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, 1999
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: None
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. [ X ]
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 24, 2000, 1,442,150 shares of common stock of the Registrant
were outstanding. Of the total outstanding shares of common stock on
March 24, 2000, 1,430,300 were held of record by American Industrial Partners
Acquisition Company, LLC, which may be deemed an affiliate of Bucyrus
International, Inc., and 5,550 shares were held by directors and officers of
the Company. There is no established public trading market for such stock.
Documents Incorporated by Reference: None
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 is currently substantially
wholly-owned by American Industrial Partners Acquisition Company, LLC
("AIPAC").
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 blasthole drills, which are used by customers who
mine coal, iron ore, copper, phosphate, bauxite and other minerals throughout
the world.
This Report includes "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. Discussions
containing such forward-looking statements may be found in this section, as
well as in ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS and elsewhere within this Report.
Forward-looking statements include statements regarding the intent, belief or
current expectations of the Company, primarily with respect to the future
operating performance of the Company or related industry developments. When
used in this Report, terms such as "anticipate," "believe," "estimate,"
"expect," "indicate," "may be," "objective," "plan," "predict," and "will be"
are intended to identify such statements. Readers are cautioned that any such
forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, and that actual results may differ from those
described in the forward-looking statements as a result of various factors,
many of which are beyond the control of the Company. Forward-looking
statements are based upon management's expectations at the time they are made.
Although the Company believes that the expectations reflected in such forward-
looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from such expectations ("Cautionary
Statements") are described generally below and disclosed elsewhere in this
Report. All subsequent written or oral forward-looking statements
attributable to the Company or persons acting on behalf of the Company are
expressly qualified in their entirety by the Cautionary Statements.
Factors that could cause actual results to differ materially from those
contemplated include:
Factors affecting customers' purchases of new equipment, rebuilds,
parts and services such as: production capacity, stockpiles, and
production and consumption rates of coal, copper, iron, gold and other
ores and minerals; the cash flows of customers; the cost and availability
of financing to customers and the ability of customers to obtain
regulatory approval for investments in mining projects; consolidations
among customers; work stoppages at customers or providers of
transportation; and the timing, severity and duration of customer buying
cycles.
Factors affecting the Company's general business, such as: unforseen
patent, tax, product, environmental, employee health or benefit, or
contractual liabilities; nonrecurring restructuring and other special
charges; changes in accounting or tax rules or regulations; reassessments
of asset valuations for such assets as receivables, inventories, fixed
assets and intangible assets; leverage and debt service; our success in
recruiting and retaining managers and key employees; and our wage
stability and cooperative labor relations; plant capacity and
utilization.
Industry Overview
The large-scale surface mining equipment manufactured and serviced by the
Company is used primarily in coal, copper and iron ore mines throughout the
world. Growth in demand for these commodities is a function of population
growth and continuing improvements in standards of living in many areas of the
world. The market for new surface mining equipment is somewhat cyclical in
nature due to market fluctuations for these commodities; however, the
aftermarket for parts and services is more stable because these expensive,
complex machines are typically kept in continuous operation for 15 to 30 years
and require regular maintenance and repair throughout their productive lives.
The largest markets for this mining equipment have been in Australia,
Canada, China, India, South Africa, South America and the United States.
Together, these markets typically account for approximately 90% of all new
machines sold, although in any given year markets in other countries may
assume greater importance.
Markets Served
The Company's products are used in a variety of different types of mining
operations, including gold, phosphate, bauxite and oil sands, as well as for
land reclamation. The Company manufactures surface mining equipment primarily
for large companies and quasi-governmental entities engaged in the mining of
coal, iron ore and copper throughout the world. Until the late 1980's, coal
mining accounted for the largest percentage of industry demand for the
Company's machines, and it continues to be one of the largest users of
replacement parts and services. In recent years, however, copper mining
operations have accounted for an increasingly greater share of new machine
sales.
Copper. In 1999, the copper industry saw a consolidation of large
producers. To balance supply against demand, a number of the smaller
North American high-cost producers closed their facilities as new mines
in South America started producing copper at lower costs. The price of
copper in 1999 dropped to an eleven-year low of $0.61 per pound in March
and then increased to $0.80 by the end of the year as supply and demand
became more closely balanced.
Coal. There are two types of coal, steam coal used to generate
electricity and coking coal used in the process of producing steel. The
largest producers are China, the United States, India, Australia, Russia
and South America. In the United States, environmental legislation has
caused the mining of coal to shift from east of the Mississippi River to
the Powder River Basin in the west, where the sulfur content is much
lower providing a cleaner burning coal. This has resulted in the closing
of many mines and idling most of the equipment. Some draglines and
electric mining shovels have been employed in the western mines. The
growing demand for coal is in the developing countries with rapid growing
populations.
Iron Ore. Iron ore is the only source of primary iron and is mined
in more than 50 countries. The five largest producers, accounting for
76% of world production, are China, Brazil, Australia, Russia and India.
The Company's excavation machines are used for land reclamation as well
as for mining, which has a positive effect on the demand for its products and
replacement parts and expands the Company's potential customer base. 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.
OEM Products
The Company's line of original equipment manufactured products includes a
full range of rotary blasthole drills, electric mining shovels and draglines.
Rotary Blasthole Drills. Most surface mines require breakage or
blasting 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. Rotary blasthole drills are used to drill these holes and
are usually described in terms of the diameter of the hole they bore.
The average life of a blasthole drill is 15 to 20 years.
The Company offers a line of rotary blasthole drills ranging in hole
diameter size from 9.0 inches to 17.5 inches and ranging in price from
approximately $1,500,000 to $2,800,000 per drill, depending on machine
size and variable features.
Electric Mining Shovels. Mining shovels are primarily used to load
coal, copper ore, iron ore, other mineral-bearing materials, overburden,
or rock into trucks. There are two basic types of mining shovels,
electric and hydraulic. Electric mining shovels are able to handle
larger shovels or "dippers", allowing them to load greater volumes of
rock and minerals, while hydraulic shovels are smaller and more
maneuverable. The Company manufactures only electric mining shovels.
The average life of an electric mining shovel is 15 to 20 years.
Mining shovels are characterized in terms of weight and dipper
capacity. The Company offers a full line of electric mining shovels,
weighing from 400 to 1,300 tons and having dipper capacities from 12 to
85 cubic yards. Prices range from approximately $3,000,000 to
approximately $10,000,000 per shovel.
Draglines. Draglines are primarily used to remove overburden, which
is the earth located over a coal or mineral deposit, by dragging a large
bucket through the overburden, carrying it away and depositing it in a
remote spoil pile. The Company's draglines weigh from 500 to 7,500 tons,
and are typically described in terms of their "bucket size", which can
range from nine to 220 cubic yards. The Company currently offers a full
line of models ranging in price from $10,000,000 to over $60,000,000 per
dragline. The average life of a dragline is 20 to 30 years.
Draglines are the industry's largest and most expensive type of
equipment, and while sales are sporadic, each dragline represents a
significant sales opportunity.
Aftermarket Parts and Services
The Company has a comprehensive aftermarket business that supplies
replacement parts and services for the surface mining industry. The Company's
aftermarket services include maintenance and repair labor, technical advice,
refurbishment and relocation of older, installed machines, particularly
draglines. The Company also provides engineering, manufacturing and servicing
for the consumable rigging products that attach to dragline buckets (such as
dragline teeth and adapters, shrouds, dump blocks and chains) and shovel
dippers (such as dipper teeth, adapters and heel bands).
In general, the Company realizes higher margins on sales of parts and
services than it does on sales of new machines. Moreover, because the
expected life of large, complex mining machines ranges from 15 to 30 years,
the Company's aftermarket business is inherently more stable and predictable
than the fluctuating market for new machines. Over the life of a machine, net
sales generated from aftermarket parts and services can exceed the original
purchase price.
A substantial portion of the Company's international repair and
maintenance services are provided through its global network of wholly-owned
foreign subsidiaries and overseas offices operating in Argentina, Australia,
Brazil, Canada, Chile, China, England, India, Mauritius, Peru and South
Africa. The Company's two wholly-owned domestic subsidiaries, Minserco, Inc.
("Minserco") and Boonville Mining Services, Inc. ("BMSI"), provide repair and
maintenance services throughout North America. Minserco, which maintains
offices in Florida, Kentucky, Texas and Wyoming, provides 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. Minserco's services are
provided almost exclusively to maintenance and repair of Bucyrus machines
operating in North America. BMSI sells replacement parts and provides repair
and rebuild services both for Company machines and other manufacturers'
equipment.
To comply with the increasing aftermarket demands of larger mining
customers, the Company offers comprehensive Maintenance and Repair Contracts
("MARCs"). Under these contracts, the Company provides all replacement parts,
regular maintenance services and necessary repairs for the excavation
equipment at a particular mine with an on-site support team. In addition,
some of these contracts call for Company personnel to operate the equipment
being serviced. MARCs are highly beneficial to the Company's mining customers
because they promote high levels of equipment reliability and performance,
allowing the customer to concentrate on mining production. MARCs typically
have terms of three to five years with standard termination and renewal
provisions, although some contracts allow termination by the customer for any
cause. New mines in areas such as Chile, Argentina and Peru are the primary
targets for MARCs because it is difficult and expensive for mining companies
to establish the necessary infrastructures for ongoing maintenance and repair
in remote locations.
The Bennett & Emmott Acquisition
On April 30, 1999, the Company's wholly-owned subsidiary, Bucyrus Canada
Limited, consummated the acquisition of certain assets of Bennett & Emmott
(1986) Ltd. ("Bennett & Emmott"), a privately owned Canadian company with
extensive experience in the field repair and service of heavy machinery for
the surface mining industry. In addition to the surface mining industry,
Bennett & Emmott services a large number of customers in the pulp and paper,
sawmill, oil and natural gas industries in Western Canada, the Northwest
Territories and the Yukon. The company provides design and manufacturing
services, as well as in-house and field repair and testing of electrical and
mechanical equipment. Bennett & Emmott also distributes compressors,
generators and related products. This acquisition strengthens the Company's
position in the oil sands area of Western Canada.
Customers
The Company does not consider itself dependent upon any single customer
or group of customers; however, on an annual basis a single customer may
account for a large percentage of sales, particularly new machine sales. In
1999, 1998 and 1997, one customer accounted for approximately 16%, 19% and
14%, respectively, of the Company's consolidated net sales.
Marketing, Distribution and Sales
In the United States, new mining machinery is primarily sold directly by
Company personnel, and to a lesser extent through a northern Minnesota
distributor who supplies customers in the iron ore mining regions of the Upper
Midwest. Outside of the United States, new equipment is sold by Company
personnel, through independent distributors and through the Company's
subsidiaries and offices located in Argentina, Australia, Brazil, Canada,
Chile, China, England, India, Mauritius, Peru and South Africa. Aftermarket
parts and services are primarily sold directly by Company personnel and
through independent distributors, the Company's foreign subsidiaries and
offices and the Company's two domestic subsidiaries, Minserco and BMSI. The
Company believes that marketing through its own global network of subsidiaries
and offices offers better customer service and support by providing customers
with direct access to the Company's technological and engineering expertise.
Typical payment terms for new equipment require a down payment, and
invoicing is done on a percentage of completion basis such that a substantial
portion of the purchase price is received by the time shipment is made to the
customer. Sales contracts for machines are predominantly at fixed prices,
with escalation clauses in certain cases. Most sales of replacement parts
call for prices in effect at the time of order. During 1999, price increases
from inflation had a relatively minor impact on the Company's reported net
sales; however, the strong United States dollar continues to negatively affect
net sales reported by the Company's foreign subsidiaries.
Foreign Operations
A substantial portion of the Company's net sales and operating earnings
is attributable to operations located abroad. Over the past five years, over
75% of the Company's new machine sales have been in international markets.
The Company's foreign sales, consisting of exports from the United States and
sales by consolidated foreign subsidiaries, totaled $250,735,000 in 1999,
$223,203,000 in 1998 and $235,750,000 in 1997. Approximately $165,762,000 of
the Company's backlog of firm orders at December 31, 1999 represented orders
for export sales compared with $235,529,000 at December 31, 1998 and
$178,237,000 at December 31, 1997.
The Company's largest foreign markets are in Australia, Canada, Chile,
China, India, Peru and South Africa. The Company also employs direct
marketing strategies in developing markets such as Indonesia, Jordan, Morocco
and Russia. In recent years, Australia and South Africa have emerged as
strong producers of metallurgical coal. Chile and Peru are producers of
copper. The Company expects that India, Russia and China will become major
coal producing regions in the future. In India, the world's second most
populous country, the demand for coal as a major source of energy is expected
to increase over the next several decades.
New machine sales in foreign markets are supported by the Company's
established network of foreign subsidiaries and overseas offices that directly
market the Company's products and provide ongoing services and replacement
parts for equipment installed abroad. The availability and convenience of the
services provided through this worldwide network not only promotes higher
margin aftermarket sales of parts and services, but also gives the Company an
advantage in securing new machine orders.
The Company and its domestic subsidiaries normally price their products,
including direct sales of new equipment to foreign customers, in U.S. dollars.
Foreign subsidiaries normally procure and price aftermarket replacement parts
and repair services in the local currency. Approximately 70% of the Company's
net sales are priced in U.S. dollars. 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.
The Company does not normally enter into currency hedges, although it may do
so with regard to certain individual contracts.
Further segment and geographical information is included in ITEM 8 -
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Competition
There are a limited number of manufacturers of new surface mining
equipment. The Company is one of two manufacturers of electric mining shovels
and draglines. The Company's only competitor in electric mining shovels and
draglines is Harnischfeger Corporation, although electric mining shovels also
compete against hydraulic shovels of which there are at least five other
manufacturers. In rotary blasthole drills, the Company competes with at least
three other manufacturers, including Harnischfeger Corporation. 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 the Company's machines, the Company is the primary
replacement source for large, heavily engineered, integral components;
however, the Company encounters intense competition for sales of smaller, less
sophisticated, consumable replacement parts and repair services in certain
markets. The Company's competition in parts sales consists primarily of
smaller independent firms called "will-fitters" that produce copies of the
parts manufactured by the Company and other original equipment manufacturers.
These copies are generally sold at lower prices than genuine parts produced by
the manufacturer. Outside North America, customers mainly rely upon the
Company's subsidiaries, distributors or direct sales from the United States
for aftermarket parts and services.
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 possesses clear non-price advantages
over will-fitters. The Company's engineering and manufacturing technology and
marketing expertise exceed that of its will-fit competitors, who are in many
cases unable to duplicate the exact specifications of genuine Bucyrus parts.
Moreover, use of parts not manufactured by the Company can void the warranty
on a new Bucyrus machine, which generally runs for one year on new equipment,
with certain components being warranted for longer periods.
Raw Materials and Supplies
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,
that are incorporated directly into the end product. The Company's foreign
subsidiaries purchase components and manufacturing services both from local
subcontractors and from the Company. Certain additional components are
sometimes purchased from subcontractors, either to expedite delivery schedules
in times of high demand or to reduce costs. Moreover, in countries where
local content preferences or requirements exist, local subcontractors are used
to manufacture a substantial portion of the components required in the
Company's foreign manufacturing operations. Although the Company is not
dependent upon any single supplier, there can be no assurance that the Company
will continue to have an adequate supply of raw materials or components
necessary to enable it to meet the demand for its products. Competitors are
believed to be subject to similar conditions.
Manufacturing
A substantial portion of the design, engineering and manufacturing of the
Company's machines is done at the Company's South Milwaukee, Wisconsin plant.
The size and weight of these mining machines dictates that the machines be
shipped to the job site in sub-assembled units where they are assembled for
operation with the assistance of Company technicians. Planning and on-site
coordination of machine assembly is a critical component of the Company's
service to its customers. Moreover, to reduce lead time and assure that
customer delivery requirements are met, the Company maintains an inventory of
sub-assembled units for frequently utilized components of various types of
equipment.
The Company manufactures and sells replacement parts and components and
provides comprehensive aftermarket service for its entire line of mining
machinery. The Company's large installed base of surface mining machinery
provides a steady stream of parts sales due to the long useful life of the
Company's machines, averaging 20 to 30 years for draglines and 15 to 20 years
for electric mining shovels and blasthole drills. Parts sales and aftermarket
services comprise a substantial portion of the Company's net sales.
Although a majority of the Company's operating profits are derived from
sales of parts and services, the long-term prospects of the Company depend
upon maintaining a large installed equipment base worldwide. Therefore, the
Company remains committed to improving the design and engineering of its
existing line of machines, as well as developing new products.
Backlog
The backlog of firm orders was $187,278,000 at December 31, 1999 and
$262,457,000 at December 31, 1998. Approximately 49% of the backlog at
December 31, 1999 is not expected to be filled during 2000.
Inventories
Inventories at December 31, 1999 were $125,132,000 compared with
$113,226,000 at December 31, 1998. At December 31, 1999 and December 31,
1998, finished goods inventory (primarily replacement parts) totalling
$94,469,000 and $78,852,000, respectively, were held to meet delivery
requirements of customers. Effective in 1999, certain parts inventories
previously classified as raw materials are now classified as finished products
(primarily replacement parts). The December 31, 1998 finished goods inventory
balance has been restated to reflect this reclassification.
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 for design and development of new products and improvements
of existing mining machinery products, including overhead, aggregated
$7,646,000 in 1999, $8,247,000 in 1998 and $7,384,000 in 1997. All
engineering and product development costs are charged to Engineering and Field
Service 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, 1999, the Company employed approximately 1,800 persons.
The four-year contract with the union representing hourly workers at the South
Milwaukee, Wisconsin facility and the four-year contract with the union
representing hourly workers at the Memphis, Tennessee facility expire in
April, 2001 and August, 2002, respectively.
Seasonal Factors
The Company does not consider a material portion of its business to be
seasonal.
ITEM 2. PROPERTIES
The Company's principal manufacturing plant in the United States is
located in South Milwaukee, Wisconsin, and is owned by the Company. This
plant comprises approximately 1,026,000 square feet of floor space. A portion
of this facility houses the Company's corporate offices. 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 draglines, electric mining shovels and blasthole 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.
The Company also has administrative and sales offices and, in some
instances, repair facilities and parts warehouses, at certain of its foreign
locations, including Argentina, Australia, Brazil, Canada, Chile, China,
England, India, Peru and South Africa.
ITEM 3. LEGAL PROCEEDINGS AND OTHER CONTINGENCIES
Joint Prosecution
On September 25, 1997, the Company and Jackson National Life Insurance
Company ("JNL") commenced an action against Milbank, Tweed, Hadley & McCloy
("Milbank") in the Milwaukee County Circuit Court (the "Milwaukee Action").
The Company sought damages against Milbank arising out of Milbank's alleged
malpractice, breach of fiduciary duty, common law fraud, breach of contract,
unjust enrichment and breach of the obligation of good faith and fair dealing.
JNL sought damages against Milbank arising out of Milbank's alleged tortious
interference with contractual relations, abuse of process and common law
fraud. On December 31, 1998, the Company and JNL settled the Milwaukee
Action, which was thereafter dismissed by the agreement of the parties on
February 24, 1999. The amounts received by the Company in connection with the
settlement of the Milwaukee Action are included in Other Income in the
Consolidated Statements of Operations for the year ended December 31, 1998.
Product Liability
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.
Environmental and Related Matters
The Company's operations and properties are subject to a broad range of
federal, state, local and foreign laws and regulations relating to
environmental matters, including laws and regulations governing discharges
into the air and water, the handling and disposal of solid and hazardous
substances and wastes, and the remediation of contamination associated with
releases of hazardous substances at Company facilities and at off-site
disposal locations. These laws are complex, change frequently and have tended
to become more stringent over time. Future events, such as compliance with
more stringent laws or regulations, more vigorous enforcement policies of
regulatory agencies or stricter or different interpretations of existing laws,
could require additional expenditures by the Company, which may be material.
Certain environmental laws, such as the Federal Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), provide for
strict, joint and several liability for investigation and remediation of
spills and other releases of hazardous substances. Such laws may apply to
conditions at properties presently or formerly owned or operated by an entity
or its predecessors, as well as to conditions at properties at which wastes or
other contamination attributable to an entity or its predecessors come to be
located.
The Company was one of 53 entities named by the United States
Environmental Protection Agency ("EPA") as potentially responsible parties
("PRPs") with regard to the Millcreek dumpsite, located in Erie County,
Pennsylvania, which is on the National Priorities List of sites for cleanup
under CERCLA. The Company was named as a result of allegations that it
disposed of foundry sand at the site in the 1970s. Both the United States
government and the Commonwealth of Pennsylvania initiated actions to recover
cleanup costs. The Company has settled with both with respect to its
liability for past costs. In addition, 37 PRPs, including the Company, have
received Administrative Orders issued by the EPA pursuant to Section 106(a) of
CERCLA to perform site capping and flood control remediation at the Millcreek
site. The Company is one of 18 parties responsible for a share of the
estimated $7,000,000 in costs, which share is presently proposed as per capita
but may be subject to reallocation before the conclusion of the case.
In December 1990, the Wisconsin Department of Natural Resources ("DNR")
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, primarily foundry sand. The DNR's Final
Site Screening Report, dated April 16, 1993, summarized the results of
additional investigation. A DNR Decision Memo, dated July 21, 1991, which was
based upon the testing results contained in the Final Site Screening Report,
recommended additional groundwater, surface water, sediment and soil sampling.
To date, the Company is not aware of any initiative by the DNR 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 DNR 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 be material,
depending on the circumstances.
Prior to 1985, a wholly-owned, indirect subsidiary of the Company
provided comprehensive general liability insurance coverage for affiliate
corporations. The subsidiary issued such policies for occurrences during the
years 1974 to 1984, which policies could involve material liability. Claims
have been made under certain of these policies for certain potential CERCLA
liabilities of former subsidiaries of the Company. It is possible that other
claims could be asserted in the future with respect to such policies. While
the Company does not believe that liability under such policies will result in
material costs, this cannot be guaranteed.
Along with multiple other parties, the Company or its subsidiaries are
currently PRP's under CERCLA and analogous state laws at three additional
sites at which the Company and/or its subsidiaries (including the above
referenced insurance subsidiary by insurance claim) may incur future costs.
The Company believes that one of these cases has been settled. While CERCLA
imposes joint and several liability on responsible parties, liability for each
site is likely to be apportioned among the parties. The Company does not
believe that its potential liability in connection with these sites or any
other discussed above, either individually or in the aggregate, will have a
material adverse effect on the Company's business, financial condition or
results of operations. However, the Company cannot guarantee that it will not
incur cleanup liability in the future with respect to sites formerly or
presently owned or operated by the Company, or with respect to off-site
locations, the costs of which could be material.
While no assurance can be given, the Company believes that expenditures
for compliance and remediation will not have a material effect on its capital
expenditures, results of operations or competitive position.
During 1999 and in early 2000, the eight pending premises liability
asbestos cases in the state courts of Indiana and in federal court, and the
one product liability asbestos case, reported in the Company's 1998 Annual
Report on Form 10-K, were settled or dismissed. During 1999 and 2000 (to the
date of this Report), the Company has been named as a co-defendant in 152
personal injury liability asbestos cases which are pending in state court in
New York County, New York. In all these cases, insurance carriers have
accepted the defense of such cases. These cases are in preliminary stages and
while the Company does not believe that costs associated with these matters
will be material, it cannot guarantee that this will be the case.
Other
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.
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 1999.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Substantially all of the Company's common stock is held by AIPAC and
there is no established public trading market therefor. The Company does not
have a recent history of paying dividends and has no present intention to pay
dividends in the foreseeable future.
In 1999, the Company sold 1,550 shares of its common stock to certain of
its executive officers at a price of $100 per share. Exemption from
registration of the shares sold under the Securities Act of 1933 (the
"Securities Act") is claimed under Section 4(2) of the Securities Act because
the offer and sale thereof was restricted to a limited number of individuals,
all of whom were members of management of the Company, without any advertising
or other selling efforts commonly associated with a "public offering".
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<CAPTION>
Predecessor
September 24- January 1- Years Ended
Years Ended December 31, December 31, September 23, December 31,
1999(a) 1998(a) 1997(a) 1997 1996 1995
(Dollars In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Net sales $318,635 $315,838 $ 95,212 $211,465 $263,786 $231,921
Net earnings (loss) $(22,575) $ (8,264) $ (7,158) $ (4,874) $ 2,878 $(18,772)
Net earnings (loss)
per share of
common stock (b):
Basic $ (15.65) $ (5.75) $ (5.00) $ (.48) $ .28 $ (1.84)
Diluted $ (15.65) $ (5.75) $ (5.00) $ (.47) $ .28 $ (1.84)
Adjusted
EBITDA (c) $ 20,742 $ 35,967 $ 9,936 $ 18,704 $ 19,247 $ 8,256
Cash dividends per
common share $ - $ - $ - $ - $ - $ -
Consolidated Balance
Sheets Data:
Total assets $416,987 $417,195 $406,107 N/A $172,895 $174,038
Long-term debt $214,009 $202,308 $174,612 N/A $ 66,627 $ 58,021
<FN>
(a) As a result of purchase accounting due to the acquisition of the Company by AIPAC on September 24, 1997, the
financial statements of the Company subsequent to this date are not comparable to the financial statements of
the Predecessor.
(b) Net loss per share of common stock for the period September 24, 1997 to December 31, 1997 is calculated on a
retroactive basis to reflect a stock split on March 17, 1998. See Note G to the Consolidated Financial
Statements for further discussion of this change in the Company's capital structure.
(c) Earnings before interest expense, income taxes, depreciation, amortization, non-cash stock compensation, (gain)
loss on sale of fixed assets, loss on fixed asset impairment, nonrecurring items, restructuring expenses,
reorganization items and inventory fair value adjustment charged to cost of products sold.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Acquisitions
On August 21, 1997, the Company entered into an Agreement and Plan of
Merger (the "AIP Agreement") with AIPAC, which is wholly-owned by American
Industrial Partners Capital Fund II, L.P., and Bucyrus Acquisition Corp.
("BAC"), a wholly-owned subsidiary of AIPAC. On August 26, 1997, pursuant to
the AIP Agreement, BAC commenced an offer to purchase for cash 100% of the
outstanding shares of common stock of the Company at a price of $18.00 per
share (the "AIP Tender Offer"). Consummation of the AIP Tender Offer occurred
on September 24, 1997, and BAC was merged with and into the Company on
September 26, 1997 (the "AIP Merger"). The Company was the surviving entity
in the AIP Merger. The purchase of the Company's outstanding shares of common
stock by AIPAC resulted in a change in control of voting interest.
On August 26, 1997, the Company consummated the acquisition (the "Marion
Acquisition") of certain assets and liabilities of The Marion Power Shovel
Company, a subsidiary of Global Industrial Technologies, Inc. ("Global"), and
of certain subsidiaries and divisions of Global that represented Global's
surface mining equipment business in Australia, Canada and South Africa
(collectively referred to herein as "Marion"). The cash purchase price for
Marion was $36,720,000, which includes acquisition expenses of $1,695,000.
The Company financed the Marion Acquisition and related expenses by utilizing
an unsecured bridge loan (the "Bridge Loan") provided by a former affiliate of
the Company, in the amount of $45,000,000. The Bridge Loan was repaid in full
on September 24, 1997 with a portion of the proceeds from the sale of the
Private Notes (see below).
On September 24, 1997, the Company completed the private placement of
$150,000,000 aggregate principal amount of its 9-3/4% Senior Notes due 2007
(the "Private Notes") in a transaction under Rule 144A of the Securities Act
of 1933, as amended (the "Act"). Following the completion of the sale of the
Private Notes, the Company purchased and cancelled its 10.5% Secured Notes due
December 14, 1999 (the "Secured Notes") at a cost of $67,414,000 including
accrued interest, utilizing a portion of the proceeds from the sale of the
Private Notes. On December 18, 1997, the Company completed the exchange of
$150,000,000 aggregate principal amount of its 9-3/4% Senior Notes due 2007
(the "Senior Notes") for the Private Notes. The Senior Notes were registered
under the Act.
On April 30, 1999, the Company's wholly-owned subsidiary, Bucyrus Canada
Limited, consummated the acquisition of certain assets of Bennett & Emmott.
The cash purchase price for Bennett & Emmott was $7,050,000, including
acquisition expenses. Bucyrus Canada Limited financed the Bennett and Emmott
acquisition and related expenses primarily by utilizing a new credit facility
with The Bank of Nova Scotia.
In connection with these acquisitions, the assets and liabilities of the
acquired companies were adjusted to their estimated fair values. Also, upon
emergence from bankruptcy in 1994, 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 include the related
amortization charges associated with the fair value adjustments.
Liquidity and Capital Resources
Liquidity
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, 1999, 1998 and 1997 were as
follows:
1999 1998 1997
(Dollars in Thousands)
Working capital $122,194 $129,568 $120,883
Current ratio 2.6 to 1 3.1 to 1 2.9 to 1
The Company is presenting below a calculation of earnings (loss) before
interest expense, income taxes, depreciation, amortization, non-cash stock
compensation, (gain) loss on sale of fixed assets, loss on fixed asset
impairment, nonrecurring items and inventory fair value adjustment charged to
cost of products sold ("Adjusted EBITDA"). 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 EBITDA levels as defined under its
bank credit agreement (see below). EBITDA as defined under the bank credit
agreement does not differ materially from Adjusted EBITDA as calculated 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. The following table
reconciles Earnings (Loss) Before Income Taxes to Adjusted EBITDA:
Predecessor
September 24- January 1-
Years Ended December 31, December 31, September 23,
1999 1998 1997 1997
(Dollars in Thousands)
Earnings (loss)
before income
taxes $(20,196) $ (5,861) $ (7,441) $ (2,233)
Nonrecurring
items (1) - - - 10,051
Depreciation 11,200 10,331 2,678 3,125
Amortization 5,648 5,701 1,435 770
Non-cash stock
compensation - - - 677
(Gain) loss on
sale of fixed
assets and loss
on fixed asset
impairment(2) 4,392 11 (3) (275)
Inventory fair
value adjustment
charged to cost
of products
sold - 6,925 8,350 283
Interest expense 19,698 18,860 4,917 6,306
________ ________ ________ ________
Adjusted EBITDA $ 20,742 $ 35,967 $ 9,936 $ 18,704
(1) Nonrecurring items consist of $6,690,000 of expense to cash out the
outstanding stock options and stock appreciation rights in connection with the
acquisition of the Company by AIPAC and $3,361,000 of loan fees incurred in
connection with the Bridge Loan that was utilized to purchase Marion. The
loan fees were expensed when the Bridge Loan was repaid.
(2) Includes a fixed asset impairment charge of $4,372,000 at the
manufacturing facility in Boonville, Indiana.
The Company has a credit agreement with Bank One, Wisconsin which
provides the Company with a $75,000,000 senior secured revolving credit
facility (the "Revolving Credit Facility") with a $25,000,000 sublimit for
standby letters of credit. The credit agreement, as amended, expires on
July 3, 2001. Borrowings under the Revolving Credit Facility bear interest at
variable rates and are subject to a borrowing base formula based on
receivables, inventory and machinery and equipment. Direct borrowings under
the Revolving Credit Facility at December 31, 1999 and 1998 were $59,350,000
and $49,950,000, respectively, at a weighted average interest rate of 8.9% and
8.0%, respectively. The increase in direct borrowings from December 31, 1998
was primarily due to increased working capital requirements. The issuance of
standby letters of credit under the Revolving Credit Facility and certain
other bank facilities reduces the amount available for direct borrowings under
the Revolving Credit Facility. At December 31, 1999 and 1998, there were
$5,295,000 and $8,712,000, respectively, of standby letters of credit
outstanding under all Company bank facilities. The Revolving Credit Facility
is secured by substantially all of the assets of the Company, other than real
property and 35% of the stock of its foreign subsidiaries, and is guaranteed
by certain of the Company's domestic subsidiaries (the "Guarantors") who have
also pledged substantially all of their assets as security. The amount
available for direct borrowings under the Revolving Credit Facility at
December 31, 1999 was $7,422,000, which is net of $7,313,000 that was used for
the March 15, 2000 interest payment on the Senior Notes.
The Company has outstanding $150,000,000 of its Senior Notes which were
issued pursuant to an indenture dated as of September 24, 1997 among the
Company, the Guarantors and Harris Trust and Savings Bank, as Trustee (the
"Senior Notes Indenture"). The Senior Notes mature on September 15, 2007.
Interest thereon is payable each March 15 and September 15.
Both the Revolving Credit Facility and the Senior Notes Indenture contain
certain covenants which may affect the Company's liquidity and capital
resources. Also, both the Revolving Credit Facility and the Senior Notes
Indenture contain numerous covenants that limit the discretion of management
with respect to certain business matters and place significant restrictions
on, among other things, the ability of the Company to incur additional
indebtedness, to create liens or other encumbrances, to make certain payments
or investments, loans and guarantees, and to sell or otherwise dispose of
assets and merge or consolidate with another entity.
The Revolving Credit Facility also contains a number of financial
covenants that require the Company (A) to maintain certain financial ratios,
including: (i) ratio of adjusted funded debt to EBITDA (as defined);
(ii) fixed charge coverage ratio; and (iii) interest coverage ratio; and (B)
to maintain a minimum net worth and other covenants which limit the ability of
the Company and the Guarantors to incur liens; merge, consolidate or dispose
of assets; make loans and investments; incur indebtedness; engage in certain
transactions with affiliates; incur contingent obligations; enter into joint
ventures; enter into lease agreements; pay dividends and make other
distributions; change its business; redeem the Senior Notes; and make capital
expenditures.
The Senior Notes Indenture contains certain covenants that, among other
things, limit the ability of the Company and the Guarantors to: (i) incur
additional indebtedness; (ii) pay dividends or make other distributions with
respect to capital stock; (iii) make certain investments; (iv) use the
proceeds of the sale of certain assets; (v) enter into certain transactions
with affiliates; (vi) create liens; (vii) enter into certain sale and
leaseback transactions; (viii) enter into certain mergers and consolidations
or a sale of substantially all of its assets; and (ix) prepay the Senior
Notes. Such covenants are subject to important qualifications and
limitations. In addition, the Senior Notes Indenture defines "EBITDA"
differently than "EBITDA" under the Revolving Credit Facility. At
December 31, 1999, the Company was in compliance with these covenants.
A failure to comply with the obligations contained in the Revolving
Credit Facility or the Senior Notes Indenture could result in an Event of
Default (as defined) under the Revolving Credit Facility or an Event of
Default (as defined) under the Senior Notes Indenture that, if not cured or
waived, would permit acceleration of the relevant debt and acceleration of
debt under other instruments that may contain cross-acceleration or cross-
default provisions. At December 31, 1999, the Company was in violation of
certain financial covenants under the Revolving Credit Facility. On March 14,
2000, the Revolving Credit Facility was amended to, among other items, waive
these covenant violations. The amendment also granted the Company a period of
time during 2000 whereby the Company will not be subject to certain of the
financial covenants contained in the Revolving Credit Facility. Subsequent to
this period of time, the Company will be subject to revised financial
covenants under the Revolving Credit Facility, which management believes are
achievable. As a result, borrowings continue to be presented as long-term.
In 1999, Bucyrus Canada Limited entered into a C$15,000,000 credit
facility with The Bank of Nova Scotia. Proceeds from this facility were used
to acquire certain assets of Bennett & Emmott. The C$10,000,000 revolving
term loan portion of this facility expires on December 31, 2000 and bears
interest at the bank's prime lending rate plus 1.50%. The C$5,000,000 non-
revolving term loan portion is payable in monthly installments over five years
and bears interest at the bank's prime lending rate plus 2%. This credit
facility contains covenants which, among other things, requires Bucyrus Canada
Limited to maintain a minimum current ratio and tangible net worth. At
December 31, 1999, Bucyrus Canada Limited was in compliance with these
covenants.
The Company believes that current levels of cash and liquidity, together
with funds generated by operations and funds available from the Revolving
Credit Facility, 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.
Capital Resources
At December 31, 1999, the Company had approximately $1,190,000 of open
capital appropriations. The Company's capital expenditures for the year ended
December 31, 1999 were $6,792,000 compared with $12,803,000 for the year ended
December 31, 1998. In the near term, the Company currently anticipates
spending closer to the 1999 level or lower.
Capitalization
The long-term debt to equity ratio at December 31, 1999 and 1998 was
2.3 to 1 and 1.7 to 1, respectively. The long-term debt to total
capitalization ratio at December 31, 1999 and 1998 was .7 to 1 and .6 to 1,
respectively. Total capitalization is defined as total common shareholders'
investment plus long-term debt plus current maturities of long-term debt and
short-term obligations.
Results of Operations
The amounts presented below for 1997 include combined amounts for the
period September 24 to December 31, 1997 and for the Predecessor period
January 1 to September 23, 1997.
Net Sales
Net sales for 1999 were $318,635,000 compared with $315,838,000 for 1998.
Net sales of repair parts and services for 1999 were $204,428,000, which was a
decrease of 2.0% from 1998. Net machine sales for 1999 were $114,207,000,
which was an increase of 6.5% from 1998. The 1999 increase was due to
dragline volume and reflects the net sales on orders received for three
partial draglines in India in 1998 and one dragline in Australia in 1997.
Net sales for 1998 were $315,838,000 compared with $306,677,000 for 1997.
Net sales of repair parts and services for 1998 were $208,570,000 which was an
increase of 5.2% from 1997. This increase was primarily due to the Marion
Acquisition. Machine sales for 1998 were $107,268,000, which was a decrease
of 1.1% from 1997. Net sales of electric mining shovels decreased 15.6%,
while net sales of blasthole drills decreased by 38.2%. These decreases were
offset by increased dragline sales.
Other Income
Other income for 1998 includes an amount related to a favorable legal
settlement.
Cost of Products Sold
Cost of products sold for 1999 was $267,323,000 or 83.9% of net sales
compared with $263,211,000 or 83.3% of net sales for 1998 and $256,744,000 or
83.7% of net sales for 1997. The increase in the cost of products sold
percentage for 1999 was primarily due to unfavorable manufacturing variances
resulting from lower manufacturing activity associated with lower bookings and
due to the mix of the aftermarket items shipped. In 1998, the Company reduced
cost of sales by $1,210,000 as a result of a change in the Company's short-
term disability plan. Included in cost of products sold for 1998 and 1997
were charges of $6,925,000 and $8,633,000, respectively, as a result of fair
value adjustments to inventory being charged to cost of products sold as the
inventory was sold. The fair value adjustments were made as a result of the
acquisition of the Company by AIPAC. Excluding the effects of the inventory
fair value adjustment, cost of products sold as a percentage of net sales for
1998 and 1997 was 81.1% and 80.9%, respectively. Also included in cost of
products sold for 1999, 1998 and 1997 was $4,856,000, $4,450,000 and
$1,266,000, respectively, of additional depreciation expense as a result of
the fair value adjustment to plant and equipment in connection with
acquisitions involving the Company.
Engineering and Field Service, Selling, Administrative and Miscellaneous
Expenses
Engineering and field service, selling, administrative and miscellaneous
expenses for 1999 were $53,631,000 or 16.8% of net sales compared with
$46,332,000 or 14.7% of net sales in 1998 and $39,968,000 or 13.0% of net
sales in 1997. Included in the 1999 amount was a fixed asset impairment
charge of $4,372,000 recorded in the fourth quarter. The impairment relates
primarily to the manufacturing facility in Boonville, Indiana, which saw
declining operating results in the second half of 1999 as volume declined.
The charge represents the difference between book value and estimated fair
value based on expected proceeds. Subsequent to year-end, the Company decided
to close its manufacturing facility in Boonville, Indiana by the end of the
second quarter of 2000. Also included in the 1999 amount was $1,212,000 of
severance expense. The 1998 amount was reduced by $563,000 as a result of a
change in the Company's short-term disability plan.
Interest Expense
Interest expense for 1999 was $19,698,000 compared with $18,860,000 for
1998 and $11,223,000 for 1997. Included in interest expense for 1999, 1998
and 1997 was $14,625,000, $14,544,000 and $4,022,000, respectively, related to
the Senior Notes that were issued at the time the Company was acquired by
AIPAC. Also included in interest for 1999 was $400,000 of interest expense
related to debt incurred for the acquisition and operation of Bennett &
Emmott. Included in interest expense for 1997 was $5,064,000 related to the
Secured Notes. The Company purchased and cancelled the previously outstanding
Secured Notes on September 24, 1997.
Nonrecurring Items
Nonrecurring items in 1997 consist of $6,690,000 of expense incurred to
cash out the outstanding options to purchase shares of the Company's common
stock and outstanding stock appreciation rights in connection with the
acquisition of the Company by AIPAC, and $3,361,000 of loan fees incurred in
connection with the Bridge Loan that was utilized to finance the Marion
Acquisition. The Bridge Loan was subsequently repaid on September 24, 1997
and the loan fees were expensed.
Income Taxes
Income tax expense consists primarily of foreign taxes at applicable
statutory rates. For United States tax purposes, there were losses for which
no income tax benefit was recorded.
Net Earnings (Loss)
The net loss for 1999 was $22,575,000 compared with net losses of
$8,264,000 for 1998 and $12,032,000 for 1997. Included in the net loss for
1998 and 1997 was $6,267,000 and $7,864,000, respectively, (net of income
taxes) of the inventory fair value adjustment related to purchase accounting.
Non-cash depreciation and amortization charges were $16,848,000 in 1999
compared with $16,032,000 in 1998 and $8,008,000 in 1997. Also included in
the net loss for 1997 was $6,690,000 of expense to cash out the outstanding
stock options and stock appreciation rights in connection with the acquisition
of the Company by AIPAC and $3,361,000 of Bridge Loan fees which were expensed
when the Bridge Loan was repaid.
Backlog and New Orders
The Company's consolidated backlog at December 31, 1999 was $187,278,000
compared with $262,457,000 at December 31, 1998 and $216,021,000 at
December 31, 1997. Machine backlog at December 31, 1999 was $40,997,000,
which is a decrease of 63.9% from December 31, 1998. During 1999, there was a
decrease in both electric mining shovel and dragline backlog. During the
second quarter of 1997, the Company executed a contract with an Australian
mining company for the sale of a Model 2570WS dragline which is scheduled for
completion early in the year 2000. Included in backlog at December 31, 1999
and 1998 was $2,376,000 and $27,273,000, respectively, related to this
machine. During the fourth quarter of 1998, the Company sold four electric
mining shovels and three blasthole drills to a customer in Peru for a new
copper mine in that country. Also, during the fourth quarter of 1998, the
Company sold three partial draglines to a customer in India. Repair parts and
service backlog at December 31, 1999 was $146,281,000, which is a decrease of
1.7% from December 31, 1998.
New orders for 1999 were $243,456,000, which was a decrease of 32.8% from
1998. New machine orders for 1999 were $41,502,000, which was a decrease of
66.5% from 1998. Included in 1998 machine orders was the aforementioned order
for four electric mining shovels and three blasthole drills to a customer in
Peru. New repair parts and service orders for 1999 were $201,954,000, which
was a decrease of 15.3% from 1998. Both the new machine orders and the parts
and service orders continue to be affected by the softness in coal prices in
Australia and South Africa, the low worldwide price of copper and the lower
demand for other minerals. Recently, copper prices have increased from
approximately $.60 per pound to $.80 per pound. Also, there has been
increased activity in the oil sands area of Western Canada where the Company
recently acquired Bennett & Emmott. In 1999, the Company received an order in
the form of a ten year shovel parts supply agreement with a customer in
Western Canada.
Year 2000
The Company did not experience any significant malfunctions or errors in
the information or non-information technology systems when the date changed
from 1999 to 2000 ("Y2K"), and has not experienced any significant problems
with suppliers' or customers' ability to function as a result of the date
change. Because it is possible that the full impact of the date change has
not been fully recognized, the Company will continue to monitor the Y2K
situation. The Company believes, however, that any potential problems are
likely to be minor, short-term and correctable.
From the beginning of fiscal 1998 through fiscal 1999, the Company
incurred approximately $4,800,000 in capital costs and approximately $700,000
in expenses for Y2K readiness matters. The primary components of these costs
were external consulting and hardware and software upgrades as well as
internal costs, primarily payroll costs of Company employees.
Subsequent Event
Due to a reduction in new orders, the Company has reduced a portion of
its manufacturing production workforce through a layoff and has also reduced
the number of its salaried employees. These activities will result in a
restructuring charge of approximately $2,600,000 in the first quarter of 2000.
Such amount primarily relates to severance payments and related matters.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk is impacted by changes in interest rates and
foreign currency exchange rates.
Interest Rates
The Company's interest rate exposure relates primarily to debt
obligations in the United States. The Company manages its borrowings under
the Revolving Credit Facility through the selection of LIBOR based borrowings
or prime-rate based borrowings. If market conditions warrant, interest rate
swaps may be used to adjust interest rate exposures, although none have been
used to date.
At December 31, 1999, a sensitivity analysis was performed for the debt
obligations that have interest rate risk. Based on this sensitivity analysis,
the Company has determined that a 10% change in the Company's weighted average
interest rate at December 31, 1999 would not have a material effect on the
Company's financial position, results of operations or cash flows.
Foreign Currency
The Company manages foreign currency exchange rate exposure by utilizing
some natural hedges to mitigate some of its transaction and commitment
exposures, and may utilize forward contracts in certain situations.
Based on the Company's overall foreign currency exchange rate exposure at
December 31, 1999, a 10% change in foreign currency exchange rates will not
have a material effect on the Company's financial position, results of
operations or cash flows.
<TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF OPERATIONS
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands, Except Per Share Amounts)
<CAPTION>
Predecessor
September 24- January 1-
Years Ended December 31, December 31, September 23,
1999 1998 1997 1997
<S> <C> <C> <C> <C>
REVENUES:
Net sales $318,635 $315,838 $ 95,212 $211,465
Other income 1,821 6,704 346 1,289
________ ________ ________ ________
320,456 322,542 95,558 212,754
________ ________ ________ ________
COSTS AND EXPENSES:
Cost of products sold 267,323 263,211 85,229 171,515
Engineering and field service, selling,
administrative and miscellaneous expenses 53,631 46,332 12,853 27,115
Interest expense 19,698 18,860 4,917 6,306
Nonrecurring items - - - 10,051
________ ________ ________ ________
340,652 328,403 102,999 214,987
________ ________ ________ ________
Loss before income taxes (20,196) (5,861) (7,441) (2,233)
Income taxes 2,379 2,403 (283) 2,641
________ ________ ________ ________
Net loss $(22,575) $ (8,264) $ (7,158) $ (4,874)
Net loss per share of common stock:
Basic $(15.65) $(5.75) $(5.00) $ (.48)
Diluted $(15.65) $(5.75) $(5.00) $ (.47)
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands)
<CAPTION>
Predecessor
September 24- January 1-
Years Ended December 31, December 31, September 23,
1999 1998 1997 1997
<S> <C> <C> <C> <C>
Net loss $(22,575) $ (8,264) $ (7,158) $ (4,874)
Other comprehensive income (loss) -
foreign currency translation adjustments (3,223) (4,756) (3,619) (1,439)
________ ________ ________ ________
Comprehensive loss $(25,798) $(13,020) $(10,777) $ (6,313)
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands, Except Per Share Amounts)
<CAPTION>
December 31, December 31,
1999 1998 1999 1998
<S> <C> <C> <C> <Cl <C>
LIABILITIES AND COMMON
ASSETS SHAREHOLDERS' INVESTMENT
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents $ 8,369 $ 8,821 Accounts payable and
Receivables 61,023 61,727 accrued expenses $ 64,640 $ 54,950
Inventories 125,132 113,226 Liabilities to customers on
Prepaid expenses and uncompleted contracts and
other current assets 5,502 6,381 warranties 4,876 3,168
Income taxes 353 950
Short-term obligations 445 513
Current maturities of long-
term debt 7,518 1,006
________ ________ ________ ________
Total Current Assets 200,026 190,155 Total Current Liabilities 77,832 60,587
OTHER ASSETS: LONG-TERM LIABILITIES:
Restricted funds on Liabilities to customers
deposit 89 476 on uncompleted contracts
Goodwill 69,335 71,835 and warranties 4,367 5,414
Intangible assets - net 40,357 42,573 Postretirement benefits 13,984 14,188
Other assets 11,375 11,526 Deferred expenses
________ ________ and other 12,645 14,585
________ ________
121,156 126,410
30,996 34,187
PROPERTY, PLANT AND EQUIPMENT: LONG-TERM DEBT, less
Land 3,287 2,933 current maturities 214,009 202,308
Buildings and improvements 12,531 10,546
Machinery and equipment 99,558 97,481 COMMON SHAREHOLDERS'
Less accumulated INVESTMENT:
depreciation (19,571) (10,330) Common stock - par value
________ ________ $.01 per share,
authorized 1,700,000
95,805 100,630 shares, issued 1,444,650
and 1,443,100 shares at
December 31, 1999 and
1998, respectively 14 14
Additional paid-in
capital 144,451 144,296
Treasury stock - 2,500
shares, at cost (196) -
Notes receivable from
shareholders (524) (400)
Accumulated deficit (37,997) (15,422)
Accumulated other
comprehensive
income (loss) (11,598) (8,375)
________ ________
94,150 120,113
________ ________ ________ ________
$416,987 $417,195 $416,987 $417,195
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' INVESTMENT
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands)
<CAPTION>
Notes Accumulated
Additional Unearned Receivable Other
Common Paid-In Treasury Stock From Accumulated Comprehensive
Stock Capital Stock Compensation Shareholders Deficit Income (Loss)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $ 105 $ 57,739 $ - $ (2,815) $ - $(16,446) $ (1,122)
Amortization of unearned
stock compensation - - - 677 - - -
Net loss - - - - - (4,874) -
Translation adjustments - - - - - - (1,439)
______ ________ ________ ________ ________ ________ ________
Balance at September 23, 1997 105 57,739 - (2,138) - (21,320) (2,561)
Merger with Bucyrus
Acquisition Corp. (105) (57,739) - 2,138 - 21,320 2,561
Capital contribution - 143,030 - - - - -
Net loss - - - - - (7,158) -
Translation adjustments - - - - - - (3,619)
______ ________ ________ ________ ________ ________ ________
Balance at December 31, 1997 - 143,030 - - - (7,158) (3,619)
Stock split 14 (14) - - - - -
Issuance of common stock
(12,800 shares) - 1,280 - - (400) - -
Net loss - - - - - (8,264) -
Translation adjustments - - - - - - (4,756)
______ ________ ________ ________ ________ ________ ________
Balance at December 31, 1998 14 144,296 - - (400) (15,422) (8,375)
Issuance of common
stock (1,550 shares) - 155 - - (124) - -
Purchase of treasury
stock (2,500 shares) - - (196) - - - -
Net loss - - - - - (22,575) -
Translation adjustments - - - - - - (3,223)
______ ________ ________ ________ ________ ________ ________
Balance at December 31, 1999 $ 14 $144,451 $ (196) $ - $ (524) $(37,997) $(11,598)
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands)
<CAPTION>
Predecessor
September 24- January 1-
Years Ended December 31, December 31, September 23,
1999 1998 1997 1997
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net loss $(22,575) $ (8,264) $ (7,158) $ (4,874)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation 11,200 10,331 2,678 3,125
Amortization 5,648 5,701 1,435 770
Non-cash stock compensation expense - - - 677
Nonrecurring items - - - 10,051
(Gain) loss on sale of property, plant
and equipment 20 11 (3) (275)
Loss on fixed asset impairment 4,372 - - -
Changes in assets and liabilities, net of
effects of acquisitions:
Receivables 134 (13,597) 10,725 (19,534)
Inventories (11,539) (2,824) 12,891 (11,100)
Other current assets 551 (1,167) 3,432 (1,434)
Other assets (817) (1,771) (405) (385)
Current liabilities other than income
taxes, short-term obligations and
current maturities of long-term debt 11,801 (7,525) (6,237) 17,210
Income taxes 213 (1,280) (1,097) 1,181
Long-term liabilities other than
deferred income taxes (3,762) (3,761) (456) (2,012)
________ ________ ________ ________
Net cash provided by (used in)
operating activities (4,754) (24,146) 15,805 (6,600)
________ ________ ________ ________
Cash Flows From Investing Activities
Payment to cash out stock options and
stock appreciation rights - - (6,944) -
Decrease in restricted funds on deposit 387 580 23 -
Purchases of property, plant and equipment (6,792) (12,803) (2,859) (4,331)
Proceeds from sale of property, plant
and equipment 215 1,428 510 1,227
Acquisition of Bucyrus International, Inc. - - (189,622) -
Purchase of Von's Welding, Inc.,
net of cash acquired - - - (841)
Purchase of surface mining equipment
business of Global Industrial
Technologies, Inc. - - - (36,720)
Receivable from Global Industrial
Technologies, Inc. - - 5,275 (5,275)
Purchase of Bennett & Emmott (1986) Ltd. (7,050) - - -
________ ________ ________ ________
Net cash used in investing activities (13,240) (10,795) (193,617) (45,940)
________ ________ ________ ________
Cash Flows From Financing Activities
Proceeds from issuance of project
financing obligations - - - 5,672
Reduction of project financing obligations - - (8,102) -
Net increase (decrease) in other bank
borrowings (69) (70) 20,837 500
Payment of acquisition and refinancing expenses - (293) (13,426) (1,476)
Payment of bridge loan fees - - - (3,361)
(Payment of) proceeds from bridge loan - - (45,000) 45,000
Capital contribution - - 143,030 -
Proceeds from issuance of long-term debt 19,386 28,785 150,000 1,706
Payment of long-term debt (1,172) (350) (65,785) -
Proceeds from issuance of common stock 31 880 - -
Purchase of treasury stock (196) - - -
________ ________ ________ ________
Net cash provided by financing activities 17,980 28,952 181,554 48,041
________ ________ ________ ________
Effect of exchange rate changes on cash (438) (261) (352) 417
________ ________ ________ ________
Net increase (decrease) in cash
and cash equivalents (452) (6,250) 3,390 (4,082)
Cash and cash equivalents at
beginning of period 8,821 15,071 11,681 15,763
________ ________ ________ ________
Cash and cash equivalents at end of period $ 8,369 $ 8,821 $ 15,071 $ 11,681
Supplemental Disclosures of
Cash Flow Information
Cash paid during the period for:
Interest $ 19,727 $ 18,080 $ 662 $ 4,046
Income taxes - net of refunds 2,624 3,569 587 1,218
</TABLE>
Supplemental Schedule of Non-Cash Investing and Financing Activities
(A) In 1997, the Company purchased all of the common stock of Von's Welding,
Inc. In conjunction with the acquisition, liabilities were assumed as
follows:
1997
Fair value of assets acquired $ 1,979
Cash paid (908)
________
Liabilities assumed $ 1,071
(B) In 1997, the Company purchased certain assets and liabilities of the
surface mining and equipment business of Global Industrial Technologies,
Inc. In conjunction with the acquisition, liabilities were assumed as
follows:
1997
Fair value of assets acquired $ 52,406
Cash paid (36,720)
________
Liabilities assumed $ 15,686
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bucyrus International, Inc. and Subsidiaries
NOTE A - SUMMARY OF ACCOUNTING POLICIES
Nature of Operations
Bucyrus International, Inc. (the "Company") is a Delaware corporation
and a leading manufacturer of surface mining equipment, principally
walking draglines, electric mining shovels and blasthole 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
The consolidated financial statements as of December 31, 1999 and
1998 and for the years ended December 31, 1999 and 1998 and the
period September 24, 1997 to December 31, 1997 were prepared under a
basis of accounting that reflects the fair value of the assets
acquired and liabilities assumed, and the related expenses and all
debt incurred in connection with the acquisition of the Company by
American Industrial Partners Acquisition Company, LLC ("AIPAC") on
September 24, 1997 (see Note B). The Predecessor consolidated
financial statements for the period prior to September 24, 1997 were
prepared using the Company's previous basis of accounting which was
based on the principles of fresh start reporting adopted in 1994 upon
emergence from bankruptcy. Accordingly, the consolidated financial
statements of the Company are not comparable to the Predecessor
consolidated financial statements.
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
value 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 value of these funds approximates fair
value.
Inventories
In connection with the acquisition of the Company by AIPAC,
inventories were adjusted to estimated fair value. 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.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price paid by AIPAC
for the outstanding shares of common stock of the Company over the
fair value of the net assets of the Company on the date of
acquisition and is being amortized on a straight-line basis over 30
years. Accumulated amortization was $5,674,000 and $3,174,000 at
December 31, 1999 and 1998, respectively.
Intangible assets were recorded at estimated fair value in connection
with the acquisition of the Company by AIPAC and consist of
engineering drawings, bill-of-material listings, software, trademarks
and tradenames which are being amortized on a straight-line basis
over 10 to 30 years. Accumulated amortization was $5,067,000 and
$2,852,000 at December 31, 1999 and 1998, respectively.
The Company continually evaluates whether events and circumstances
have occurred that indicate the remaining estimated useful life of
goodwill and intangible assets may warrant revision or that the
remaining balance of each may not be recoverable. When factors
indicate that goodwill and intangible assets should be evaluated for
possible impairment, the Company uses an estimate of the undiscounted
cash flows over the remaining life of the goodwill and intangible
assets in measuring whether they are recoverable.
Property, Plant and Equipment
In connection with the acquisition of the Company by AIPAC, property,
plant and equipment were adjusted to estimated fair value.
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.
The Company continually evaluates whether events and circumstances
have occurred that indicate the remaining estimated useful life of
property, plant and equipment may warrant revision or that the
remaining balance of each may not be recoverable. The Company
accounts for impairment of long-lived assets in accordance with
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of," and has recorded an impairment of fixed asset charge of
$4,372,000 in the fourth quarter of 1999. The impairment relates
primarily to the manufacturing facility in Boonville, Indiana, which
saw declining operating results in the second half of 1999 as volume
declined. The charge represents the difference between book value
and estimated fair value based on expected proceeds. Subsequent to
year-end, the Company decided to close its manufacturing facility in
Boonville, Indiana by the end of the second quarter of 2000.
Foreign Currency Translation
The assets and liabilities of foreign subsidiaries are 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 are deferred and
reflected as a separate component of Common Shareholders' Investment.
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. Revenue from all other types of
sales is recognized as products are shipped or services are rendered.
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 $1,789,000 and
$92,000 at December 31, 1999 and 1998, respectively.
Accounting Pronouncements
During 1998, the Company adopted Statement of Position ("SOP")
No. 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." The Company's accounting for the costs
of computer software developed or obtained for internal use is
consistent with the guidelines established in the SOP and, as a
result, the adoption of this statement did not have a material effect
on the Company's financial position or results of operations.
In 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133" ("SFAS 133"). SFAS 133 is now effective
for fiscal years beginning after June 15, 2000. SFAS 133 establishes
accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset
or liability measured at its fair value. SFAS 133 requires that
changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income
statement, and requires that the Company must formally document,
designate and assess the effectiveness of transactions that receive
hedge accounting. The Company may implement SFAS 133 as of the
beginning of any fiscal quarter. SFAS 133 cannot be applied
retroactively. Based on the Company's current transactions involving
derivative instruments and hedging, management believes adoption of
SFAS 133 will not have a material effect on its financial position or
results of operations.
NOTE B - ACQUISITIONS
Acquisition by American Industrial Partners
On August 21, 1997, the Company entered into an Agreement and Plan of
Merger (the "AIP Agreement") with AIPAC, which is wholly-owned by
American Industrial Partners Capital Fund II, L.P. ("AIP"), and
Bucyrus Acquisition Corp. ("BAC"), a wholly-owned subsidiary of
AIPAC. On August 26, 1997, pursuant to the AIP Agreement, BAC
commenced an offer to purchase for cash 100% of the outstanding
shares of common stock of the Company at a price of $18.00 per share
(the "AIP Tender Offer"). Consummation of the AIP Tender Offer
occurred on September 24, 1997, and BAC was merged with and into the
Company on September 26, 1997 (the "AIP Merger"). The Company was
the surviving entity in the AIP Merger and is currently substantially
wholly-owned by AIPAC. The purchase of all of the Company's
outstanding shares of common stock by AIPAC resulted in a change in
control of voting interest.
Approximately $189,622,000 was required to purchase all of the
outstanding shares of the Company's common stock. BAC received
$143,030,000 of the necessary funds to purchase the shares of the
Company's common stock as an equity contribution from AIPAC. The
remainder of the consideration required to consummate the AIP Tender
Offer and pay related expenses was funded by a bridge loan from AIPAC
to BAC, which was repaid in full on September 26, 1997.
The AIP Agreement also provided that each outstanding option to
purchase shares of the Company's common stock and each outstanding
stock appreciation right granted under the Company's Non-Employee
Directors' Stock Option Plan (the "Directors' Stock Option Plan"),
the 1996 Employees' Stock Incentive Plan (the "1996 Employees' Plan)
and any other stock-based incentive plan or arrangement of the
Company, whether or not then exercisable or vested, would be
cancelled (see Note G). In consideration of such cancellation, the
holders of such options and stock appreciation rights received for
each share subject to such option or stock appreciation right an
amount in cash equal to the excess of the offer price of $18 per
share over the per share exercise price of such option or the per
share base price of such stock appreciation right, as applicable,
multiplied by the number of shares subject to such option or stock
appreciation right. Included in nonrecurring items in the
Consolidated Statement of Operations is $6,690,000 of expense
incurred to cash out the outstanding options and stock appreciation
rights.
The acquisition of the Company by AIPAC was accounted for as a
purchase and, accordingly, the assets acquired and liabilities
assumed were adjusted to their estimated fair values. The final
allocation of the purchase price was as follows:
(Dollars in Thousands)
Working capital $ 127,232
Property, plant and equipment 100,855
Intangible assets (including
goodwill of $75,009) 120,397
Other long-term assets and liabilities (205,454)
_________
Total cash purchase price $ 143,030
Marion Acquisition
On August 26, 1997, the Company consummated the acquisition (the
"Marion Acquisition") of certain assets and liabilities of The Marion
Power Shovel Company, a subsidiary of Global Industrial Technologies,
Inc. ("Global"), and of certain subsidiaries and divisions of Global
that represented Global's surface mining equipment business in
Australia, Canada and South Africa (collectively referred to herein
as "Marion"). The purchase price for Marion was $36,720,000, which
includes acquisition expenses of $1,695,000. The net assets acquired
and results of operations since the date of acquisition are included
in the Company's consolidated financial statements.
The Company financed the Marion Acquisition and related expenses by
utilizing an unsecured bridge loan (the "Bridge Loan") provided by a
former affiliate of the Company, in the amount of $45,000,000. The
Bridge Loan was repaid in full on September 24, 1997 with a portion
of the proceeds from the 9-3/4% Senior Notes due 2007 (see Note F).
The Bridge Loan had an interest rate of 10.625% and the total
interest expense incurred by the Company was $385,000. The Company
incurred $3,361,000 of loan fees in connection with the Bridge Loan.
The subsequent expensing of these fees when the Bridge Loan was
repaid are included in nonrecurring items in the Consolidated
Statement of Operations.
The acquisition of Marion by the Company was accounted for as a
purchase and, accordingly, the assets acquired and liabilities
assumed by the Company were recorded at their estimated fair values.
The assets acquired and liabilities assumed in the Marion Acquisition
were revalued in connection with the AIP Merger.
During 1998, the Company finalized the allocations of the purchase
prices relating to the acquisition of the Company by AIPAC and the
Marion Acquisition. The adjustments primarily related to warranty,
employee benefits and a litigation settlement and resulted in a net
increase to liabilities and goodwill of $8,488,000.
Pro Forma Results of Operations
The following unaudited pro forma results of operations assumes that
the Company had been acquired by AIPAC and the Company acquired
Marion on January 1, 1996. Such information reflects adjustments to
reflect additional interest expense and depreciation expense,
amortization of goodwill and the effects of adjustments made to the
carrying value of certain assets and liabilities.
Years Ended December 31,
1997 1996
(Dollars in Thousands,
Except Per Share Amounts)
(Unaudited)
Net sales $ 346,913 $ 373,411
Net loss (10,297) (19,438)
Net loss per share of
common stock (7.20) (13.59)
The pro forma financial information presented above is not
necessarily indicative of either the results of operations that would
have occurred had the acquisitions been effective on January 1, 1996
or of future operations of the Company.
Bennett & Emmott Acquisition
On April 30, 1999, the Company's wholly-owned subsidiary, Bucyrus
Canada Limited, consummated the acquisition of certain assets of
Bennett & Emmott (1986) Ltd. ("Bennett & Emmott"), a privately owned
Canadian Company with extensive experience in the field repair and
service of heavy machinery for the surface mining industry. The cash
purchase price for Bennett & Emmott was $7,050,000, including
acquisition expenses. The net assets acquired and results of
operations since the date of acquisition are included in the
Company's consolidated financial statements.
Bucyrus Canada Limited financed the Bennett & Emmott acquisition and
related expenses primarily by utilizing a new credit facility with
The Bank of Nova Scotia (see Note F). The acquisition was accounted
for as a purchase and, accordingly, the assets acquired were recorded
at their estimated fair values. The allocation of the purchase price
was as follows:
(Dollars in Thousands)
Inventory $ 2,001
Property, plant and equipment 5,032
Other 17
________
Total cash purchase price $ 7,050
NOTE C - RECEIVABLES
Receivables at December 31, 1999 and 1998 include $14,936,000 and
$12,470,000, 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
$1,090,000 and $918,000 at December 31, 1999 and 1998, respectively.
NOTE D - INVENTORIES
Inventories consist of the following:
1999 1998
(Dollars in Thousands)
Raw materials and parts $ 13,470 $ 9,443
Costs relating to
uncompleted contracts 1,000 4,503
Customers' advances offset
against costs incurred on
uncompleted contracts - (2,296)
Work in process 16,193 22,724
Finished products (primarily
replacement parts) 94,469 78,852
________ ________
$125,132 $113,226
Effective August 1, 1999, certain parts inventories previously
classified as raw materials and parts are now classified as finished
products (primarily replacement parts). Reclassifications have been
made to the December 31, 1998 inventory balances to present them on a
basis consistent with the current year.
Included in cost of products sold for 1998 and 1997 were charges of
$6,925,000 and $8,633,000, respectively, as a result of fair value
adjustments to inventory being charged to cost of products sold as
the inventory was sold. The fair value adjustments were made as a
result of the acquisition of the Company by AIPAC.
NOTE E - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
1999 1998
(Dollars in Thousands)
Trade accounts payable $ 36,374 $ 28,407
Wages and salaries 5,873 5,970
Interest 5,062 4,965
Other 17,331 15,608
________ ________
$ 64,640 $ 54,950
NOTE F - LONG-TERM DEBT AND FINANCING ARRANGEMENTS
Long-term debt consists of the following:
1999 1998
(Dollars in Thousands)
9-3/4% Senior Notes due 2007 $150,000 $150,000
Revolving credit facility 59,350 49,950
Revolving term loan at
Bucyrus Canada Limited 6,150 -
Non-revolving term loan at
Bucyrus Canada Limited 3,296 -
Construction Loans at
Bucyrus International
(Chile) Limitada 1,562 2,400
Other 1,169 964
________ ________
221,527 203,314
Less current maturities of
long-term debt (7,518) (1,006)
________ ________
$214,009 $202,308
The Company has outstanding $150,000,000 of 9-3/4% Senior Notes due
2007 (the "Senior Notes") which were issued pursuant to an indenture
dated as of September 24, 1997 among the Company, certain of its
domestic subsidiaries (the "Guarantors"), and Harris Trust and
Savings Bank, as Trustee (the "Senior Notes Indenture"). The Senior
Notes mature on September 15, 2007. Interest thereon is payable each
March 15 and September 15. The Senior Notes Indenture contains
certain covenants that, among other things, limit the ability of the
Company and the Guarantors to: (i) incur additional indebtedness;
(ii) pay dividends or make other distributions with respect to
capital stock; (iii) make certain investments; (iv) sell certain
assets; (v) enter into certain transactions with affiliates; (vi)
create liens; (vii) enter into certain sale and leaseback
transactions; and (viii) enter into certain mergers and
consolidations. Such covenants are subject to important
qualifications and limitations. At December 31, 1999, the Company
was in compliance with these covenants.
The Company has a credit agreement with Bank One, Wisconsin which
provides the Company with a $75,000,000 senior secured revolving
credit facility (the "Revolving Credit Facility") with a $25,000,000
sublimit for standby letters of credit. The credit agreement, as
amended, expires on July 3, 2001. Borrowings under the Revolving
Credit Facility bear interest at variable rates and are subject to a
borrowing base formula based on receivables, inventory and machinery
and equipment. Direct borrowings under the Revolving Credit Facility
at December 31, 1999 and 1998 were $59,350,000 and $49,950,000,
respectively, at a weighted average interest rate of 8.9% and 8.0%,
respectively. The issuance of standby letters of credit under the
Revolving Credit Facility and certain other bank facilities reduces
the amount available for direct borrowings under the Revolving Credit
Facility. At December 31, 1999 and 1998, there were $5,295,000 and
$8,712,000, respectively, of standby letters of credit outstanding
under all Company bank facilities. The Revolving Credit Facility
contains covenants which, among other things, require the Company to
maintain certain financial ratios and a minimum net worth. At
December 31, 1999, the Company was in violation of certain financial
covenants under the Revolving Credit Facility. On March 14, 2000,
the Revolving Credit Facility was amended to, among other items,
waive these covenant violations. The amendment also granted the
Company a period of time during 2000 whereby the Company will not be
subject to certain of the financial covenants contained in the
Revolving Credit Facility. Subsequent to this period of time, the
Company will be subject to revised financial covenants under the
Revolving Credit Facility, which management believes are achievable.
As a result, borrowings continue to be presented as long-term. The
Revolving Credit Facility is secured by substantially all of the
assets of the Company, other than real property and 35% of the stock
of its foreign subsidiaries. The average borrowing under the
Revolving Credit Facility during 1999 was $52,407,000 at a weighted
average rate of 8.3%, and the maximum borrowing outstanding was
$65,350,000. The average borrowing under the Revolving Credit
Facility during 1998 was $43,454,000 at a weighted average interest
rate of 8.6%, and the maximum borrowing outstanding was $57,075,000.
The average borrowing under the Revolving Credit Facility during the
period September 24, 1997 to December 31, 1997 was $28,512,000 at a
weighted average interest rate of 8.7%, and the maximum borrowing
outstanding during this period was $36,350,000. The amount available
for direct borrowings under the Revolving Credit Facility at
December 31, 1999 was $7,422,000, which is net of $7,313,000 that
is to be used for the March 15, 2000 interest payment on the Senior
Notes.
In 1999, Bucyrus Canada Limited entered into a credit facility with
The Bank of Nova Scotia. Proceeds from this facility were used to
acquire certain assets of Bennett & Emmott. The C$10,000,000
revolving term loan portion of this facility expires on December 31,
2000 and bears interest at the bank's prime lending rate plus 1.50%.
The C$5,000,000 non-revolving term loan portion is payable in monthly
installments over five years and bears interest at the bank's prime
lending rate plus 2%. This credit facility contains covenants which,
among other things, requires Bucyrus Canada Limited to maintain a
minimum current ratio and tangible net worth. At December 31, 1999,
Bucyrus Canada Limited was in compliance with these covenants.
Maturities of long-term debt are the following for each of the next
five years:
(Dollars in Thousands)
2000 $ 7,518
2001 60,568
2002 886
2003 478
2004 2,077
At December 31, 1999, the Senior Notes were bid at 72%. Based on
this information, management believes the fair value of the Senior
Notes is approximately $108,000,000.
NOTE G - COMMON SHAREHOLDERS' INVESTMENT
On March 17, 1998, the Company's Board of Directors authorized a
stock split which increased the number of authorized shares of common
stock of the Company from 1,000 shares to 1,600,000 shares.
Simultaneous with this authorization, AIPAC cancelled 9.976% of its
interest in its 1,000 shares of common stock of the Company and
received 1,430,300 shares for their remaining interest (the "Stock
Split"). Subsequently, the Company's Board of Directors increased
the number of authorized shares of common stock of the Company to
1,700,000 shares.
In 1998, the Company's Board of Directors adopted the Bucyrus
International, Inc. 1998 Management Stock Option Plan (the "1998
Option Plan") which authorizes the granting of stock options to key
employees for up to a total of 200,000 shares of common stock of the
Company at exercise prices to be determined in accordance with the
provisions of the 1998 Option Plan. Options granted under the 1998
Option Plan are targeted to vest on the last day of the plan year at
the rate of 25% of the aggregate number of shares of common stock
underlying each series of options per year, provided that the Company
attains specified EBITDA targets. In the event that the EBITDA
target is not attained in any plan year, the options scheduled to
vest at the end of that plan year will vest according to a pro rata
schedule set forth in the 1998 Option Plan. Notwithstanding the
foregoing, all options granted under the 1998 Option Plan shall vest
automatically on the ninth anniversary of the date of the grant,
regardless of performance criteria, and expire and terminate no later
than ten years after the date of grant.
The following table sets forth the activity and outstanding balances
of options exercisable for shares of common stock under the 1998
Option Plan:
Options Available For
Outstanding Future Grants
At plan inception - 150,400
Increase in shares available
for future grants - 49,600
Granted on March 17, 1998
($100 per share) 115,850 (115,850)
Granted on July 31, 1998
($100 per share) 3,350 (3,350)
Granted on December 21, 1998
($100 per share) 59,767 (59,767)
Options forfeited
($100 per share) (2,900) 2,900
________ ________
Balances at December 31, 1998 176,067 23,933
Granted on June 23, 1999
($100 per share) 3,750 (3,750)
Granted on September 1, 1999
($100 per share) 4,927 (4,927)
Options forfeited
($100 per share) (106,444) 106,444
________ ________
Balances at December 31, 1999 78,300 121,700
At December 31, 1999, none of the options outstanding were vested.
The options had a weighted average remaining contractual life of
8.2 years.
In 1995, the Company's Board of Directors adopted the Directors'
Stock Option Plan. As discussed in Note B, options granted under the
Directors' Stock Option Plan were cancelled upon the acquisition of
the Company by AIPAC. The Directors' Stock Option Plan provided 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 the
Company's common stock at an exercise price based on the last sale
price of the common stock on the date of grant. The following table
sets forth the activity and outstanding balances of options
exercisable for shares of common stock under the Directors' Stock
Option Plan:
Options Available For
Outstanding Future Grants
Balances at January 1, 1997
($6.00 - $9.25 per share) 20,000 40,000
Granted on February 5, 1997
($7.50 per share) 12,000 (12,000)
Granted on April 30, 1997
($9.375 per share) 2,000 (2,000)
Cashed out pursuant to the
acquisition of the Company
by AIPAC (34,000) -
Cancelled pursuant to the
acquisition of the Company
by AIPAC - (26,000)
_______ _______
Balances at December 31, 1997 - -
In 1996, the Company's Board of Directors adopted the 1996 Employees'
Plan. As discussed in Note B, options and stock appreciation rights
granted under the 1996 Employees' Plan were cancelled upon the
acquisition of the Company by AIPAC. The 1996 Employees' Plan
authorized 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 Company's 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 Company's common stock on the date of grant;
(c) restricted stock; and (d) performance shares. The 1996
Employees' Plan provided that up to a total of 1,000,000 shares of
the Company's common stock, subject to adjustment under plan
provisions, would be available for the granting of awards thereunder.
The following table sets forth the activity and outstanding balances
of grants under the 1996 Employees' Plan:
Available For
Granted Future Grants
Balances at January 1, 1997 580,000 420,000
Non-qualified stock options
granted on February 5, 1997
($7.50 per share) 323,000 (323,000)
Options forfeited ($7.50
per share) (11,000) 11,000
Non-qualified stock options and
stock appreciation rights
cashed out pursuant to the
acquisition of the Company
by AIPAC (592,000) -
Lapse of restrictions on
restricted stock (33,333) -
Restricted stock purchased
pursuant to the acquisition
of the Company by AIPAC (266,667) -
Cancelled pursuant to the
acquisition of the Company
by AIPAC - (108,000)
_______ ________
Balances at December 31, 1997 - -
Certain grants under the 1996 Employees' Plan resulted in additional
compensation expense to the Company. Stock compensation expense
recognized for the year ended December 31, 1997 was $677,000.
The Company accounted for the 1998 Option Plan, 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:
Predecessor
September 24- January 1-
Years Ended December 31, December 31, September 23,
1999 1998 1997 1997
(Dollars in Thousands,
Except Per Share Amounts)
Net loss:
As reported $ (22,575) $ (8,264) $ (7,158) $ (4,874)
Pro forma (22,753) (8,698) (7,158) (4,648)
Net loss per
share of
common stock:
Basic
As reported (15.65) (5.75) (5.00) (.48)
Pro forma (15.77) (6.05) (5.00) (.45)
Diluted
As reported (15.65) (5.75) (5.00) (.47)
Pro forma (15.77) (6.05) (5.00) (.45)
In 1997, the fair value of stock options granted was equal to the
cash paid for each outstanding stock option in the AIP Tender Offer.
The weighted average grant date fair value of stock options granted
in 1999 and 1998 under the 1998 Option Plan was $75 and $76 per
option, respectively. The fair value of grants was estimated on the
date of grant using the minimum value method with the following
weighted average assumptions:
1998 Option Plan
1999 1998
Risk-free interest rate 5.8% 5.5%
Expected dividend yield 0% 0%
Expected life 5 years 5 years
Calculated volatility N/A N/A
NOTE H - 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.
Loss before income taxes consists of the following:
Predecessor
September 24- January 1-
Years Ended December 31, December 31, September 23,
1999 1998 1997 1997
(Dollars in Thousands)
United States $ (23,730) $ (8,132) $ (5,038) $ (8,876)
Foreign 3,534 2,271 (2,403) 6,643
_________ _________ _________ _________
Total $ (20,196) $ (5,861) $ (7,441) $ (2,233)
The provision for income tax expense (benefit) consists of the
following:
Predecessor
September 24- January 1-
Years Ended December 31, December 31, September 23,
1999 1998 1997 1997
(Dollars in Thousands)
Foreign income taxes:
Current $ 2,369 $ 3,387 $ 1,010 $ 2,697
Deferred (113) (1,119) (1,343) 6
_________ _________ _________ _________
Total 2,256 2,268 (333) 2,703
_________ _________ _________ _________
Other (state and
local taxes):
Current 123 135 50 (62)
Deferred - - - -
_________ _________ _________ _________
Total 123 135 50 (62)
_________ _________ _________ _________
Total income
tax expense
(benefit) $ 2,379 $ 2,403 $ (283) $ 2,641
Total income tax expense (benefit) differs from amounts expected by
applying the Federal statutory income tax rate to loss before income
taxes as set forth in the following table:
<TABLE>
<CAPTION>
Predecessor
September 24- January 1-
Years Ended December 31, December 31, September 23,
1999 1998 1997 1997
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 expense (benefit)
at Federal statutory
rate $ (7,069) (35.0)% $ (2,051) (35.0)% $ (2,604) (35.0)% $ (782) (35.0)%
Valuation allowance
adjustments 5,450 27.0 531 9.1 1,681 22.6 2,761 123.6
Impact of foreign
subsidiary income,
tax rates and tax
credits 2,865 14.2 2,925 49.9 425 5.7 616 27.6
State income taxes
net of Federal
income tax benefit 256 1.3 20 .3 (14) (.2) (11) (.5)
Nondeductible
goodwill
amortization 875 4.3 904 15.4 207 2.8 - -
Other items 2 - 74 1.3 22 .3 57 2.6
________ ______ ________ ______ ________ ______ ________ ______
Total income
tax expense (benefit) $ 2,379 11.8% $ 2,403 41.0% $ (283) (3.8)% $ 2,641 118.3%
</TABLE>
Significant components of deferred tax assets and deferred tax
liabilities are as follows:
December 31,
1999 1998
(Dollars in Thousands)
Deferred tax assets:
Postretirement benefits $ 6,032 $ 5,966
Inventory valuation
provisions 8,087 7,183
Accrued and other
liabilities 9,067 9,480
Research and development
expenditures 7,555 7,688
Tax loss carryforward 32,692 31,265
Tax credit carryforward 479 479
Other items 632 229
________ ________
Total deferred tax assets 64,544 62,290
Deferred tax liabilities:
Excess of book basis over
tax basis of property,
plant and equipment and
intangible assets (37,465) (40,046)
Legal settlement - (1,970)
Valuation allowance (24,686) (17,994)
________ ________
Net deferred tax asset $ 2,393 $ 2,280
The classification of the net deferred tax assets and liabilities is
as follows:
December 31,
1999 1998
(Dollars in Thousands)
Current deferred tax asset $ 1,673 $ 1,577
Long-term deferred tax asset 1,235 962
Current deferred tax liability (85) (60)
Long-term deferred tax
liability (430) (199)
________ ________
Net deferred tax asset $ 2,393 $ 2,280
Due to the recent history of domestic 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.
In 1999, the valuation allowance increased by $6,692,000 to offset an
increase in net deferred tax assets for which no tax benefit was
recognized.
As of December 31, 1999, the Company has available approximately
$79,500,000 of federal net operating loss carryforwards ("NOL") from
the years 1988 through 1999, expiring in the years 2003 through 2019,
to offset against future federal taxable income. Because both the
1997 acquisition of the Company by AIPAC and the 1994 consummation of
the Second Amended Joint Plan of Reorganization of B-E Holdings, Inc.
and the Company as modified on December 1, 1994 (the "Amended Plan")
resulted in an "ownership change" within the meaning of Section 382
of the Internal Revenue Code, the use of the majority of such NOL is
subject to certain annual limitations. The total NOL available to
offset federal taxable income in 2000 is approximately $34,200,000.
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 of the Amended Plan, 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 2000 through 2014) 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
$64,300,000.
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 $19,300,000 at December 31, 1999. 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 I - PENSION AND RETIREMENT PLANS
The Company has several pension and retirement plans covering
substantially all employees. The following tables set forth the
domestic plans' funded status and amounts recognized in the
consolidated financial statements at December 31, 1999 and 1998:
Years Ended December 31,
1999 1998
(Dollars in Thousands)
Change in benefit obligation:
Benefit obligation at
beginning of year $ 77,219 $ 72,004
Service cost 2,112 1,883
Interest cost 5,120 5,058
Amendments (1,151) 94
Actuarial (gain) loss (8,644) 3,265
Benefits paid (5,083) (5,085)
________ ________
Benefit obligation
at end of year 69,573 77,219
________ ________
Change in plan assets:
Fair value of plan assets
at beginning of year 70,082 68,950
Actual return on plan assets 11,990 4,316
Employer contributions 1,185 1,901
Benefits paid (5,083) (5,085)
________ ________
Fair value of plan assets
at end of year 78,174 70,082
________ ________
Net amount recognized:
Funded status 8,601 (7,137)
Unrecognized prior
service cost (1,151) -
Unrecognized net
actuarial (gain) loss (7,681) 6,927
________ ________
Net pension liability $ (231) $ (210)
Amounts recognized in
consolidated balance
sheets:
Prepaid benefit costs $ 4,024 $ 3,599
Accrued benefit liabilities (4,255) (3,809)
________ ________
Net pension liability $ (231) $ (210)
Weighted-average assumptions
at end of year:
Discount rate 8.0% 6.875%
Expected return on
plan assets 9% 9%
Rate of compensation
increase 4.5% to 5% 4.5% to 5%
Predecessor
September 24- January 1-
Years Ended December 31, December 31, September 23,
1999 1998 1997 1997
(Dollars in Thousands)
Components of
net periodic
benefit cost:
Service cost $ 2,112 $ 1,883 $ 486 $ 1,264
Interest cost 5,120 5,058 1,355 3,574
Expected return
on plan assets (6,127) (5,987) (1,599) (8,101)
Recognized net
actuarial
loss 100 - - 4,170
________ ________ ________ ________
Total benefit
cost $ 1,205 $ 954 $ 242 $ 907
The projected benefit obligation, accumulated benefit obligation and
fair value of plan assets for the pension plans with accumulated
benefit obligations in excess of plan assets were $226,000, $148,000
and $0, respectively, at December 31, 1999. These amounts were
$26,729,000, $19,833,000 and $19,575,000, respectively, at
December 31, 1998.
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 $939,000, $972,000 and
$862,000 (including $626,000 for the Predecessor) in 1999, 1998 and
1997, respectively.
NOTE J - 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 tables set forth the plan's status and amounts
recognized in the consolidated financial statements at December 31,
1999 and 1998:
Years Ended December 31,
1999 1998
(Dollars in Thousands)
Change in benefit obligation:
Benefit obligation at
beginning of year $ 14,919 $ 16,645
Service cost 457 410
Interest cost 1,049 1,008
Plan participants'
contributions 70 82
Amendments (506) (2,542)
Net actuarial loss 119 1,159
Benefits paid (1,698) (1,843)
________ ________
Benefit obligation
at end of year 14,410 14,919
________ ________
Change in plan assets:
Fair value of plan assets
at beginning of year - -
Employer contributions 1,628 1,761
Plan participants'
contributions 70 82
Benefits paid (1,698) (1,843)
________ ________
Fair value of plan assets
at end of year - -
________ ________
Net amount recognized:
Funded status (14,410) (14,919)
Unrecognized net
actuarial loss 1,477 1,429
Unrecognized prior
service cost (2,661) (2,358)
________ ________
Accrued postretirement
benefit liability $(15,594) $(15,848)
Years Ended December 31,
1999 1998
(Dollars in Thousands)
Weighted-average assumptions
at end of year:
Discount rate 8.0% 6.875%
Expected return on
plan assets n/a n/a
Rate of compensation
increase n/a n/a
For measurement purposes, a 7% gross health care trend rate was used
for benefits for 2000. Trend rates were assumed to decrease
gradually to 5% in 2002 and remain at that level thereafter.
Predecessor
September 24- January 1-
Years Ended December 31, December 31, September 23,
1999 1998 1997 1997
(Dollars in Thousands)
Components of
net periodic
benefit cost:
Service cost $ 457 $ 410 $ 124 $ 302
Interest cost 1,049 1,008 316 774
Recognized net
actuarial
loss 71 - - 41
Amortization
of prior
service cost (203) (184) - -
________ ________ ________ ________
Net periodic
benefit cost $ 1,374 $ 1,234 $ 440 $ 1,117
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plan. A one percentage point
change in assumed health care cost trend rates would have the
following effects:
One Percentage One Percentage
Point Increase Point Decrease
(Dollars in Thousands)
Effect on total of service
and interest cost components $ 136 $ (117)
Effect on postretirement
benefit obligation 934 (831)
NOTE K - RESEARCH AND DEVELOPMENT
Expenditures for design and development of new products and
improvements of existing mining machinery products, including
overhead, aggregated $7,646,000 in 1999, $8,247,000 in 1998 and
$7,384,000 (including $5,043,000 for the Predecessor) in 1997. All
engineering and product development costs are charged to engineering
and field service expense as incurred.
NOTE L - CALCULATION OF NET LOSS PER SHARE OF COMMON STOCK
Basic net loss per share of common stock was computed by dividing net
loss by the weighted average number of shares of common stock
outstanding. Diluted net loss per share of common stock was
calculated after giving effect to dilutive securities. The following
is a reconciliation of the numerators and the denominators of the
basic and diluted net loss per share of common stock calculations:
Predecessor
September 24- January 1-
Years Ended December 31, December 31, September 23,
1999 1998 1997 1997
(Dollars in Thousands, Except Per Share Amounts)
Basic
Net loss $ (22,575) $ (8,264) $ (7,158) $ (4,874)
Weighted
average shares
outstanding 1,442,466 1,436,648 1,430,300 10,259,260
Net loss
per share $ (15.65) $ (5.75) $ (5.00) $ (.48)
Diluted
Net loss $ (22,575) $ (8,264) $ (7,158) $ (4,874)
Weighted
average shares
outstanding -
basic 1,442,466 1,436,648 1,430,300 10,259,260
Effect of dilutive
securities -
stock options,
stock appreciation
rights and
restricted
stock - - - 174,840
__________ __________ __________ __________
Weighted
average shares
outstanding -
diluted 1,442,466 1,436,648 1,430,300 10,434,100
Net loss
per share $ (15.65) $ (5.75) $ (5.00) $ (.47)
Net loss per share of common stock for the period September 24, 1997
to December 31, 1997 is calculated on a retroactive basis to reflect
the 1,430,300 shares now owned by AIPAC as a result of the Stock
Split (see Note G).
NOTE M - SEGMENT AND GEOGRAPHICAL INFORMATION
The Company designs, manufactures and markets large excavation
machinery used for surface mining and supplies replacement parts and
services for such machines. The Company manufactures its machines
and replacement parts primarily at one location. There is no
significant difference in the production process for machines and
replacement parts. The Company's products are sold primarily to
large companies and quasi-governmental entities engaged in the mining
of coal, iron ore and copper throughout the world. New equipment and
replacement parts and services are sold in North America primarily by
Company personnel and through independent distributors and its
domestic subsidiaries, and overseas by Company personnel and through
independent distributors and the Company's foreign subsidiaries and
offices.
Due to the relatively low number of new machines sold each year, the
profitability of each machine sale is evaluated on an order by order
basis with specific margin goals being established prior to the sale
of the machine. Historically, there has been very little variance
between the estimated margin on a machine sale and the actual margin
achieved. The sales of replacement parts and services occur on a
consistent basis throughout the year. The gross margins on
replacement parts and service sales are regularly reviewed by the
Company's chief operating decision maker to assess performance. Over
the past several years, the sale of replacement parts and services
has accounted for approximately two-thirds of the Company's annual
net sales. Operating expenses and assets are managed on a macro
basis and are not allocated to machines or replacement parts and
services as part of performance assessment.
Based on the above, the Company's operations are classified as one
operating segment.
The following table summarizes the Company's net sales:
Years Ended December 31,
1999 1998 1997
(Dollars in Thousands)
Machines $114,207 $107,268 $108,425
Parts and services 204,428 208,570 198,252
________ ________ ________
$318,635 $315,838 $306,677
Financial information by geographical area is set forth in the
following table. Each geographic area represents the origin of the
financial information.
Sales to
External Long-Lived
Customers Assets
(Dollars in Thousands)
1999
United States $166,585 $ 81,099
Australia 66,496 1,122
South America 35,837 6,177
Far East and South Africa 24,097 882
Other Foreign 25,620 6,525
________ ________
$318,635 $ 95,805
1998
United States $170,605 $ 90,181
Australia 58,491 1,092
South America 36,260 7,451
Far East and South Africa 31,080 1,032
Other Foreign 19,402 874
________ ________
$315,838 $100,630
1997
United States $183,995 $ 86,780
Australia 42,370 1,250
South America 31,057 7,894
Far East and South Africa 25,807 1,273
Other Foreign 23,448 427
________ ________
$306,677 $ 97,624
The Company does not consider itself to be dependent upon any single
customer or group of customers; however, on an annual basis a single
customer may account for a large percentage of sales, particularly
new machine sales. In 1999, 1998 and 1997, one customer accounted
for approximately 16%, 19% and 14%, respectively, of the Company's
consolidated net sales.
NOTE N - COMMITMENTS, CONTINGENCIES AND CREDIT RISKS
Joint Prosecution
On September 25, 1997, the Company and Jackson National Life
Insurance Company ("JNL") commenced an action against Milbank, Tweed,
Hadley & McCloy ("Milbank") in the Milwaukee County Circuit Court
(the "Milwaukee Action"). The Company sought damages against Milbank
arising out of Milbank's alleged malpractice, breach of fiduciary
duty, common law fraud, breach of contract, unjust enrichment and
breach of the obligation of good faith and fair dealing. JNL sought
damages against Milbank arising out of Milbank's alleged tortious
interference with contractual relations, abuse of process and common
law fraud. On December 31, 1998, the Company and JNL settled the
Milwaukee Action, which was thereafter dismissed by the agreement of
the parties on February 24, 1999. The amounts received by the
Company in connection with the settlement of the Milwaukee Action are
included in Other Income in the Consolidated Statements of Operations
for the year ended December 31, 1998.
Environmental
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.
Product Liability
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.
Other Litigation
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.
Commitments
The Company has obligations under various operating leases and rental
and service agreements. The expense relating to these agreements was
$6,244,000 in 1999, $7,157,000 in 1998 and $7,240,000 (including
$5,157,000 for the Predecessor) in 1997. Future minimum annual
payments under noncancellable agreements are as follows:
(Dollars in Thousands)
2000 $ 4,382
2001 3,663
2002 3,080
2003 2,637
2004 2,458
After 2004 1,936
________
$ 18,156
Credit Risks
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 O - 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:
1999 $ 74,610 $ 90,549 $ 75,977 $ 77,499
1998 73,700 80,041 76,149 85,948
1997 - - 10,429 84,783
1997 - Predecessor 59,886 83,876 67,703 -
Gross profit(1):
1999 $ 14,251 $ 16,986 $ 14,077 $ 5,998
1998 7,119 16,503 15,412 13,593
1997 - - 2,992 6,991
1997 - Predecessor 11,881 15,620 12,449 -
Net earnings (loss)(1):
1999(2) $ (2,096) $ (756) $ (2,798) $(16,925)
1998 (9,069) (293) (868) 1,966
1997 - - 1,269 (8,427)
1997 - Predecessor(3) 915 2,508 (8,297) -
Basic net earnings (loss)
per common share(1):
1999 $ (1.45) $ (.52) $ (1.94) $ (11.74)
1998 (6.33) (.20) (.60) 1.37
1997 - - .89 (5.89)
1997 - Predecessor .09 .24 (.81) -
Diluted net earnings (loss)
per common share(1):
1999 $ (1.45) $ (.52) $ (1.94) $ (11.74)
1998 (6.33) (.20) (.60) 1.37
1997 - - .89 (5.89)
1997 - Predecessor .09 .24 (.78) -
Weighted average shares
outstanding - basic
(in thousands):
1999 1,442 1,442 1,442 1,443
1998 1,432 1,438 1,438 1,439
1997 - - 1,430 1,430
1997 - Predecessor 10,242 10,268 10,268 -
Weighted average shares
outstanding - diluted
(in thousands):
1999 1,442 1,442 1,442 1,443
1998 1,432 1,438 1,438 1,439
1997 - - 1,430 1,430
1997 - Predecessor 10,283 10,407 10,623 -
(1) Due to the acquisition of the Company by AIPAC, the results of the
Company are not comparable to the results of the Predecessor.
(2) Included in the net loss for the fourth quarter of 1999 was a fixed asset
impairment charge of $4,372,000 at the manufacturing facility in
Boonville, Indiana.
(3) Included in the Predecessor net loss for the period ended September 23,
1997 were $10,051,000 of nonrecurring items. See Note B.
NOTE P - SUBSEQUENT EVENT
Due to a reduction in new orders, the Company has reduced a portion
of its manufacturing production workforce through a layoff and has
also reduced the number of its salaried employees. These activities
will result in a restructuring charge of approximately $2,600,000 in
the first quarter of 2000. Such amount primarily relates to
severance payments and related matters.
NOTE Q - SUPPLEMENTAL CONSOLIDATING CONDENSED FINANCIAL INFORMATION
The Company's payment obligations under the Senior Notes are
guaranteed by certain of the Company's wholly-owned subsidiaries (the
"Guarantor Subsidiaries"). Such guarantees are full, unconditional
and joint and several. Separate financial statements of the
Guarantor Subsidiaries are not presented because the Company's
management has determined that they would not be material to
investors. The following supplemental financial information sets
forth, on an unconsolidated basis, statement of operations, balance
sheet and statement of cash flow information for the Company (the
"Parent Company"), for the Guarantor Subsidiaries and for the
Company's non-guarantor subsidiaries (the "Other Subsidiaries"). The
supplemental financial information reflects the investments of the
Company in the Guarantor and Other Subsidiaries using the equity
method of accounting. Parent Company amounts for net earnings (loss)
and common shareholders' investment differ from consolidated amounts
as intercompany profit in subsidiary inventory has not been
eliminated in the Parent Company statement but has been eliminated in
the Consolidated Totals.
<TABLE>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Operations
For the Year Ended December 31, 1999
(Dollars in Thousands)
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales $206,676 $ 36,453 $160,661 $(85,155) $318,635
Other income 5,284 1 579 (4,043) 1,821
________ ________ ________ ________ ________
211,960 36,454 161,240 (89,198) 320,456
________ ________ ________ ________ ________
Costs and Expenses:
Cost of products sold 177,436 32,978 139,774 (82,865) 267,323
Engineering and field
service, selling,
administrative
and miscellaneous
expenses 32,894 6,494 14,243 - 53,631
Interest expense 19,033 1,698 3,010 (4,043) 19,698
________ ________ ________ ________ ________
229,363 41,170 157,027 (86,908) 340,652
________ ________ ________ ________ ________
Earnings (loss) before
income taxes and equity
in net earnings of
consolidated subsidiaries (17,403) (4,716) 4,213 (2,290) (20,196)
Income taxes (benefit) 684 (138) 1,833 - 2,379
________ ________ ________ ________ ________
Earnings (loss) before
equity in net loss of
consolidated subsidiaries (18,087) (4,578) 2,380 (2,290) (22,575)
Equity in net loss of
consolidated subsidiaries (2,198) - - 2,198 -
________ ________ ________ ________ ________
Net earnings (loss) $(20,285) $ (4,578) $ 2,380 $ (92) $(22,575)
</TABLE>
<TABLE>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Operations
For the Year Ended December 31, 1998
(Dollars in Thousands)
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales $206,633 $ 35,444 $145,468 $(71,707) $315,838
Other income 9,100 3 954 (3,353) 6,704
________ ________ ________ ________ ________
215,733 35,447 146,422 (75,060) 322,542
________ ________ ________ ________ ________
Costs and Expenses:
Cost of products sold 177,511 31,550 124,619 (70,469) 263,211
Engineering and field
service, selling,
administrative
and miscellaneous
expenses 29,673 1,939 14,720 - 46,332
Interest expense 18,503 728 2,982 (3,353) 18,860
________ ________ ________ ________ ________
225,687 34,217 142,321 (73,822) 328,403
________ ________ ________ ________ ________
Earnings (loss) before
income taxes and equity
in net earnings of
consolidated subsidiaries (9,954) 1,230 4,101 (1,238) (5,861)
Income taxes 38 492 1,873 - 2,403
________ ________ ________ ________ ________
Earnings (loss) before
equity in net earnings of
consolidated subsidiaries (9,992) 738 2,228 (1,238) (8,264)
Equity in net earnings of
consolidated subsidiaries 2,966 - - (2,966) -
________ ________ ________ ________ ________
Net earnings (loss) $ (7,026) $ 738 $ 2,228 $ (4,204) $ (8,264)
</TABLE>
<TABLE>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Operations
For the Period September 24, 1997 to December 31, 1997
(Dollars in Thousands)
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales $ 64,060 $ 8,047 $ 38,196 $(15,091) $ 95,212
Other income 890 - 242 (786) 346
________ ________ ________ ________ ________
64,950 8,047 38,438 (15,877) 95,558
________ ________ ________ ________ ________
Costs and Expenses:
Cost of products sold 58,115 7,057 35,530 (15,473) 85,229
Engineering and field
service, selling,
administrative
and miscellaneous
expenses 7,759 621 4,473 - 12,853
Interest expense 4,840 92 771 (786) 4,917
________ ________ ________ ________ ________
70,714 7,770 40,774 (16,259) 102,999
________ ________ ________ ________ ________
Earnings (loss) before
income taxes and equity
in net earnings (loss) of
consolidated subsidiaries (5,764) 277 (2,336) 382 (7,441)
Income taxes (benefit) 73 111 (467) - (283)
________ ________ ________ ________ ________
Earnings (loss) before equity
in net earnings (loss) of
consolidated subsidiaries (5,837) 166 (1,869) 382 (7,158)
Equity in net earnings
(loss) of consolidated
subsidiaries (1,703) - - 1,703 -
________ ________ ________ ________ ________
Net earnings (loss) $ (7,540) $ 166 $ (1,869) $ 2,085 $ (7,158)
</TABLE>
<TABLE>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Operations
For the Period January 1, 1997 to September 23, 1997 - Predecessor
(Dollars in Thousands)
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales $126,962 $ 23,836 $ 84,658 $(23,991) $211,465
Other income 1,696 1 274 (682) 1,289
________ ________ ________ ________ ________
128,658 23,837 84,932 (24,673) 212,754
________ ________ ________ ________ ________
Costs and Expenses:
Cost of products sold 107,735 20,240 67,278 (23,738) 171,515
Engineering and field
service, selling,
administrative
and miscellaneous
expenses 16,190 1,871 9,024 30 27,115
Interest expense 5,818 248 922 (682) 6,306
Nonrecurring items 10,051 - - - 10,051
________ ________ ________ ________ ________
139,794 22,359 77,224 (24,390) 214,987
________ ________ ________ ________ ________
Earnings (loss) before
income taxes and equity
in net earnings of
consolidated subsidiaries (11,136) 1,478 7,708 (283) (2,233)
Income taxes (benefit) (412) 576 2,477 - 2,641
________ ________ ________ ________ ________
Earnings (loss) before
equity in net earnings of
consolidated subsidiaries (10,724) 902 5,231 (283) (4,874)
Equity in net earnings of
consolidated subsidiaries 6,133 - - (6,133) -
________ ________ ________ ________ ________
Net earnings (loss) $ (4,591) $ 902 $ 5,231 $ (6,416) $ (4,874)
</TABLE>
<TABLE>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Balance Sheets
December 31, 1999
(Dollars in Thousands)
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ 23 $ 8,346 $ - $ 8,369
Receivables 34,851 3,065 22,936 171 61,023
Intercompany receivables 68,233 2,712 10,912 (81,857) -
Inventories 73,147 3,669 50,579 (2,263) 125,132
Prepaid expenses and
other current assets 652 473 4,377 - 5,502
________ ________ ________ _________ ________
Total Current Assets 176,883 9,942 97,150 (83,949) 200,026
OTHER ASSETS:
Restricted funds on deposit - - 89 - 89
Goodwill 69,335 - - - 69,335
Intangible assets - net 40,310 47 - - 40,357
Other assets 8,958 - 2,417 - 11,375
Investment in subsidiaries 19,147 - - (19,147) -
________ ________ ________ _________ ________
137,750 47 2,506 (19,147) 121,156
PROPERTY, PLANT AND
EQUIPMENT - net 71,875 9,067 14,863 - 95,805
________ ________ ________ _________ ________
$386,508 $ 19,056 $114,519 $(103,096) $416,987
LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 40,185 $ 1,607 $ 23,139 $ (291) $ 64,640
Intercompany payables 905 19,749 55,882 (76,536) -
Liabilities to customers
on uncompleted contracts
and warranties 4,200 - 676 - 4,876
Income taxes 150 46 157 - 353
Short-term obligations 150 - 295 - 445
Current maturities of
long-term debt 413 - 7,105 - 7,518
________ ________ ________ _________ ________
Total Current Liabilities 46,003 21,402 87,254 (76,827) 77,832
LONG-TERM LIABILITIES:
Liabilities to customers
on uncompleted contracts
and warranties 4,332 - 35 - 4,367
Postretirement benefits 13,480 - 504 - 13,984
Deferred expenses and other 11,316 334 995 - 12,645
________ ________ ________ _________ ________
29,128 334 1,534 - 30,996
LONG-TERM DEBT, less
current maturities 210,105 - 3,904 - 214,009
COMMON SHAREHOLDERS'
INVESTMENT 101,272 (2,680) 21,827 (26,269) 94,150
________ ________ ________ _________ ________
$386,508 $ 19,056 $114,519 $(103,096) $416,987
</TABLE>
<TABLE>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Balance Sheets
December 31, 1998
(Dollars in Thousands)
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ 60 $ 8,761 $ - $ 8,821
Receivables 32,414 3,926 25,387 - 61,727
Intercompany receivables 77,179 1,855 1,365 (80,399) -
Inventories 67,052 4,728 43,056 (1,610) 113,226
Prepaid expenses and
other current assets 763 596 5,022 - 6,381
________ ________ ________ _________ ________
Total Current Assets 177,408 11,165 83,591 (82,009) 190,155
OTHER ASSETS:
Restricted funds on deposit - - 476 - 476
Goodwill 71,835 - - - 71,835
Intangible assets - net 42,441 132 - - 42,573
Other assets 9,556 - 1,970 - 11,526
Investment in subsidiaries 25,725 - - (25,725) -
________ ________ ________ _________ ________
149,557 132 2,446 (25,725) 126,410
PROPERTY, PLANT AND
EQUIPMENT - net 75,286 14,894 10,450 - 100,630
________ ________ ________ _________ ________
$402,251 $ 26,191 $ 96,487 $(107,734) $417,195
LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 42,501 $ 1,597 $ 11,185 $ (333) $ 54,950
Intercompany payables - 22,906 54,808 (77,714) -
Liabilities to customers
on uncompleted contracts
and warranties 2,526 - 642 - 3,168
Income taxes 186 28 736 - 950
Short-term obligations 513 - - - 513
Current maturities of
long-term debt 168 - 838 - 1,006
________ ________ ________ _________ ________
Total Current Liabilities 45,894 24,531 68,209 (78,047) 60,587
LONG-TERM LIABILITIES:
Liabilities to customers
on uncompleted contracts
and warranties 4,839 - 575 - 5,414
Postretirement benefits 13,645 - 543 - 14,188
Deferred expenses and other 13,052 206 1,327 - 14,585
________ ________ ________ _________ ________
31,536 206 2,445 - 34,187
LONG-TERM DEBT, less
current maturities 200,746 - 1,562 - 202,308
COMMON SHAREHOLDERS'
INVESTMENT 124,075 1,454 24,271 (29,687) 120,113
________ ________ ________ _________ ________
$402,251 $ 26,191 $ 96,487 $(107,734) $417,195
</TABLE>
<TABLE>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Cash Flows
For the Year Ended December 31, 1999
(Dollars in Thousands)
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Net Cash Provided By (Used
In) Operating Activities $ (6,931) $ 484 $ 1,693 $ - $ (4,754)
________ ________ ________ ________ ________
Cash Flows From Investing
Activities
Decrease in restricted
funds on deposit - - 387 - 387
Purchases of property,
plant and equipment (4,691) (542) (1,559) - (6,792)
Proceeds from sale of
property, plant and
equipment 95 21 99 - 215
Purchase of Bennett &
Emmott (1986) Ltd. - - (7,050) - (7,050)
Dividends paid to parent 2,451 - (2,451) - -
________ ________ ________ ________ ________
Net cash used in
investing activities (2,145) (521) (10,574) - (13,240)
________ ________ ________ ________ ________
Cash Flows From Financing
Activities
Net increase in long-term
debt and other bank
borrowings 9,241 - 8,904 - 18,145
Proceeds from issuance of
common stock 31 - - - 31
Purchase of treasury stock (196) - - - (196)
________ ________ ________ ________ ________
Net cash provided by
financing activities 9,076 - 8,904 - 17,980
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - (438) - (438)
________ ________ ________ ________ ________
Net decrease in cash and
and cash equivalents - (37) (415) - (452)
Cash and cash equivalents
at beginning of year - 60 8,761 - 8,821
________ ________ ________ ________ ________
Cash and cash equivalents
at end of year $ - $ 23 $ 8,346 $ - $ 8,369
</TABLE>
<TABLE>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Cash Flows
For the Year Ended December 31, 1998
(Dollars in Thousands)
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Net Cash Provided By
(Used In) Operating
Activities $(22,339) $ 3,140 $ (4,947) $ - $(24,146)
________ ________ ________ ________ ________
Cash Flows From Investing
Activities
Decrease in restricted
funds on deposit - - 580 - 580
Purchases of property,
plant and equipment (8,055) (3,183) (1,565) - (12,803)
Proceeds from sale of
property, plant and
equipment 46 - 1,382 - 1,428
Dividends paid to parent 958 - (958) - -
________ ________ ________ ________ ________
Net cash used in
investing activities (7,051) (3,183) (561) - (10,795)
________ ________ ________ ________ ________
Cash Flows From Financing
Activities
Net (increase) decrease
in other bank borrowings 104 - (174) - (70)
Payment of acquisition
and refinancing expenses (293) - - - (293)
Proceeds from issuance of
long-term debt 28,785 - - - 28,785
Payment of long-term debt (86) - (264) - (350)
Proceeds from issuance
of common stock 880 - - - 880
________ ________ ________ ________ ________
Net cash provided by (used
in) financing activities 29,390 - (438) - 28,952
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - (261) - (261)
________ ________ ________ ________ ________
Net decrease in cash
and cash equivalents - (43) (6,207) - (6,250)
Cash and cash equivalents
at beginning of year - 103 14,968 - 15,071
________ ________ ________ ________ ________
Cash and cash equivalents
at end of year $ - $ 60 $ 8,761 $ - $ 8,821
</TABLE>
<TABLE>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Cash Flows
For the Period September 24, 1997 to December 31, 1997
(Dollars in Thousands)
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Net Cash Provided By
Operating Activities $ 6,079 $ 440 $ 9,286 $ - $ 15,805
________ ________ ________ ________ ________
Cash Flows From Investing
Activities
Payment to cash out stock
options and stock
appreciation rights (6,944) - - - (6,944)
Decrease in restricted
funds on deposit - - 23 - 23
Purchases of property,
plant and equipment (1,234) (497) (1,128) - (2,859)
Proceeds from sale of
property, plant and
equipment 235 - 275 - 510
Acquisition of Bucyrus
International, Inc. (189,622) - - - (189,622)
Receivable from Global 6,346 - (1,071) - 5,275
________ ________ ________ ________ ________
Net cash used in investing
activities (191,219) (497) (1,901) - (193,617)
________ ________ ________ ________ ________
Cash Flows From Financing
Activities
Reduction of project
financing obligations (8,102) - - - (8,102)
Net increase (decrease)
in other bank borrowings 22,231 (459) (935) - 20,837
Payment of acquisition
and refinancing expenses (13,426) - - - (13,426)
Payment of bridge loan (27,024) - (17,976) - (45,000)
Capital contribution 143,030 - - - 143,030
Proceeds from issuance of
long-term debt 150,000 - - - 150,000
Payment of long-term debt (65,785) - - - (65,785)
Change in intercompany
accounts (17,976) - 17,976 - -
________ ________ ________ ________ ________
Net cash provided by (used in)
financing activities 182,948 (459) (935) - 181,554
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - (352) - (352)
________ ________ ________ ________ ________
Net (decrease) increase
in cash and cash
equivalents (2,192) (516) 6,098 - 3,390
Cash and cash equivalents
at beginning of period 2,192 619 8,870 - 11,681
________ ________ ________ ________ ________
Cash and cash equivalents
at end of period $ - $ 103 $ 14,968 $ - $ 15,071
</TABLE>
<TABLE>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Cash Flows
For the Period January 1, 1997 to September 23, 1997 - Predecessor
(Dollars in Thousands)
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Net Cash Provided by (Used
In) Operating Activities $ (9,085) $ 804 $ 1,681 $ - $ (6,600)
________ ________ ________ ________ ________
Cash Flows From Investing
Activities
Purchases of property,
plant and equipment (985) (144) (3,202) - (4,331)
Proceeds from sale of
property, plant and
equipment 5 - 1,222 - 1,227
Purchase of Von's Welding,
Inc., net of cash
acquired (841) - - - (841)
Purchase of surface mining
and equipment business
of Global Industrial
Technologies, Inc. (15,827) - (20,893) - (36,720)
Receivable from Global (6,346) - 1,071 - (5,275)
Change in intercompany
accounts (1,846) - 1,846 - -
Dividends paid to parent 150 - (150) - -
________ ________ ________ ________ ________
Net cash used in investing
activities (25,690) (144) (20,106) - (45,940)
________ ________ ________ ________ ________
Cash Flows From Financing
Activities
Proceeds from issuance
of project financing
obligations 5,672 - - - 5,672
Net increase in other
bank borrowings 36 (190) 654 - 500
Payment of acquisition
and refinancing expenses (1,476) - - - (1,476)
Payment of bridge loan fees (3,361) - - - (3,361)
Proceeds from bridge loan 27,024 - 17,976 - 45,000
Proceeds from issuance
of long-term debt - - 1,706 - 1,706
________ ________ ________ ________ ________
Net cash provided by (used in)
financing activities 27,895 (190) 20,336 - 48,041
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - 417 - 417
________ ________ ________ ________ ________
Net (decrease) increase
in cash and cash
equivalents (6,880) 470 2,328 - (4,082)
Cash and cash equivalents
at beginning of period 9,072 149 6,542 - 15,763
________ ________ ________ ________ ________
Cash and cash equivalents
at end of period $ 2,192 $ 619 $ 8,870 $ - $ 11,681
</TABLE>
ARTHUR ANDERSEN
Report of Independent Public Accountants
To the Board of Directors and Shareholders of Bucyrus International, Inc.:
We have audited the accompanying consolidated balance sheets of Bucyrus
International, Inc. (Delaware corporation) as of December 31, 1999 and 1998
and the related consolidated statements of operations, comprehensive income,
common shareholders' investment and cash flows for the years ended
December 31, 1999 and 1998, the period from September 24, 1997 to December 31,
1997, and the period from January 1, 1997 to September 23, 1997. These
financial statements and the schedule referred to below are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedule 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.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bucyrus
International, Inc. as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for the years ended December 31, 1999 and 1998,
the period from September 24, 1997 to December 31, 1997, and the period from
January 1, 1997 to September 23, 1997, in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on the consolidated
financial 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, 1999 and 1998, the period from September 24,
1997 to December 31, 1997, and the period from January 1, 1997 to
September 23, 1997, has 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
March 14, 2000
<TABLE>
Bucyrus International, Inc. and Subsidiaries
Schedule II - Valuation and Qualifying Accounts and Reserves
For the Years Ended December 31, 1999 and 1998 and
Periods Ended December 31, 1997 and September 23, 1997
(Dollars in Thousands)
<CAPTION>
Charges
Balance At (Credits) (Charges) Balance At
Beginning To Costs Credits End
Of Period And Expenses To Reserves(1) Of Period
<S> <C> <C> <C> <C>
Allowance for possible losses:
Year ended December 31, 1999:
Notes and accounts receivable - current $ 918 $ 95 $ 77 $1,090
Year ended December 31, 1998:
Notes and accounts receivable - current $ 734 $ 27 $ 157 $ 918
Period September 24, 1997 to December 31, 1997:
Notes and accounts receivable - current $ 684 $ 112 $ (62) $ 734
Predecessor
Period January 1, 1997 to September 23, 1997:
Notes and accounts receivable - current $ 539 $ (8) $ 153 $ 684
<FN>
(1) Includes uncollected receivables written off, net of recoveries, and translation adjustments at the foreign
subsidiaries. The period January 1, 1997 to September 23, 1997 includes $158,000 of allowance for possible
losses acquired in connection with the Marion Acquisition.
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Directors
Directors of the Company are elected annually and hold office until the
next annual meeting of shareholders and until their successors are duly
elected and qualified. The executive officers of the Company serve at the
discretion of the Company's Board of Directors (the "Board").
The following table sets forth, for each of the six directors of the
Company, information regarding their names, ages, principal occupations, and
other directorships in certain companies held by them, and their length of
continuous service as a director of the Company. Except as otherwise noted,
each director has engaged in the principal occupation or employment and has
held the offices shown for more than the past five years. Unless otherwise
indicated, each director listed above is a citizen of the United States and
the address of such person is the Company's principal executive offices.
There are no family relationships among the directors and executive officers
of the Company.
Name Age Principal Occupation and Directorships
W. Richard Bingham 63 Mr. Bingham is a director, the
President, Treasurer and Assistant
Secretary of American Industrial
Partners Corporation. He co-founded
American Industrial Partners and has
been a director and officer of the firm
since 1989. Mr. Bingham is also a
director of Great Lakes Carbon
Corporation, RBX Group, Stanadyne
Automotive and Sweetheart Holdings. He
formerly served on the boards of Avis,
Inc., ITT Life Insurance Corporation
and Valero Energy Corporation.
Mr. Bingham has been a director of the
Company since September 1997.
Wayne T. Ewing 66 Mr. Ewing is a coal industry management
consultant doing business as The Ewing
Company since 1997. Mr. Ewing was
Senior Vice President for Coal
Operations from 1995 to 1996 and
Executive Vice President Marketing from
1993 to 1995 with Kerr-McGee Coal
Corporation. From 1963 to 1993,
Mr. Ewing held various executive
positions with Peabody Holding Company.
Mr. Ewing has been a director of the
Company and a non-executive vice
chairman of the Company's Board since
February 1, 2000.
Willard R. Hildebrand 60 Mr. Hildebrand was President and Chief
Executive Officer of the Company from
March 11, 1996 to December 14, 1998
upon which he became a non-executive
vice chairman of the Company's Board
until March 11, 2000. 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. Mr. Hildebrand has been a
director of the Company since March
1996.
Kim A. Marvin 37 Mr. Marvin is a director, the Secretary
and a Managing Director of American
Industrial Partners Acquisition
Company, LLC. Mr. Marvin joined the
San Francisco office of American
Industrial Partners in 1997 from the
Mergers & Acquisitions Department of
Goldman, Sachs & Co. where he had been
employed since 1994. Mr. Marvin has
been a director of the Company since
September 1997.
Robert L. Purdum 64 Mr. Purdum is a director and a Managing
Director of American Industrial
Partners Corporation. Mr. Purdum
became the Non-Executive Chairman of
the Company's Board following the AIP
Merger. Mr. Purdum retired as Chairman
of Armco, Inc. in 1994. From November
1990 to 1993, Mr. Purdum was Chairman
and Chief Executive Officer of Armco,
Inc. Mr. Purdum has been a director of
AIP Management Co. since joining
American Industrial Partners in 1994.
Mr. Purdum is also a director of
Berlitz International, Inc. Mr. Purdum
has been a director of the Company
since November 1997.
Theodore C. Rogers 65 Mr. Rogers has served as President and
Chief Executive Officer of the Company
since December 23, 1999. Mr. Rogers is
a director, the Chairman of the Board
and the Secretary of American
Industrial Partners Corporation. He
co-founded American Industrial Partners
and has been a director and officer of
the firm since 1989. He currently
serves as a director and the Chief
Executive Officer of RBX Group and as a
non-executive Chairman of the Board and
director of Great Lakes Carbon
Corporation and CIS Corporation. He is
also a director of Derby International,
Inc., Stanadyne Automotive, Steel
Heddle Group and Sweetheart Holdings.
Mr. Rogers has been a director of the
Company since November 1997.
Executive Officers
Set forth below are the names, ages and present occupations of all
executive officers of the Company. Executive officers named therein are
elected annually and serve at the pleasure of the Board. Messrs. Bruno,
Mackus and Salsieder are each employed under one-year employment agreements
which automatically renew for additional one-year terms subject to the
provisions thereof. See ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS - Employment Agreements.
Name Age, Position and Background
Theodore C. Rogers Mr. Rogers, age 65, has served as President and
Chief Executive Officer since December 23, 1999.
Mr. Rogers co-founded American Industrial Partners
and has been an officer and director of the firm
since 1989. Mr. Rogers was President, Chairman,
Chief Executive Officer and Chief Operating Officer
of NL Industries. Mr. Rogers has been a director
of the Company since November 1997.
John F. Bosbous Mr. Bosbous, age 47, has served as Treasurer since
March 1998. Mr. Bosbous was Assistant Treasurer
from 1988 to 1998, and Assistant to the Treasurer
from August 1984 to February 1998.
Frank P. Bruno Mr. Bruno, age 63, has served as Vice President -
Human Resources since December 1, 1997. Mr. Bruno
was a consultant from 1996 to 1997. From 1984 to
1995, Mr. Bruno held various positions in Human
Resources and Administration with Eagle Industries,
Inc.
Craig R. Mackus Mr. Mackus, age 48, has served as Secretary since
May 1996 and as Controller since February 1988.
Mr. Mackus was Division Controller and Assistant
Corporate Controller from 1985 to 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.
Thomas B. Phillips Mr. Phillips, age 54, rejoined the Company on
January 10, 2000 as Vice President-Operations.
From September, 1999 through January, 2000
Mr. Phillips served as a Consultant and Assistant
to the President at United Container Machinery,
Inc. From 1983 through 1999 Mr. Phillips held
various positions with the Company; Executive Vice
President - Operations from June 1998 through April
1999, Vice President - Materials from March 1996 to
June 1998, Director of Materials from 1986 to 1996,
Manufacturing Manager from June 1986 to October
1986 and Materials Manager from 1983 to 1986.
Michael W. Salsieder Mr. Salsieder, age 48, has served as Vice President
and General Counsel since he joined the Company in
June 1999. Mr. Salsieder was Vice President and
General Counsel with Joy Mining Machinery from
April 1999 to June 1999. From 1993 to April 1999
Mr. Salsieder was Vice President, General Counsel
and Secretary with P&H Mining. From 1990 to 1993
Mr. Salsieder was corporate counsel for Beloit
Corporation. Joy Mining Machinery, P&H Mining and
Beloit Corporation are all subsidiaries of
Harnischfeger Industries, Inc.
Timothy W. Sullivan Mr. Sullivan, age 46, rejoined the Company on
January 17, 2000 as Executive Vice President. From
January 1999 through December 1999 Mr. Sullivan
served as President and Chief Executive Officer of
United Container Machinery, Inc. From 1986 through
1998 Mr. Sullivan held various positions with the
Company; Executive Vice President - Marketing from
June 1998 through December 1998, Vice President
Marketing and Sales from April 1995 through May
1998, 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.
ITEM 11. EXECUTIVE COMPENSATION
Compensation of Directors
Directors of the Company are not compensated for their service as
directors, except Mr. Purdum who is paid $12,500 per month, regardless of
whether meetings are held or the number of meetings held, and Mr. Ewing who is
paid an annual fee of $25,000. Directors are reimbursed for out-of-pocket
expenses.
Summary Compensation Table
The following table sets forth certain information for each of the last
three fiscal years concerning compensation awarded to, earned by or paid to
each person who served as the Company's Chief Executive Officer during fiscal
1999 and each of the four most highly compensated executive officers other
than the Chief Executive Officer who were in office on December 31, 1999. The
persons named in the table are sometimes referred to herein as the "named
executive officers".
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation(1 ) Awards
Securities All Other
Name and Underlying Compensation
Principal Position Year Salary($) Bonus($) Options(#) ($)(2)
<S> <C> <C> <C> <C> <C>
Stephen R. Light(3) 1999 $ 467,308 $ 112,500 927 $ 17,011
President and Chief 1998 - - 59,767 -
Executive Officer
Theodore C. Rogers (3) 1999 - - - -
President and Chief
Executive Officer
John F. Bosbous 1999 109,860 - - 4,040
Treasurer 1998 105,762 10,491 800 3,684
1997 100,924 27,866 6,000 67,041
Frank P. Bruno 1999 128,694 - - 5,015
Vice President- 1998 120,294 14,916 6,100 4,776
Human Resources 1997 16,500 20,700 - 82
Craig R. Mackus 1999 145,011 - - 5,440
Secretary and 1998 138,542 17,178 7,500 5,788
Controller 1997 132,914 47,680 30,000 320,456
Michael G. Onsager (4) 1999 135,402 - - 5,087
Vice President- 1998 127,392 15,817 7,500 5,414
Engineering 1997 118,848 41,470 30,000 319,612
_______________
<FN>
(1) Certain personal benefits provided by the Company to the named executive officers are not included in the above
table as permitted by SEC regulations because the aggregate amount of such personal benefits for each named
executive officer in each year reflected in the table did not exceed the lesser of $50,000 or 10% of the sum of
such officer's salary and bonus in each respective year.
(2) "All Other Compensation" includes the following: (i) the employer match under the Company's 401(k) savings plan
for 1999, 1998 and 1997, respectively: Mr. Light ($5,000, $0 and $0), Mr. Bosbous ($3,611, $3,124 and $3,537),
Mr. Bruno ($4,219, $3,793 and $0), Mr. Mackus ($4,866, $5,000 and $4,750), and Mr. Onsager ($4,537, $5,000 and
$4,245); (ii) imputed income from life insurance for 1999, 1998 and 1997, respectively: Mr. Light ($1,626, $0 and
$0), Mr. Bosbous ($429, $560 and $504), Mr. Bruno ($796, $983 and $82), Mr. Mackus ($574, $788 and $706), and
Mr. Onsager ($550, $414 and $367); (iii) severance payments made in 1999 to Mr. Light ($10,385); (iv) the value
realized by each of the named executive officers on September 24, 1997 upon the cancellation of their respective
stock options and stock appreciation rights ("SARs") in connection with the AIP Merger (measured by the difference
between the option/SAR exercise price and $18.00, times the number of options/SARs held) Mr. Bosbous ($63,000),
Mr. Bruno ($0), Mr. Mackus ($315,000), and Mr. Onsager ($315,000).
(3) Mr. Light was the President and Chief Executive Officer from December 14, 1998 through December 23, 1999.
Compensation earned by Mr. Light in 1998 was paid in 1999. All options issued to Mr. Light terminated on
December 23, 1999. Mr. Rogers became the President and Chief Executive Officer on December 23, 1999. No
compensation will be paid to Mr. Rogers during his tenure.
(4) Mr. Onsager was the Vice President - Engineering through January 31, 2000. Mr. Onsager is no longer employed by
the Company.
</TABLE>
1998 Management Stock Option Plan
On March 17, 1998, the Board adopted the 1998 Management Stock Option
Plan (the "1998 Option Plan") as part of the compensation and incentive
arrangements for certain management employees of the Company and its
subsidiaries. The 1998 Option Plan provides for the grant of stock options to
purchase up to an aggregate of 200,000 shares of common stock of the Company
at exercise prices to be determined in accordance with the provisions of the
1998 Option Plan. Options granted under the 1998 Option Plan are targeted to
vest on the last day of the plan year at the rate of 25% of the aggregate
number of shares of common stock underlying each series of options per year,
provided that the Company attained a specified target of EBITDA in that plan
year ($40,209,000 in 1998, $50,399,000 in 1999, and yet to be determined for
the years 2000 and 2001). In the event that the EBITDA goal is not attained
in any plan year, the options scheduled to vest at the end of that plan year
will vest according to a pro rata schedule set forth in the 1998 Option Plan,
provided that if less than 90% of the EBITDA goal is achieved, then no portion
of the options shall vest at the end of that plan year. None of the options
granted under the 1998 Option Plan have vested as of the date of this report.
In the event that the EBITDA goal is surpassed in any plan year, the surplus
shall be applied first to offset any EBITDA deficit from prior plan years, and
second to accelerate vesting of up to one-quarter of the options scheduled to
vest in 2001 according to a pro rata schedule set forth in the 1998 Option
Plan.
Notwithstanding the foregoing, all options granted under the 1998 Option
Plan shall vest automatically on the ninth anniversary of the date of the
grant, regardless of performance criteria or, in the event of a Company Sale
(as defined in the 1998 Option Plan), immediately prior to such sale. Options
granted pursuant to the 1998 Option Plan may be forfeited or repurchased by
the Company at fair value, as defined, in the event of the participating
employee's termination, and if not previously forfeited or exercised, expire
and terminate no later than ten years after the date of grant or, in the event
of a Company Sale, upon the consummation of such sale.
<TABLE>
Option Grants Table
The following table sets forth information concerning the grant of stock options under the Company's
1998 Option Plan during 1999 to the named executive officers.
<CAPTION>
Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Price Appreciation
Underlying Options for Ten Year Option
Options Granted to Exercise or Term(3)
Granted Employees in Base Price Expiration
Name (#) 1999(1) ($/share)(2) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
S. R. Light 927 10.7% $100.00 N/A N/A N/A
<FN>
(1) A total of 8,677 options were granted to employees under the 1998 Option Plan during 1999.
Mr. Light's options were terminated on December 23, 1999.
(2) The exercise price of each option granted was equal to 100% of the fair value of the Company's common
stock on the date of grant. The fair value was established by the Company's Board of Directors as the
price for which the Company will buy or sell its common stock.
</TABLE>
<TABLE>
Aggregate Option Exercises in 1999 and Year-End Option Values
The following table sets forth information regarding the exercise of stock options by each of the
named executive officers during 1999 and the fiscal year-end value of the unexercised stock options held by
such officers.
<CAPTION>
Value of Unexercised
Number of Securities In-The-Money
Shares Underlying Unexercised Options at End of
Acquired Options at End of Fiscal Year 1999 (1)
On Value Fiscal Year 1999 (#) ($)
Exercise Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
S. R. Light 0 N/A 0 0 $ 0 $ 0
T. C. Rogers 0 N/A 0 0 0 0
J. F. Bosbous 0 N/A 0 800 0 0
F. P. Bruno 0 N/A 0 6,100 0 0
C. R. Mackus 0 N/A 0 7,500 0 0
M. G. Onsager 0 N/A 0 7,500 0 0
<FN>
(1) Substantially all of the Company's common stock is owned by AIPAC and there is no established public
trading market therefor. Under the 1998 Option Plan, the fair value of a share of common stock is
established by the board of directors as the price at which the Company will buy or sell its common
stock. The fair value as of December 31, 1999, as so established, was $100 per share, which is equal
to the fair value on the date of grant, and is also the stock option exercise price, for all of the
options listed in the above table. Accordingly, none of the options listed in the above table was
"in-the-money" on December 31, 1999.
</TABLE>
Pension Plan Table
The following table sets forth the estimated annual benefits payable on a
straight life annuity basis (prior to offset of one-half of estimated Social
Security benefits) to participating employees, including officers, upon
retirement at normal retirement age for the years of service and the average
annual earnings indicated under the Company's defined benefit pension plan.
Years of Service
Remuneration 35 30 25 20 15
$125,000 $ 76,563 $ 65,625 $ 54,688 $ 43,750 $ 32,813
150,000 91,875 78,750 65,625 52,500 39,375
175,000 107,188 91,875 76,563 61,250 45,938
200,000 122,500 105,000 87,500 70,000 52,500
225,000 137,813 118,125 98,438 78,750 59,063
250,000 153,125 131,250 109,375 87,500 65,625
300,000 183,750 157,500 131,250 105,000 78,750
400,000 245,000 210,000 175,000 140,000 105,000
450,000 275,625 236,250 196,875 157,500 118,125
500,000 306,250 262,500 218,750 175,000 131,250
Covered compensation for purposes of the Company's defined benefit
pension plan consists of the average of a participant's highest total salary
and bonus (excluding compensation deferred pursuant to any non-qualified plan)
for a consecutive five year period during the last ten calendar years of
service prior to retirement.
The years of credited service under the defined benefit pension plan for
each of the named executive officers are as follows: Mr. Mackus (19),
Mr. Light (1), Mr. Bosbous (15), Mr. Bruno (2), and Mr. Onsager (20).
Mr. Rogers is not a member of the plan.
Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as
amended, limit the annual benefits which may be paid from a tax-qualified
retirement plan. As permitted by the Employee Retirement Income Security Act
of 1974, the Company has a supplemental plan which authorize the payment out
of general funds of the Company of any benefits calculated under provisions of
the applicable retirement plan which may be above the limits under these
sections.
Board Compensation Report on Executive Compensation
The Board is responsible for the compensation packages offered to the
Company's executive officers, including the Chief Executive Officer (the
"CEO") and the named executive officers.
Executive Compensation
The Board, in consultation with the CEO, establishes base salaries for
the executive officers of the Company which the Company believes are
commensurate with their respective responsibilities, position and experience.
Consideration is also given to the compensation levels of similarly situated
personnel of other companies in the industry where such information is
available. When making adjustments in base salaries, the Board generally
considers the foregoing factors as well as corporate financial performance.
In individual cases where appropriate, the Board also considers nonfinancial
performance measures, such as increases in market share, manufacturing
efficiency gains, improvements in product quality and improvements in
relations with customers, suppliers and employees. Executive officers' base
salaries are reviewed annually. The Board generally begins its review by
analyzing the current base salaries of the executive officers. Based on such
review, the corporate performance of the Company, the individual contributions
of the executive officers, and the factors discussed above, the Board will
approve such compensation.
Executive officers and other Company employees participated in the 1999
Management Incentive Plan. Under the 1999 Management Incentive Plan, the
Board established a management incentive budget based on a matrix consisting
of budgeted earnings before interest expense, taxes, depreciation and
amortization ("EBITDA") and interest expense and, in consultation with the CEO,
established target incentive bonus percentages of between 10% and 35% of base
salary for executive officers (other than the CEO, whose target incentive
bonus percentage is established pursuant to his employment agreement - see
"Chief Executive Officer Compensation," below) and certain employees. These
targeted percentages were adjustable pursuant to a formula based on a range of
values whereby the target incentive bonus percentage would be zero (and no
bonuses would be paid) if actual EBITDA was less than 80% of budgeted EBITDA,
and a maximum bonus of four times the target incentive bonus percentage would
be paid if actual EBITDA was 130% or more of budgeted EBITDA. In 1999, the
Company's actual EBITDA did not exceed budgeted EBITDA, and no bonus was paid
under this plan.
Chief Executive Officer Compensation
See CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - Employment
Agreements; Mr. Light. The factors recited in the first paragraph above under
"Executive Compensation" were considered by the Board in these negotiations.
Mr. Rogers does not receive any compensation directly from the Company.
International Revenue Code Section 162(m)
Under Section 162(m) of the Internal Revenue Code, the tax deduction by
certain corporate taxpayers, such as the Company, is limited with respect to
compensation paid to certain executive officers unless such compensation is
based on performance objectives meeting specific regulatory criteria or is
otherwise excluded from the limitation. The compensation package of Mr. Light
does not so qualify. Where practical, the Board intends to qualify
compensation paid to the Company's executive officers in order to preserve the
full deductibility thereof under Section 162(m), although the Board reserves
the right in individual cases to cause the Company to enter into compensation
arrangements which may result in some compensation being nondeductible under
Code Section 162(m).
BOARD OF DIRECTORS OF
BUCYRUS INTERNATIONAL, INC.
W. Richard Bingham
Wayne T. Ewing
Willard R. Hildebrand
Kim A. Marvin
Robert L. Purdum
Theodore C. Rogers
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial owners of more than five
percent of the Company's common stock as of March 24, 2000:
Amount and Nature
Name and Address of of Beneficial Ownership Percent of Class
Beneficial Owner (# of Shares) Class
AIPAC 1,430,300 99.2%
One Maritime Plaza
Suite 2525
San Francisco, CA 94111
The following table sets forth the beneficial ownership of the Company's
common stock by each director, each of the named executive officers and by all
directors and executive officers of the Company as a group as of March 24,
2000:
Amount and Nature
Name of of Beneficial Ownership (1) Percent of Class
Beneficial Owner (# of Shares) Class (2)
W. R. Bingham 0 (3) *
J. F. Bosbous 0 *
W. T. Ewing 0 *
W. R. Hildebrand 4,000 *
S. R. Light 5,000 (4) *
K. A. Marvin 0 (3) *
R. L. Purdum 0 (3) *
T. C. Rogers 0 (3) *
F. P. Bruno 300 *
C. R. Mackus 500 *
M. G. Onsager 500 (4) *
All directors and
executive officers
as a group (12 persons) 5,550 *
(1) Amounts indicated reflect shares as to which the beneficial owner
possesses sole voting and dispositive powers.
(2) Asterisk denotes less than 1%.
(3) Messrs. Bingham, Marvin, Purdum and Rogers are officers of AIPAC which
is the beneficial owner of 1,430,300 shares of common stock of the
Company. Messrs. Bingham, Marvin, Purdum and Rogers each disclaim
beneficial ownership of all such shares.
(4) Mr. Light was employed by the Company through December 23, 1999.
Mr. Onsager was employed by the Company through January 31, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Employment Agreements
The Company has employment agreements with certain of the named executive
officers. These agreements govern the compensation, benefits and treatment
upon termination under various circumstances, including voluntary termination
by either party, or termination by reason of retirement, death or disability,
or in the event of a change of control, as those terms are defined in the
agreements. Each employment agreement automatically renews for a one-year
term upon the expiration of its initial term and any subsequent terms, unless
two months written notice is given by either party of intent to terminate at
the end of that term. Each employment agreement may be terminated by either
the Company or the executive at any time by giving notice as required under
the agreement, provided, however, that if the named executive officer is
terminated by the Company without cause at any time, or if the executive
terminates his employment with good reason in connection with a change in
control, as those terms are defined in the agreement, then the executive will
be entitled to certain severance benefits as described in that executive's
individual agreement. Finally, each agreement imposes confidentiality
restrictions on the executive and places restrictions on the executive's
involvement in activities that may compete with the Company both during
employment and following termination. Violation of such confidentiality and
non-competition provisions, or other termination for cause, as defined in the
agreements, may result in forfeiture of severance and other benefits that may
otherwise accrue. Individual compensation, benefits and other salient
features of each agreement are described below.
Mr. Light
On December 9, 1998, the Company entered into an employment agreement
with Mr. Light to serve as the Company's President and Chief Executive Officer
and to serve on the Company's Board of Directors. Upon Mr. Light's
termination of employment, effective December 23, 1999, certain provisions of
Mr. Light's employment agreement will become effective. Accordingly,
Mr. Light will receive his base salary of $450,000 per year through
December 31, 2000 and an annual bonus in the amount of $112,500. In addition,
Mr. Light is entitled to participate in the employee benefit programs of the
Company, continued use of a Company car, club memberships and supplemental
long-term disability program.
In 1998, Mr. Light was required to purchase 5,000 shares of the Company's
common stock at a price of $100 per share. Mr. Light paid the Company
$100,000 of the purchase price of such stock and executed a low interest
promissory note to the Company in the amount of $400,000 for the balance.
Principal and interest payments on the note are due on April 1 of 2000, 2001
and 2002, and any remaining principal or interest shall be due on March 31,
2003. Such promissory note is secured by Mr. Light's pledge of these shares
of stock to the Company as collateral pursuant to a pledge agreement entered
into contemporaneously with the promissory note and the employment agreement.
Pursuant to Mr. Light's employment agreement, Mr. Light was also granted
options under the 1998 Option Plan to purchase an additional number of shares
to provide Mr. Light with a total equity stake of 4% of the Company's Common
Stock on a fully diluted basis. These options terminated on December 23,
1999.
Mr. Hildebrand
Mr. Hildebrand served as President and Chief Executive Officer under an
employment agreement with the Company dated March 11, 1996, as amended
March 5, 1998, until Mr. Light assumed those responsibilities on December 9,
1998. Pursuant to Mr. Hildebrand's employment agreement, he remained employed
as the Vice Chairman of the Company until the end of the initial term of his
employment agreement, which expired on March 11, 2000. The amendment dated
March 5, 1998 also required that Mr. Hildebrand serve as a director of the
Company for the duration of his employment under the agreement.
Mr. Hildebrand has been advised that the Company has elected not to renew his
employment agreement after the initial term expired on March 11, 2000.
Commencing on March 11, 2000, Mr. Hildebrand will receive severance in the
amount of $10,000 per month for a period of one year. In addition,
Mr. Hildebrand will be entitled to participate in the Company's medical and
retirement programs.
As Vice Chairman, Mr. Hildebrand's base salary was $120,000 per year. In
addition, pursuant to his employment agreement, Mr. Hildebrand was offered (i)
up to 4,000 shares of common stock of the Company for $100.00 per share, and
(ii) options to purchase seven times the number of shares of common stock
purchased in (i) above at a price of $100.00 per share pursuant to the Option
Plan.
Others
Messrs. Bruno and Mackus each serve under one-year employment agreements
with the Company dated December 1, 1997 and May 21, 1997, respectively. Each
of these agreements provides for the executive's position and base salary,
which is subject to merit increases in accordance with the Company's normal
salary merit increase review policy. In addition, the executive is entitled
to participate in such employee and fringe benefits plans as the Company
provides to other similarly situated management employees.
Secured Promissory Note and Pledge Agreement
In connection with Mr. Light's employment, he was required to purchase
5,000 shares of the Company's common stock at an aggregate purchase price of
$500,000. Mr. Light borrowed the sum of $400,000 from the Company to pay a
portion of this purchase price and issued a promissory note to the Company in
such amount, secured by his shares of common stock of the Company. The
interest rate due on such loan is 4.52% per annum. The amount outstanding as
of March 24, 2000 was $400,000.
Consulting Agreement
On February 1, 2000, the Company entered into an eighteen month
Consulting Agreement with Mr. Ewing which provides for Mr. Ewing to perform
certain consulting assignments for the Company at a rate of $1,500 per day
plus reimbursement of reasonable expenses. During the term of the Consulting
Agreement, Mr. Ewing will be entitled to receive bonuses for the sale of
Company machines into the North American coal industry. In addition,
Mr. Ewing will be entitled to a bonus if the incremental standard parts margin
generated on Company parts sales to the North American coal industry in each
calendar year are above an established base.
Management Services Agreement
AIP provides substantial ongoing financial and management services to the
Company utilizing the extensive operating and financial experience of AIP's
principals. AIP will receive an annual fee of $1,450,000 for providing
general management, financial and other corporate advisory services to the
Company, payable semiannually 45 days after the scheduled interest payment
date for the Senior Notes, and will be reimbursed for out-of-pocket expenses.
The fees will be paid to AIP pursuant to a management services agreement among
AIP, the Company and the Guarantors and will be subordinated in right of
payment to the Senior Notes.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page No.
(a) 1. FINANCIAL STATEMENTS
Consolidated Statements of Operations for 26
the years ended December 31, 1999 and 1998
and periods ended December 31, 1997 and
September 23, 1997.
Consolidated Statements of Comprehensive Income (Loss) 27
Consolidated Balance Sheets as of December 31, 28-29
1999 and 1998.
Consolidated Statements of Common Shareholders' 30
Investment for the years ended December 31, 1999
and 1998 and periods ended December 31, 1997 and
September 23, 1997.
Consolidated Statements of Cash Flows for the 31-34
years ended December 31, 1999 and 1998 and periods
ended December 31, 1997 and September 23, 1997.
Notes to Consolidated Financial Statements 35-76
for the years ended December 31, 1999 and 1998
and periods ended December 31, 1997 and
September 23, 1997.
Report of Arthur Andersen LLP 77
2. FINANCIAL STATEMENT SCHEDULE
Schedule II - Valuation and Qualifying 78
Accounts and Reserves
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.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter of 1999.
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/ T. C. Rogers March 28, 2000
Theodore C. Rogers, President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints T. C. Rogers and C. R. Mackus, 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/ W. Richard Bingham March 29, 2000
W. Richard Bingham, Director
/s/ Wayne T. Ewing March 28, 2000
Wayne T. Ewing, Director
/s/ W. R. Hildebrand March 30, 2000
Willard R. Hildebrand, Director
/s/ Kim A. Marvin March 28, 2000
Kim A. Marvin, Director
/s/ Robert L. Purdum March 28, 2000
Robert L. Purdum, Director
/s/ T. C. Rogers March 28, 2000
Theodore C. Rogers, Director
/s/ Craig R. Mackus March 28, 2000
Craig R. Mackus, Secretary
and Controller
(Principal Accounting and
Financial Officer)
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH
REPORTS FILED PURSUANT TO SECTION 15(d) OF THE
ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT
The Registrant does not furnish an annual report or proxy soliciting
material to its security holders.
BUCYRUS INTERNATIONAL, INC.
EXHIBIT INDEX
TO
1999 ANNUAL REPORT ON FORM 10-K
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
2.1 Agreement and Plan of Exhibit 1 to
Merger dated August 21, Registrant's
1997, between Registrant, Tender Offer
American Industrial Solicitation/
Partners Acquisition Recommendation
Company, LLC and Bucyrus Statement on
Acquisition Corp. Schedule 14D-9
filed with the
Commission on
August 26, 1997.
2.2 Certificate of Merger Exhibit 2.2 to
dated September 26, 1997, Registrant's
issued by the Secretary Current Report
of State of the State of on Form 8-K
Delaware. filed with the
Commission on
October 10, 1997.
2.3 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, filed with the
as modified December 1, Commission and
1994, including Exhibits. dated December 1,
1994.
2.4 Order dated December 1, Exhibit 2.2 to
1994 of the U.S. Bankruptcy Registrant's
Court, Eastern District of Current Report
Wisconsin, confirming the on Form 8-K
Second Amended Joint Plan filed with the
of Reorganization of B-E Commission and
Holdings, Inc. and Bucyrus- dated December 1,
Erie Company under Chapter 1994.
11 of the Bankruptcy Code,
as modified December 1, 1994,
including Exhibits.
3.1 Restated Certificate Exhibit 3.6 to
of Incorporation of Registrant's
Registrant. Annual Report on
Form 10-K for
the year ended
December 31, 1998.
3.2 By-laws of Registrant. Exhibit 3.5 to
Registrant's
Annual Report on
Form 10-K for
the year ended
December 31, 1998.
4.1 Indenture of Trust dated Exhibit 4.1 to
as of September 24, 1997 Registration
among Registrant, Boonville Statement on
Mining Services, Inc., Form S-4 of
Minserco, Inc. and Von's Registrant,
Welding, Inc. and Harris Boonville Mining
Trust and Savings Bank, Services, Inc.,
Trustee. Minserco, Inc. and
Von's Welding, Inc.
(SEC Registration
No. 333-39359)
4.2 Form of Guarantee of Included as
Boonville Mining Services, Exhibit E
Inc., Minserco, Inc. and to Exhibit 4.1
Von's Welding, Inc. dated above.
as of September 24, 1997
in favor of Harris Trust
and Savings Bank as Trustee
under the Indenture.
4.3 Form of Registrant's Exhibit 4.3 to
9-3/4% Senior Note due 2007. Registration
Statement on
Form S-4 of
Registrant, Boonville
Mining Services, Inc.,
Minserco, Inc. and
Von's Welding, Inc.
(SEC Registration
No. 333-39359)
10.1 Credit Agreement, dated Exhibit 10.1 to
September 24, 1997 between Registrant's
Bank One, Wisconsin and Current Report
Registrant. on Form 8-K
filed with the
Commission on
October 10, 1997.
(a) First amendment dated Exhibit 10.1(a)
July 21, 1998 to Credit to Registrant's
Agreement. Quarterly Report
on Form 10-Q
filed with the
Commission on
November 16, 1998.
(b) Second amendment dated Exhibit 10.1(b)
September 30, 1998 to to Registrant's
Credit Agreement. Annual Report on
Form 10-K for
the year ended
December 31, 1998.
(c) Third amendment dated Exhibit 10.1(c)
April 20, 1999 to Credit to Registrant's
Agreement. Quarterly Report
on Form 10-Q
filed with the
Commission on
August 12, 1999.
(d) Fourth amendment dated Exhibit 10.1(a)
September 30, 1999 to to Registrant's
Credit Agreement. Quarterly Report
on Form 10-Q
filed with the
Commission on
November 12, 1999.
(e) Fifth amendment dated X
March 14, 2000 to Credit
Agreement.
10.2 Management Services Agreement Exhibit 10.2 to
by and among Registrant, Registration
Boonville Mining Services, Statement on
Inc., Minserco, Inc. and Form S-4 of
Von's Welding, Inc. and Registrant,
American Industrial Partners. Boonville Mining
Services, Inc.,
Minserco, Inc. and
Von's Welding, Inc.
(SEC Registration
No. 333-39359)
10.3 Registration Agreement dated Exhibit 10.3 to
September 24, 1997 by and Registration
among Registrant, Boonville Statement on
Mining Services, Inc., Form S-4 of
Minserco, Inc. and Von's Registrant,
Welding, Inc. and Salomon Boonville Mining
Brothers, Inc., Jefferies & Services, Inc.,
Company, Inc. and Donaldson, Minserco, Inc. and
Lufkin & Jenrette Securities Von's Welding, Inc.
Corporation. (SEC Registration
No. 333-39359)
10.4 Joint Prosecution Agreement Exhibit 9 to
dated as of August 21, 1997 Registrant's
by and among Registrant and Tender Offer
Jackson National Life Solicitation/
Insurance Company. Recommendation
Statement on
Schedule 14D-9
filed with the
Commission on
August 26, 1997.
10.5 Settlement Agreement dated Exhibit 10 to
as of August 21, 1997, by Registrant's
and between Jackson National Tender Offer
Life Insurance Company and Solicitation/
Registrant. Recommendation
Statement on
Schedule 14D-9
filed with the
Commission on
August 26, 1997.
10.6 Employment Agreement Exhibit 10.27 to
between Registrant and Registrant's
W. R. Hildebrand dated Annual Report on
as of March 11, 1996. Form 10-K for
the year ended
December 31, 1995.
10.7 Employment Agreement Exhibit 10.17 to
between Registrant and Registrant's
C. R. Mackus dated as of Quarterly Report
May 21, 1997. on Form 10-Q for
the quarter ended
June 30, 1997.
10.8 Annual Management Incentive Exhibit 10.14 to
Plan for 1997, adopted by Registrant's
Board of Directors Annual Report on
February 5, 1997. Form 10-K for
the year ended
December 31, 1997.
10.9 Amendment No. 1 dated Exhibit 10.15 to
March 5, 1998 to Employment Registrant's
Agreement dated March 11, Annual Report on
1996 between Registrant Form 10-K for
and W. R. Hildebrand. the year ended
December 31, 1997.
10.10 1998 Management Stock Option Exhibit 10.17 to
Plan. Registrant's
Annual Report on
Form 10-K for
the year ended
December 31, 1997.
10.11 Employment Agreement Exhibit 10.18 to
between Registrant and Registrant's
F. P. Bruno dated as of Annual Report on
December 1, 1997. Form 10-K for
the year ended
December 31, 1998.
10.12 Employment Agreement Exhibit 10.19 to
between Registrant and Registrant's
S. R. Light dated as of Annual Report on
December 9, 1998. Form 10-K for
the year ended
December 31, 1998.
10.13 Secured Promissory Note Exhibit 10.20 to
between Stephen R. Light Registrant's
and the Registrant Annual Report on
dated December 18, 1998. Form 10-K for
the year ended
December 31, 1998.
10.14 Pledge Agreement between Exhibit 10.21 to
Stephen R. Light and the Registrant's
Registrant dated Annual Report on
December 18, 1998. Form 10-K for
the year ended
December 31, 1998.
10.15 Separation Agreement Exhibit 10.2
between Registrant to Registrant's
and D. J. Smoke dated Quarterly Report
July 22, 1999. on Form 10-Q
filed with the
Commission on
August 12, 1999.
10.16 Employment Agreement X
between Registrant and
M. W. Salsieder dated
June 23, 1999.
10.17 Secured Promissory Note X
between Registrant and
M. W. Salsieder dated
June 23, 1999.
10.18 Pledge Agreement X
between Registrant and
M. W. Salsieder dated
June 23, 1999.
10.19 Consulting Agreement X
between Registrant and
Wayne T. Ewing dated
February 1, 2000.
21.1 Subsidiaries of Registrant. Exhibit 21.1 to
Registration
Statement on
Form S-4 of
Registrant,
Boonville Mining
Services, Inc.,
Minserco, Inc. and
Von's Welding, Inc.
(SEC Registration
No. 333-39359)
24.1 Powers of Attorney X*
27.1 Financial Data Schedule X
(Edgar filing only.)
*Included as part of the signature pages to this Annual Report on Form 10-K.
EXHIBIT 10.1(e)
FORM 10-K
YEAR ENDED DECEMBER 31, 1999
FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT, dated as of March 14,
2000, amends and supplements the Credit Agreement dated as of September 24,
1997, as amended by the First Amendment to Credit Agreement dated as of
July 21, 1998, the Second Amendment to Credit Agreement dated as of
September 30, 1998, the Third Amendment to Credit Agreement dated as of
April 20, 1999 and the Fourth Amendment to Credit Agreement dated as of
September 30, 1999 (as so amended, the "Credit Agreement"), among BUCYRUS
INTERNATIONAL, INC., a Delaware corporation (the "Company"), the financial
institutions party thereto (the "Banks"), THE BANK OF NOVA SCOTIA, as
documentation agent, and BANK ONE, WISCONSIN, as agent for the Banks and as
letter of credit issuing bank.
RECITALS
The Company, the Banks, the Documentation Agent and the Agent
desire to amend the Credit Agreement as set forth below.
AGREEMENTS
In consideration of the promises and agreements set forth in the
Credit Agreement, as amended hereby, the parties agree as follows:
1. Definitions and References. Capitalized terms not
defined herein have the meanings ascribed to them in the Credit Agreement.
Upon the execution and delivery of this Fifth Amendment by all of the
parties hereto and the satisfaction of the conditions set forth in section
3 below, all references to the Credit Agreement set forth in the Loan
Documents shall mean the Credit Agreement as amended by this Fifth Amendment
to Credit Agreement.
2. Amendments.
(a) The defined term "Adjusted Funded Debt to EBITDA
Ratio" in Section 1.01 of the Credit Agreement is amended to read as
follows:
"Adjusted Funded Debt to EBITDA Ratio" means the
relationship, expressed as a numerical ratio, between:
(a) Adjusted Funded Debt; and
(b) EBITDA
Adjusted Funded Debt of the Company and its consolidated
Subsidiaries shall be determined based upon consolidated
financial statements of the Company and its consolidated
Subsidiaries as of the last day of the fiscal quarter. Solely
for purposes of determining the Adjusted Funded Debt to EBITDA
Ratio, EBITDA shall (a) for the fiscal quarter ending
September 30, 2000, equal EBITDA of the Company and its
consolidated Subsidiaries for such fiscal quarter multiplied by
4, (b) for the fiscal quarter ending December 31, 2000, equal
EBITDA of the Company and its consolidated Subsidiaries for the
six-month period ending on such date multiplied by 2, (c) for
the fiscal quarter ending March 31, 2001, equal EBITDA of the
Company and its consolidated Subsidiaries for the nine-month
period ending on such date multiplied by 1.33 and (d)
thereafter, shall equal EBITDA of the Company and its
consolidated Subsidiaries for the 12-month period ending on the
date of determination.
(b) The defined term "Applicable Margin" in Section 1.01
of the Credit Agreement is amended to read as follows:
"Applicable Margin" means, at all times on and after March 1,
2000:
(i) with respect to Base Rate Loans, 0.80%; and
(ii) with respect to LIBOR Rate Loans, 3.50%;
provided, however, that the Applicable Margin shall be subject to
adjustment on the date which is 45 days after the end of each fiscal
quarter, commencing with the fiscal quarter ending June 30, 2000 (each
a "Margin Adjustment Date") and the Applicable Margin shall be
determined in accordance with the following matrix:
Ratio of Adjusted
Funded Debt to Base Rate Loan LIBOR Rate Loan
EBITDA Applicable Margin Applicable Margin
Less than 2.75:1.0 0.00% 1.50%
2.75:1.0 to 3.24:1.0 0.00% 1.75%
3.25:1.0 to 3.49:1.0 0.00% 2.00%
3.50:1.0 to 3.99:1.0 0.50% 2.25%
4.00:1.0 to 4.49:1.0 0.50% 2.50%
4.50:1.0 to 4.99:1.0 0.50% 2.75%
5.00:1.0 to 5.49:1.0 0.60% 3.00%
5.50:1.0 to 5.99:1.0 0.70% 3.25%
6.00:1.0 or greater 0.80% 3.50%
Adjusted Funded Debt and EBITDA of the Company and its consolidated
Subsidiaries shall be determined in the same manner as set forth in
the defined term "Adjusted Funded Debt to EBITDA Ratio". Any change
in the Applicable Margin shall be effective on the Margin Adjustment
Date and will apply to all Loans outstanding as of such date.
(c) The final paragraph of the defined term "Fixed
Charge Coverage Ratio" in Section 1.01 of the Credit Agreement is amended
to read as follows:
all as determined for the Company and its consolidated Subsidiaries
(a) for the fiscal quarters ending September 30, 2000, December 31,
2000 and March 31, 2001, for the three-month, six-month and nine-month
periods, respectively, preceding the date of determination and (b) for
each subsequent fiscal quarter, for the twelve-month period preceding
the date of determination.
(d) The final paragraph of the defined term "Interest
Charge Coverage Ratio" in Section 1.01 of the Credit Agreement is amended
to read as follows:
all as determined for the Company and its consolidated Subsidiaries
(a) for the fiscal quarters ending September 30, 2000, December 31,
2000 and March 31, 2001, for the three-month, six-month and nine-month
periods, respectively, preceding the date of determination and (b) for
each subsequent fiscal quarter, for the twelve-month period preceding
the date of determination.
(e) The defined term "Net Worth" in Section 1.01 of the Credit
Agreement is amended to read as follows:
"Net Worth" means, for any Person as of the date of
determination, an amount (on a consolidated basis) equal to the total
assets of such Person less the total liabilities of such Person;
provided that for purposes of calculating the Net Worth of the Company
and its consolidated Subsidiaries (a) the Net Worth of Equipment
Assurance Ltd. shall not be less that $0, (b) the cumulative foreign
currency translation adjustments shall be taken into account only if
and to the extent that the negative amount thereof exceeds
($25,000,000) and (c) the following shall be disregarded: (i) the
amortization or write-off of goodwill, financing fees and other
intangible assets, (ii) severance payments paid or accrued with
respect to former employees of the Company or any of its Subsidiaries
and (iii) any gain or loss resulting from the sale or other
disposition of fixed assets.
(f) The following proviso is inserted immediately prior
to the final period in the defined term "1997 Senior Note Interest Reserve"
in Section 1.01 of the Credit Agreement:
; provided, however, that (a) on the date of the September 15, 2000
interest payment on the 1997 Senior Notes, the 1997 Senior Note
Interest Reserve will decrease to $0 and will increase on each of
September 30, 2000, October 31, 2000 and November 30, 2000 by an
amount equal to 1/3 of such interest payment and (b) on the date of
the March 15, 2001 interest payment on the 1997 Senior Notes, the 1997
Senior Note Interest Reserve will decrease to $0 and will increase on
each of March 31, 2001, April 30, 2001 and May 31, 2001 by an amount
equal to 1/3 of such interest payment
(g) Clause (a) of the defined term "Revolving
Termination Date" in Section 1.01 of the Credit Agreement is amended by
deleting the date "May 31, 2002" and inserting in its place the date "July
3, 2001".
(h) The following defined terms are inserted, in
appropriate alphabetical order, into Section 1.01 of the Credit Agreement:
"Supporting Letter of Credit" means an Irrevocable Letter
of Credit issued by a financial institution acceptable to all the
Banks naming the Agent as the beneficiary in the stated amount of
$3,000,000, and any letter of credit issued in replacement thereof or
in substitution therefor (provided that any replacement or substitute
Supporting Letter of Credit must be issued by a financial institution
and contain terms and conditions acceptable to all the Banks).
(i) Section 2.16 of the Credit Agreement is created to
read as follows:
2.16 Special LIBOR Rate Loan. Notwithstanding any
contrary provision of this Agreement, if the Agent makes a drawing
under the Supporting Letter of Credit, the Company shall be deemed to
have irrevocably requested on that day that the Banks make a LIBOR
Rate Loan in the principal amount of $3,000,000 and having an interest
period of one month (the "Special LIBOR Rate Loan"). The Banks shall,
on that day, make the Special LIBOR Rate Loan to the Company.
The Special LIBOR Rate Loan will be funded by the
conversion of Base Rate Loans. If there are less than $3,000,000 in
principal amount of Base Rate Loans then outstanding, then the LIBOR
Rate Loans with an Interest Period ending on the date closest thereto
shall be deemed prepaid in such amount as is necessary so that the
Special LIBOR Rate Loan can be made. The Company shall pay any amount
owing under Section 4.04 resulting from any such prepayment.
At the end of each Interest Period of the Special LIBOR
Rate Loan, the Special LIBOR Rate Loan shall be automatically
continued for a one-month Interest Period.
The Special LIBOR Rate Loan may not be repaid or prepaid
until such date as all other Obligations have been paid in full, the
Commitments have expired and all Letters of Credit have expired.
Except as set forth in this Section, the provisions of
this Agreement applying to LIBOR Rate Loans shall apply to the Special
LIBOR Rate Loan.
(j) Subsection 7.01(b) of the Credit Agreement is
amended to read as follows:
(b) as soon as available, but not later than 30 days
after the end of each month, a copy of the unaudited consolidated and
consolidating balance sheets of the Company and its Subsidiaries as
of the end of such month, the related consolidated and consolidating
statement of income and the related consolidated statements of
shareholders' equity and cash flows for the period commencing on the
first day and ending on the last day of such month, and certified by
a Responsible Officer as fairly presenting, in accordance with GAAP
(subject to ordinary, good faith year-end audit adjustments), the
financial position and the results of operations of the Company and
its Subsidiaries; and
(k) Subsection 7.02(a) of the Credit Agreement is
amended to read as follows:
(a) concurrently with the delivery of the financial
statements referred to in subsections 7.01(a) and (b), each of the
following executed or certified by a Responsible Officer: (i) a
Compliance Certificate; (ii) shipment/bookings/backlog report; and
(iii) a schedule of Capital Expenditures made by the Company and its
Subsidiaries during the preceding month;
(l) Subsection 7.02(c) of the Credit Agreement is
amended to read as follows:
(c) within 10 Business Days after the fifteenth and last
day of each month, a completed Borrowing Base Certificate executed by
a Responsible Officer; and
(m) Clause (c) of Section 8.06 of the Credit Agreement
is amended by inserting the following parenthetical at the end of such
clause:
(provided, however, that the Company may not pay such management fees
to AIP during the period beginning March 1, 2000 and ending on the
date the Agent receives financial statements evidencing that the
Company has satisfied the financial covenants in Section 8.16 for two
consecutive fiscal quarters and any management fees accrued during
such period shall be repaid in equal quarterly installments during the
next four fiscal quarters and, provided further, however, the Company
may reimburse an Affiliate for fees such Affiliate is required to pay
in connection with providing the Supporting Letter of Credit)
(n) Section 7.15 of the Credit Agreement is created to
read as follows:
7.15 September 2000 and March 2001 Interest Payments on 1997
Senior Notes. The Company shall furnish to the Agent, at least five
Business Days prior to the September 15, 2000 and March 15, 2001
interest payment dates on the 1997 Senior Notes (a) a projected
Borrowing Base Certificate as of September 15, 2000 or March 15, 2001,
as the case may be, which, after taking into account any new Borrowing
necessary to make such interest payment, indicates that the lesser of
(i) the combined Commitments or (ii) the Borrowing Base Amount exceeds
(iii) the sum of the Effective Amount of all outstanding Revolving
Loans and the Effective Amount of all L/C Obligations, (b) a projected
Compliance Certificate as of September 30, 2000 or March 31, 2001, as
the case may be, which contains detailed calculations which indicate
that the Company will be in compliance with all of the covenants
contained in Section 8.16 of this Agreement on such date and (c) a
certificate of a Responsible Officer stating that as of the date
thereof no Default or Event of Default exists.
The Company shall use the most recently available financial
information to prepare such projected Borrowing Base Certificate and
projected Compliance Certificate. If, after the delivery of such
certificates to the Agent, the Company becomes aware that the
information in either certificate is materially inaccurate or that a
Default or Event of Default has occurred, the Company shall
immediately so notify the Agent.
If an Event of Default exists on the due date of either the
September 15, 2000 interest payment or the March 15, 2001 interest
payment, the Company shall not use the proceeds of any Borrowings or
any funds in which the Agent has a security interest pursuant to the
Loan Documents to make such interest payment.
(o) Section 8.16 of the Credit Agreement is amended to
read as follows:
8.16 Financial Covenants.
(a) Adjusted Funded Debt to EBITDA Ratio. The Company
shall not permit the Adjusted Funded Debt to EBITDA Ratio, as of the
end of any fiscal quarter, to exceed the applicable ratio set forth
in the following table:
Fiscal Quarter
Ending Ratio
September 30, 2000 6.70:1.0
December 31, 2000 6.40:1.0
March 31, 2001 6.10:1.0
(b) Fixed Charge Coverage Ratio. The Company shall not
permit the Fixed Charge Coverage Ratio, as of the end of any fiscal
quarter, to be less than the applicable ratio set forth in the
following table:
Fiscal Quarter
Ending Ratio
September 30, 2000 1.35:1.0
December 31, 2000 1.35:1.0
March 31, 2001 1.60:1.0
(c) Interest Coverage Ratio. The Company shall not
permit the Interest Coverage Ratio, as of the end of any fiscal
quarter, to be less than the applicable ratio set forth in the
following table:
Fiscal Quarter
Ending Ratio
September 30, 2000 1.50:1.0
December 31, 2000 1.60:1.0
March 31, 2001 1.70:1.0
(d) Net Worth. The Company shall not permit Net Worth
to be less than $107,500,000 as of March 31, 2000 or the last day of
each subsequent month.
(p) Section 8.17 of the Credit Agreement is amended to
read as follows:
8.17 Capital Expenditures. The Company shall not, and
shall not permit any Subsidiary to, make any Capital Expenditures if,
as a result thereof, a Default or Event of Default would exist or if
the aggregate Capital Expenditures by the Company and its Subsidiaries
would exceed (a) $5,000,000 during the fiscal year ending December 31,
2000 or (b) $3,750,000 during the period from January 1, 2001 through
June 30, 2001, plus, in each period, Capital Expenditures funded with
the net proceeds of assets sales.
(q) Subsection 9.01(c) of the Credit Agreement is
amended to read as follows:
(c) Specific Defaults. (i) The Company fails to perform or
observe any term, covenant or agreement contained in Article VIII;
(ii) the projected Borrowing Base Certificate furnished pursuant to
Section 7.15 (as updated, if applicable) indicates that, after giving
effect to the September 15, 2000 or March 15, 2001, as the case may
be, interest payment on the 1997 Senior Notes and any Borrowing
necessary to make such payment, the lesser of [1] the combined
Commitments or [2] the Borrowing Base Amount will be less than [3] the
sum of the Effective Amount of all outstanding Revolving Loans and the
Effective Amount of all L/C Obligations or (iii) the projected
Compliance Certificate furnished pursuant to Section 7.15 (as updated,
if applicable) indicates that the Company will not be in compliance
with all of the covenants contained in Section 8.16 of this Agreement
as of September 30, 2000 or March 31, 2001, as the case may be; or
(r) Exhibit C attached to this Fifth Amendment shall
replace its predecessor attached to the Credit Agreement.
3. Limited Waiver. The Banks waive all Defaults and Events
of Default arising from the failure to the Company to comply with Sections
8.16 of the Credit Agreement prior to the date hereof. This waiver does not
apply to another other Default or Event of Default existing under the Credit
Agreement nor to any failure of the Company to comply with Section 8.16 of
the Credit Agreement after the date hereof. The Banks reserve all of their
rights and remedies with respect to all Defaults and Events of Default not
expressly waived herein.
4. Conditions to Effectiveness of Fifth Amendment. This
Fifth Amendment shall become effective upon its execution and delivery by
the Company and the Majority Banks and receipt by the Agent of the
following:
(a) An irrevocable letter of credit in the amount of
$3,000,000 issued by Bank One naming the Agent as the beneficiary, having
an expiry date of November 30, 2000 and having such drawing conditions and
other terms and conditions as are reasonably acceptable to all the Banks;
(b) a schedule, executed by a Responsible Officer,
describing, in such detail as the Banks may reasonably request, all
Indebtedness of the Company or any of its Domestic Subsidiaries;
(c) a copy, certified by the Secretary or an Assistant
Secretary of the Company, of resolutions adopted by the Board of Directors
of the Company authorizing the execution and delivery of this Fifth
Amendment, an incumbency certificate containing the true signatures of the
officers of the Company authorized by such resolutions to execute this Fifth
Amendment on behalf of the Company and such other documents and instruments
as the Banks shall reasonable request relating to the transactions
contemplated by this Fifth Amendment; and
(d) a fee of $375,000 which shall be fully earned and
nonrefundable on the date of payment.
The Agent shall furnish to each Bank such Bank's Pro Rata Share
of the fee.
5. Representations and Warranties. The Company represents
and warrants to the Agent and each Bank that:
(a) The representations and warranties respecting the
Company and its properties set forth in the Loan Documents to which the
Company is a party are true and correct in all material respects after
giving effect to this Fifth Amendment;
(b) The Net Worth of the Company (after giving effect
to the revision thereto set forth in section 2 above) was not less than
$143,030,000 as of September 23, 1997 and was not less than $124,438,000 as
of December 31, 1999; and
(c) After giving effect to the limited waiver set forth
in section 3 above, no Default or Event of Default exists as of the date of
this Fifth Amendment.
6. Miscellaneous.
(a) The Company agrees to pay all costs and expenses
(including reasonable attorneys fees) paid or incurred by the Agent in
connection with this Fifth Amendment.
(b) This Fifth Amendment shall be governed by, and
construed in accordance with, the laws of the State of Wisconsin.
(c) This Fifth Amendment may be executed in any number
of separate counterparts, each of which, when so executed, shall be deemed
an original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
(d) The increase in the interest rate applicable to
Loans, and the increase in the fee with respect to Letters of Credit,
outstanding under the Credit Agreement resulting from the amendment of the
defined term "Applicable Margin" set forth above shall become effective as
of March 1, 2000 and shall apply to all Loans and Letters of Credit
outstanding on that date.
7. Full Force and Effect. The Credit Agreement, as amended
hereby, remains in full force and effect.
BUCYRUS INTERNATIONAL, INC.
BY /s/T. C. Rogers
Title: CEO
BANK ONE, WISCONSIN, as Agent,
Issuing Bank and a Bank
BY /s/Mark Bruss
Title: First Vice President
THE BANK OF NOVA SCOTIA, as
Documentation Agent and a Bank
BY /s/F. C. H. Ashby
Title: Senior Manager Loan Operations
FIRSTAR BANK, N.A.
BY /s/M. J. Hildebrand
Title: Vice President
FLEET CAPITAL CORPORATION
BY /s/Brian Conole
Title: Senior Vice President
LASALLE BANK NATIONAL
ASSOCIATION
BY /s/James A. Meyer
Title: First Vice President
BANK OF SCOTLAND
BY /s/Annie Glynn
Title: Senior Vice President
CONSENT AND REAFFIRMATION OF GUARANTORS
Each of the undersigned (a) consents to the execution and
delivery of the Fifth Amendment to Credit Agreement by the Company,
(b) reaffirms all of its obligations under the Subsidiary Guaranty dated
as of September 24, 1997 (the "Subsidiary Guaranty") from the undersigned
to and for the benefit of the "Benefited Parties" (as defined therein)
and (c) agrees that the Subsidiary Guaranty remains in full force and
effect.
Dated as of March 14, 2000.
MINSERCO, INC.
BY /s/C. R. Mackus
Its V. P. Finance
BOONVILLE MINING SERVICES, INC.
BY /s/C. R. Mackus
Its V. P. Finance
EXHIBIT 10.16
FORM 10-K
YEAR ENDED DECEMBER 31, 1999
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made this 23rd day of June, 1999, by and
between BUCYRUS INTERNATIONAL, INC., a Delaware corporation (the "Company"),
and MICHAEL W. SALSIEDER ("Employee").
WHEREAS, the Company desires to employ Employee as General Counsel,
and Employee 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 agree as follows:
1. Position. Employee shall be employed by the Company as Vice
President and General Counsel upon the terms and conditions contained
herein.
2. Salary. During the term of this Agreement, the Company shall
pay Employee an annual base salary of One Hundred Fifty Thousand Dollars
($150,000.00), minus applicable withholdings, in accordance with the
Company's normal payroll practices (the "Base Salary"). The Base Salary is
subject to merit increases in accordance with the Company's normal salary
merit increase review policy.
3. Annual Performance Bonus. Employee shall be eligible to
participate in an annual performance bonus plan, with performance targets
to be based on the Company's existing financial plan, and otherwise on terms
to be mutually agreed upon by Employee and the Company (the "Annual Bonus
Plan"); provided, that the terms of the Annual Bonus Plan shall provide that
the amount of the annual bonus payable to Employee (the "Annual Bonus")
shall be equal to 35% of Employee's Base Salary upon the achievement of the
targeted performance goals for the relevant fiscal year of the Company, with
the potential for an Annual Bonus of up to 105% of Base Salary in the event
of exceptional performance; and provided, further, that Employee's Annual
Bonus with respect to fiscal 1999 shall be pro rata from date of employment
and shall not be less than $13,125.
4. Stock; Stock Options.
(a) Purchase of Shares of Company Common Stock. As a condition
of the effectiveness of this Agreement, no later than July 15, 1999, the
Employee shall purchase 750 shares of the Company's common stock, par value
$0.01 per share ("Common Stock"), at a price of $100 per share (the
"Purchased Shares"). The Company shall accept payment for a portion of the
purchase price of the Purchased Shares in the form of Employee's promissory
note substantially in the form attached hereto as Annex A (the "Note"), in
the maximum principal amount of $60,000, subject to Employee's pledge of all
the Purchased Shares to secure the Note pursuant to a pledge agreement (the
"Pledge Agreement") executed by the parties substantially in the form
attached hereto as Annex B. As a condition of such purchase, Employee shall
become a party to that certain Stockholders Agreement, dated as of March 17,
1998, among the Company and its Stockholders (the "Stockholders Agreement"),
by executing a Joinder Agreement thereto generally in the form attached as
Exhibit A to the Stockholders Agreement; provided, that the Stockholders
Agreement shall be interpreted (and, as necessary, deemed amended) so as to
be consistent with the terms of the Pledge Agreement. Employee acknowledges
receipt of a copy of the Stockholders Agreement and the opportunity to have
carefully reviewed the Stockholders Agreement with counsel prior to
executing this Agreement.
(b) Grant of Stock Options. Subject to Employee's compliance
with the provisions of Section 4(a), the Employee shall be granted options
("Options") under the Company's 1998 Management Stock Option Plan (the
"Stock Option Plan") to purchase 3,750 of additional shares of Common Stock;
provided, that notwithstanding the terms of the Stock Option Plan and
Schedule 1 to the form of stock option agreement annexed thereto, (i) the
normal vesting period of such options shall be the three year period from
January 1, 1999 to December 31, 2001, (ii) the Company is currently in the
process of reassessing the EBITDA target for 1999 for all management option
holders, and any such reassessment shall apply to Employee's Options, and
(iii) additional changes to the terms of the Options may be made by the
Company as shall be reasonably necessary and appropriate to conform the
Options to the aforesaid three year vesting schedule. Employee acknowledges
receipt of a copy of the Stock Option Plan (together with the annexes
thereto) and the opportunity to have carefully reviewed the Stock Option
Plan with counsel prior to executing this Agreement.
5. Additional Benefits.
(a) Employee Benefits. During the Term, Employee shall be
entitled to participate in all employee welfare benefit plans and programs
generally made available from time to time to the Company's senior
management, including without limitation any major medical, dental,
retirement and life insurance plans, subject to any eligibility requirements
and the other generally applicable terms of such plans. Without limitation,
Employee shall be entitled to use of a Company-provided automobile in
accordance with the Company's policies applicable to its senior management.
(b) Expenses. During the Term, the Company shall reimburse
Employee for any expenses reasonably incurred by him in furtherance of his
duties hereunder, including without limitation travel, meals, and
accommodations, upon submission by him of vouchers or receipts and in
compliance with such rules and policies relating thereto as the Company may
from time to time adopt or as may be required in order to permit such
payments to be taken as proper deductions by the Company or any subsidiary
under the Internal Revenue Code of 1986, as amended, and the rules and
regulations adopted pursuant thereto now or hereafter in effect. The
Company shall also reimburse Employee for reasonable spousal travel expenses
to customer or industry events to the extent consistent with Company policy.
6. Duration and Termination.
(a) Duration. Subject to termination as provided below, this
Agreement and Employee's employment hereunder shall begin on the date
hereof, continue for a period of one (1) year, and automatically renew
thereafter for successive one year terms unless either party gives the other
party sixty (60) days written notice that this Agreement and Employee's
employment shall terminate on the last day of the original term or any
renewal term, as the case may be.
(b) Termination Without Cause. This Agreement and Employee's
employment may be terminated by either party without Cause (as defined in
Paragraph 6(c)) at any time by giving at least sixty (60) days' written
notice to the other party of the intent to do so.
(c) Termination by the Company for Cause. The Company shall
have the right to terminate this Agreement and Employee's employment
hereunder in the event of any of the following (which shall constitute
"Cause"): (i) fraud, dishonesty, or misconduct by Employee in connection
with the business of the Company; (ii) commission by Employee of a felony;
or (iii) a material breach by Employee of the terms of this Agreement.
(d) Termination Upon Death or Disability. This Agreement and
Employee's employment hereunder shall immediately terminate in the event of
Employee's death or Disability (as hereinafter defined). For purposes of
this Agreement, Employee shall be deemed to have suffered a "Disability" in
the event that a physician selected by the Company determines that Employee,
due to a physical or mental condition, is unable to substantially perform
his duties hereunder for a period of at least ninety (90) days.
7. Compensation upon Termination. Upon termination of Employee's
employment under this Agreement, all of the Company's obligation to pay
Employee compensation and provide benefits under this Agreement shall
terminate, except that in the event Employee's employment is terminated by
the Company based on notice provided by the Company pursuant to Paragraph
6(a) or 6(b), Employee shall be entitled to (1) continuation of his Base
Salary and health insurance and pension benefits (to the extent coverage
terms permit) for a period of one (1) year from the date of such termination
(the "Severance Period"), payable in accordance with the Company's normal
payroll practices; and (2) out-placement consulting services from a firm
selected by the Company at a total cost not to exceed Fifteen Thousand
Dollars ($15,000). The Company shall have the right to discontinue payments
or other benefits hereunder in the event Employee breaches the restrictions
in Paragraph 9 or 10 or any such restriction is determined to be
unenforceable in any respect.
8. Change of Control.
(a) Definitions. For purposes of this Paragraph 8:
(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 more
than 50% 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) A merger or consolidation of the Company with
any other corporation is completed 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 sale of substantially all of the Company's
assets is completed to a corporation which is not a wholly-owned
subsidiary of the Company.
(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 Employee's
express written consent:
(A) (1) The assignment of Employee to duties
materially inconsistent with Employee's authorities, duties,
responsibilities, and status (including offices, titles, and reporting
requirements) pursuant to Paragraph 1, or (2) relocation of Employee's
regular place of employment to a location more than fifty (50) miles
from the location as of the Effective Date.
(B) A reduction by the Company in Employee's Base
Salary as in effect on the Effective Date.
(C) A material reduction in Employee'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 or practices, in which Employee participates as of the
Effective Date.
(vi) "Qualifying Termination" shall mean any termination
of Employee's employment other than: (A) by the
Company for Cause (as defined in Paragraph 6(c)
hereof); (B) by reason of death, Disability (as
defined in Paragraph 6(d) hereof), or Retirement
(as such term is then defined in the Company's tax
qualified defined benefit retirement plan); or (C)
by Employee pursuant to Paragraph 6(a) or 6(b)
without Good Reason. In the event Employee shall
terminate this Agreement for Good Reason,
Employee's notice of termination pursuant to
Paragraph 6(a) or 6(b) shall set forth the facts
and circumstances claimed to provide a basis for
such termination.
(b) Employment Termination. In the event of a Qualifying
Termination on, or within twelve (12) months after, the Effective Date, then
in addition to the compensation and benefits provided to Employee under the
provisions of Paragraph 7 of this Agreement, the Company shall, at the
expiration of the Severance Period, as an additional severance benefit, make
a lump sum payment to Employee in an amount equal to one-half of Employee's
annual Base Salary.
(c) Vesting of Options. In the event of a Qualifying
Termination on, or within twelve (12) months after, the Effective Date,
Employee's unvested Stock Options shall automatically be fully vested and
exercisable as of the Effective Date.
9. Confidentiality. Employee shall keep confidential and not
divulge to any other person or entity, during the term of employment or
thereafter, any Confidential Information of the Company. For purposes
hereof, "Confidential Information" shall mean any of the business secrets,
trade secrets, drawings, engineering data, plans, strategies, policies,
methods, marketing plans, customer purchasing history, customer lists, cost
structures, vendor pricing, contemplated product improvements and
developments, repair and failure frequencies and information, computer
software and programs, and any other data related to any aspect of the
business of the Company. Such information also includes information which
the Company received from a third party and holds in confidence. 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 Employee, shall be the sole and exclusive property of the Company, and
Employee shall surrender them to the Company, as applicable, at any time
upon request by the Company.
As a former employee of Harnischfeger Corporation, Employee has a
legal obligation (including, but not limited to, his obligations under the
Harnischfeger Employee Proprietary Rights and Confidentiality Agreement) not
to disclose any trade secret or confidential information of Harnischfeger.
Therefore, Employee will refrain from any discussion of such Harnischfeger
trade secret or confidential information, and Company agrees to refrain from
asking any questions or soliciting any information regarding the same.
10. Covenant Not to Compete. In order to induce the Company to
enter into this Agreement, Employee hereby agrees that during the term of
this Agreement and for a period of one (1) year thereafter (exclusive of any
period of breach), Employee will not, without the prior written consent of
the Company, work for, be employed by or otherwise provide services (which
are substantially the same or similar to the services provided by Employee
to the Company) to, Harnischfeger Industries, Inc., ("Harnischfeger"), any
affiliated entity of Harnischfeger or any other entity that engages in 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 Employee ceases to
be employed by the Company, provided, however, that the post termination
covenant not to compete will not apply where the Company has terminated the
Employee.
Employee agrees that such restriction is fair and reasonably necessary
to protect the legitimate business interests of the Company, and that the
Company would suffer irreparable harm in the event of breach by Employee.
As a result, Employee agrees that the Company shall, in addition to other
remedies provided by law, be entitled to injunctive relief in the event of
breach by Employee.
11. Indemnification and Compensation Regarding Harnischfeger. In
the event Harnischfeger Industries, Inc., or any of its subsidiaries, brings
any actions, including an action for damages or for equitable injunctive
relief ("Harnischfeger Actions"), relating to Employee's employment with
Company, Company agrees to indemnify, defend and hold Employee harmless
against any damages and costs (including legal fees) incurred by Employee
as a result of such Harnischfeger Actions. Company agrees to pay Employee
his normal Base Salary and continue Employee Benefits during the pendency
of the Harnischfeger Actions. In the event Employee's employment with
Company must be terminated as a result of the Harnischfeger Actions,
Employee will be entitled to receive the termination severance payments
provided for in this Agreement, and such termination will be deemed to be
a termination Without Cause as provided in Paragraph 6(b) above.
12. Assignability. This Agreement may not be assigned without the
prior written consent of the parties; provided, however, this Agreement may
be assigned without consent to a successor of the business of the Company.
13. Notices. All notices hereunder shall be in writing and
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.
14. Severability. If any provision of this Agreement shall be
determined to be invalid or unenforceable for any reason, such determination
shall not affect, impair or invalidate the remainder of this Agreement.
15. Choice of Forum and Law. Jurisdiction over disputes with regard
to this Agreement shall be exclusively in the courts of the State of
Wisconsin. This Agreement shall be construed in accordance with and
governed by the laws of the State of Wisconsin.
16. Entire Agreement. This Agreement contains the entire agreement
of the parties hereto, and supersedes all other oral or written agreements
or understandings between them regarding the subject matter hereof. This
Agreement may not be modified except by written agreement of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
BUCYRUS INTERNATIONAL, INC.
By: /s/Stephen R. Light
S. R. Light
President and Chief Executive Officer
/s/Michael W. Salsieder
Michael W. Salsieder, Employee
EXHIBIT 10.17
FORM 10-K
YEAR ENDED DECEMBER 31, 1999
ANNEX A
SECURED PROMISSORY NOTE
Milwaukee, Wisconsin June 23, 1999
$60,000
FOR VALUE RECEIVED, Michael W. Salsieder (the "Borrower") hereby
promises to pay to Bucyrus International, Inc., a Delaware corporation
("Payee") the principal sum of SIXTY THOUSAND DOLLARS ($60,000) in lawful
money of the United States of America, on March 31, 2003 (the "Repayment
Date"), together with accrued and unpaid interest thereon from the date
hereof. Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in the Employment Agreement, dated as of June 23,
1999 (the "Employment Agreement"), between Borrower and Payee. This Note
shall be full recourse to the Borrower.
1. Principal Payments. Subject to the provisions of
Section 3 below, payments of principal on the Note shall be made as follows:
(a) Principal payments in the amounts set forth herein
shall be due and payable hereunder on April 1 of each of 2000, 2001 and 2002
(the "Installment Dates"), with any remaining principal balance due in full
on the Repayment Date.
(b) The principal payment due and payable on each
Installment Date shall be in an amount not less than 50% of the Borrower's
pre-tax Annual Bonus earned with respect to the immediately preceding fiscal
year; provided, that no principal payment shall be due and payable on an
Installment Date if Borrower receives no Annual Bonus with respect to the
fiscal year ending immediately prior to the year in which such Installment
Date occurs; and provided, further, that except as provided in Section 3(b)
below, regardless of any failure of Employee to earn an Annual Bonus with
respect to any fiscal year of the Company, the entire unpaid principal
balance of this Note shall remain due and payable on the Repayment Date.
(c) Notwithstanding anything herein to the contrary, the
principal payment due and payable on April 1, 2000 shall be in an amount not
less than $15,000.
(d) The Borrower shall have the right to prepay the
principal amount hereof in full or in part, together with all accrued
interest on the amount prepaid to the date of such prepayment, at any time
without penalty.
2. Interest Payments. Except as provided in Section 3(b)
below, the Borrower also promises to pay interest on the unpaid principal
amount hereof, from the date hereof until paid in full, on April 1 of each
year, with the first such interest payment being due and payable on April
1, 2000, at a rate of 5.37% per annum, which interest rate is the minimum
applicable federal mid-term interest rate set forth under Section 1274 of
the Internal Revenue Code as of the date hereof.
3. Termination of Employment.
(a) If the Borrower's employment with Payee is
terminated for Cause, then the principal balance of this Note and all
accrued interest thereon shall be due and payable in full on the date which
is ten (10) days following the effective date of such termination.
(b) If the Borrower terminates his employment under the
Employment Agreement for Good Reason or is terminated by Payee without
Cause, then no further payments of interest or principal on this Note shall
be due and payable following the effective date of such termination of
employment except in connection with one or more Liquidating Events (as
defined below) with respect to the Purchased Shares. For purposes of this
Note, a "Liquidating Event" shall be defined as any event that results in
liquidity for the Common Stock such that the Borrower would have the ability
to freely sell all or any portion of the Purchased Shares, or any shares of
capital stock or other consideration received from another entity by holders
of the Payee's Common Stock as a result of a business combination or other
transaction involving the Payee, at fair market value, and shall include,
without limitation, (A) any sale of Common Stock by American Industrial
Partners Capital Fund II, L.P., which by operation of any other agreement
gives the Borrower the right to sell the Purchased Shares, and (B) an
initial public offering of Payee's Common Stock. In the event a Liquidating
Event occurs, the Borrower shall make a payment on the principal balance of
this Note and accrued interest thereon to the date of termination of
employment in an amount equal to the aggregate value of the Purchased Shares
subject to such sale by the Borrower as of the date of such Liquidating
Event. Such amount shall be applied first to accrued interest and then to
principal, and shall become due and payable on the date which is ten (10)
days following such Liquidating Event.
(c) In the event of the termination of Borrower's
employment with Payee by reason of Borrower's death or Total Disability,
this Note shall be cancelled in exchange for the return to the Company of
that number of Purchased Shares sufficient in value to pay off the then
remaining balance of this Note (or all of the Purchased Shares, if their
aggregate value is less than the then remaining balance of this Note).
4. Security. Pursuant to the Pledge Agreement, dated as of
the date hereof (the "Pledge Agreement"), by and between Payee and the
Borrower, the obligations of the Borrower hereunder are secured by the
Pledged Collateral (as defined in the Pledge Agreement), and the holder of
this Note is entitled to the benefits of such Pledged Collateral.
5. Events of Default. Each of the following events shall
constitute an "Event of Default" hereunder (whether it shall be voluntary
or involuntary or occur or be effected by operation of law or otherwise):
(i) the Borrower's failure to pay, within fifteen (15) days after the date
when such payment is due, any payment of principal or interest on this Note,
(ii) the Borrower's failure to observe or perform, within fifteen (15) days
after receipt of notice of default from Payee, any covenant or agreement
contained in this Note or the Pledge Agreement, (iii) if any
representation, warranty, certification or statement made by the Borrower
in the Pledge Agreement or in any certificate or other document delivered
pursuant to the Pledge Agreement shall prove to have been incorrect in any
material respect when made or deemed made, (iv) the appointment of a
receiver or a trustee of all or part of the Borrower's property, (v) an
assignment for the benefit of the Borrower's creditors, (vi) the
commencement or filing of any voluntary proceeding or petition by the
Borrower under any bankruptcy or insolvency law or any law relating to the
relief of debtors or readjustment of indebtedness, (vii) the commencement
or filing of any involuntary proceeding or petition against the Borrower
under any bankruptcy or insolvency law or any law relating to the relief of
debtors or readjustment of indebtedness, which proceeding or petition shall
not have been dismissed within sixty (60) days after commencement or filing
thereof, (viii) the appointment of a receiver, custodian, trustee or
liquidator for any part of the assets or property of the Borrower, (ix) the
failure of the Borrower generally to pay his debts as they become due, and
(x) the failure of Payee to have a first priority security interest in the
Pledged Collateral (as defined in the Pledge Agreement).
6. Remedies.
(a) Upon the occurrence of any Event of Default, the
holder of this Note may, by notice in writing to the Borrower, declare this
Note and the principal of and accrued interest on this Note and all other
charges owing to Payee to be, and the same shall upon such notice forthwith
become, due and payable. Upon the occurrence of an Event of Default, the
holder of this Note may, in addition to all rights and remedies available
to it at law, exercise any or all of its rights under the Pledge Agreement.
(b) No failure or delay by the holder of this Note in
exercising any remedy, right, power or privilege under this Note or the
Pledge Agreement shall operate as a waiver of such remedy, right, power or
privilege, nor shall any single or partial exercise of such remedy, right,
power or privilege preclude any other or further exercise of such remedy,
right, power or privilege. No remedy, right, power or privilege conferred
upon or reserved to the holder of this Note by this Note or the Pledge
Agreement is intended to be exclusive of any other remedy, right, power or
privilege provided or permitted by this Note, the Pledge Agreement or by
law, but each shall be cumulative and in addition to every other remedy,
right, power or privilege so provided or permitted and each may be exercised
concurrently or independently from time to time and as often as may be
deemed expedient by the holder of this Note. Any provision of this Note
which is prohibited or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Note.
(c) The holder of this Note shall have the right, at its
option, to declare the entire unpaid principal balance of this Note,
irrespective of the Repayment Date set forth above, immediately due and
payable, together with accrued interest thereon, if the Borrower (or any
affiliate of the Borrower) sells, transfers or disposes of any portion of
the Pledged Collateral (as defined in the Pledge Agreement).
7. Costs of Collection. Upon the failure of the Borrower to
pay any amount due hereunder as and when due, the Borrower shall pay on
demand any and all costs and expenses (including, without limitation, all
court costs and attorneys' fees) incurred by the holder hereof in connection
with the collection of any outstanding principal balance and interest
accrued hereunder (whether or not suit is filed to enforce the terms
hereof), and in connection with the enforcement of any rights or remedies
provided for pursuant to this Note and the Pledge Agreement. If not paid
on demand, all such costs and expenses automatically shall be added to the
remaining principal balance hereunder as of the date immediately following
the date of such demand.
8. Method of Payment, etc. All payments of principal and
interest in respect of this Note shall be made in lawful money of the United
States of America in same day funds at such place as shall be designated in
writing for such purpose by the Payee. Whenever any payment on this Note
shall be stated to be due on a day which is not a business day, such payment
shall be made on the next succeeding business day and such extension of time
shall be included in the computation of the payment of interest on this
Note. The Payee hereby agrees, by its acceptance hereof, that it will make
a notation hereon of all principal payments previously made hereunder and
of the date to which interest hereon has been paid; provided, however, that
the failure to make a notation of any payment made on this Note shall not
limit or otherwise affect the obligations of the Borrower hereunder with
respect to payments of principal of or interest on this Note.
9. Governing Law. THIS NOTE SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
WISCONSIN.
10. Waiver. The Borrower hereby waives any right it might
otherwise have to require notice or acceptance by any other person of its
obligations or liabilities under this Note which are unconditional and
absolute and waives diligence, presentment, demand of payment, protest and
notice with respect to all of the obligations of the Borrower under this
Note and with respect to any action under this Note and all other notices
and demands whatsoever, except as specifically provided for in this Note.
This Note may be amended, and the observance of any term of this Note may
be waived, with (and only with) the written consent of Payee.
11. Assignment or Pledge of Note. This Note and Payee's
rights hereunder may not be assigned or otherwise transferred by Payee to
any person or entity (other than to an affiliate of Payee), in whole or in
part, without giving prior written notice to the Borrower of such
assignment, pledge or other transfer.
12. Loss, Mutilation, Etc. Upon notice from the holder of
this Note to the Borrower of the loss, theft, destruction or mutilation of
this Note, and upon receipt of an indemnity reasonably satisfactory to the
Borrower from the holder of this Note or, in the case of mutilation hereof,
upon surrender of the mutilated Note, the Borrower will make and deliver a
new note of like tenor in lieu of this Note.
13. Notices. All notices and other communications required
or permitted under this Note shall be in writing and shall be personally
delivered or sent by certified first class United States mail, postage
prepaid, return receipt requested, and if mailed and shall be deemed to have
been received on the third business day after deposit in the mail, addressed
to Payee or to the Borrower at the addresses set forth in Section 12 of the
Employment Agreement. Notice of any change of either party's address shall
be given by written notice in the manner set forth in Section 12 of the
Employment Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed and delivered as of the date and at the place first written above.
MICHAEL W. SALSIEDER
/s/Michael W. Salsieder
EXHIBIT 10.18
FORM 10-K
YEAR ENDED DECEMBER 31, 1999
ANNEX B
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement"), dated as of June 23, 1999,
is entered into by Michael W. Salsieder ("Pledgor"), in favor of Bucyrus
International, Inc., a Delaware corporation (together with its successors
and assigns, "Pledgee").
RECITALS
WHEREAS, (i) Pledgor and Pledgee have entered into the
Employment Agreement, dated as of June 23, 1999 (the "Employment
Agreement"), providing for, among other things, the terms of Pledgor's
employment with Pledgee and the sale of the Purchased Shares by the Pledgee
to the Pledgor, and (ii) in connection with the sale and purchase of the
Purchased Shares, Pledgor has executed a promissory note, dated as of the
date hereof (the "Note"), in favor of Pledgee;
WHEREAS, it is a condition precedent to the sale of the
Purchased Shares under the Employment Agreement that Pledgor shall have
entered into this Agreement and granted the pledges provided herein;
WHEREAS, Pledgor will derive substantial benefit from the loan
evidenced by the Note and wishes to grant a security interest in favor of
Pledgee as set forth herein; and
WHEREAS, Pledgor is the legal and beneficial owner of the shares
of capital stock listed opposite the name of Pledgor on Schedule I hereto
(collectively, the "Pledged Shares");
NOW, THEREFORE, in consideration of the foregoing premises and
for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, Pledgor hereby agrees with Pledgee as follows:
SECTION 1. Certain Defined Terms. Capitalized terms used
herein and not otherwise defined shall have the meanings assigned in the
Employment Agreement. The following terms as used herein shall have the
following meanings:
"Agreement" means this Pledge Agreement, as amended, restated
or supplemented or otherwise modified from time to time in accordance with
its terms.
"Employment Agreement" shall have the meaning set forth in the
recitals to this Agreement.
"Event of Default" shall have the meaning specified in Section
8 hereof.
"Indemnitee" shall have the meaning set forth in Section 15
hereof.
"Note" shall have the meaning set forth in the recitals to this
Agreement.
"Pledge Amendment" shall have the meaning set forth in Section
7(b) hereof.
"Pledged Collateral" means:
(a) the Pledged Shares and the certificates representing the
Pledged Shares and any interest of Pledgor in the entries on the books of
any financial intermediary pertaining to the Pledged Shares, and, subject
to Section 8, all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged
Shares;
(b) all additional shares of, and all securities convertible
into and warrants, options and other rights to purchase, stock (whether
certificated or uncertificated and now existing or hereafter created) of any
Pledgee of the Pledged Shares from time to time acquired by Pledgor in any
manner (which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgor
in the entries on the books of any financial intermediary pertaining to such
additional shares, and, subject to Section 8, all dividends, cash, warrants,
rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange
for any or all of such additional shares, securities, warrants, options or
other rights; and
(c) to the extent not covered above, all Proceeds of the
Pledged Collateral described in clauses (a) and (b).
"Pledged Shares" shall have the meaning set forth in the
recitals to this Agreement.
"Pledgee" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Pledgor" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Proceeds" shall have the meaning assigned that term under the
Uniform Commercial Code (the "Code") as in effect in any relevant
jurisdiction or under relevant law and, in any event, shall include, but not
be limited to, any and all (i) proceeds of any indemnity or guaranty payable
to Pledgor from time to time with respect to any of the Pledged Collateral,
and (ii) any other amounts from time to time paid or payable under or in
connection with any of the Pledged Collateral or otherwise receivable or
received when the Pledged Collateral is or proceeds thereof are sold,
collected, exchanged or otherwise disposed of, whether such disposition is
voluntary or involuntary.
"Secured Obligations" shall have the meaning set forth in
Section 3 hereof.
"Securities Act" means the Securities Act of 1933, as from time
to time amended.
"Underlying Debt" shall have the meaning set forth in Section
3 hereof.
SECTION 2. Pledge of Security. Pledgor hereby pledges to
Pledgee and grants to Pledgee a first priority security interest in all of
the Pledged Collateral.
SECTION 3. Security for Obligations. This Agreement secures,
and the Pledged Collateral is collateral security for, (i) the prompt
payment and performance in full when due, whether at stated maturity, by
acceleration or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a)
of the Bankruptcy Code and the operation of Sections 502(b) and 506(b) of
the Bankruptcy Code or any successor provision thereto, and all interest
accruing on the payment obligations set forth in the Note after the filing
of a petition by or against the Pledgor under the Bankruptcy Code, in
accordance with the Note whether or not the claim for such interest is
allowed as a claim after such filing in any proceeding under the Bankruptcy
Code), of all obligations of Pledgor under the Note, whether now existing
or hereafter arising, voluntary or involuntary, whether or not jointly owed
with others, direct or indirect, absolute or contingent, liquidated or
unliquidated, and whether or not from time to time decreased or extinguished
and later increased, created or incurred and all or any portion of such
obligations that are paid to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Pledgee as a preference,
fraudulent transfer or otherwise (all such obligations being the "Underlying
Debt"), and (ii) all obligations or liabilities of every nature of Pledgor
now or hereafter existing under this Agreement (all such obligations of
Pledgor, together with the Underlying Debt, being the "Secured
Obligations").
SECTION 4. Delivery of Pledged Collateral. All certificates
or instruments representing or evidencing the Pledged Collateral shall be
delivered to and held by or on behalf of Pledgee pursuant hereto and shall
be in suitable form for transfer by delivery, or, as applicable, shall be
accompanied by Pledgor's endorsement, where necessary, of duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Pledgee. If an Event of Default shall have occurred and be
continuing, Pledgee shall have the right, at any time in its discretion and
without notice to Pledgor, to transfer to or to register in the name of
Pledgee or any of its nominees any or all of the Pledged Collateral, subject
only to the revocable rights specified in Section 8(a) hereof. In addition,
if an Event of Default shall have occurred and be continuing, Pledgee shall
have the right at any time to exchange certificates or instruments
representing or evidencing Pledged Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 5. Representations and Warranties. Pledgor hereby
represents and warrants to Pledgee as follows:
(a) Pledged Collateral. There are no outstanding options,
warrants, rights to subscribe, stock purchase rights or other agreements
granted or entered into by Pledgor outstanding with respect to, or property
that is now or hereafter convertible into, or that requires the issuance or
sale of, any Pledged Shares.
(b) Ownership of Pledged Collateral. Pledgor is the sole
legal, record and beneficial owner of the Pledged Collateral pledged by
Pledgor free and clear of any lien except for the security interest created
by this Agreement.
(c) Consents. No consent of any other party (including,
without limitation, stockholders or creditors of Pledgor or any Person under
any contractual obligation of Pledgor) and no consent, authorization,
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required either (i) for the
pledge by Pledgor of the Pledged Collateral pursuant to this Agreement and
the grant by Pledgor of the security interest granted hereby or for the
execution, delivery or performance of this Agreement by Pledgor, or (ii) for
the exercise by Pledgee of the voting or other rights provided for in this
Agreement or the remedies in respect of the Pledged Collateral pursuant to
this Agreement (except (A) those which have been obtained or made, and
(B) as may be required in connection with a disposition of Pledged
Collateral by laws affecting the offering and sale of securities generally
or the disposition of collateral generally).
(d) Neither the execution and delivery of this Agreement by
the Pledgor nor the consummation of the transactions herein contemplated nor
the fulfillment of the terms hereof (i) violate the terms of any agreement,
indenture, mortgage, deed of trust, equipment lease, instrument or other
document to which the Pledgor is a party or by which it may be bound or to
which any of its properties or assets may be subject, which violation or
conflict would have a material adverse effect on the financial condition of
the Pledgor or on the value of the Pledged Collateral, or a material adverse
effect on the security interests hereunder, (ii) conflict with any law,
order, rule or regulation applicable to the Pledgor, of any court or any
government, regulatory body or administrative agency or other governmental
body having jurisdiction over the Pledgor or its properties, or (iii) result
in or require the creation or imposition of any lien (other than the lien
contemplated hereby in favor of Pledgee), upon or with respect to any of the
property now owned or hereafter acquired by the Pledgor or the Pledgee,
which violation or conflict would have a material adverse effect on the
financial condition, business, assets or liabilities of the Pledgor and the
Pledgee taken as a whole, or on the value of the Pledged Collateral or a
material adverse effect on the security interests hereunder.
(e) Perfection. The pledge and delivery to Pledgee of the
Pledged Collateral pursuant to this Agreement creates a valid and perfected
first priority security interest of Pledgee in the Pledged Collateral of
Pledgor, securing the payment and performance of the Secured Obligations,
subject to no liens, and all actions necessary or desirable to perfect and
protect such security interest have been duly taken.
SECTION 6. Certain Covenants. Pledgor hereby covenants that,
until the Secured Obligations have been indefeasibly paid in full and the
Note has been extinguished and canceled, Pledgor will:
(a) not (i) sell, assign (by operation of law or otherwise)
or otherwise dispose of, or grant any option with respect to, any of the
Pledged Collateral pledged hereunder by Pledgor, or (ii) create or permit
to exist any lien upon or with respect to any of the Pledged Collateral,
except for the security interest under this Agreement;
(b) (i) at any time and from time to time, upon request of the
Pledgee, to give, execute, file and/or record any notice, financing
statement, continuation statement, instrument, document or agreement that
the Pledgee shall consider reasonably necessary or desirable to create,
preserve, continue, perfect or validate any security interest granted
hereunder or which the Pledgee may consider reasonably necessary or
desirable to exercise or enforce its rights hereunder with respect to such
security interest, (ii) to give the Pledgee notice of any litigation filed
or claim asserted against the Pledgor relating to or potentially affecting
the Pledged Collateral, (iii) if requested by the Pledgee, to receive and
collect the Proceeds, in trust and as the property of the Pledgee, and to
immediately endorse as appropriate and deliver such Proceeds to the Pledgee
when requested by the Pledgee in the exact form in which they are received,
(iv) not to commingle the Proceeds or collections thereunder with other
property, (v) to keep complete and accurate records regarding all of the
Proceeds, (vi) to provide any service and do other acts or things necessary
to keep the Pledged Collateral and the Proceeds free and clear of all
defenses, rights of offset and counterclaim, and (vii) to pledge hereunder,
immediately upon its acquisition (directly or indirectly) thereof, any and
all additional shares of Common Stock of Pledgee, or any securities
convertible into or exercisable for shares of Common Stock of Pledgee.
(c) (i) pay promptly the obligations set forth under the Note
when due, (ii) indemnify the Pledgee against all loss, claims, demands and
liabilities of every kind arising from the Pledged Collateral and the
transactions and other agreements and undertakings contemplated hereby, and
(iii) pay all expenses, including reasonable attorneys' fees, incurred by
the Pledgee in the preservation, realization, enforcement and exercise of
its rights, powers and remedies hereunder.
SECTION 7. Further Assurances; Pledge Amendments.
(a) Pledgor agrees that at any time and from time to time, at
the expense of Pledgor, Pledgor shall promptly execute and deliver all
further instruments and documents, and take all further actions, that may
be necessary or appropriate, or that Pledgee may reasonably request, in
order to perfect and protect any security interest granted or purported to
be granted hereby or to enable Pledgee to exercise and enforce its rights
and remedies hereunder with respect to any Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any
additional shares of stock or other securities required to be pledged
hereunder, promptly (and in any event within ten (10) days) deliver to
Pledgee a Pledge Amendment, duly executed by Pledgor, in substantially the
form of Schedule II hereto (a "Pledge Amendment"), in respect of the
additional shares of stock or other securities to be pledged pursuant to
this Agreement. Pledgor hereby authorizes Pledgee to attach each Pledge
Amendment to this Agreement and agrees that all Pledged Shares listed on any
Pledge Amendment delivered to Pledgee shall for all purposes hereunder be
considered Pledged Collateral.
SECTION 8. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default (as defined below) shall
have occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Pledged
Collateral or any part thereof for any purpose not in violation of the
terms of the Employment Agreement or the Note. It is understood,
however, that neither (A) the voting by Pledgor of any Pledged Shares
for or Pledgor's consent to the election of directors at a regularly
scheduled annual or other meeting of stockholders or with respect to
incidental matters at any such meeting, nor (B) Pledgor's consent to
or approval of any action otherwise permitted under the terms of the
Employment Agreement or the Note shall be deemed inconsistent with the
terms of any of such documents within the meaning of this Section
8(a)(i), and no notice of any such voting or consent need be given to
Pledgee.
(ii) Pledgor shall be entitled to receive and retain, and
to utilize free and clear of the lien of this Agreement, any and all
dividends and other distributions paid in respect of the Pledged
Collateral; provided, however, that any and all dividends, interest
and other distributions paid or payable in additional equity
securities, or warrants, options or similar rights to acquire
additional equity securities shall be, and shall forthwith be
delivered to Pledgee to hold as, Pledged Collateral and shall, if
received by Pledgor, be received in trust for the benefit of Pledgee,
be segregated from the other property or funds of Pledgor and be
forthwith delivered to Pledgee as Pledged Collateral in the same form
as so received (with all necessary endorsements).
(iii) Pledgee shall promptly execute and deliver (or cause
to be executed and delivered) to Pledgor all such proxies, dividend
payment orders and other instruments as Pledgor may from time to time
reasonably request for the purpose of enabling Pledgor to exercise the
voting and other consensual rights which it is entitled to exercise
pursuant to paragraph (i) above and to receive the dividends,
principal or interest payments which it is authorized to receive and
retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event
of Default (as defined below):
(i) Upon written notice from Pledgee to Pledgor, all
rights of Pledgor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise pursuant to Section
8(a)(i) shall cease, and all such rights shall thereupon become vested
in Pledgee who shall thereupon have the right to exercise such voting
and other consensual rights.
(ii) All rights of Pledgor to receive the dividends,
interest and other payments which it would otherwise be authorized to
receive and retain pursuant to Section 8(a)(ii) shall cease, and all
such rights shall thereupon become vested in Pledgee who shall
thereupon have the right to receive and hold as Pledged Collateral
such dividends, interest and other payments which shall, upon written
notice from Pledgee, be paid to Pledgee.
(iii) All dividends, interest and other payments which are
received by Pledgor contrary to the provisions of paragraph (ii) of
this Section 8(b) shall be received in trust for the benefit of
Pledgee, shall be segregated from other funds of Pledgor and shall
forthwith be paid over to Pledgee as Pledged Collateral in the same
form as so received (with any necessary endorsements).
(c) In order to permit Pledgee to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant to
Section 8(b)(i) hereof and to receive all dividends and other distributions
which it may be entitled to receive under Section 8(a)(ii) hereof or Section
8(b)(ii) hereof, Pledgor shall promptly execute and deliver (or cause to be
executed and delivered) to Pledgee all such proxies, dividend payment orders
and other instruments as Pledgee may from time to time reasonably request.
(d) Each of the following shall constitute an event of default
(an "Event of Default") hereunder: (i) Pledgor's failure to pay, within
fifteen (15) days after the date when such payment is due, any payment of
principal or interest on the Note, (ii) Pledgor's failure to observe or
perform, within fifteen (15) days after receipt of notice of default from
Pledgee, any covenant or agreement contained in this Agreement or in the
Note, (iii) if any representation, warranty, certification or statement made
by the Pledgor in this Agreement or in any certificate or other document
delivered pursuant to the Note or this Agreement shall prove to have been
incorrect in any material respect when made or deemed made, (iv) the
appointment of a receiver or a trustee of all or part of the Pledgor's
property, (v) an assignment for the benefit of the Pledgor's creditors, (vi)
the commencement or filing of any voluntary proceeding or petition by the
Pledgor under any bankruptcy or insolvency law or any law relating to the
relief of debtors or readjustment of indebtedness, (vii) the commencement
or filing of any involuntary proceeding or petition against the Pledgor
under any bankruptcy or insolvency law or any law relating to the relief of
debtors or readjustment of indebtedness, which proceeding or petition has
not been dismissed within sixty (60) days after the commencement or filing
thereof, (viii) the appointment of a receiver, custodian, trustee or
liquidator for any part of the assets or property of the Pledgor, (ix) the
failure of the Pledgor generally to pay his debts as they become due, and
(x) the failure of the Pledgee to have a first priority security interest
in the Pledged Collateral.
SECTION 9. Remedies upon Default. If any Event of Default
shall have occurred and be continuing:
(a) Pledgee may exercise in respect of the Pledged Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the Uniform Commercial Code as in effect in the State of Wisconsin (or
any other state with jurisdiction over the Pledged Collateral) at that time,
and Pledgee may also in its sole discretion, without notice (except as
specified below), sell the Pledged Collateral or any part thereof in one or
more parcels at public or private sale, at any exchange, broker's board or
at any of Pledgee's offices or elsewhere, for cash, on credit or for future
delivery, at such time or times and at such price or prices and upon such
other terms as are commercially reasonable, irrespective of the impact of
any such sales on the market price of the Pledged Collateral. Pledgee may
be the purchaser of any or all of the Pledged Collateral at any such sale
and shall be entitled, for the purpose of bidding and making settlement or
payment of the purchase price for all or any portion of the Pledged
Collateral sold at any such public sale, to use and apply any of the Secured
Obligations as a credit on account of the purchase price of any Pledged
Collateral payable by Pledgee at such sale. Each purchaser at any such sale
shall hold the property sold absolutely free from any claim or right on the
part of Pledgor, and Pledgor hereby waives (to the extent permitted by law)
all rights of redemption, stay and/or appraisal which it now has or may at
any time in the future have under any rule of law or statute now existing
or hereafter enacted. Pledgor agrees that, to the extent notice of sale
shall be required by law, at least ten (10) days' notice to Pledgor of the
time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. Pledgee shall not
be obligated to make any sale of Pledged Collateral regardless of notice of
sale having been given. Pledgee may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it
was so adjourned. Pledgor hereby waives any claims against Pledgee arising
by reason of the fact that the price at which any Pledged Collateral may
have been sold at such a private sale was less than the price which might
have been obtained at a public sale, even if Pledgee accepts the first offer
received and does not offer such Pledged Collateral to more than one
offeree. If the proceeds of any sale or other disposition of the Pledged
Collateral are insufficient to pay all the Secured Obligations, Pledgor
shall be liable for the deficiency and the fees of any attorneys employed
by Pledgee to collect such deficiency.
(b) If Pledgee determines to exercise its right to sell any
or all of the Pledged Collateral, upon written request, Pledgor shall
furnish to Pledgee all such information as Pledgee may reasonably request
in order to facilitate such sale.
SECTION 10. Pledgee May Perform. If Pledgor fails to perform
any agreement contained herein, then, during an Event of Default, Pledgee
may itself perform, or cause performance of, such agreement, and the
expenses of Pledgee incurred in connection therewith shall be payable by
Pledgor under Section 15(b) hereof.
SECTION 11. Pledgee Appointed Attorney-in-Fact. Pledgor hereby
irrevocably appoints Pledgee as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor or
otherwise, from time to time, during the continuation of an Event of
Default, in Pledgee's reasonable discretion to take any action and to
execute any instrument, including but not limited to financing and
continuation statements, which Pledgee may deem necessary or advisable,
subject to the terms and conditions of this Agreement, to accomplish the
purposes of this Agreement, including, without limitation, (a) to receive,
endorse and collect all instruments made payable to Pledgor representing any
dividend, principal or interest payment or other distribution in respect of
the Pledged Collateral or any part thereof and to give full discharge for
the same, and (b) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Pledged Collateral, and to file any claims
or take any action or institute any proceedings which Pledgee may deem
necessary or desirable for the collection of any of the Pledged Collateral
or to enforce the rights of Pledgee with respect to any of the Pledged
Collateral.
SECTION 12. Standard of Care. The powers conferred on Pledgee
hereunder are solely to protect its interest in the Pledged Collateral and
shall not impose on it any duty to exercise such powers. Pledgee shall be
deemed to have exercised reasonable care in the custody and preservation of
the Pledged Collateral in its possession if the Pledged Collateral is
accorded treatment substantially equivalent to that which Pledgee accords
its own property consisting of negotiable securities, it being understood
that Pledgee shall have no responsibility for (a) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relating to any Pledged Collateral, whether or not Pledgee
has or is deemed to have knowledge of such matters, (b) taking any necessary
steps (other than steps taken in accordance with the standard of care set
forth above to maintain possession of the Pledged Collateral) to preserve
rights against any parties with respect to any Pledged Collateral,
(c) taking any necessary steps to collect or realize upon the Secured
Obligations or any guarantee therefor, or any part thereof, or any of the
Pledged Collateral, or (d) initiating any action to protect the Pledged
Collateral against the possibility of a decline in market value.
SECTION 13. Application of Proceeds. All Proceeds received by
Pledgee in respect of any sale of, collection from, or other realization
upon all or any part of the Pledged Collateral may, in the discretion of
Pledgee, be held by Pledgee as Pledged Collateral for, and/or then or at any
time thereafter applied in whole or in part by Pledgee against the Secured
Obligations in the following order of priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, and all expenses, liabilities and
advances made or incurred by Pledgee in connection therewith and all
amounts for which Pledgee is entitled to indemnification and
reimbursement hereunder and all advances made by Pledgee hereunder for
the account of the Pledgor or for the payment of all costs and
expenses paid or incurred by Pledgee in connection with the exercise
of any right or remedy hereunder, all in accordance with Section 15
hereof;
SECOND: To the payment in full of all Secured Obligations,
including those obligations set forth in the Note; and
THIRD: To the payment to or upon the order of Pledgor, or to
whosoever may be lawfully entitled to receive the same or as a court
of competent jurisdiction may direct, of any surplus then remaining
from such proceeds.
SECTION 14. Actions by Pledgee. During the continuation of an
Event of Default, Pledgee shall have the right hereunder, in its sole
discretion, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action with
respect to the Pledged Collateral (including, without limitation, the
release or substitution of Pledged Collateral).
SECTION 15. Indemnity and Expenses.
(a) Pledgor agrees to indemnify Pledgee and each of the
officers, directors, agents, employees and affiliates of Pledgee (each an
"Indemnitee"), from and against any and all claims, losses and liabilities
in any way relating to, growing out of or resulting from this Agreement and
the transactions contemplated hereby (including, without limitation,
enforcement of this Agreement), except claims, losses or liabilities
resulting from the gross negligence or willful misconduct of the Indemnitee
seeking indemnification.
(b) Pledgor will upon demand pay to Pledgee the amount of any
and all reasonable costs and expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which Pledgee may
incur in connection with (i) the administration of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of Pledgee hereunder, or (iv) the failure
by Pledgor to perform or observe any of the provisions hereof.
SECTION 16. Waivers of Pledgor.
(a) Pledgor hereby waives any right to require Pledgee to:
(i) proceed against Pledgor, any guarantor of any of the Secured Obligations
or any other person or entity, (ii) proceed against or exhaust any other
security held from Pledgor or any other person or entity, (iii) give notice
to Pledgor of the terms, time and place of any public or private sale of the
Pledged Collateral or any other security, or otherwise comply with Section
9504 of the Uniform Commercial Code (except as set forth in this Agreement),
(iv) pursue any other remedy in Pledgee's power, or (v) make or give any
presentments, demands for performance, notices of nonperformance, protests,
notices of protest or notices of dishonor in connection with any obligations
or evidences of indebtedness which constitute in whole or in part the
Secured Obligations or in connection with the creation of new or additional
Secured Obligations;
(b) Pledgor waives any defense arising by reason of: (i) any
disability or other defense of Pledgor or any other entity, including,
without limitation, any defense based on or arising out of the
unenforceability of any of the Secured Obligations, legal or equitable
discharge of the Secured Obligations or this Agreement or any statute of
limitations affecting Pledgor's liability hereunder, (ii) the cessation from
any cause whatsoever, other than payment in full, of the Secured Obligations
or the release or substitution of any sureties or guarantors of the Secured
Obligations, (iii) any act or omission (other than as a result of the gross
negligence or willful misconduct of the Pledgee) by Pledgee which directly
or indirectly results in or aids the discharge of Pledgor or any of the
Secured Obligations by operation of law or otherwise, (iv) the release of
any other collateral securing the Secured Obligations or the failure by
Pledgee to perfect or maintain the perfection of any such other collateral,
(v) any modification of the Secured Obligations, in any form whatsoever,
including, but not limited to the renewal, extension, acceleration or other
change in the time for payment of the Secured Obligations, and any change
in the terms of the Secured Obligations, including, but not limited to, any
increase or decrease of the rate of interest on the Secured Obligations, and
(vi) any law limiting the liability of or exonerating guarantors or
sureties; and
(c) until all the Secured Obligations shall have been paid in
full, Pledgor waives any right to enforce any remedy which Pledgee now has
or may hereafter have against any person or entity guaranteeing or securing
the Secured Obligations, and waives any benefit of, or any right to
participate in any security whatsoever now or hereafter held by Pledgee for
the Secured Obligations.
SECTION 17. Continuing Security Interest; Transfer of
Indebtedness. This Agreement shall create a continuing security interest
in the Pledged Collateral and shall, unless released and/or terminated,
(a) remain in full force and effect until indefeasible payment in full of
all Secured Obligations, (b) be binding upon Pledgor, its successors and
assigns, and (c) inure, together with the rights and remedies of Pledgee
hereunder, to the benefit of Pledgee and its successors, and permitted
transferees and assigns. Without limiting the generality of the foregoing
clause (c), upon any assignment by Pledgee of any Underlying Debt of the
Borrower held by it to any other person or entity, such other person or
entity shall thereupon become vested with all the benefits in respect
thereof granted to Pledgee herein or otherwise. Upon the date upon which
the Secured Obligations have been indefeasibly paid and performed in full
and the Note has been extinguished and cancelled, this Agreement shall
automatically terminate, and (i) Pledgor shall be entitled to the return,
upon its request and at its expense, against receipt and without recourse
to Pledgee, of such of the Pledged Collateral pledged by Pledgor hereunder
as shall not have been sold or otherwise applied pursuant to the terms
hereof prior to such request, (ii) Pledgee's security interest in and lien
on such Pledged Collateral shall be simultaneously released upon the making
of such request, and (iii) Pledgee shall, at Pledgor's expense, execute
and/or deliver such documents as Pledgor shall reasonably request to
evidence such release.
SECTION 18. No Waiver by Pledgee; Authority of Pledgor. No
failure on the part of Pledgee to exercise, and no course of dealing with
respect to, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise
by Pledgee of any right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or
remedy. The remedies herein provided are cumulative to the fullest extent
permitted by law and are not exclusive of any remedies provided by law. It
is not necessary for Pledgee to inquire into the powers of Pledgor or the
officers, directors or agents acting or purporting to act on behalf of
Pledgor.
SECTION 19. Amendment, Etc. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by Pledgor
herefrom, shall in any event be effective unless the same shall be in
writing and signed by Pledgee, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given.
SECTION 20. Addresses for Notices. Unless otherwise
specifically provided herein, any notice or other communication herein
required or permitted to be given shall be given as provided under Section
12 of the Employment Agreement.
SECTION 21. Governing Law; Terms. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF WISCONSIN, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY
INTEREST GRANTED HEREUNDER, OR ANY REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF WISCONSIN. Unless otherwise defined herein, terms
defined in Article 9 of the Code are used herein as therein defined.
SECTION 22. Severability. Any provisions of this Agreement
which are prohibited or unenforceable in any jurisdiction shall, as to such
jurisdictions, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 23. Consent to Jurisdiction and Service of Process.
(a) Any legal action or proceeding with respect to this Agreement and any
action for enforcement of any judgment in respect thereof may be brought in
the courts of the State of Wisconsin or of the United States of America for
the Eastern District of Wisconsin, and, by execution and delivery of this
Agreement, each of Pledgor and Pledgee hereby accepts for itself and in
respect of its property, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts and any appellate courts from any
thereof. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement shall affect any right that Pledgee may
otherwise have to bring any action or proceeding relating to this Agreement
against Pledgor or its properties in the courts of any jurisdiction.
(b) Pledgor hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any court
referred to in paragraph (a) of this Section. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 20 hereof.
Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 24. Marshaling; Payments Set Aside. Pledgee shall not
be under any obligation to marshal any assets in favor of Pledgor or any
other party or against or in payment of any or all of the Secured
Obligations. To the extent that Pledgor makes a payment or payments to
Pledgee or Pledgee enforces its security interests or exercises its rights
of setoff, and such payment or payments or proceeds of such enforcement or
setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or
federal law, common law or equitable cause, then to the extent of such
recovery, the obligation or part thereof originally intended to be
satisfied, and all Liens, rights and remedies therefor, shall be revived and
continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
SECTION 25. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement or be given any substantive effect.
SECTION 26. Counterparts. This Agreement and any amendments,
waivers, consents or supplements may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed
an original, and all of which together shall constitute one and the same
Agreement.
IN WITNESS WHEREOF, Pledgor has caused this Pledge Agreement to
be duly executed and delivered as of the date first above written.
PLEDGOR:
MICHAEL W. SALSIEDER
/s/Michael W. Salsieder
PLEDGEE:
BUCYRUS INTERNATIONAL, INC.
By: /s/Stephen R. Light
Name: Stephen R. Light
Title: President and Chief Executive Officer
SCHEDULE I
to the Pledge Agreement
Attached to and forming a part of the Pledge Agreement, dated
as of June 23, 1999, between Pledgor and Pledgee.
Pledgor: Michael W. Salsieder
Percent of
Shares Issued
Class Stock Number and
Stock Pledgee of Stock Certificate Nos. of Shares Outstanding
Bucyrus
International, Inc. Common 750 .05%
SCHEDULE II
to the Pledge Agreement
[FORM OF PLEDGE AMENDMENT]
This Pledge Amendment, dated [_______ __, ____], is delivered
pursuant to Section 7 of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Amendment may be attached to the
Pledge Agreement, dated as of June 23, 1999, between Michael W. Salsieder
and Pledgee (the "Pledge Agreement"; capitalized terms defined therein being
used herein as therein defined), and that the Pledged Shares listed on this
Pledge Amendment shall be deemed to be part of the Pledged Shares and shall
become part of the Pledged Collateral and shall secure the Secured
Obligations as provided in the Pledge Agreement.
MICHAEL W. SALSIEDER
______________________________
Percent of
Shares Issued
Class Stock Number and
Stock Issuer of Stock Certificate Nos. of Shares Outstanding
EXHIBIT 10.19
FORM 10-K
YEAR ENDED DECEMBER 31, 1999
AGREEMENT
This Agreement dated February 1, 2000 is between Wayne T. Ewing
(hereinafter "Ewing") and Bucyrus International, Inc. (hereinafter
"Bucyrus").
In consideration of the mutual covenants and agreements set forth herein,
the parties hereto agree as follows:
1. During the term of this Agreement, Ewing agrees to perform certain
consulting assignments for Bucyrus, only as approved in advance by
Robert L. Purdum, Chairman of the Board of Bucyrus. Ewing shall be
paid $1,500.00 per day and shall be reimbursed his reasonable
expenses for performing said consulting services. Such consulting
fees and expenses shall be paid and reimbursed on a monthly basis
against submitted time and expense statements as approved by Robert
Purdum.
2. During the term of this Agreement, Bucyrus agrees to pay the
following bonuses to Ewing:
a. $25,000.00 for each Bucyrus electric mining shovel or dragline
sold into the North American coal industry.
b. $5,000.00 for each Bucyrus rotary blasthole drill sold into
the North American coal industry.
c. $50,000.00 for the first sale of Bucyrus' new large electric
mining shovel (currently commonly called "Big Bite") into the
North American coal industry, but only if Ewing's direct
involvement contributes to the sale of "Big Bite". Such
payment will be instead of, and not in addition to, the
payment provided in Section 2(a) above.
d. $100,000.00 for the second sale of "Big Bite" into the North
American coal industry, but only if Ewing's direct involvement
contributes to the sale. Such payment will be instead of, and
not in addition to, the payment provided in Section 2(a)
above.
e. For any "Big Bite" sales into the North American coal industry
after the second "Big Bite" sale, or for the first two "Big
Bite" sales into the North American coal industry if Ewing was
not involved in the sale, Ewing will be paid as provided in
Section 2(a) above.
3. During the term of this Agreement, Bucyrus shall also pay Ewing a
bonus of 5% of the incremental standard parts margin generated in
each calendar year over and above the standard margin generated on
parts sold to the North American coal industry in the previous
calendar year (the "base year"). For each year this Agreement is in
place, the previous calendar year becomes the base year. For
example, if in the year 2000 the standard margin on parts sold into
the North American coal industry increased by $6,000,000.00 over the
1999 base year, Ewing would receive $300,000.00 in bonus payments.
Any partial calendar year calculations shall be prorated
accordingly.
4. The bonus payments provided in Sections 2 and 3 above will be made
to Ewing within 30 days after completion of the annual audit of
Bucyrus' financial statements (the "Payment Date"), and will only
apply to sales actually made to customers during the term of this
Agreement as evidenced by a signed agreement with the customer.
Provided, however, if Bucyrus has not received total payment from
the customer for the sale of equipment by the Payment Date, Ewing
shall only be entitled to payment of a percentage of his bonus equal
to the percentage of the purchase price actually received by
Bucyrus. Ewing will be paid the remainder of his bonus after
receipt by Bucyrus of the total purchase price.
5. The term of this Agreement shall commence on the date of this
Agreement and shall continue thereafter for eighteen (18) months.
The term of this Agreement may be extended by mutual agreement of
the parties.
6. This Agreement, or any provision hereof, may not be assigned by
Ewing without the prior written consent of Bucyrus.
7. Ewing's relationship with Bucyrus in this Agreement is that of an
independent contractor.
8. This Agreement shall be governed by and construed in accordance with
the laws of the State of Wisconsin.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
BUCYRUS INTERNATIONAL, INC. WAYNE T. EWING
By: /s/Robert L. Purdum /s/Wayne T. Ewing
Name: Robert L. Purdum
Title: CHR - BOD Bucyrus International
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 8,369
<SECURITIES> 0
<RECEIVABLES> 62,113
<ALLOWANCES> (1,090)
<INVENTORY> 125,132
<CURRENT-ASSETS> 200,026
<PP&E> 115,376
<DEPRECIATION> (19,571)
<TOTAL-ASSETS> 416,987
<CURRENT-LIABILITIES> 77,832
<BONDS> 214,009
0
0
<COMMON> 14
<OTHER-SE> 94,136
<TOTAL-LIABILITY-AND-EQUITY> 416,987
<SALES> 318,635
<TOTAL-REVENUES> 320,456
<CGS> 267,323
<TOTAL-COSTS> 267,323
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,698
<INCOME-PRETAX> (20,196)
<INCOME-TAX> 2,379
<INCOME-CONTINUING> (22,575)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,575)
<EPS-BASIC> (15.65)
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