial
goals, and thereby enhance shareholder value;
3) emphasize "Pay-For-Performance" by having a meaningful
portion of participants' total compensation at risk;
4) inspire participants to pursue innovatively and
aggressively individual, team, Subsidiary, Division and
Company goals, and
5) include all Company personnel (domestic and international,
regardless of position to be eligible to share in a
portion of the Management Incentive Program (Profit
Sharing).
II. ADMINISTRATION:
The Plan is administered by the Compensation Committee (the
"Committee") of the Board of Directors.
The Committee may issue such rules and guidelines as it deems
necessary for administration of the Plan. All actions of the
Committee will be subject to the approval of the Board of
Directors.
<PAGE>
III. ELIGIBILITY:
The following employees are potentially eligible to participate
in the Plan;
o All hourly employees (domestic, international, union,
non-union).
o All salaried employees, exempt or non-exempt.
o Employees reporting directly to a Subsidiary or
Division General Manager or equivalent.
o All Corporate Managers/Supervisors or staff personnel
who are participants in the Business Plan Process and
have completed Standards of Performance (SOP's) -
Form - C.
IV. PARTICIPATION:
As part of the Business Plan and Budgeting Process, the
Corporate Operating Committee (C.O.C.) will select and submit
for approval, those who will participate in the Business Plan
Process. Final approval will be by the Chief Executive Officer
(C.E.O.)
V. TARGET INCENTIVE AWARDS:
As part of the Business Plan, the C.E.O. will establish for
each individual a "Target Incentive Award" by determining a
multiplier to be used in conjunction with the individual's base
salary. The multipliers (and therefore the "Target Incentive
Award") will vary according to the nature and extent of the
participant's ability to affect the attainment of the Company's
strategy, goals and objectives. For non-participants in the
Business Plan Process (as defined), a bonus pool based upon a
percentage of base salaries will be established for various
levels of performance and categories of personnel.
VI. PERFORMANCE OBJECTIVES:
As part of the Business Plan Process, "Performance Objectives"
will be established by the Committee for the following areas:
o Overall Corporate performance.
o Subsidiary or Division performance.
o Individual performance objectives.
<PAGE>
VI. PERFORMANCE OBJECTIVES: (Continued)
Coincident with the establishment of Performance Objectives,
the Committee will establish for each participant an
apportionment from these three areas based upon an appraisal of
the relative impact of the participant's position on the
Corporate, Subsidiary/Division and Individual Performance
Objectives. In addition, the apportionment will be influenced
by the Committee's desire to emphasize particular Performance
Objectives. These Performance Objectives will be subject to
final approval of both the C.E.O. and B.O.D.
FISCAL 1996 PERFORMANCE OBJECTIVES:
For Fiscal Year 1996, the C.O.C. has established and the Board of
Directors has approved the following Performance Objectives.
Corporate:
o Corporate-wide earnings before depreciation, amortization,
interest and taxes; (Operating Cash Flow - O.C.F.) and
o Free Cash Flow after Capital Expenditures (O.C.F. less
CapEx).
Subsidiary/Division:
o Corporate-wide earnings before depreciation, amortization,
interest and taxes; (Operating Cash Flow - O.C.F.)
o Subsidiary/Division Operating Cash Flow (after Corporate
allocations and before interest and taxes).
o Free Cash Flow after Capital Expenditures (O.C.F. less
CapEx) Subsidiary/Division-specific Objectives.
Individual: (optional)
o Standard of Performance Objectives and goals based upon
individual project results or personal development goals,
as agreed upon by the participant and his/her supervisor.
<PAGE>
VI. PERFORMANCE OBJECTIVES: (Continued)
For Fiscal 1996, the Plan Weighting Table below represents the
minimum percentage allocations for O.C.F. performance for
participants in the Business Plan Process.
CORPORATE SUBSIDIARY INDIVIDUAL
PARTICIPANTS PLAN PLAN PLAN
(% OR LESS)
President
& C.E.O. 70% 20% 10%
Corporate
Vice Presidents/
Directors 60% 40%
Subsidiary/Division
General Managers/
Equivalent 40%(1) 60%(1) 40%
Direct reports to above:
- Corporate 40% 60%
- Subsidiary/Division 40%(2) 60%(2) 40%
- Other corporate staff 40% 60%
- Other Subsidiary/
Division Staff - 40% 60%
All other Plan Participants
- Corporate 90% N/A
- Subsidiary/Division 90% N/A
____________________
(1) Equals 60% combined.
(2) Equals 60% combined.
<PAGE>
VII. PERFORMANCE:
Managers having responsibility for more than one Business
Unit/Function will have the O.C.F. (Operating Cash Flow) and
Performance Objectives of each Unit/Function combined to
determine their Base Target Multipliers.
For Corporate and Subsidiary/Division Objectives, the
following award multipliers apply:
DEGREE OF
ACHIEVEMENT OF AWARD
PERFORMANCE PERFORMANCE PAYMENT
OBJECTIVE MEASUREMENT MULTIPLIER
150% Maximum 2.00
100% Target (goal) 1.00
90% Threshold .33
<90% Unacceptable 0
IMPORTANT
Below 90% achievement level for O.C.F., the Compensation
Committee has the discretion to not pay any individual
performance incentives under either the Corporate or
Subsidiary/Division Plan, if in its judgement such payment
would have an adverse impact on the Corporation.
NOTE: For levels of achievement which are below Maximum and
above Threshold and which fall between the levels listed above,
the multiplier will be prorated accordingly.
Example: A level of achievement of 112.5% of a Corporate or
Subsidiary/Division Objective would yield a multiplier
of 1.25. Achievement of 95% of these Objectives would
yield a multiplier of 0.665.
VIII. PAYMENT OF AWARDS EARNED:
Payment of each participant's award will be made in cash as
soon as possible following the determination of the amount of
the award earned (but no later than March 15, 1997), less any
amounts required to be withheld for taxes. The Compensation
Committee has the discretion to authorize quarterly payouts (in
arrears) of bonuses earned.
<PAGE>
IX. TERMINATION OF EMPLOYMENT:
If a participant ceases to be employed by the Company before
payment of his/her award with respect to a fiscal year by
reason of death, disability or retirement, his/her award will
be reduced pro-rata for the number of weeks before the end of
the fiscal year, if any, in which the participant's employment
terminates. If the participant's employment with the Company
ceases for any other reason prior to payment of the award, no
award will be paid. Also, an employee must be employed not
less than six months as of 12/31/96 to be eligible to
participate on a pro-rata basis.
X. MISCELLANEOUS:
The Plan will be unfunded, and all awards will be paid from the
general assets of the Company.
By adopting this Plan, the Company is not precluded from
adopting other forms of incentive compensation.
The establishment of the Plan or participation by an employee
in the Plan will not entitle an employee to continue in the
employ of the Company or affect the Company's right to
terminate at will the employment of an employee.
Amounts payable under the Plan are not subject to alienation,
in any manner whatsoever, by participants.
This plan does not supersede any contractual obligations
previously made between the Company and any of its key
employees.
A participant's performance must be satisfactory, regardless of
Company performance, before he or she may be granted an
incentive award.
XI. AMENDMENT:
The Compensation Committee may amend or terminate the Plan at
any time. No amendment or termination will affect the right of
a participant to payment of amounts which are determined prior
to such amendment or termination.
XII. EFFECTIVE DATE:
The Plan will be effective as of January 1, 1996, and will
continue in effect until terminated by the Compensation
Committee of the Board of Directors.
<PAGE>
XIII. PLAN ALLOCATION:
Distribution of the allocation of the Annual Management
Incentive Plan shall be generally as follows: (Determined
primarily by number of employees/base salaries, and
contribution levels)):
20-50% A. Management in the Corporate Business Plan Process
with S.O.P.'s.
20-40% B. Management in the Subsidiary/Division Business
Plan Process with S.O.P.
3-10% C. Salaried exempt and non-exempt
(domestic/international).
3-10% D. Hourly personnel (domestic/international).
XIV. SPECIAL RECOGNITION AWARDS:
The Plan includes a formalized program to reward outstanding
achievements and contributions to the success of the Company by
individual employees who are not eligible participants of the
Management Incentive Compensation Plan.
All non-union exempt and non-exempt employees are eligible to
be candidates for these special awards.
At the conclusion of each fiscal year, a General Manager,
Subsidiary/Division Manager or Corporate Supervisor/Manager can
recommend an employee for special recognition to the
Compensation Committee. Awards of one to four weeks salary can
be granted depending on the Committee's evaluation. This
program is designed to reward special performance or efforts
for 1%-2% of the eligible workforce outside of the Management
Incentive Compensation Plan.
XV. AWARD CALCULATION:
The following is the manner in which incentive awards will be
calculated.
STEP 1 -- List salary as of last day of the fiscal year.
STEP 2 -- Determine the individual's assigned Target Award
Incentive multiplier (refer to paragraph V).
STEP 3 -- Multiply (resultants of Step 1 and Step 2).
STEP 4 -- Determine the degree of achievement of the
Corporate and Subsidiary/Division Performance
Objectives and from this determine the award
payment multiplier (refer to paragraph VII).
STEP 5 -- Multiply (resultants of Step 3 and Step 4).
STEP 6 -- This is the total earned award.
<PAGE>
AWARD CALCULATION EXAMPLE:
J. Smith has a salary of $30,000. He/she has been assigned a Target Incentive
Award multiplier of .035 by the Committee. At the end of the year, results
were at Maximum or 150% of target.
ON-TARGET INCENTIVE AWARD
Individual's Salary X Individual's Personal Multiplier = Incentive if all
areas "on-target".
$30,000 X .035 = $1,050 (NOTE: This is used as the base in all incentive
calculations.)
INDIVIDUAL AWARD PORTION
$1,050 X 2.0 (award payment multiplier) = $2,100.00 $2,100.00
TOTAL INCENTIVE AWARD $2,100.00
<PAGE>
GRAPH - DESCRIPTION:
Graph showing relationship between INCENTIVE BONUS POOL ($MM) (shown on X-axis
with range of values $0 to $4.0M) and E.B.I.T.D.A. ($MM) (shown on Y-axis with
range of values $16.5M to $29.5M).
Three plotted points are as follows: Point A -- Incentive Bonus Pool of
$0.363M corresponds to $16.5MM E.B.I.T.D.A.; Point B -- Incentive Bonus Pool
of $1.1M corresponds to $18.4MM BUDGET E.B.I.T.D.A.; Point C -- Incentive
Bonus Pool of $2.2M corresponds to $27.6MM E.B.I.T.D.A. Straight lines drawn
from Point A to Point B, and from Point B to Point C. Vertical line drawn
above Point C illustrates maximum Incentive Bonus Pool of $2.2M.
Narrative on table is as follows: "FISCAL 1996 PRELIMINARY MANAGEMENT
INCENTIVE PLAN GROSS PLAN OF $19.5MM E.B.I.T.D.A. ACCRUES $1.1MM OF INCENTIVE
FOR $18.4MM E.B.I.T.D.A. NET FORM-C PARTICIPANTS PAID ON BASE SALARY ONLY"
Legend below table is as follows: "NOTE: E.B.I.T.D.A. EXCLUDES RESTRUCTURING
EXPENSES, EXTRAORDINARY GAINS, AND ACCOUNTING CHANGES."
EXHIBIT 13
1996 FORM 10-K
1996
ANNUAL
REPORT
[PHOTO: BUCYRUS INTERNATIONAL, INC'S.
39R BLAST HOLE DRILL IN ACTION AT
KENNECOTT UTAH COPPER CORPORATION'S
BINGHAM CANYON MINE IN UTAH]
[Company Logo:
"BUCYRUS" framed above
by spoil piles and below Bucyrus International, Inc.
by open pit benches.]
<PAGE>
(Picture - Company Logo: The 39R made its debut at MinExpo in
"BUCYRUS" framed above by September of 1996. MinExpo is the pre-
spoil piles and below by miere trade event in the mining industry,
open pit benches.) and the 39R received considerable
attention at the show because of its
unprecedented design features. Blast hole
At the 1996 Annual Shareholder's drills are used to drill holes in a
Meeting our company's name was pattern within a designated area of the
officially changed to Bucyrus mine. These holes can be anywhere from
International, Inc. Because 35 to 60 feet deep and 9 to 12 1/4" wide
70 percent of our business is depending on the site requirements.
outside of North America, the Explosive material is then placed in the
new name more accurately holes and the area is blasted resulting
reflects our worldwide focus. in fragmented material that is removed
With nine international and further processed for copper and
subsidiaries and offices other valuable minerals.
throughout the world, our
name is widely recognized The design of the innovative 39R was based
and well respected. on the results of an in-depth customer
survey. Bucyrus engineers were challenged
In conjunction with the name to design every feature of the drill to
change, a new, more meaningful meet two key criteria: increased
logo was introduced that productivity and decreased maintenance. As
graphically depicts the a result, the 39R is the most maneuverable
industries served by Bucyrus drill in the market with a propel speed of
equipment. The name Bucyrus 2 miles per hour, 25 percent gradeability,
is framed on the top by spoil and the ability to propel with the mast
piles representative of coal, raised or lowered. This means the 39R
phosphate and bauxite mining can move from hole to hole in the drill
operations. Below the name pattern faster than any other drill
Bucyrus are open pit mine available today. Additionally, it is the
benches symbolic of copper only drill that is capable of infinitely
and iron ore mining variable angle hole drilling from -15 to
activities. +30 degrees. With these enhanced angle
hole drilling capabilities, drilling close
to the highwall is no longer a challenge
for our customers.
Front cover Reduction of maintenance was addressed in
depicts Bucyrus every aspect of machine design. For
International, example, the inverted triangular mast
Inc.'s 39R [Picture incorporates greater torsional stiffness
Blast Hole Drill of front and withstands the dynamic loads
in action at cover.] experienced when propelling over rough
Kennecott Utah terrain. No other drill can claim this
Copper Corporation's unique design feature.
Bingham Canyon
Mine in Utah. The 39R is another example of Bucyrus
International's unprecedented expertise in
developing products to meet market demand.
<PAGE>
In 1996, Compania Minera Dona
Ines de Collahuasi S.C.M. ordered
five 495BI electric mining shovels
and five 49RIII blast hole drills to
mine copper in the mountains of
northern Chile.
These machines will develop the
largest known copper deposit in [PICTURE]
the world. The annual production
will average 330,000 tonnes of
copper in concentrate and 50,000 495BI digging overburden
tonnes of cathode copper. in a copper mine.
Bucyrus Chile Limitada, a subsidiary
of Bucyrus International, Inc., will
oversee the erection of all ten
shovels and drills. Collahuasi has
also chosen Bucyrus Chile Limitada to
handle the maintenance and repair
of the equipment with a five year
contract.
The first 395BIII, mining iron ore, is
located 25 km northwest of Vallenar
in the Atacama region of Chile. The
[PICTURE] Los Colorados mine, owned by Compania
Minera Huasco S.A., will be removing
395BIII digging in the 28 million tonnes of overburden and
Los Colorados iron ore mine. producing 8.6 million tonnes of iron ore
per year with the 395BIII electric mining
shovel.
<PAGE>
New
Machine
Tools
CNC Vertical Turning Center
installed in 1996. A multi-task
machining center with shuttle
tables, part probes, and auto-
[PICTURE] matic tool changer incorporates
live-spindle technology on a
vertical turning machine. The
shuttle tables allow machining
as one part while a second part
is being set up.
CNC Mill/Turn Machining
Center installed in 1996. An-
other multi-task machining
[PICTURE] center performs ten different
operations while reducing setup
and move/queue times. This
machine produces higher quality
parts while reducing manufac-
turing time.
<PAGE>
FINANCIAL HIGHLIGHTS
Years Ended December 31,
__________________________________________________________________________
(Dollars in Thousands,
Except Per Share Amounts) 1996 1995
__________________________________________________________________________
Net Sales $263,786 $231,921
Net Earnings (Loss) 2,878 (18,772)
Per Common Share:
Net Earnings (Loss) .28 (1.84)
Dividends - -
Book Value 3.56 3.39
Long-Term Debt 66,627 58,021
Working Capital 78,814 65,330
Common Shareholders' Investment 37,461 34,680
Backlog 158,727 118,024
Adjusted EBITDA(1) 19,247 8,256
__________________________________________________________________________
Current Ratio 2.9 2.2
Shareholders of Record 1,926 2,029
Employees at Year-End 1,384 1,166
__________________________________________________________________________
(1) Earnings before interest expense, income taxes, depreciation,
amortization, stock compensation, (gain) loss on sale of fixed assets,
restructuring expenses, reorganization items and inventory fair value
adjustment charged to cost of products sold.
CONTENTS COMPANY PROFILE
Financial Highlights 1 Bucyrus International, Inc. is a
Company Profile 1 leading manufacturer of surface
President's Letter 2 mining equipment, principally
Surface Mining Equipment 4 walking draglines, electric
Consolidated Statements mining shovels and blast hole
of Operations 5 drills, and related replacement
Consolidated Balance Sheets 6 parts. Major markets for the
Consolidated Statements of surface mining industry are
Common Shareholders' coal mining, copper and iron ore
Investment (Deficiency mining and phosphate production.
in Assets) 7
Consolidated Statements of
Cash Flows 9
Notes to Consolidated
Financial Statements 11
Reports of Independent
Accountants 31
Management's Discussion 33
Selected Financial Data 39
Stock Information 39
Officers and Directors
and Corporate Information 40
<PAGE>
(Picture - Company Logo:
"BUCYRUS" framed above by spoil piles
and below by open pit benches.)
TO OUR CUSTOMERS, SHAREHOLDERS, SUPPLIERS AND EMPLOYEES
We are delighted to report that the Company has progressed significantly
during 1996. We have continued the process of company growth and development
to improve long-term shareholder value. The changes within Bucyrus
International have all been focused on the creation of a market driven company
that assures our customers of highly productive machinery with the lowest cost
per ton of material moved. In addition to product development and improved
manufacturing capabilities, we recognize that customer acceptance is also a
function of our parts and service support activities. While this process of
improvement continues, the accomplishments of 1996 form the basis for
profitable growth and continued customer acceptance in 1997 and beyond.
Our financial performance for the year included our first profit since 1987
and is viewed by management as only the beginning of a successful turnaround.
Highlights of these results in comparison with 1995 are as follows:
o Increased net sales by 13.7% to $263.8 million
o Reported net income of $2.9 million compared to a loss of
$18.8 million for 1995
o Increased year-end backlog 34.5% to $158.7 million
o Increased adjusted EBITDA 133.1% to $19.2 million
o Improved the current ratio to 2.9 from 2.2
Our engineering function was significantly restructured during the year and
became dedicated to the successful completion of numerous product improvements
and improved customer service. These improvements were developed in concert
with several important customers utilizing Bucyrus equipment. A key customer
focus group was formed during the first quarter of 1996 to provide direction
to our engineering development activities. This group met again during the
first quarter of 1997 to monitor our progress and to provide additional advice
in partnership with our engineers and important suppliers. A continuation of
this close relationship with our customers is fundamental to our objectives to
become more market driven.
Our first new product in years, the 39R diesel hydraulic blast hole drill has
been produced and is now working at a large copper mine in Utah. This
innovative machine offers excellent mobility and extraordinary drill
productivity.
Our South Milwaukee manufacturing plant has not had adequate capital resources
for the last several years due to the financial condition of the Company. A
three year machine shop modernization program has begun and involves an
approximate $20 million investment in the latest technology in the machine
tool industry. This program is aimed at reduced lead times, quicker
turnaround, reduced in process inventory and overall cost reduction.
Our customer support activities have been expanded to meet the demands of our
mining customers around the world. In North America, our Minserco subsidiary
experienced significant growth in revenues of 82% in 1996. This highly
specialized organization provides logistic and repair services to customers
with the complete OEM technical support of our corporate engineering staff.
Many of our International Subsidiaries have developed long-term Maintenance
And Repair Contracts (MARC) with important customers. This activity allows
the customer to concentrate on mining while Bucyrus service teams manage and
direct the maintenance of the equipment to assure optimal results.
<PAGE>
Vendor partnerships have been formed on a win-win basis to reduce costs,
advance product technology and to improve customer support. We place a high
value on our supplier relationships, all of which are aimed at adding value
for our customers.
Our recent market successes include 19 of the last 20 electric mining shovels
sold to the developing China market and over a 60% share of the rapidly
growing Chile copper mining market. Our strategy is to develop improved
market positions in other world markets. We are encouraged! During late 1995
and 1996, three of our modern mining shovels were commissioned in North
America with three different customers. In March 1997, we received orders for
two additional shovels from one of those customers. The only meaningful
measure of our success is to experience repeat sales.
Although we are encouraged by our recent success in North America, 70% of our
sales have been in international markets over the last several years and we
fully expect that trend to continue in the future.
We are very encouraged by the resurgence in international coking coal prices
which bodes well for new machine prospects in the traditional markets of
Australia and Western Canada. The rapid economic growth in the Asia-Pacific
region is also driving the demand for steam coal for power generation which is
creating investment and expansion plans for the Australian coalfields.
Moreover, the recovery in the price of copper from its mid 1996 slide, the
result of highly unusual trading, has brought back on line several new copper
projects as well as expansion of existing copper mines in Chile, Argentina,
Mexico, Indonesia and Sweden.
The long awaited financing to fund a major expansion of the Indian coal mining
industry appears to be in place and we believe that significant machine
purchases are imminent. We are also confident that there will be continued
expansion of surface coal mining in China with several machine purchases
planned for the near term.
The worldwide trend for privatization of many foreign government controlled
mining areas should also create increased demand for our products and
services. The fact that India has allotted many new coal properties for
privatized development and the long awaited partial privatization of CVRD, the
huge government owned iron ore company in Brazil, are good examples of this
trend.
We have invested capital in our international markets in 1996 and are
continuing this activity into 1997 with a new expanded service center and
office complex in Antofagasta, Chile and important new facilities in South
Africa located in the heart of the South African coalfields. This investment
is again targeted at improved customer service to which our worldwide
customers are entitled.
The near and medium term prognosis for the surface mining machinery market
appears to be extremely positive.
While the company has accomplished much during the past year, we recognize
that there is much more to be done. We wish to thank our customers,
suppliers, employees and shareholders for their continued support of these
efforts.
Sincerely,
/s/W. R. Hildebrand
W. R. Hildebrand
President and
Chief Executive Officer
<PAGE>
SURFACE MINING EQUIPMENT
Scope of Operation
Bucyrus International, Inc. (the "Company"), formerly known as Bucyrus-
Erie Company, manufactures mining equipment in South Milwaukee, Wisconsin for
surface mining applications. The product line consists of a full range of
rotary blast hole drills, electric mining shovels and walking draglines.
Rotary blast hole drills bore large holes in mineral deposits or rocky
overburden so that explosive charges can be placed to loosen and fragment
materials, facilitating removal by electric mining shovels and walking
draglines.
Electric mining shovels are primarily used to load coal, copper, iron
ore, other mineral-bearing materials, overburden and rock into some form of
haulage system such as a truck or conveyor.
Walking draglines are used primarily to remove overburden above the coal
seams in surface coal operations, assist in land reclamation and mine
phosphate and bauxite.
The Company also manufactures and supplies replacement parts and provides
after sales service for all of its product lines. Minserco, Inc., a wholly-
owned subsidiary of the Company, services the mining industry with
comprehensive structural and mechanical engineering, non-destructive testing,
repairs and rebuilds of machine components, product and component upgrades,
contract maintenance, turnkey erections and machine moves. Boonville Mining
Services, Inc., another wholly-owned subsidiary of the Company, operates as a
separate enterprise that provides replacement parts and repair and rebuild
services for surface mining equipment. In addition, the Company engineers,
manufactures, sells and services rigging products which attach to dragline
buckets and shovel dippers. These products include such items as dragline
teeth and adapters, shrouds, dump blocks and chains as well as dipper teeth
and adapters and heel bands.
To comply with the increasing after sales demands of larger mining
customers, maintenance and repair contracts are provided. Under these
contracts, the Company services the equipment with an on site support team
maintaining a high level of production reliability, thus allowing the customer
to concentrate on mining production.
The Company's continued commitment to quality has been formally
recognized by receiving ISO 9001 Certification from the world's foremost
standards organization, Det Norske Veritas. This certification signifies that
the Company meets the most rigid standards for design, development, production
and erection of blast hole drills, electric mining shovels and walking
draglines.
Worldwide Demand
In recent years worldwide demand for blast hole drills and electric
mining shovels has increased in copper and iron ore surface mining
applications. The Company has increased its market share in the blast hole
drill market due to the reliability and productivity of the 49R series drills
and maintains its traditional market share for other products. The demand for
mining machines in worldwide coal mining operations increased in 1996 and the
Company has been receiving inquiries for walking dragline tenders due in 1997.
New Products
The new 39R "prototype" rotary blast hole drill was introduced in 1996
and incorporates diesel/hydraulic technology and includes such features as a
combination of mast, pipe positioner and rigid mounted crawler frames to
produce a stable, mobile and productive drill capable of drilling at 30 to
- -15 angles. The 39R is expected to propel up a 25% grade with the mast in
any position and have the capability of leveling the drill on a 20% slope for
drilling. The machine is designed to drill from 9 inch to 12-1/4 inch holes
and joins the 49R and 59R model drills in the Company's line of rotary blast
hole drills.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands, Except Per Share Amounts)
<CAPTION>
Predecessor
Company
December 14 - January 1 -
Years Ended December 31, December 31, December 13,
1996 1995 1994 1994
<S> <C> <C> <C> <C>
REVENUES:
Net sales $263,786 $231,921 $ 7,810 $186,174
Other income 1,003 1,295 79 2,976
________ ________ ________ ________
264,789 233,216 7,889 189,150
________ ________ ________ ________
COSTS AND EXPENSES:
Cost of products sold 215,126 205,552 6,933 157,181
Product development, selling, administrative
and miscellaneous expenses 36,470 34,172 1,099 30,158
Interest expense (Predecessor Company
contractual interest not recognized
in 1994 - $20,250) 8,557 6,254 284 13,911
Restructuring expenses - 2,577 - -
Reorganization items - 919 - 9,338
________ ________ ________ ________
260,153 249,474 8,316 210,588
________ ________ ________ ________
Earnings (loss) before income taxes
and extraordinary gain 4,636 (16,258) (427) (21,438)
Income taxes 1,758 2,514 125 1,395
________ ________ ________ ________
Earnings (loss) before extraordinary gain 2,878 (18,772) (552) (22,833)
Extraordinary gain - - - 142,480
________ _________ _________ _________
Net earnings (loss) 2,878 (18,772) (552) 119,647
Redeemable preferred stock dividends - - - (40)
Preferred stock accretion - - - (106)
Reorganization item - preferred stock - - - (40,555)
________ ________ _________ _________
Net earnings (loss) attributable
to common shareholders $ 2,878 $(18,772) $ (552) $ 78,946
Net earnings (loss) per share of common
stock:
Earnings (loss) before extraordinary gain $ .28 $(1.84) $( .05) $(2.46)
Extraordinary gain - - - 15.37
______ ______ ______ ______
Net earnings (loss) .28 (1.84) (.05) 12.91
Preferred stock dividends, accretion and
reorganization item - - - (4.39)
______ ______ ______ ______
Net earnings (loss) per share attributable
to common shareholders $ .28 $(1.84) $( .05) $ 8.52
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands, Except Per Share Amounts)
<CAPTION>
December 31, December 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C> <C>
LIABILITIES AND COMMON
ASSETS SHAREHOLDERS' INVESTMENT
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents $ 15,763 $ 11,150 Accounts payable and
Receivables 32,085 35,603 accrued expenses $ 33,765 $ 37,487
Inventories 70,889 73,566 Liabilities to customers on
Prepaid expenses and uncompleted contracts and
other current assets 2,504 1,414 warranties 3,579 8,222
Income taxes 1,469 3,463
Short-term obligations 3,186 5,573
Current maturities of long-
term debt 428 1,658
________ ________ ________ ________
Total Current Assets 121,241 121,733 Total Current Liabilities 42,427 56,403
OTHER ASSETS: LONG-TERM LIABILITIES:
Restricted funds on Deferred income taxes 148 183
deposit 1,079 2,877 Liabilities to customers
Intangible assets 8,545 9,021 on uncompleted contracts
Other assets 6,003 4,760 and warranties 3,277 3,127
________ ________ Postretirement benefits 11,064 11,527
Deferred expenses
15,627 16,658 and other 11,891 10,097
________ ________
PROPERTY, PLANT AND EQUIPMENT:
Land 2,752 1,507 26,380 24,934
Buildings and improvements 6,698 5,630
Machinery and equipment 33,959 32,250 LONG-TERM DEBT, less
Less accumulated current maturities 66,627 58,021
depreciation (7,382) (3,740)
________ _______
36,027 35,647
COMMON SHAREHOLDERS'
INVESTMENT:
Common stock - par value
$.01 per share,
authorized 20,000,000
shares, issued and
outstanding 10,534,574
and 10,234,574 shares,
respectively $ 105 $ 102
Additional paid-in
capital 57,739 54,259
Unearned stock compensation(2,815) -
Accumulated deficit (16,446) (19,324)
Cumulative translation
adjustment (1,122) (357)
________ ________
37,461 34,680
________ ________ ________ ________
$172,895 $174,038 $172,895 $174,038
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' INVESTMENT (DEFICIENCY IN ASSETS)
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands)
<CAPTION>
Additional Cumulative
Common Stock Paid-In Accumulated Translation
Class C Class D Common Stock Warrants Capital Deficit Adjustment
<S> <C> <C> <C> <C> <C> <C> <C>
Predecessor Company
Balance at
January 1, 1994 $ 92 $ 1 $ - $ 1 $ - $ (138,994) $(4,209)
Exercise of warrants
(6,392 shares) - - - (1) 1 - -
Net earnings - - - - - 119,647 -
Preferred stock
accretion - - - - - (106) -
Preferred stock
dividends - - - - - (129) -
Reorganization item -
preferred stock - - - - - (40,555) -
Translation adjustments - - - - - - 991
Cancellation of former
equity and elimination
of accumulated deficit
and cumulative foreign
currency translation
adjustments (92) (1) - - (1) 60,137 3,218
Issuance of new
common stock
(10,170,417
shares) - - 102 - 53,898 - -
_______ _______ ________ ______ _______ ___________ ______
Balance at
December 13, 1994 $ - $ - $ 102 $ - $53,898 $ - $ -
<CAPTION>
Additional Unearned Cumulative
Common Paid-In Stock Accumulated Translation
Stock Capital Compensation Deficit Adjustment
<S> <C> <C> <C> <C> <C>
Balance at December 14, 1994 $ 102 $ 53,898 $ - $ - $ -
Net loss - December 14
to December 31, 1994 - - - (552) -
Translation adjustments -
December 14 to
December 31, 1994 - - - - 169
________ ________ _________ _________ _______
Balance at December 31, 1994 102 53,898 - (552) 169
Issuance of common stock
(64,157 shares) - 361 - - -
Net loss - - - (18,772) -
Translation adjustments - - - - (526)
________ ________ _________ _________ ________
Balance at December 31, 1995 102 54,259 - (19,324) (357)
Grants under stock
compensation plans 3 3,480 (3,483) - -
Amortization of unearned
stock compensation - - 668 - -
Net earnings - - - 2,878 -
Translation adjustments - - - - (765)
________ ________ _________ _________ ________
Balance at December 31, 1996 $ 105 $ 57,739 $ (2,815) $ (16,446) $ (1,122)
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands)
<CAPTION>
Predecessor
Company
December 14 - January 1 -
Years Ended December 31, December 31, December 13,
1996 1995 1994 1994
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net earnings (loss) $ 2,878 $(18,772) $ (552) $119,647
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in)
operating activities:
Inventory obsolescence provision (see Note E) - 4,416 - -
Depreciation 3,882 3,671 145 7,356
Amortization 1,142 1,194 23 3,679
Stock compensation expense 668 - - -
Deferred rent (interest) on sale and leaseback
financing arrangement - - - 7,287
In kind interest on the Secured Notes
due December 14, 1999 7,783 5,691 258 -
Amortization of debt discount - - - 71
(Gain) loss on sale of property, plant
and equipment 362 (166) 5 37
Non-cash reorganization items - - - 1,680
Extraordinary gain - - - (142,480)
Changes in assets and liabilities:
Receivables 3,021 (9,651) 4,318 (4,616)
Inventories 2,026 3,769 (61) (7,539)
Other current assets (1,114) 564 (73) 125
Other assets (1,145) (578) (12) (13)
Current liabilities other than income
taxes, short-term obligations and
current maturities of long-term debt (5,332) 8,073 (5,197) 17,326
Income taxes (1,991) 740 302 543
Long-term liabilities other than
deferred income taxes (2,093) (1,035) (93) (1,372)
________ ________ ________ ________
Net cash provided by (used in) operating
activities 10,087 (2,084) (937) 1,731
________ ________ ________ ________
Cash Flows From Investing Activities
Decrease in restricted funds on deposit 1,798 798 - 2,863
Purchases of property, plant and equipment (4,996) (3,006) (190) (2,616)
Proceeds from sale of property, plant
and equipment 1,058 263 - 125
________ ________ ________ ________
Net cash (used in) provided by investing
activities (2,140) (1,945) (190) 372
________ ________ ________ ________
Cash Flows From Financing Activities
Proceeds from issuance of project
financing obligations 5,402 6,012 1,620 7,891
Reduction of project financing obligations (8,104) (7,117) - (6,933)
Net (decrease) increase in other bank
borrowings (1,350) 304 - (1,210)
Proceeds from issuance of long-term debt 849 - - -
________ ________ ________ ________
Net cash (used in) provided by financing
activities (3,203) (801) 1,620 (252)
________ ________ ________ ________
Effect of exchange rate changes on cash (131) (229) (5) 174
________ ________ ________ ________
Net increase (decrease) in cash
and cash equivalents 4,613 (5,059) 488 2,025
Cash and cash equivalents at beginning
of period 11,150 16,209 15,721 13,696
________ ________ ________ ________
Cash and cash equivalents at end of period $ 15,763 $ 11,150 $ 16,209 $ 15,721
Supplemental Disclosures of Cash Flow Information
Cash paid (received) during the period for:
Interest $ 491 $ 289 $ 20 $ 345
Income taxes (1) 3,246 1,270 12 (259)
<FN>
(1) These amounts are net of federal and state income tax refunds of $1 in 1996, $416 in 1995 and $908 (including $907
for the Predecessor Company) in 1994.
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 $361 of liabilities for
certain legal and professional fees incurred in connection with the Company's reorganization under chapter 11 of the
Bankruptcy Code.
(B) In 1994, the Predecessor Company increased the carrying amount of the Series A redeemable preferred stock by $129,
which represented the estimated fair value of the pre-petition dividends not declared or paid, but were payable under
mandatory redemption features. The Predecessor Company also recorded preferred stock discount accretion of $106
in 1994 on these securities. As of the Petition Date (see Note B), the Predecessor Company increased the carrying
amount of the Series A redeemable preferred stock by $40,555 to the amount of the allowed claim in the Amended
Plan.
(C) Pursuant to the Amended Plan, the Company issued shares of Common Stock in exchange for the unsecured debt securities
of Holdings and the Company and the equity securities of Holdings.
See notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bucyrus International, Inc. and Subsidiaries
NOTE A - SUMMARY OF ACCOUNTING POLICIES
Nature of Operations
Bucyrus International, Inc. (the "Company"), formerly known as
Bucyrus-Erie Company, is a Delaware corporation and a leading
manufacturer of surface mining equipment, principally walking
draglines, electric mining shovels and blast hole drills, and related
replacement parts. Major markets for the surface mining industry are
coal mining, copper and iron ore mining and phosphate production.
Basis of Presentation
As discussed in Note B, the Company accounted for the reorganization
under chapter 11 of the Bankruptcy Code effective December 14, 1994
(the "Effective Date") 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" ("SOP 90-
7"). Accordingly, the consolidated financial statements of the
Company are not comparable to the consolidated financial statements
of periods prior to the Effective Date. The Predecessor Company
consolidated financial statements are those of B-E Holdings, Inc.
("Holdings"), the former parent of the Company, which include the
accounts and operating results of the Company.
The preparation of the consolidated 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, disclosure of contingent assets
and liabilities and the reported amounts of revenues and expenses.
Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of all
subsidiaries. All significant intercompany transactions, profits and
accounts have been eliminated.
Cash Equivalents
All highly liquid investments with maturities of three months or less
when purchased are considered to be cash equivalents. The carrying
amount of these investments approximates fair value.
Restricted Funds on Deposit
Restricted funds on deposit represent cash and temporary investments
used to support the issuance of standby letters of credit and other
obligations. The carrying amount of these funds approximates fair
value.
Inventories
Inventories are stated at lower of cost (first-in, first-out method)
or market (replacement cost or estimated net realizable value).
Advances from customers are netted against inventories to the extent
of related accumulated costs. Advances in excess of related costs
and earnings on uncompleted contracts are classified as a liability
to customers.
Intangibles
As of the Effective Date, intangible assets were recorded at
estimated fair value to the extent of available reorganization value
and accumulated amortization was eliminated in accordance with the
principles of fresh start reporting. Intangible assets consist of
engineering drawings and bill-of-material listings which are being
amortized on a straight-line basis over 20 years (30 years for the
Predecessor Company). At December 31, 1996 and 1995, accumulated
amortization for intangible assets was $975,000 and $499,000,
respectively.
Property, Plant and Equipment
As of the Effective Date, property, plant and equipment was recorded
at estimated fair value to the extent of available reorganization
value and accumulated depreciation was eliminated in accordance with
the principles of fresh start reporting. Additions made subsequent
to the Effective Date are recorded at cost. Depreciation is provided
over the estimated useful lives of respective assets using the
straight-line method for financial reporting and accelerated methods
for income tax purposes. Estimated useful lives used for financial
reporting purposes range from ten to forty years for buildings and
improvements and three to seventeen years for machinery and
equipment.
Foreign Currency Translation
The assets and liabilities of foreign subsidiaries are generally
translated into U.S. dollars using year-end exchange rates. Revenues
and expenses are translated at average rates during the year.
Adjustments resulting from this translation, except for one foreign
subsidiary which operates in a highly inflationary economy, are
deferred and reflected as a separate component of Common
Shareholders' Investment. For the one subsidiary operating in a
highly inflationary economy, adjustments resulting from the
translation of financial statements are reflected in the Consolidated
Statements of Operations.
Revenue Recognition
Revenue from long-term sales contracts is recognized using the
percentage-of-completion method. At the time a loss on a contract
becomes known, the amount of the estimated loss is recognized in the
consolidated financial statements. Included in the current portion
of liabilities to customers on uncompleted contracts and warranties
are advances in excess of related costs and earnings on uncompleted
contracts of $575,000 and $790,000 at December 31, 1996 and 1995,
respectively.
Impairment of Long-Lived Assets
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" ("SFAS 121"). SFAS 121 requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity
be reviewed for impairment when certain events or changes in
circumstances indicate that the carrying amount of an asset may not
be recoverable. The Company adopted SFAS 121 in 1996. Upon
completion of a review of all long-lived assets and intangibles,
management determined that no adjustment to the carrying value of
these assets is necessary.
Reclassifications
Certain reclassifications have been made to the 1995 and 1994
consolidated financial statements to present them on a basis
consistent with the current year.
NOTE B - FINANCIAL REPORTING RELATING TO REORGANIZATION PROCEEDINGS
On February 18, 1994 (the "Petition Date"), Holdings 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"). No other subsidiaries of Holdings or the
Company were included in the filing. 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 became
effective on the Effective Date.
On the Effective Date, Holdings merged with and into the Company
pursuant to the Amended Plan and the Agreement and Plan of Merger
dated as of December 14, 1994 between Holdings and the Company (the
"Merger Agreement"). Pursuant to the Amended Plan and the Merger
Agreement, the Company issued 10,170,417 shares of its common stock,
par value $.01 per share (the "Common Stock"), which included
10,000,004 shares of Common Stock issued to holders of Holdings' and
the Company's unsecured debt securities and Holdings' equity
securities (including preferred stock) in exchange for such
securities. The Company also issued 170,413 shares of Common Stock
and paid $350,000 in cash to Bell Helicopter Textron, Inc. ("Bell
Helicopter") in settlement of Bell Helicopter's claims against the
Company and an inactive subsidiary of the Company asserted in a civil
action.
Also on the Effective Date pursuant to the Amended Plan, the Company
issued an aggregate principal amount of $52,072,000 of Secured Notes
due December 14, 1999 (the "Secured Notes") in exchange for the
outstanding Series A 10.65% Senior Secured Notes due July 1, 1995 of
the Company, the outstanding Series B 16.5% Senior Secured Notes due
January 1, 1996 of the Company, the obligations of the Company under
its sale and leaseback financing arrangement and accrued interest,
the sum of said items being $54,571,000.
As a result of these transactions pursuant to the Amended Plan, an
extraordinary gain on debt discharge of $142,480,000 was recognized,
which consists of the following:
(Dollars in Thousands)
Carrying value of unsecured debt securities
of Holdings and the Company $158,350
Accrued interest on unsecured debt
securities of Holdings and the Company 31,663
Concession on Series A and B Senior Secured
Notes and obligation under sale and leaseback
financing arrangement 2,499
Settlement of Bell Helicopter claim 3,000
Write-off of previously recorded capitalized
financing costs (309)
________
195,203
Estimated fair value of Common Stock
issued for unsecured debt securities
and Bell Helicopter claim 52,723
________
Total Extraordinary Gain $142,480
For financial statement purposes, there was no income tax expense
recognized.
Reorganization items included in the Consolidated Statements of
Operations represent the expenses incurred as a result of the
Company's efforts to reorganize under chapter 11 of the Bankruptcy
Code. In 1995, reorganization items consist entirely of legal and
professional fees. Reorganization items in 1994 consist of
$8,023,000 of legal and professional fees, $41,122,000 to adjust debt
and redeemable preferred stock to the amount of the allowed claims in
the Amended Plan and a $1,113,000 write-off of capitalized financing
costs. These expenses were partially offset by $365,000 of interest
income earned from the Petition Date through December 13, 1994 on
accumulated cash balances of Holdings and the Company.
The Company accounted for the reorganization by using the principles
of fresh start reporting as required by SOP 90-7. 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.
NOTE C - RESTRUCTURING EXPENSES
Restructuring expenses of $2,577,000 for the year ended December 31,
1995 consist of employee severance expenses recorded to reflect the
cost of reduced employment and the severance costs related to the
resignation of three officers of the Company.
NOTE D - RECEIVABLES
Receivables at December 31, 1996 and 1995 include $6,830,000 and
$6,994,000, respectively, of revenues from long-term contracts which
were not billable at that date. Billings on long-term contracts are
made in accordance with the payment terms as defined in the
individual contracts.
Current receivables are reduced by an allowance for losses of
$539,000 and $667,000 at December 31, 1996 and 1995, respectively.
NOTE E - INVENTORIES
Inventories consist of the following:
1996 1995
(Dollars in Thousands)
Raw materials and parts $ 10,628 $ 12,138
Costs relating to
uncompleted contracts 4,183 5,861
Customers' advances offset
against costs incurred on
uncompleted contracts (1,816) (2,440)
Work in process 13,746 13,511
Finished products (primarily
replacement parts) 44,148 44,496
________ ________
$ 70,889 $ 73,566
Inventory was recorded at estimated fair value as of the Effective
Date in accordance with the principles of fresh start reporting. The
remaining estimated fair value adjustment of $10,065,000 was charged
to cost of products sold in 1995 as the inventory was sold.
During 1995, the Company completed an evaluation of its inventory and
recorded a charge of $4,416,000 to cost of products sold for the
scrapping and disposal of excess inventory which related to certain
older and discontinued machine models.
NOTE F - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
1996 1995
(Dollars in Thousands)
Trade accounts payable $ 14,270 $ 16,703
Wages and salaries 5,495 4,005
Service and erection 2,138 1,802
Reorganization items 1,071 1,602
Excess refund from
Internal Revenue Service 373 2,700
Other 10,418 10,675
________ ________
$ 33,765 $ 37,487
In 1996, the Company reached an agreement with the Internal Revenue
Service to repay the excess refund in semi-annual payments over five
years at 8% interest commencing September 15, 1996. Accordingly, a
portion of the liability has been included in long-term liabilities
in the Consolidated Balance Sheet at December 31, 1996.
NOTE G - LONG-TERM DEBT AND FINANCING ARRANGEMENTS
Long-term debt consists of the following:
1996 1995
(Dollars in Thousands)
Secured Notes due
December 14, 1999 $ 65,785 $ 58,021
Bridge Loan Account at
Bucyrus Europe at
floating interest rate
(8.625% at December 31,
1996 and 1995), due 1997 428 1,600
Construction Loan at
Bucyrus Chile, Ltda. 842 58
________ ________
67,055 59,679
Less current maturities of
long-term debt (428) (1,658)
________ ________
Long-term debt $ 66,627 $ 58,021
Interest on the Secured Notes accrued at a rate of 10.5% per annum
until December 14, 1995. Thereafter, interest accrues at a rate of
10.5% per annum, if paid in cash, or 13.0% per annum, if paid in
kind. The Credit Agreement (as defined below) required accrued
interest on the Secured Notes to be paid in kind prior to January 1,
1996, and thereafter restricts the cash payment of principal and
interest on the Secured Notes unless certain ratios and conditions
are met. Otherwise, interest on the Secured Notes is payable in kind
at the discretion of the Company during the term of the Secured
Notes. All interest through June 30, 1996 was accrued at 13% since
the Company paid this interest in kind. For the quarter ended
September 30, 1996, interest was accrued at 10.5% since at that time
it was the Company's intention to pay the December 31, 1996 interest
payment in cash. During the fourth quarter of 1996, the Company
decided to pay the December 31, 1996 interest payment in kind. As a
result, interest expense of $386,000 related to the third quarter of
1996 was recorded during the fourth quarter of 1996.
The Secured Notes are secured by a security interest on substantially
all of the Company's property (other than land and buildings), the
shares of the Company's United States subsidiaries and 65% of the
shares of certain non-United States subsidiaries (collectively, the
"Pledged Shares"). The Secured Notes are subordinated to the
security interest in favor of Bank One, Milwaukee, National
Association ("Bank One") up to $16,000,000 in indebtedness and other
amounts owing under the Credit Agreement (as defined below).
During 1996, there were two trades of the Secured Notes, which are
privately held. In February, 1996, 97.2% of the Secured Notes were
purportedly sold for 94.67% of face value. In March, 1996, the
remaining 2.8% of the Secured Notes were purportedly sold for 98% of
face value. Based on these trades, management believes that the
carrying value of the Secured Notes approximates fair value.
The Construction Loan outstanding at Bucyrus Chile, Ltda. at
December 31, 1996 bears interest at 9.24% and is due in February,
1997. However, this loan will be refinanced with a new $2,000,000
construction loan which will be payable commencing in 1999.
Therefore, the amount outstanding at December 31, 1996 is classified
as long-term debt and the maturities below reflect the refinancing.
Maturities of long-term debt are the following for each of the next
five years:
1997 $ 428,000
1998 -
1999 66,356,000
2000 271,000
2001 -
The Company has a Credit Agreement dated as of December 14, 1994 (the
"Credit Agreement"), with Bank One. The Credit Agreement, as
amended, contains a credit facility for working capital and general
corporate purposes (the "Loan Facility"), a letter of credit facility
(the "L/C Facility") and a project financing loan facility (the
"Project Financing Facility"). Under the Loan Facility, 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 April 30, 1998
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 through April 30, 1998
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
April 30, 1999. Under the Project Financing Facility, Bank One may
make project financing loans to the Company from time to time.
Borrowings under the Project Financing Facility bear interest at the
Company's option either at a rate equal to Bank One's reference rate
or an adjusted LIBOR rate plus a variable margin. Borrowings under
the Credit Agreement are secured by a security interest on
substantially all of the Company's property (other than land and
buildings), including the Pledged Shares. At December 31, 1996 and
1995, the Company had borrowings outstanding under the Loan Facility
of $357,000 and $269,000, respectively. At December 31, 1996 and
1995, $7,316,000 and $3,419,000, respectively, of the L/C Facility
was being used. Under the Project Financing Facility, the Company
has a line of credit for $14,000,000 to support one current order.
Bank One has participated a portion of the Project Financing Facility
to The Bank of Nova Scotia. Availability is based on the amount of
inventory being financed and any accounts receivable relating to such
project. Availability at December 31, 1996 was approximately
$3,300,000. There were no borrowings under the Project Financing
Facility at December 31, 1996 and 1995.
The Credit Agreement prohibits the Company from making any dividends
or other distributions upon the Common Stock, other than dividends
payable solely in Common Stock or other equity securities of the
Company. The Indenture relating to the Secured Notes prohibits the
Company from declaring or paying any dividend or making any
distribution in respect of the Common Stock (other than dividends or
distributions payable solely in shares of Common Stock or in options,
warrants or other rights to acquire Common Stock), if at the time
thereof an Event of Default (as defined in such Indenture) or an
event that with the lapse of time or the giving of notice, or both,
would constitute an Event of Default (as defined in such Indenture)
shall have occurred and be continuing.
The agreements relating to the Secured Notes and the Credit Agreement
permit additional project financing from other lenders to manufacture
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 project.
Project financing borrowings mature not later than the date of the
final payment by the customer under the applicable purchase contract.
At December 31, 1996 and 1995, the Company had $2,431,000 and
$5,132,000, respectively, of outstanding project financing borrowings
not related to the Project Financing Facility. The outstanding
project financing borrowings at December 31, 1996 and 1995 bear
interest at 8.25% and 7.75%, respectively, and are included in
Short-Term Obligations in the Consolidated Balance Sheets.
As required under various agreements, Equipment Assurance Limited, an
off-shore insurance subsidiary of the Company, has pledged $1,056,000
and $2,856,000 of its cash to secure its reimbursement obligations
for outstanding letters of credit at December 31, 1996 and 1995,
respectively. Bucyrus Chile Ltda. has pledged $23,000 and $21,000 of
its cash for a bank guarantee at December 31, 1996 and 1995,
respectively. These collateral amounts are classified as Restricted
Funds on Deposit in the Consolidated Balance Sheets.
NOTE H - COMMON SHAREHOLDERS' INVESTMENT
In 1995, the Company's Board of Directors adopted the Bucyrus
International, Inc. Non-Employee Directors' Stock Option Plan (the
"Directors' Stock Option Plan"). The Directors' Stock Option Plan
provides for the automatic grant of non-qualified stock options to
non-employee members of the Board of Directors for up to 60,000
shares of Common Stock at an exercise price based on the last sale
price of the Common Stock on the date of grant. Options granted vest
and are exercisable immediately on the date of grant and terminate on
the earlier of ten years after the date of grant, six months after
the non-employee director ceases to be a director of the Company by
reason of death, or three months after the non-employee director
ceases to be a director of the Company for any reason other than
death. The following summary shows activity and outstanding balances
of options exercisable for shares of Common Stock under the
Directors' Stock Option Plan:
Options Available For
Outstanding Future Grants
At plan inception - 60,000
Granted on February 16, 1995
($6.00 per share) 8,000 (8,000)
__________ __________
Balances at December 31, 1995 8,000 52,000
Granted on February 8, 1996
($9.25 per share) 8,000 (8,000)
Granted on March 11, 1996
($9.00 per share) 4,000 (4,000)
__________ __________
Balances at December 31, 1996
($6.00 - $9.25 per share) 20,000 40,000
At December 31, 1996, all of the options outstanding were exercisable
at a weighted average exercise price of $7.90 per share and have a
weighted average remaining contractual life of 8.7 years. The
weighted average exercise price of options granted in 1996 was $9.17
per share.
In 1996, the Company's Board of Directors adopted the Bucyrus
International, Inc. 1996 Employees' Stock Incentive Plan (the "1996
Employees' Plan"). The 1996 Employees' Plan authorizes the granting
to key employees of: (a) stock options, which may be either
incentive stock options or non-qualified stock options, at an
exercise price per share not less than 55% of the fair market value
of the Common Stock on the date of grant; (b) stock appreciation
rights at a grant price of not less than 100% of the fair market
value of the Common Stock on the date of grant; (c) restricted stock;
and (d) performance shares. The 1996 Employees' Plan provides that
up to a total of 1,000,000 shares of Common Stock, subject to
adjustment under plan provisions, will be available for the granting
of awards thereunder.
The following summary shows activity and outstanding balances of
grants under the 1996 Employees' Plan:
Available For
Granted Future Grants
At plan inception - 1,000,000
Non-qualified stock options
granted on March 11, 1996
($5.0875 per share) 200,000 (200,000)
Restricted stock granted on
March 11, 1996 300,000 (300,000)
Non-qualified stock options
granted on November 7, 1996
($8.75 per share) 30,000 (30,000)
Stock appreciation rights
granted on November 7, 1996
($8.75 per share) 50,000 (50,000)
_________ _________
Balances at December 31, 1996 580,000 420,000
At December 31, 1996, options for 200,000 shares were exercisable at
an exercise price of $5.0875 per share. The weighted average
exercise price of the options granted in 1996 was $5.57 per share.
The weighted average remaining contractual life of the options at
December 31, 1996 was 9.3 years.
The restricted stock vests in installments over a period of time as
determined in each individual grant and is subject to restrictions
imposed by the Board of Directors. The stock appreciation rights may
be settled in cash, Common Stock or other consideration as determined
in each individual grant. The remaining contractual life of the
stock appreciation rights at December 31, 1996 was 9.8 years.
Certain grants under the 1996 Employees' Plan result in additional
compensation expense to the Company. Compensation related to future
periods is reported as an offset within Common Shareholders'
Investment in the Consolidated Balance Sheet. Stock compensation
expense recognized for the year ended December 31, 1996 was $668,000.
The Company accounts for the Directors' Stock Option Plan and the
1996 Employees' Plan in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," as
allowed by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). Had
compensation expense for these plans been determined consistent with
SFAS 123, the Company's net earnings (loss) and net earnings (loss)
per share would have been reduced to the following pro forma amounts:
1996 1995
(Dollars in Thousands,
Except Per Share Amounts)
Net Earnings (Loss) As Reported $2,878 $(18,772)
Pro Forma 2,688 (18,808)
Net Earnings (Loss) As Reported .28 (1.84)
Per Share Pro Forma .26 (1.84)
The weighted average grant-date fair value of stock options granted
in 1996 and 1995 under the Directors' Stock Option Plan was $4.93 and
$4.44 per option, respectively. The weighted average grant-date fair
value of stock options granted under the 1996 Employees' Plan whose
exercise price was less than market price of the Common Stock on the
date of grant was $6.55 per option. The weighted average grant-date
fair value of stock options granted under the 1996 Employees' Plan
whose exercise price was equal to the market price of the Common
Stock on the date of grant was $6.00 per option. The grant-date fair
value of the restricted stock was $9.00 per share. The grant-date
fair value of the stock appreciation rights was $6.00 per right. The
fair value of grants is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted
average assumptions:
Directors' 1996
Stock Option Plan Employees' Plan
1996 1995 1996
Risk-free interest rate 6.48% 6.41% 6.34%
Expected dividend yield 0% 0% 0%
Expected life 7 years 7 years 5.6 years
Calculated volatility 67.07% 73.92% 66.10%
NOTE I - INCOME TAXES
Deferred taxes are provided to reflect temporary differences between
the financial and tax basis of assets and liabilities using presently
enacted tax rates and laws. A valuation allowance is recognized if
it is more likely than not that some or all of the deferred tax
assets will not be realized.
Earnings (loss) before income taxes and extraordinary gain consists
of the following:
Predecessor
Company
December 14- January 1-
Years Ended December 31, December 31, December 13,
1996 1995 1994 1994
(Dollars in Thousands)
United States $ 232 $ (22,749) $ (199) $ (23,972)
Foreign 4,404 6,491 (228) 2,534
_________ _________ _________ _________
Total $ 4,636 $ (16,258) $ (427) $ (21,438)
The provision for income taxes consists of the following:
Predecessor
Company
December 14- January 1-
Years Ended December 31, December 31, December 13,
1996 1995 1994 1994
(Dollars in Thousands)
Foreign income taxes:
Current $ 1,902 $ 4,080 $ 90 $ 956
Deferred (430) (1,717) - 259
_________ _________ _________ _________
Total 1,472 2,363 90 1,215
Other (state and
local taxes):
Current 274 163 35 180
Deferred 12 (12) - -
_________ _________ _________ _________
Total 286 151 35 180
_________ _________ _________ _________
Total income tax
expense $ 1,758 $ 2,514 $ 125 $ 1,395
Total income tax expense differs from amounts expected by applying
the Federal statutory income tax rate to earnings (loss) before
income taxes and extraordinary gain as set forth in the following
table:
<PAGE>
<TABLE>
<CAPTION>
Predecessor
Company
December 14 - January 1 -
Years Ended December 31, December 31, December 13,
1996 1995 1994 1994
Tax Tax Tax Tax
Expense Expense Expense Expense
(Benefit) Percent (Benefit) Percent (Benefit) Percent (Benefit) Percent
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tax benefit at
Federal statutory
rate $ 1,622 35.0% $ (5,690) (35.0)% $ (150) (35.0)% $ (7,503) (35.0)%
Valuation allowance
adjustments (81) (1.7) 7,189 44.2 92 21.5 5,310 24.8
Impact of foreign
subsidiary income,
tax rates and tax
credits 7 .2 419 2.6 179 41.9 187 .9
State income taxes
net of Federal
income tax benefit 136 2.9 27 .2 (7) (1.6) 66 .3
Nondeductible
reorganization
expenses - - 322 2.0 - - 3,268 15.2
Bell Helicopter
settlement - - - - - - (439) (2.0)
Other items 74 1.5 247 1.5 11 2.5 506 2.3
________ ______ ________ ______ ________ ______ ________ ______
Total income
tax expense $ 1,758 37.9% $ 2,514 15.5% $ 125 29.3% $ 1,395 6.5%
</TABLE>
<PAGE>
Significant components of deferred tax assets and deferred tax
liabilities are as follows:
December 31,
1996 1995
(Dollars in Thousands)
Deferred tax assets:
Postretirement benefits $ 4,777 $ 4,905
Inventory valuation
provisions 3,978 4,687
Accrued and other
liabilities 7,286 9,003
Research and development
expenditures 8,711 6,239
Tax loss carryforward 27,644 27,788
Tax credit carryforward 479 479
Other items 524 450
__________ __________
Total deferred tax assets 53,399 53,551
Deferred tax liabilities -
Excess of book basis over
tax basis of property,
plant and equipment and
intangible assets (9,008) (9,966)
Valuation allowance (41,637) (41,249)
__________ __________
Net deferred tax asset
recognized in the
Consolidated
Balance Sheets $ 2,754 $ 2,336
Due to the recent history of net operating losses, a valuation
allowance has been used to reduce the net deferred tax assets (after
giving effect to deferred tax liabilities) for domestic operations to
an amount that is more likely than not to be realized. For the year
ended December 31, 1996, the valuation allowance was increased by
$388,000 to offset an increase in net deferred tax assets for which
no tax benefit was recognized.
Because the consummation of the Amended Plan on the Effective Date
resulted in an "ownership change" within the meaning of Section 382
of the Internal Revenue Code, the net operating loss carryforwards
("NOL") available to the Company as of the Effective Date were
limited to $53,460,000, the annual use of which is limited to
$3,564,000 plus any unused annual NOL limitation amounts from years
subsequent to the Effective Date. NOL incurred subsequent to the
Effective Date is not subject to the annual Section 382 limitation.
At December 31, 1996, the Company has available approximately
$69,109,000 of federal NOL, expiring in years 2003 through 2011, to
offset against future taxable income. The total federal NOL
available for 1997, including the 1997 annual NOL limitation amount,
is approximately $26,341,000.
Additionally, the Company has available for federal income tax
purposes approximately $479,000 of alternative minimum tax credit
carryforward which carries forward indefinitely. However, because
the credit arose prior to the Effective Date, it will be subject to
the annual limitations discussed above and will not be usable until
the year 2010.
The Company also has a significant amount of state NOL's (which
expire in the years 1997 through 2011) available to offset future
state taxable income in states where it has significant operations.
Since the majority of states in which the Company files its state
returns follow rules similar to federal rules, it is expected that
the usage of state NOL's will be limited to approximately
$61,000,000.
Cumulative undistributed earnings of foreign subsidiaries that are
considered to be permanently reinvested, and on which U.S. income
taxes have not been provided by the Company, amounted to
approximately $19,000,000 at December 31, 1996. It is not
practicable to estimate the amount of additional tax which would be
payable upon repatriation of such earnings; however, due to foreign
tax credit limitations, higher effective U.S. income tax rates and
foreign withholding taxes, additional taxes could be incurred.
NOTE J - PENSION AND RETIREMENT PLANS
The Company has several pension and retirement plans covering
substantially all employees. The plan covering domestic salaried and
certain non-union hourly employees provides pension benefits that are
based on final average pay formulas. The funding policy for that
plan is to contribute amounts at least equal to the minimum annual
amount required by applicable regulations. Plans covering hourly and
certain union members generally provide benefits of stated amounts
for each year of service. Contributions to these plans are funded
based on normal cost plus amortization of unfunded past service cost
over 30 to 40 years. In addition, the Company has certain unfunded
supplemental retirement plans for which benefits are payable out of
the general funds of the Company.
The following tables set forth the domestic plans' funded status and
amounts recognized in the consolidated financial statements at
December 31, 1996 and 1995:
Status of All Plans
1996 1995
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
(Dollars in Thousands)
Actuarial present
value of benefit
obligations:
Accumulated
benefit
obligation:
Vested $ (54,487) $ (362) $ (47,057) $ (186)
Non-vested (4,357) - (5,052) -
_________ _________ _________ _________
Total accumulated
benefit
obligation $ (58,844) $ (362) $ (52,109) $ (186)
Projected benefit
obligation
for services
rendered to
date $ (66,760) $ (478) $ (58,458) $ (769)
Plan assets at
fair value,
primarily listed
stocks and
corporate and U.S.
government bonds 63,718 - 59,589 -
_________ _________ _________ _________
Projected benefit
obligation less
than (in excess
of) plan assets (3,042) (478) 1,131 (769)
Unrecognized net
(gain) loss 2,219 14 (2,635) 84
_________ _________ _________ _________
Net pension liability
recognized in
the Consolidated
Balance Sheets $ (823) $ (464) $ (1,504) $ (685)
The weighted average discount rate, rate of increase in future
compensation levels, and expected long-term rate of return on assets
used to develop the projected benefit obligation at December 31, 1996
were 7.5%, 4.5% and 9%, respectively. The corresponding rates used
at December 31, 1995 were 7.75%, 5% and 9%, respectively. Mortality
assumptions were also updated in 1996. The changes in the various
assumptions resulted in a $6,581,000 increase in the projected
benefit obligation.
The foreign subsidiaries do not have a material pension liability at
December 31, 1996 and 1995.
Net domestic periodic pension cost includes the following components:
Predecessor
Company
December 14- January 1-
Years Ended December 31, December 31, December 13,
1996 1995 1994 1994
(Dollars in Thousands)
Service cost $ 1,554 $ 1,308 $ 79 $ 1,591
Interest cost 4,431 4,259 186 3,714
Actual return on
plan assets (7,697) (10,483) (27) (533)
Net amortization
and deferral 2,527 6,219 (194) (4,231)
________ ________ ________ ________
Net periodic
pension cost $ 815 $ 1,303 $ 44 $ 541
The Company has 401(k) Savings Plans available to substantially all
United States employees. Matching employer contributions are made in
accordance with plan provisions subject to certain limitations.
Matching employer contributions made were $801,000 in 1996, $611,000
in 1995 and $655,000 (including $622,000 for the Predecessor Company)
in 1994.
NOTE K - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain health care benefits to age 65 and life
insurance benefits for certain eligible retired United States
employees. Substantially all current employees may become eligible
for those benefits if they reach early retirement age while working
for the Company. The majority of the costs of such benefits are
funded as they are incurred.
The following table sets forth the plan's status and amounts
recognized in the consolidated financial statements at December 31,
1996 and 1995:
1996 1995
(Dollars in Thousands)
Accumulated postretirement
benefit obligation:
Retirees $ (8,165) $ (7,511)
Fully eligible active
plan participants (746) (792)
Other active plan
participants (5,958) (5,506)
___________ ___________
(14,869) (13,809)
Unrecognized net loss 2,280 873
___________ ___________
Accrued postretirement
benefit cost recognized
in the Consolidated
Balance Sheets $ (12,589) $ (12,936)
Net periodic postretirement benefit cost includes the following
components:
Predecessor
Company
December 14- January 1-
Years Ended December 31, December 31, December 13,
1996 1995 1994 1994
(Dollars in Thousands)
Service cost $ 323 $ 266 $ 15 $ 303
Interest cost 1,039 1,064 51 1,003
________ ________ ________ ________
Net periodic post-
retirement benefit
cost $ 1,362 $ 1,330 $ 66 $ 1,306
The weighted average discount rate used in determining the
accumulated postretirement benefit obligation at December 31, 1996
and 1995 was 7.5% and 7.75%, respectively. The decrease in the
discount rate resulted in a $271,000 increase in the accumulated
postretirement benefit obligation. The assumed health care cost
trend rate used in measuring the accumulated postretirement benefit
obligation was 10% at December 31, 1996, declining 1% each year
thereafter, to 5% in the year 2002 and beyond. A 1% increase in the
assumed health care cost trend rate for each year would increase the
accumulated postretirement benefit obligation at December 31, 1996 by
$972,000 and would increase the net periodic postretirement benefit
cost for 1996 by $109,000.
NOTE L - RESEARCH AND DEVELOPMENT
Expenditures for design and development of new products and
improvements of existing mining machinery products, including
overhead, aggregated $6,930,000 in 1996, $5,739,000 in 1995 and
$4,181,000 (including $3,945,000 for the Predecessor Company) in
1994. All engineering and product development costs are charged to
product development expense as incurred.
NOTE M - CALCULATION OF NET EARNINGS (LOSS) PER SHARE OF COMMON STOCK
1996 net earnings per share of common stock is based on the weighted
average number of common and common equivalent shares outstanding
during the year. Restricted common stock (see Note H) is considered
to be issued and outstanding and is included in the net earnings per
share calculation using the treasury stock method. Previous years'
net earnings (loss) per share of common stock are based on the
weighted average number of common shares outstanding since common
stock equivalents were not significant. Stock options outstanding in
1994 under the B-E Holdings, Inc. 1988 Stock Option Plan were not
included in the per share calculations because they were anti-
dilutive. The weighted average number of common and common
equivalent shares outstanding for the years ended December 31, 1996
and 1995, the period December 14, 1994 to December 31, 1994 and the
period January 1, 1994 to December 13, 1994, were 10,258,604,
10,203,462, 10,170,417 and 9,268,627, respectively.
Net earnings attributable to common shareholders for the Predecessor
Company includes redeemable preferred stock dividends declared and
paid as well as dividends earned but not declared.
NOTE N - FOREIGN OPERATIONS, EXPORT SALES AND SIGNIFICANT CUSTOMERS
The Company designs, manufactures and sells products in a single
industry segment, Energy and Industrial Products. Operations are
conducted in the United States and through subsidiaries located
throughout the world.
Financial information by geographical area is summarized in the
following table. Each geographic area represents the origin of the
financial information presented. Transfers between geographic areas
represent intercompany export sales of goods produced in the United
States and are accounted for based on established sales prices
between the related companies. In computing operating earnings for
non-United States subsidiaries, no allocations of interest or income
taxes have been made. Eliminations for operating earnings (loss)
include elimination of general corporate expenses. Identifiable
assets of subsidiaries are those related to the operations of those
subsidiaries. United States assets consist of all other operating
assets.
Transfers
Sales to Between Operating
Unaffiliated Geographic Total Earnings Identifiable
Customers Areas Net Sales (Loss) Assets
(Dollars in Thousands)
1996
United States $ 175,675 $ 24,451 $ 200,126 $ 7,830 $ 118,375
South America 27,602 - 27,602 2,270 19,358
Australia, Far
East and South
Africa 40,896 134 41,030 4,190 22,135
Other Foreign 19,613 (14) 19,599 1,126 15,556
Eliminations - (24,571) (24,571) (2,223) (2,529)
_________ _________ _________ _________ _________
$ 263,786 $ - $ 263,786 $ 13,193 $ 172,895
1995
United States $ 132,320 $ 29,847 $ 162,167 $ (17,689) $ 119,791
South America 29,954 - 29,954 3,326 18,775
Australia, Far
East and South
Africa 46,923 - 46,923 4,151 18,127
Other Foreign 22,724 289 23,013 2,208 20,342
Eliminations - (30,136) (30,136) (2,000) (2,997)
_________ _________ _________ _________ _________
$ 231,921 $ - $ 231,921 $ (10,004) $ 174,038
1994
United States $ 122,765 $ 23,019 $ 145,784 $ (11,709) $ 132,430
South America 17,016 7 17,023 1,859 15,700
Australia, Far
East and South
Africa 36,179 23 36,202 2,890 19,674
Other Foreign 18,024 234 18,258 1,129 14,818
Eliminations - (23,283) (23,283) (1,839) (2,749)
_________ _________ _________ _________ _________
$ 193,984 $ - $ 193,984 $ (7,670) $ 179,873
Export sales from United States operations, excluding sales to
affiliates, amounted to $103,777,000 in 1996, $69,476,000 in 1995 and
$60,627,000 (including $57,898,000 for the Predecessor Company) in
1994.
In 1996, one customer received approximately 14% of the Company's
consolidated net sales. In 1995 and 1994, a different customer
received approximately 22% and 20%, respectively, of the Company's
consolidated net sales. The Company is not dependent upon any one
customer.
NOTE O - COMMITMENTS, CONTINGENCIES AND CREDIT RISKS
Jackson National Life Insurance Company ("JNL"), the holder of
approximately 40.14% of the outstanding Common Stock and 97.2% of the
Secured Notes, has filed a claim (the "JNL 503(b) Claim") against the
Company for reimbursement of approximately $3,300,000 of professional
fees and disbursements incurred in connection with the Company's
chapter 11 proceedings pursuant to Section 503(b) of the Bankruptcy
Code. Pursuant to a settlement agreement dated May 23, 1995, 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
at a price equal to $5.6375 per share. By order dated June 3, 1996,
the Bankruptcy Court ruled that JNL would be awarded the sum of $500.
JNL has appealed the decision. The Company has been advised by its
reorganization 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 consolidated financial statements.
Concurrently with the trial of the JNL 503(b) Claim, the Bankruptcy
Court considered the final fee application of the law firm of
Milbank, Tweed, Hadley & McCloy ("Milbank"), who rendered services as
reorganization counsel for the Company in connection with the chapter
11 proceedings. The Milbank fee application was for approximately
$2,330,000, of which 80% had previously been paid by the Company on
an interim basis. By order dated June 3, 1996, the Bankruptcy Court
ruled that Milbank would receive 80% of the claimed amount as full
and final compensation, thereby resulting in no further payments
being due and owing to Milbank on the claim. JNL appealed the
decision of the Bankruptcy Court not to order disgorgement of amounts
already paid to Milbank. Milbank has not appealed the decision.
The Company's wholly-owned subsidiary, Boonville Mining Services,
Inc. ("BMSI"), was a defendant in an amended complaint filed on
September 24, 1992 by Dresser Industries, Inc. and Global Industrial
Technologies, Inc. (the "Plaintiffs"), alleging that BMSI's purchase
of drawings and other assets of C&M of Indiana, a division of
Construction and Mining Services, Inc., and BMSI's use of these and
other drawings allegedly acquired subsequently, constituted a
misappropriation of the Plaintiffs' trade secrets relating to Marion
Power Shovel Company, a division of Global Industrial Technologies,
Inc. BMSI had denied these claims. On June 17, 1996, BMSI settled
the litigation which resulted in an immaterial effect on earnings.
The Company is involved in various other litigation arising in the
normal course of business. It is the view of management that the
Company's recovery or liability, if any, under pending litigation is
not expected to have a material effect on the Company's financial
position or results of operations, although no assurance to that
effect can be given.
Expenditures for ongoing compliance with environmental regulations
that relate to current operations are expensed or capitalized as
appropriate. Expenditures that relate to an existing condition
caused by past operations and which do not contribute to current or
future revenue generation are expensed. Liabilities are recorded
when environmental assessments indicate that remedial efforts are
probable and the costs can be reasonably estimated. Estimates of the
liability are based upon currently available facts, existing
technology and presently enacted laws and regulations. These
liabilities are included in the Consolidated Balance Sheets at their
undiscounted amounts. Recoveries are evaluated separately from the
liability and, if appropriate, are recorded separately from the
associated liability in the Consolidated Balance Sheets.
The Company is normally subject to numerous product liability claims,
many of which relate to products no longer manufactured by the
Company or its subsidiaries, and other claims arising in the ordinary
course of business. The Company has insurance covering most of said
claims, subject to varying deductibles ranging from $300,000 to
$3,000,000, and has various limits of liability depending on the
insurance policy year in question. It is the view of management that
the final resolution of said claims and other similar claims which
are likely to arise in the future will not individually or in the
aggregate have a material effect on the Company's financial position
or results of operations, although no assurance to that effect can be
given.
The Company has obligations under various operating leases and rental
and service agreements. The expense relating to these agreements was
$5,658,000 in 1996, $5,351,000 in 1995 and $4,720,000 (including
$4,525,000 for the Predecessor Company) in 1994. Future minimum
annual payments under noncancellable agreements are as follows:
1997 $ 5,248,000
1998 4,256,000
1999 1,938,000
2000 1,418,000
2001 1,063,000
After 2001 1,187,000
$15,110,000
At December 31, 1996, the Company is also committed to acquire
approximately $1,550,000 of equipment. The Company expects to lease
the equipment.
A significant portion of the Company's consolidated net sales are to
customers whose activities are related to the coal, copper and iron
ore mining industries, including some who are located in foreign
countries. The Company generally extends credit to these customers
and, therefore, collection of receivables may be affected by the
mining industry economy and the economic conditions in the countries
where the customers are located. However, the Company closely
monitors extension of credit and has not experienced significant
credit losses. Also, most foreign sales are made to large, well-
established companies. The Company generally requires collateral or
guarantees on foreign sales to smaller companies.
NOTE P - QUARTERLY RESULTS - UNAUDITED
Quarterly results are as follows:
Quarters Ended at End of
March June September December
(Dollars in Thousands,
Except Per Share Amounts)
Net sales:
1996 $ 61,456 $ 69,364 $ 68,077 $ 64,889
1995 56,873 55,709 61,408 57,931
Gross profit:
1996 $ 11,793 $ 12,004 $ 12,785 $ 12,078
1995 7,179 7,927 2,782 8,481
Net earnings (loss):
1996(1) $ 298 $ 612 $ 1,495 $ 473
1995(2) (2,059) (2,985) (12,051) (1,677)
Net earnings (loss)
per share:
1996 $ .03 $ .06 $ .14 $ .05
1995 (.20) (.29) (1.18) (.16)
Weighted average shares
used in calculation
(in thousands):
1996 10,235 10,235 10,235 10,273
1995 10,170 10,173 10,235 10,235
(1) Interest expense on the Secured Notes of $386,000 related to the quarter
ended September 30, 1996 was recorded during the quarter ended December 31,
1996. See Note G.
(2) Included in the net loss for the quarter ended September 30, 1995 were
inventory obsolescence adjustments of $4,416,000, a $1,018,000 charge for the
reestimation of certain customer warranty reserves, and restructuring expenses
of $2,577,000.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Shareholders of Bucyrus International, Inc.:
We have audited the accompanying balance sheets of Bucyrus International, Inc.
(Delaware Corporation) as of December 31, 1996 and 1995 and the related
statements of operations, common shareholders' investment and cash flows for
the years then ended. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bucyrus International, Inc.
as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
January 31, 1997.
<PAGE>
Deloitte &
Touche LLP
____________ ________________________________________________________
411 East Wisconsin Avenue Telephone: (414) 271-3000
Milwaukee, Wisconsin 53202-4496
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Bucyrus International, Inc.:
We have audited the accompanying consolidated statements of operations, common
shareholders' investment (deficiency in assets) and cash flows of Bucyrus
International, Inc. (formerly Bucyrus-Erie Company) and subsidiaries (the
"Company") for the period from December 14, 1994 to December 31, 1994 and the
period from January 1, 1994 to December 13, 1994 (Predecessor Company
operations). These financial statements are the responsibility of Company
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As discussed in Note B to the consolidated financial statements, on
December 1, 1994, the Bankruptcy Court entered an order confirming an Amended
Joint Plan of Reorganization which became effective on December 14, 1994.
Accordingly, the accompanying consolidated financial statements have been
prepared in conformity with AICPA Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code," for the
Company as a new entity with assets, liabilities, and a capital structure
having carrying values not comparable with prior periods as discussed in
Note B to the consolidated financial statements. Under the Amended Joint Plan
of Reorganization, the Company's parent, B-E Holdings, Inc., was merged with
and into the Company as of the effective date. The consolidated financial
statements for the period prior to December 14, 1994 includes the operating
results of the merged entities (Predecessor Company).
In our opinion, the Company's consolidated financial statements present
fairly, in all material respects, the results of operations and cash flows of
Bucyrus International, Inc. and subsidiaries for the period December 14, 1994
to December 31, 1994 in conformity with generally accepted accounting
principles. Further, in our opinion, the Predecessor Company consolidated
financial statements referred to above present fairly, in all material
respects, the results of operations and cash flows of the Predecessor Company
for the period January 1, 1994 to December 13, 1994 in conformity with
generally accepted accounting principles.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
April 10, 1995
_______________
Deloitte Touche
Tohmatsu
International
_______________
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Bucyrus International, Inc. and Subsidiaries
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 are not comparable to the
consolidated financial statements of periods prior to the Effective Date. 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's
consolidated financial statements included the related depreciation and
amortization charges associated with the fair value adjustments since the date
of the acquisition.
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 December 31, 1996, 1995 and 1994 were as
follows:
1996 1995 1994
(Dollars in Thousands)
Working capital $78,814 $65,330 $78,208
Current ratio (ratio of current
assets to current liabilities) 2.9 to 1 2.2 to 1 2.6 to 1
The increase in working capital and the current ratio for the year ended
December 31, 1996 was primarily due to a decrease in current liabilities to
customers on uncompleted contracts and warranties and a decrease in
outstanding project financing borrowings. The decrease in working capital and
the current ratio for the year ended December 31, 1995 was primarily due to
the inventory fair value adjustment of $10,065,000 being charged to cost of
products sold as the inventory was sold and an inventory obsolescence
provision of $4,416,000. See RESULTS OF OPERATIONS - Cost of Products Sold.
The table below summarizes the Company's cash position at December 31,
1996:
Restricted Unrestricted
Location Cash Cash Total
(Dollars in Thousands)
United States $ - $ 9,230 $ 9,230
Foreign Subsidiaries 23 5,945 5,968
Equipment Assurance Limited 1,056 588 1,644
_______ _______ _______
$ 1,079 $15,763 $16,842
A portion of the unrestricted cash at the foreign subsidiaries is not
readily repatriatable because it is required for working capital purposes at
these respective locations.
The following table reconciles Earnings (Loss) Before Income Taxes and
Extraordinary Gain to earnings before extraordinary gain, interest expense,
income taxes, depreciation, amortization, stock compensation, (gain) loss on
sale of fixed assets, restructuring expenses, reorganization items and
inventory fair value adjustment charged to cost of products sold ("Adjusted
EBITDA") (see footnote 3 below):
Predecessor
Company
December 14 - January 1 -
Years Ended December 31, December 31, December 13,
1996 1995 1994 1994
(Dollars in Thousands)
Earnings (loss)
before income
taxes and
extraordinary
gain $ 4,636 $(16,258) $ (427) $(21,438)
Restructuring
expenses - 2,577 - -
Reorganization
items - 919 - 9,338
Inventory fair
value adjustment
charged to cost
of products
sold - 10,065 362 -
Non cash expenses:
Depreciation 3,882 3,671 145 7,356
Amortization 1,142 1,194 23 3,679
Stock
compensation 668 - - -
(Gain) loss on
sale of fixed
assets 362 (166) 5 37
Payment in kind
interest on the
Secured Notes and
deferred rent
(interest) on sale
and leaseback
financing
arrangement
(Predecessor
Company) 7,783 5,691 258 7,287
Amortization of
debt discount - - - 71
Cash interest
expense (1) 774 563 26 6,553
________ ________ ________ ________
Adjusted
EBITDA (2)(3) $ 19,247 $ 8,256 $ 392 $ 12,883
(1) Cash interest expense for the Predecessor Company includes all
accrued but unpaid interest prior to February 18, 1994 (the "Petition Date"),
the date the Predecessor Company commenced voluntary petitions under Chapter
11 of the Bankruptcy Code. Contractual interest of $20,250,000 on the
unsecured debt of the Predecessor Company did not accrue subsequent to the
Petition Date. Excludes interest on the Secured Notes due December 14, 1999
("Secured Notes") that will be paid in kind, amortization of debt discount and
deferred rent (interest) on the sale and leaseback financing arrangement.
(2) Adjusted EBITDA for the year ended December 31, 1995 is reduced by a
charge of $4,416,000 to cost of products sold for the scrapping and disposal
of excess inventory which related to certain older and discontinued machine
models.
(3) The Company is presenting a calculation of Adjusted EBITDA to
highlight the effects that fresh start accounting, restructuring expenses and
reorganization items have on reported net earnings. Since cash flow from
operations is very important to the Company's future, the Adjusted EBITDA
calculation provides a summary review of cash flow performance. In addition,
the Company is required to maintain certain minimum Adjusted EBITDA levels
under its bank credit agreement (see below). The Adjusted EBITDA calculation
is not an alternative to operating income under generally accepted accounting
principles as an indicator of operating performance or to cash flows as a
measure of liquidity.
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, as
amended, contains a credit facility for working capital and general corporate
purposes (the "Loan Facility"), a letter of credit facility (the "L/C
Facility") and a project financing loan facility (the "Project Financing
Facility"). Under the Loan Facility, 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 April 30, 1998. Under the L/C Facility, Bank One has agreed to issue
letters of credit through April 30, 1998 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
April 30, 1999. Under the Project Financing Facility, Bank One may make
project financing loans to the Company from time to time. Borrowings under
the Credit Agreement are secured by a security interest on substantially all
of the Company's property (other than land and buildings), including the
shares of the Company's United States subsidiaries and 65% of the shares of
certain non-United States subsidiaries. At December 31, 1996 and 1995, the
Company had borrowings outstanding under the Loan Facility of $357,000 and
$269,000, respectively. At December 31, 1996 and 1995, $7,316,000 and
$3,419,000, respectively, of the L/C Facility was being used. Under the
Project Financing Facility, the Company has a line of credit for $14,000,000
to support one current order. Bank One has participated a portion of the
Project Financing Facility to The Bank of Nova Scotia. Availability is based
on the amount of inventory being financed and any accounts receivable relating
to such project. Availability at December 31, 1996 was approximately
$3,300,000. There were no borrowings under the Project Financing Facility at
December 31, 1996 and 1995.
The agreements relating to the Secured Notes and the Credit Agreement
permit additional project financing from the lenders to manufacture 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 project. Project financing borrowings
mature not later than the date of the final payment by the customer under the
applicable purchase contract. At December 31, 1996 and 1995, the Company had
$2,431,000 and $5,132,000, respectively, of outstanding project financing
borrowings not related to the Project Financing Facility. These borrowings
are classified as Short-Term Obligations in the Consolidated Balance Sheets.
The Company believes that current levels of cash and liquidity, together
with funds generated by operations, funds available from its Credit Agreement
and other project financing arrangements 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.
The Company had outstanding letters of credit and guarantees of
$14,619,000 at December 31, 1996. Of this amount, $7,316,000 is related to
the Credit Agreement with the remainder provided by various banks and
insurance companies.
At December 31, 1996, the Company had approximately $3,414,000 of open
capital appropriations. Included in open capital appropriations is the
remaining $1,930,000 for a new service shop facility in Chile which is being
financed primarily with a local bank in Chile and the remaining $507,000 for
land and a new facility in South Africa.
In addition, the Company has committed $5,400,000 of a potential
$20,000,000 machine shop tool modernization project. The initial machine
tools have been leased and the remaining machine tools are expected to be
financed or leased.
CAPITALIZATION
The long-term debt to equity ratio at December 31, 1996 and 1995 was
1.8 to 1 and 1.7 to 1, respectively.
RESULTS OF OPERATIONS
Net Sales
Net sales for 1996 were $263,786,000 compared with $231,921,000 for 1995.
Sales of repair parts and services for 1996 were $156,390,000, which is an
increase of .6% from 1995. This increase consists of an increase in sales at
Minserco, Inc., a mining service subsidiary of the Company, offset by a
decrease in sales of repair parts, primarily at foreign locations. Machine
sales for 1996 were $107,396,000, which is an increase of 40.4% from 1995.
The increase in machine sales was primarily due to increased electric mining
shovel shipments, primarily in copper markets.
Net sales for 1995 were $231,921,000 compared with $193,984,000 for 1994.
Sales of repair parts and services for 1995 were $155,434,000, which is an
increase of 7.5% from 1994. The increase in repair parts and service sales
was primarily due to increased repair parts sales at foreign locations as a
result of higher demand for replacement parts. Machine sales for 1995 were
$76,487,000, which is an increase of 54.7% from 1994. The increase was due to
increased blast hole drill and electric mining shovel shipments, primarily in
copper, coal and iron ore markets.
Other Income
Other income, which consists primarily of interest income, was
$1,003,000, $1,295,000 and $3,055,000 for 1996, 1995 and 1994, respectively.
Included in the amount for 1994 was a favorable insurance settlement of
$1,350,000.
Cost of Products Sold
Cost of products sold for 1996 was $215,126,000 or 81.6% of net sales
compared with $205,552,000 or 88.6% of net sales for 1995 and $164,114,000 or
84.6% of net sales for 1994. Included in cost of products sold for 1995 and
1994 were charges of $10,065,000 and $362,000, respectively, as a result of
the fair value adjustment to inventory. This adjustment was made in
accordance with the principles of fresh start reporting adopted in 1994 and
was charged to cost of products sold as the inventory was sold. Also included
in cost of products sold for 1995 was a charge of $4,416,000 for the scrapping
and disposal of excess inventory which related to certain older and
discontinued machine models. Excluding the effects of the inventory fair
value adjustment and excess inventory charge, cost of products sold as a
percentage of net sales for 1995 was 82.4%. The increase in gross margin
percentage for 1996, not including the fair value and excess inventory
adjustments, was primarily due to improved margins on machine sales.
Product Development, Selling, Administrative and Miscellaneous Expenses
Product development, selling, administrative and miscellaneous expenses
for 1996 were $36,470,000 or 13.8% of net sales compared with $34,172,000 or
14.7% of net sales in 1995 and $31,257,000 or 16.1% of net sales in 1994. The
dollar increase for 1996 was primarily due to higher product development and
service costs to provide increased support to customers.
Interest Expense
Interest expense for 1996 was $8,557,000 compared with $6,254,000 for
1995. The increase for 1996 was primarily due to an increase in the interest
rate on the Secured Notes from 10.5% to 13% effective December 14, 1995 for
interest paid in kind by adding the interest to the principal balance. Also,
interest on the Secured Notes was accrued on a higher principal balance in
1996 since all interest paid to date has been paid in kind. The Company has
the option of paying interest on the Secured Notes in cash at 10.5% or in kind
at 13%.
Interest expense for 1995 was $6,254,000 compared with $14,195,000 for
1994. The decrease was primarily due to the exchange of unsecured debt
securities of Holdings and the Company for shares of the Company's common
stock in connection with the Company's reorganization pursuant to the Amended
Plan.
Restructuring Expenses
Restructuring expenses of $2,577,000 in 1995 consist of employee
severance expenses recorded to reflect the cost of reduced employment and the
severance costs related to the resignation of three officers of the Company.
Reorganization Items
Reorganization items represent the expenses incurred as a result of the
Company's efforts to reorganize under chapter 11 of the Bankruptcy Code. In
1995, reorganization items consist entirely of legal and professional fees.
Reorganization items in 1994 consist of $8,023,000 of legal and professional
fees, $41,122,000 to adjust debt and redeemable preferred stock to the amount
of the allowed claims in the Amended Plan and a $1,113,000 write-off of
capitalized financing costs. These expenses were partially offset by $365,000
of interest income earned from the Petition Date through December 13, 1994 on
accumulated cash balances of Holdings and the Company.
Income Taxes
Income tax expense consists primarily of foreign taxes at applicable
statutory rates.
Net Earnings (Loss)
Net earnings for 1996 was $2,878,000 compared with a net loss of
$18,772,000 for 1995. During 1995, the Company undertook a restructuring of
its corporate headquarters and foreign subsidiaries and completed an
evaluation of its inventories and other items. The Company, in evaluating its
inventory, determined that excess levels existed for certain older and
discontinued machine models. Accordingly, a charge of $4,416,000 was made in
1995 for the eventual scrapping and disposal of this inventory. Severance
costs of $2,577,000 were also recorded to reflect the cost of reduced
employment at the corporate headquarters and foreign subsidiaries, and the
resignation of three former officers. In addition, a $1,018,000 charge
resulting from the reestimation of certain customer warranty reserves was
recorded in 1995 and a $919,000 charge was made for reorganization items
related to issues continuing from the bankruptcy proceedings. Net loss for
1995 also included $8,633,000 (net of income taxes) of the inventory fair
value adjustment related to fresh start reporting.
Net loss for 1995 was $18,772,000 compared with net earnings of
$119,095,000 for 1994. Included in net earnings for 1994 was an extraordinary
gain on debt discharge of $142,480,000, which was partially offset by
reorganization items of $9,338,000.
Backlog and New Orders
The Company's consolidated backlog on December 31, 1996 was $158,727,000
compared with $118,024,000 at December 31, 1995 and $72,346,000 at
December 31, 1994. Machine backlog at December 31, 1996 was $49,020,000,
which is a decrease of 25.5% from December 31, 1995. The decrease in machine
backlog from December 31, 1995 was primarily in electric mining shovel volume.
Repair parts and service backlog at December 31, 1996 was $109,707,000, which
is an increase of 110.1% from December 31, 1995. The increase in repair parts
and service backlog from December 31, 1995 was primarily at foreign locations
and reflect new orders related to long-term maintenance and repair contracts
which will be completed in the next three to five years.
New orders for 1996 were $304,489,000, which is an increase of 9.7% from
1995. New machine orders for 1996 were $90,606,000, which is a decrease of
22.3% from 1995. The decrease in new machine orders for 1996 was primarily in
electric mining shovel volume and represented low machine sales activity
during the second half of 1996, primarily related to copper markets. Copper
prices have decreased recently from historically high levels. Nevertheless,
copper prices are expected to increase through 1997 which should result in
continued demand from this market segment for electric mining shovels and
blast hole drills. Price increases for hard coking coal in 1995 and 1996 have
brought new demand for machines in western Canada and Australia in recent
months. Also, there was an increase in iron ore production in late 1994 that
was sustained through 1995 and 1996. The Company anticipates that some iron
ore producers will continue to replace aged electric mining shovel and blast
hole drill fleets with new machines in an effort to reduce iron ore production
costs. New repair parts and service orders for 1996 were $213,883,000, which
is an increase of 32.9% from 1995. The increase in repair parts and service
orders for 1996 was primarily due to large maintenance and repair contract
orders at foreign locations in the first quarter of 1996.
<PAGE>
SELECTED FINANCIAL DATA
Bucyrus International, Inc. and Subsidiaries
(Dollars In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Predecessor Company (b)
Years Ended December 14 - January 1 - Years Ended
December 31, December 31, December 13, December 31,
1996 1995 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Net sales $263,786 $231,921 $ 7,810 $186,174 $198,464 $242,468
Earnings (loss) before
extraordinary gain
and cumulative
effects of changes
in accounting
principles $ 2,878 $(18,772) $ (552) $(22,833) $(40,692) $(16,747)
Net earnings (loss) $ 2,878 $(18,772) $ (552) $119,647 $(51,990) $(16,747)
Net earnings (loss)
attributable
to common
shareholders $ 2,878 $(18,772) $ (552) $ 78,946 $(52,629) $(19,138)
Earnings (loss)
per share
before extra-
ordinary gain
and cumulative
effects of changes
in accounting
principles $ .28 $ (1.84) $ (.05) $ (2.46) $ (4.56) $ (2.64)
Net earnings (loss)
per share $ .28 $ (1.84) $ (.05) $ 12.91 $ (5.82) $ (2.64)
Net earnings (loss)
per share
attributable
to common
shareholders $ .28 $ (1.84) $ (.05) $ 8.52 $ (5.89) $ (3.01)
Adjusted EBITDA (c) $ 19,247 $ 8,256 $ 392 $ 12,883 $ 11,694 $ 25,347
Cash dividends per
common share $ - $ - $ - $ - $ - $ -
Consolidated Balance
Sheets Data:
Total assets $172,895 $174,038 $179,873 N/A $188,811 $206,805
Long-term debt $ 66,627 $ 58,021 $ 53,170 N/A $ 769(a) $ 165(a)
Redeemable
preferred stock N/A N/A N/A N/A $ 30,302 $ 29,310
<FN>
(a) Amounts are net of $201,979 at December 31, 1993 and $197,334 at December 31, 1992, of long-term debt
classified as a current liability.
(b) As a result of the reorganization and implementation of fresh start reporting as of the Effective Date,
the financial statements of the Company subsequent to the Effective Date are not comparable to the
financial statements of the Predecessor Company.
(c) Earnings before extraordinary gain, cumulative effects of changes in accounting principles, interest
expense, income taxes, depreciation, amortization, stock compensation, (gain) loss on sale of fixed
assets, restructuring expenses, reorganization items and inventory fair value adjustment charged to
cost of products sold.
</TABLE>
<PAGE>
STOCK INFORMATION
Stock Ownership Price Range of Common Stock
Effective April 26, 1995, the Closing sales prices of the Company's
Company's Common Stock has been Common Stock based on information
traded on the Nasdaq National provided to the Company by the
Market tier of The Nasdaq Stock OTC Bulletin Board for the period
Market under the symbol BCYR. January 1, 1995 to April 25, 1995
From December 22, 1994 to and by The Nasdaq Stock Market for
April 25, 1995, the Company's periods thereafter were as follows:
Common Stock was traded on the
OTC Bulletin Board under the Stock Prices
trading symbol BCYR. At year- High Low Closing
end, 10,534,574 shares of
common stock were owned by 1,926 1996 Quarter
registered shareholders of First $10-1/4 $ 6-3/4 $ 8
record compared with 2,029 a Second 11-3/4 7 10-1/4
year earlier. In addition, Third 10-1/2 8-1/4 9-1/4
there were beneficial owners Fourth 9-3/4 7-3/8 8-3/4
of shares held of record
brokers and fiduciaries. 1995 Quarter
The Company's Common Stock First $ 9 $ 4 $ 5
is owned by residents of Second 6-7/8 4-15/16 5-3/4
many states and some foreign Third 10-3/4 5-1/16 8-7/8
countries. Fourth 9-1/4 7-1/8 8-1/8
Transfer Agent and Registrar No dividends were paid in 1996 or
1995. The Company is presently
American Stock Transfer and prohibited from paying dividends
Trust Company other than dividends payable solely
40 Wall Street in Common Stock or other equity
46th Floor securities of the Company. For
Brooklyn, New York 10005 information regarding restrictions
on the Company's ability to pay
dividends, see Note G to the NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
OFFICERS AND DIRECTORS AND CORPORATE INFORMATION
Officers and Directors
OFFICERS
Willard R. Hildebrand, President and
Chief Executive Officer
Daniel J. Smoke, Vice President and
Chief Financial Officer
Michael G. Onsager, Vice President - Engineering
Timothy W. Sullivan, Vice President - Marketing
Thomas B. Phillips, Vice President - Materials
Craig R. Mackus, Controller and Secretary
BOARD OF DIRECTORS
F. John Stark, III, Chairman of the Board,
Senior Vice President and General Counsel and
portfolio manager of the Special Investments
Portfolio for PPM America, Inc. (asset
management company)
C. Scott Bartlett, Jr., Consultant on banking
matters
Willard R. Hildebrand, President and Chief
Executive Officer
Charles S. Macaluso, Principal with Miller
Associates, Inc.
Frank W. Miller, President of Miller
Associates, Inc. (private management
and consulting firm)
George A. Poole, Jr., Private investor
Joseph J. Radecki, Jr., Executive Vice
President of Jefferies & Company, Inc.
(investment banking and advisory firm)
Russell W. Swansen, President of PPM America,
Inc. (asset management company)
Samuel M. Victor, Executive Vice President and
a Principal of Chanin and Company (investment
banking and financial advisory firm)
AUDIT COMMITTEE
George A. Poole, Jr.
Joseph J. Radecki, Jr.
F. John Stark, III
BENEFIT PLAN COMMITTEE
Russell W. Swansen
Craig R. Mackus
Gary R. Noel
COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE
C. Scott Bartlett, Jr.
Russell W. Swansen
FINANCE AND INVESTMENT COMMITTEE
Willard R. Hildebrand
Charles S. Macaluso
Frank W. Miller
Joseph J. Radecki, Jr.
Samuel M. Victor
OPERATING COMMITTEE
C. Scott Bartlett, Jr.
Willard R. Hildebrand
Frank W. Miller
F. John Stark, III
<PAGE>
Corporate Information
AUDITORS
Arthur Andersen LLP
Milwaukee, Wisconsin
CORPORATE OFFICES
South Milwaukee, Wisconsin
PRINCIPAL SUBSIDIARIES
Bucyrus (Africa) (Proprietary) Limited
Boksburg, Republic of South Africa
Bucyrus (Australia) Proprietary Ltd.
Brisbane, Queensland, Australia
Bucyrus Europe Limited
Lincoln, England
Bucyrus (Brasil) Ltda.
Vespasiano, Brazil
Bucyrus Chile Limitada
Santiago, Chile
Bucyrus Canada Limited
Toronto, Canada
Bucyrus India Private Limited
New Delhi, India
Bucyrus (Mauritius) Limited
Port-Louis, Republic of Mauritius
Boonville Mining Services, Inc.
Boonville, Indiana
Minserco, Inc.
South Milwaukee, Wisconsin
Equipment Assurance Limited
Grand Cayman, British West Indies
ANNUAL MEETING
The annual meeting of shareholders of
Bucyrus International, Inc. will be
held on April 30, 1997 at a time and
place as set forth in the Company's
1996 Proxy Statement.
CHANGE OF ADDRESS
Report old and new address to:
American Stock Transfer and
Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
<PAGE>
Minserco
[PICTURE]
Minserco employees erecting a
machine at the mine site.
[PICTURE]
Minserco employees
preparing to remove [PICTURE]
the base from under a
2570W dragline.
<PAGE>
[PICTURE]
2570WS dragline
removing overburden in
a Wyoming coal mine.
<PAGE>
Principal U.S. Subsidiaries
o Minserco, Inc. o Boonville Mining
South Milwaukee, WI Services, Inc.
Kilgore, TX (B.M.S.I.)
Mt. Sterling, KY Boonville, IN
Ft. Meade, FL
International Subsidiaries and
Representative Offices
o Bucyrus (Africa) o Bucyrus Chile
(Proprietary) Limited Limitada
Republic of South Africa Antofagasta
Boksburg Iquique
Witbank Santiago
Vereeniging Buenos Aries,
Argentina
o Bucyrus (Australia)
Proprietary Ltd o Bucyrus (China)
Brisbane, Queensland Beijing
Geebung, Queensland
Perth, Western Australia o Bucyrus Europe
Muswellbrook, Limited
New South Wales Lincoln, England
o Bucyrus (Brasil) Ltda. o Bucyrus India Private
Vespasiano Limited
Parauapebas Calcutta
Biarro Amazonas Itabira New Delhi
o Bucyrus Canada Limited o Bucyrus (Mauritius)
(Edmonton) Nisku, Alberta Limited
Labrador City, Port-Louis
Newfoundland
o Equipment Assurance
Limited
Grand Cayman,
British West Indies
[PICTURE CONTINUED
FROM PREVIOUS PAGE]
2570WS dragline
removing overburden in
a Wyoming coal mine.
<PAGE>
Bucyrus International, Inc.
P. O. Box 500
South Milwaukee, WI 53172-0500
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 15,763
<SECURITIES> 0
<RECEIVABLES> 32,624
<ALLOWANCES> (539)
<INVENTORY> 70,889
<CURRENT-ASSETS> 121,241
<PP&E> 43,409
<DEPRECIATION> (7,382)
<TOTAL-ASSETS> 172,895
<CURRENT-LIABILITIES> 42,427
<BONDS> 66,627
0
0
<COMMON> 105
<OTHER-SE> 37,356
<TOTAL-LIABILITY-AND-EQUITY> 172,895
<SALES> 263,786
<TOTAL-REVENUES> 264,789
<CGS> 215,126
<TOTAL-COSTS> 215,126
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (19)
<INTEREST-EXPENSE> 8,557
<INCOME-PRETAX> 4,636
<INCOME-TAX> 1,758
<INCOME-CONTINUING> 2,878
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,878
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
