SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1994 Commission File Number: 1-5646
CLARK EQUIPMENT COMPANY
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of 38-0425350
incorporation or organization) (IRS Employer Identification No.)
100 North Michigan Street 46634
P.O. Box 7008 (Zip Code)
South Bend, Indiana
(Address of Principal (219) 239-0100
Executive Offices) (Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $7.50 Par Value New York Stock Exchange, Inc.
Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by a 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 ]
As of March 13, 1995, the aggregate market value of the voting stock held
by nonaffiliates of the Registrant was $857,428,172, based on the closing
price of the stock as reported on the Composite Transaction Reporting
System by the New York Stock Exchange on March 13, 1995. (Number includes
the shares held by the Registrant's Leveraged Employee Stock Ownership
Plan.)
As of March 13, 1995, there were 17,132,696 shares of Registrant's $7.50
Par Value Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Annual Report to Stockholders for the fiscal year
ended December 31, 1994 ("Annual Report") are incorporated by reference in
Parts I and II of this Form 10-K.
Portions of Registrant's Proxy Statement for the 1995 Annual Meeting of
Stockholders ("Proxy Statement") are incorporated by reference into Part
III of this Form 10-K.
PART I
ITEM 1. BUSINESS
Clark Equipment Company, a Delaware corporation, is the successor
to certain corporations the first of which was organized on December 24,
1902. Unless the context otherwise indicates, the terms "Registrant",
"Clark" and "Company" when used in this Form 10-K refer to Clark Equipment
Company and its consolidated subsidiaries.
Description of Business
Clark's business is the design, manufacture and sale of compact
construction machinery, asphalt paving equipment, axles and transmissions
for off-highway equipment and golf cars and utility vehicles.
Skid steer loaders, compact excavators and a limited line of
agricultural equipment are manufactured by Clark's Melroe Company Business
Unit ("Melroe") which is headquartered in Fargo, North Dakota. Off-highway
axles and transmissions are manufactured by the Company's Clark Hurth
Components Company Business Unit ("Clark Hurth") which is headquartered in
Statesville, North Carolina. Asphalt paving equipment is manufactured by
the Company's subsidiary Blaw-Knox Construction Equipment Corporation
("Blaw-Knox") which is headquartered in Mattoon, Illinois. Golf cars and
utility vehicles are manufactured by the Company's subsidiary, Club Car,
Inc. ("Club Car") which is headquartered in Martinez, Georgia.
On March 13, 1995, the Company acquired 9,461,810 shares of Club
Car, representing approximately 99% of the outstanding shares, for a cash
price of $25 per share pursuant to a tender offer initiated by the Company
on February 8, 1995. Club Car is one of the largest manufacturers of golf
cars and light utility vehicles in the world and had sales in its fiscal
year ending on September 25, 1994 of approximately $186 million. On March
17, 1995, the Company completed a merger of Club Car with another wholly-owned
subsidiary of the Company. Upon consummation of the merger, Club Car
became a wholly-owned subsidiary of the Company, and the shareholders of
Club Car who did not tender their shares became entitled to receive $25 per
share. The total purchase price for Club Car was approximately $242.6
million, after taking into account amounts paid with respect to certain
outstanding stock options, tax benefits related to these stock options and
certain transaction expenses. The financial statements which are included
in this Form 10-K do not include Club Car.
The Company acquired Blaw-Knox on May 13, 1994 from White
Consolidated Industries, Inc. for a purchase price of approximately $145
million. The Balance Sheet and results of operations of Blaw-Knox are
included in the consolidated accounts of the Company subsequent to the
acquisition date.
On May 13, 1994, the Company completed the initial public offering
of the stock of Clark Automotive Products Corporation ("CAPCO"). CAPCO was
engaged in the business of manufacturing transmissions, primarily for
on-highway applications, for sale in Brazil and North America. The Company
sold approximately 91 percent of its interest in CAPCO and received net
proceeds of approximately $103 million, resulting in a gain of
approximately $33 million. The results of CAPCO have been deconsolidated
to reflect the operations of this segment on a discontinued basis in the
Statements of Income contained in this Form 10-K for all periods presented.
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VME Group N.V. ("VME") is a joint venture owned 50% by the Company
and 50% by A.B. Volvo of Sweden ("Volvo"). It is engaged in the
manufacture and sale of construction and earthmoving equipment. On
March 5, 1995, the Company entered into an agreement to sell all of its
shares of VME to Volvo for a cash purchase price of $560 million. In
addition, immediately prior to the sale, VME will pay a cash dividend to
the Company of $13 million. The sale of the Company's VME shares to Volvo
is expected to close early in April of 1995. VME is reflected as a
discontinued operation in the Statements of Income which are included in
this Form 10-K for all periods presented.
On July 31, 1992, the Company sold all of the outstanding stock of
Clark Material Handling Company ("CMHC"), and certain other subsidiaries
which comprised its material handling equipment business, to Terex
Corporation ("Terex") for approximately $91 million. A gain of $8.5
million was recognized on the sale which has been included in discontinued
operations. CMHC is reflected as a discontinued operation in the
Statements of Income which are filed as a part of this Form 10-K. As a
part of the sale, Terex and CMHC assumed substantially all of the
obligations of the Company relating to the CMHC operation. In the event
that Terex and CMHC fail to perform or are unable to discharge any of the
assumed obligations, the Company could be required to discharge such
obligations. This issue is discussed in more detail in the footnote
captioned "Contingencies" in that portion of the Company's Annual Report to
Stockholders which is attached hereto as Exhibit 13.
Backlog Orders
The approximate dollar backlog of orders believed to be firm was
$221 million (which includes $20 million for Blaw-Knox but does not include
Club Car) at December 31, 1994 and $125 million at December 31, 1993.
Generally, Clark's customers may cancel their orders without incurring
significant cancellation charges, and, therefore, Clark's backlog is
essentially a report of the recorded intentions to purchase its products,
which could change before the sales are completed. The backlog figures
stated above are based on orders to Clark's factories or warehouses from
Clark's independent dealers and other customers who buy directly from
Clark's factories or warehouses.
Manufacturing
Melroe products are manufactured in the United States for sale
throughout the world to a wide variety of users and industries, including
the construction and agricultural industries. These products are
distributed under the trademarks "Melroe" and "Bobcat". In addition,
Melroe products are manufactured by a licensee in Australia.
Clark Hurth products are manufactured in the United States,
Belgium and Italy for sale throughout the world primarily to the
construction, mining and material handling equipment industries. In
addition, Clark Hurth products are manufactured by licensees in South
Africa and Brazil.
Blaw-Knox products are manufactured in the United States and
England for sale throughout the world primarily to the highway construction
and asphalt paving industries.
Club Car products are manufactured in the United States for sale
throughout the world in the golf, recreational, commercial and industrial
markets.
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Distribution
Clark Hurth products are sold directly to customers by employee
sales representatives and through manufacturers representatives and
independent distributors. Melroe and Blaw-Knox products are sold primarily
through independent dealers. Club Car products are sold directly to
customers by employee sales representatives and through independent
distributors and dealers. Clark maintains a large modern central parts
warehouse in Chicago, which, in conjunction with a communications network
and electronic data processing equipment, provide expeditious shipment of
customers' and dealers' orders for repair and replacement parts for Melroe
and VME products. Clark Hurth, Blaw-Knox and Club Car parts are
distributed from their respective manufacturing facilities.
Operations Outside the United States
Operations outside the United States are subject to, among other
things, the laws and regulations of foreign governments relating to
investments, operations and currency restrictions, import and export duties
and revaluations and fluctuations of currencies. Operations outside the
United States are also subject to changes in governments and economic
policies.
License fees from licensees outside the United States and Canada,
other than from consolidated subsidiaries, and dividends from associated
companies aggregated approximately $0.8 million in 1994, approximately $0.3
million in 1993 and approximately $0.4 million in 1992.
Raw Materials and Components
The principal raw materials and components purchased by the
Company are steel; castings; engines and accessories; hydraulic motors,
pumps, valves and cylinders; fabricated metal parts; fabricated plastic
parts; tires and tubes; electrical equipment; drive train components;
brakes and brake components; bearings; forgings; fasteners; bushings;
electric motors; gears and gear blanks; screw machine products; seals;
clutch plates; torque convertors; synchronizer rings; steering arms; CV
joints; cardan shafts; seats; paint; sealants and adhesives; antifreeze;
batteries; radiators; oil coolers; springs; shocks; chain; sprockets;
glass; filters; fabricated plastic parts; injection molded plastics;
control cables; aluminum extrusions; and rotational and vacuum formed
plastics.
The items described above are purchased from a number of different
suppliers, both on an individual purchase commitment basis and on a
one-year blanket order basis. Multiple sources for most items are available,
but substitution of engines and accessories, hydraulic motors, electrical
equipment, brake assemblies, pumps, and valves, in the event they were to
become unavailable from the usual sources, would in some instances require
engineering modifications to the product in which they are used.
Energy
Clark's manufacturing operations and those of its suppliers depend
to a substantial extent upon the availability of natural gas, fuel oil,
propane, electricity, coal, uranium and generating capacity. Clark
presently expects that its plants will be able to operate with little or no
interruption resulting out of scarcity of energy through 1995.
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Engineering and Product Development
An engineering staff is maintained at each of the principal
manufacturing facilities of Clark. These staffs are supplemented by
laboratories which provide technical support for product testing, materials
research and process development. Approximately 225 engineering employees
(engineers, designers, draftsmen and technicians) are presently engaged
full time in engineering and product development activities. Approximately
$15.6 million in 1994, $17.0 million in 1993 and $14.7 million in 1992 was
spent on Company-sponsored activities relating to the development of new
products and the improvement of existing products for Clark's continuing
operations.
Approximately 47 employees of Club Car are presently engaged full
time in engineering and product development activities. Club Car spent
approximately $2.2 million, $2 million and $1.9 million on Company-
sponsored engineering and product development activities during its fiscal
years ending on September 25, 1994, September 26, 1993 and September 27,
1992 respectively.
Although Clark owns numerous patents and has patent applications
pending, its business is not materially dependent upon patent protection.
Competition
Clark conducts its domestic and foreign operations under highly
competitive conditions and its business is subject to cyclical influences
and other factors. The customers for most of Clark's products are
commercial, industrial or farm users who use the products in business for
profit. Product performance and parts and service availability are primary
considerations for these customers in the choice among competing products.
Availability of rental and financing programs and warranty policies are
also important considerations. In making a purchase decision, the above
factors, plus the initial selling price, the date on which delivery can be
made, and the general product reputation will be considered by the
purchaser, and the order will normally be placed with the seller who comes
closest to satisfying the purchaser's particular requirements of all of
these factors.
Melroe is the leading producer of skid steer loaders in the United
States and has approximately 9 significant competitors worldwide. Melroe
also has approximately 6 significant competitors in its excavator line and
3 significant competitors in its agricultural spraying equipment product
line.
Clark Hurth has approximately 19 significant competitors and is
also subject to potential competition from its customers.
Blaw-Knox is the leading producer of asphalt paving equipment in
the United States and has approximately 5 significant competitors in North
America and 18 significant competitors in the rest of the world.
Club Car is one of the two largest manufacturers of golf cars and
utility vehicles in the world and has approximately 5 significant
competitors in each product line.
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Customers
The Company is not dependent upon a single customer or a few
customers, the loss of any one or more of which would have a material
adverse effect on its operations.
Seasonality
Although Clark experiences slight seasonal variations in its sales
of Melroe, Clark Hurth and Blaw-Knox products, Clark does not consider any
material part of those businesses to be seasonal.
Club Car's peak sales of golf cars occur during the months of
February through June when units are shipped to golf clubs at the beginning
of their golf season. Warm weather states, such as California and Florida,
have golf seasons beginning in the fall which stimulate fleet and retail
sales during the fall. Sales of Club Car's utility vehicle products occur
year-round but are heavier in the spring.
Environmental Compliance
Clark's facilities are subject to environmental regulation by
federal, state and local authorities. In 1994, the Company spent
approximately $2.1 million in connection with environmental compliance and
cleanup activities. Capital expenditures for environmental control
activities are not expected to be material for the remainder of 1995 and
1996. Clark is also involved in environmental cleanup activities or
litigation in connection with former waste disposal sites and current and
former plant locations. The Company has and will continue to make
provisions for these cleanup costs as necessary and when the Company's
liability can be reasonably estimated. As of December 31, 1994, the
Company had reserves of $16 million for potential future environmental
cleanup costs. Although the Company cannot determine whether or not a
material effect on future operations is reasonably likely to occur, it
believes that the recorded reserve levels are appropriate estimates of its
potential liability for environmental cleanup costs. The Company further
believes that the additional maximum exposure level in excess of the
recorded reserve level would not be material to the financial condition of
the Company. Although settlement of the reserves will cause future cash
outlays, it is not expected that such outlays will materially impact the
Company's liquidity position.
Employees
As of December 31, 1994, Clark employed 2,919 persons in North
America and 1,491 persons outside North America. A portion of Clark's
production, maintenance and warehouse employees in the United States are
represented by local unions affiliated with the International Brotherhood
of Teamsters, the United Automobile, Aerospace and Agricultural Implement
Workers of America and the United Paperworkers International Union, which
are affiliated with the AFL-CIO.
At the end of its fiscal year ending on September 25, 1994, Club
Car had 683 full time and 160 temporary employees, none of whom were
covered by a collective bargaining agreement.
Industry Segment and Geographic Area Discussion
Incorporated by reference to pages 38 and 39 of that portion of the
Company's Annual Report which is attached hereto as Exhibit 13.
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ITEM 2. PROPERTIES
Clark or a subsidiary of Clark owns the following principal
facilities in fee, except where a lease is indicated:
Total Floor Space Leased Floor Space
Principal Products Approximate Sq.Ft. Approximate Sq. Ft.
Manufactured Plant Office Plant Office
(in thousands) (in thousands)
Melroe
Bismarck, ND 375 48 - -
Gwinner, ND 420 99 - 54
Fargo, ND - 22 - 22
Lot, Belgium 144 38 - -
Other Melroe - 4 - 4
Clark Hurth
Bruges, Belgium 312 19 - -
Statesville, NC 423 60 18 -
Buchanan, MI 52 10 13 -
Arco, Italy 199 78 - -
Valsugana, Italy 83 7 - -
Rovereto, Italy 35 3 35 3
Blaw-Knox
Mattoon, IL 347 47 - -
Rochester, England 216 47 - -
Manchester, England 7 - - -
Coatbridge, Scotland 6 - - -
Club Car
Martinez, GA 273 60 - -
Other - 86 - 86
Other Business Locations
Corporate Headquarters- - 36 - 36
South Bend, IN
Records Retention- - 15 - 15
South Bend, IN
Clark Distribution Services-
Chicago, IL 507 58 - -
Bedford Park, IL 91 2 91 2
3,490 739 157 222
Clark owns the production equipment and machines at its plants,
except for an insignificant number of items which are leased. All of
Clark's principal plants and warehouse facilities are in good operating
condition. In 1994, Clark sold idle facilities in Georgetown, Kentucky,
Atlanta, Georgia and South Bend, Indiana.
In 1994 Clark's manufacturing plants (not including Club Car)
operated at approximately 91% of capacity.
ITEM 3. LEGAL PROCEEDINGS
In the Matter of Industrial Pretreatment Violations at Melroe Company,
Gwinner, North Dakota
On October 5, 1992, the United States Environmental Protection
Agency ("EPA") issued a Finding of Violation and Order for Compliance
("Order") which alleges that the Company has failed to comply with the
pretreatment regulations promulgated pursuant to Section 306 and 307 of the
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Clean Water Act. The Order alleges that certain metal finishing
wastewaters generated at the Company's Melroe facility in Gwinner, North
Dakota were discharged into the Publicly Owned Treatment Works operated by
the City of Gwinner in violation of the applicable pretreatment
regulations. The Order also alleges that the Company failed to comply with
certain reporting requirements set forth in the pretreatment regulations.
The Order requires the Company to comply with the discharge limitations for
metal finishing wastewater and all related reporting requirements. The
Company has taken all actions required of it under the Order.
On April 29, 1994, the U.S. filed suit against the Company in the
United States District Court for the District of North Dakota. The
complaint seeks (i) to permanently enjoin the Company to comply fully with
all applicable requirements of the Act and Regulations and (ii) civil
penalties against the Company of up to $25,000 per day for each violation
for (a) alleged discharges of pollutants in violation of the effluent
limitations contained in the pretreatment regulations, (b) failure to
submit timely and complete reports and (c) a failure to sample and analyze
its regulated wastewater prior to discharge into the POTW. This case is
now in the discovery phase.
The Company believes that its liability, if any, in connection
with this lawsuit is adequately covered by its reserve for environmental
liabilities. The Company does not expect that this lawsuit will have a
material adverse effect on the Company's financial condition, results of
operations or liquidity position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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EXECUTIVE OFFICERS OF THE REGISTRANT
Name of Officer and Age as of Principal Occupation
Positions/Offices March 1, Date First and Employment During
Presently Held 1995 Elected Past Five Years
Leo J. McKernan* 57 5/22/86 Chairman, President and
Chairman, President Chief Executive Officer of
and Chief Executive Clark Equipment Company.
Officer
Frank M. Sims* 62 3/17/87 Senior Vice President of
Senior Vice President Clark Equipment Company.
Paul R. Bowles 57 9/22/89 Vice President - Corporate
Vice President Development of Clark
Equipment Company.
Thomas L. Doepker 51 7/13/84 Vice President and
Vice President and Treasurer of Clark
Treasurer Equipment Company.
William N. Harper 50 12/09/86 Vice President and
Vice President and Controller of Clark
Controller Equipment Company.
Bernard D. Henely 51 7/13/84 Vice President and
Vice President, General Counsel of
General Counsel and Clark Equipment Company.
Secretary
David D. Hunter 54 10/24/94 President of Blaw-Knox
Vice President Construction Equipment
Corporation, a Business
Unit of Clark Equipment
Company. Prior to
October 1994, Managing
Director of European
Operations of Clark Hurth
Components Company.
Prior to April 1992,
Executive Vice President
of Talley Industries Inc.
James D. Kertz 58 2/9/93 President of Melroe Company,
Vice President a Business Unit of Clark
Equipment Company. Prior
to September 1992,
Executive Vice President of
Melroe Company.
John J. Reynolds 61 8/13/91 President of Clark Hurth
Vice President Components Company, a
Business Unit of Clark
Equipment Company. Prior
to April 1991, President of
Cherry-Burrell Corporation-
automatic packaging and
processing equipment.
* Member of the Board of Directors of the Company.
Each officer's term expires at the annual meeting of the Board of Directors
on May 9, 1995.
-9-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Incorporated by reference to page 41 of that portion of the
Company's Annual Report which is attached hereto as Exhibit 13.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference to page 45 of that portion of the
Company's Annual Report which is attached hereto as Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Incorporated by reference to pages 1 through 11 of that portion of
the Company's Annual Report which is attached hereto as Exhibit
13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference to pages 12 through 38, 40 and 41 of
that portion of the Company's Annual Report which is attached
hereto as Exhibit 13.
Also see Index to Financial Statements on page 13 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the directors of the Registrant is
incorporated by reference to the section in the Company's Proxy
Statement which is captioned "Identification of Nominees for
Director". Information regarding the executive officers of the
Registrant is set forth in Part I of this report under the
caption "Executive Officers of the Registrant".
-10-
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to the sections in the Company's Proxy
Statement which are captioned "Executive Compensation", "Stock
Option/SAR Tables", "Executive Employment Contracts", "Retirement
Program", "Director Compensation Arrangements", and "Stock
Acquisition Plan for Non-Employee Directors".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the section in the Company's Proxy
Statement which is captioned "Security Ownership of Certain
Beneficial Owners and Management".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
Incorporated by reference to pages 12 through 45 of that
portion of the Company's Annual Report which is attached
hereto as Exhibit 13.
2. Financial Statement Schedule (see index on page 13 of this
report).
3. Exhibits:
See Exhibit List and Index attached. Exhibits numbered
(10)(a) through (10)(aa) are management contracts and
compensatory plans or arrangements.
(b) Reports on Form 8-K:
1. The Registrant filed a Form 8-K dated October 26, 1994
reporting on Item 5, OTHER EVENTS, and Item 7, FINANCIAL
STATEMENTS AND EXHIBITS.
-11-
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 on the
31st day of March 1995.
CLARK EQUIPMENT COMPANY
By /s/ Leo J. McKernan
Leo J. McKernan
Chairman, President and
Chief Executive Officer
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 in the capacities and on the dates indicated. Each person whose
signature appears below hereby authorizes B. D. Henely and John J. Moran,
Jr. and each of them severally, with full power in each to act without the
other and with full power of substitution and resubstitution, to execute in
the name of each such person, and to file any amendments to this report as
the registrant deems appropriate, and appoints such persons as
attorneys-in-fact to sign on his behalf individually, and in each capacity
stated below, and file all amendments to this report.
SIGNATURE TITLE DATE
/s/ Leo J. McKernan Chairman, President, Chief March 31, 1995
Leo J. McKernan Executive Officer and Director
(Principal Executive Officer)
/s/ William N. Harper Vice President and Controller March 31, 1995
William N. Harper (Principal Financial Officer and
Principal Accounting Officer)
Directors
/s/ James C. Chapman
James C. Chapman Director )
/s/ Donald N. Frey
Donald N. Frey Director )
/s/ James A.D. Geier
James A.D. Geier Director )
/s/ Gaynor N. Kelley
Gaynor N. Kelley Director ) March 31, 1995
/s/ Ray B. Mundt
Ray B. Mundt Director )
/s/ Frank M. Sims
Frank M. Sims Director )
-12-
CLARK EQUIPMENT COMPANY
INDEX TO FINANCIAL STATEMENTS
The financial statements of Clark Equipment Company and its
consolidated subsidiaries, together with the report thereon of Price
Waterhouse LLP dated March 6, 1995, appearing on pages 12 through 45 of
that portion of the Company's 1994 Annual Report which is attached hereto
as Exhibit 13, are incorporated by reference in this Form 10-K Annual
Report. The following additional financial data should be read in
conjunction with such financial statements. Schedules not included with
this additional financial data have been omitted because they are not
applicable or the required information is shown in the financial statements
or notes thereto.
The consolidated financial statements of VME Group N.V. (VME) and its
subsidiaries have been incorporated beginning on page 16 of this report.
VME, at December 31, 1994, was a joint venture owned 50 percent each by
Clark Equipment Company and A.B. Volvo of Sweden. The Company has agreed
to sell its shares of VME to A.B. Volvo and the sale is expected to close
in early April 1995.
Financial statements of other unconsolidated majority owned
subsidiaries and 50% or less owned persons have been omitted because the
proportionate share of the pre-tax income and total assets of each such
company is less than 20% of the respective amounts for the registrant and
its consolidated subsidiaries, and the investment in and advances to each
company is less than 20% of total assets of the registrant and its
consolidated subsidiaries.
Additional Information:
Page
Report of Independent Accountants on Financial
Statement Schedule 14
Clark Equipment Company and Consolidated Subsidiaries-
Schedule II 15
VME Group N.V. and its subsidiaries
Consolidated Financial Statements and Notes
to Consolidated Financial Statements 16 through 43
Report of KPMG Bohlins AB on the
Financial Statements of VME Holding Sweden AB 44 AND 45
-13-
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
Board of Directors
Clark Equipment Company
South Bend, Indiana
Our audits of the consolidated financial statements referred to in our
report dated March 6, 1995 appearing in the 1994 Annual Report to
Stockholders of Clark Equipment Company (which report and consolidated
financial statements are incorporated by reference in this Annual Report on
Form 10-K) also included an audit of the Financial Statement Schedule
listed in Item 14(a) of this Form 10-K. In our opinion, the Financial
Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
/s/ Price Waterhouse
Price Waterhouse
South Bend, Indiana
March 6, 1995
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CLARK EQUIPMENT COMPANY
AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Amounts in Thousands)
Effect of
Balance at Charged to Exchange Balance at
Beginning of Costs and 1/ Rate End of
Period Expenses Deductions Changes Period
Year Ended December 31, 1994
Allowance for Doubtful Accounts $ 5,485 $ 1,463 $ (1,122) $ 189 $ 6,015
Year Ended December 31, 1993
Allowance for Doubtful Accounts $ 4,735 $ 905 $ 23 $ (178) $ 5,485
Year Ended December 31, 1992
Allowance for Doubtful Accounts $ 8,671 $ 1,028 $ (4,754) $ (210) $ 4,735
<FN>
1/ Represents losses incurred on write-offs less amounts recovered. The 1992 amount includes
reductions of $3,472 due to the sale of Clark Material Handling Company to the Terex
Corporation on July 31, 1992.
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VME GROUP N.V.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
-16-
VME GROUP N.V.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
* Report of Independent Accountants.
* Consolidated Balance Sheet as of December 31, 1994 and 1993.
* Consolidated Statement of Operations for each of the years
in the three year period ended December 31, 1994.
* Consolidated Statement of Cash Flows for each of the years
in the three year period ended December 31, 1994.
* Notes to Consolidated Financial Statements.
SUPPLEMENTAL SCHEDULE
II Valuation and Qualifying Accounts
SCHEDULES OMITTED
* Other schedules required by Regulation S-X are omitted because of
absence of the conditions under which they are required or because
information called for is shown in the financial statements and
notes thereto.
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BP America Building Telephone 216 781 3700
200 Public Square
27th Floor
Cleveland, Ohio 44114-2301
Price Waterhouse LLP
Report of Independent Accountants
To the Board of Directors and
Shareholders of VME Group N.V.
In our opinion, based upon our audits and the report of other auditors, the
accompanying consolidated balance sheet and the related consolidated
statements of operations and of cash flows present fairly, in all material
respects, the financial position of VME Group N.V. and its subsidiaries at
December 31, 1994 and 1993, and the results of their operations and their
cash flows for each of the three years in the period ended December 31,
1994, in conformity with generally accepted accounting principles in the
United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of certain subsidiaries, which statements reflect total assets
of $489,725,000 and $412,300,000 at December 31, 1994 and 1993,
respectively, and total revenues of $648,270,000, $511,000,000 and
$586,800,000 for the three years in the period ended December 31, 1994,
respectively. Those statements were audited by other auditors whose report
thereon has been furnished to us, and our opinion expressed herein, insofar
as it relates to the amounts included for these subsidiaries, is based
solely on the report of the other auditors. We conducted our audits of
these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a
reasonable basis for the opinion expressed above.
As discussed in Notes 3 and 19, the Company changed its method of
accounting for income taxes and postretirement benefits effective January
1, 1993.
/s/ Price Waterhouse LLP
Cleveland, Ohio
February 27, 1995, except
as to Note 24, which is
as of March 6, 1995
-18-
VME GROUP N.V.
CONSOLIDATED BALANCE SHEET
(Amounts in millions, except share and per share amounts)
December 31,
1994 1993
ASSETS
Current assets:
Cash and cash equivalents $ 58.9 $ 36.2
Receivables 213.0 167.9
Inventories 319.7 271.2
Other assets 68.8 48.0
Total current assets 660.4 523.3
Long-term assets:
Property, plant and equipment, net 158.9 152.8
Other assets 13.8 17.9
Goodwill 120.0 84.3
Total assets $ 953.1 $ 778.3
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 142.2 $ 90.3
Short-term debt 16.5 52.2
Current portion of long-term debt 8.3 4.3
Other liabilities 242.1 152.1
Total current liabilities 409.1 298.9
Long-term liabilities:
Debt 54.5 127.1
Shareholders' loans 70.0 70.0
Pension liability 58.6 80.9
Other 40.4 23.0
Total liabilities 632.6 599.9
Commitments and contingencies
Minority interests 10.1 20.0
Shareholders' equity:
Common stock: $516 par value - 129.0 129.0
authorized 600,000 shares;
issued and outstanding
250,000 shares
Paid in capital 80.9 80.9
Retained earnings (deficit) 97.9 (34.2)
Cumulative translation adjustments 26.1 7.0
Pension adjustments (23.5) (24.3)
Total shareholders' equity 310.4 158.4
________ ________
Total liabilities and
shareholders' equity $ 953.1 $ 778.3
======== ========
The accompanying notes are an integral part of these financial statements.
-19-
VME GROUP N.V.
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in millions, except per share amounts)
Year Ended December 31,
1994 1993 1992
Sales $1,566.0 $1,239.3 $1,357.3
Cost of sales (1,141.8) (958.0) (1,169.3)
Gross profit 424.2 281.3 188.0
Selling, general and
administrative expense (226.8) (211.3) (237.4)
Restructuring cost - - (18.7)
Other income (expense) 12.6 (5.3) (6.6)
Operating income (loss) 210.0 64.7 (74.7)
Financial income and expense :
Interest income 7.7 5.8 8.4
Interest expense (18.0) (32.2) (47.0)
Interest expense, net (10.3) (26.4) (38.6)
Income (loss) before income taxes,
minority interests and effect
of change in accounting 199.7 38.3 (113.3)
Benefit (provision) for income taxes (66.5) (17.9) 23.4
Income (loss) before
minority interests and effect
of change in accounting 133.2 20.4 (89.9)
Minority interests (1.1) (2.7) (3.7)
Income (loss) before effect
of change in accounting 132.1 17.7 (93.6)
Effect of change in accounting for
income taxes - 12.3 -
Net income (loss) $ 132.1 $ 30.0 $ (93.6)
======== ======== ========
Per share information :
Income (loss) before effect of
change in accounting $ 528.40 $ 70.95 $(374.47)
Effect of change in accounting
for income taxes - 49.14 -
Net income (loss) $ 528.40 $120.09 $(374.47)
========= ========= =========
The accompanying notes are an integral part of these financial statements.
-20-
VME GROUP N.V.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in millions)
Year Ended December 31,
1994 1993 1992
Cash flows from operating activities:
Net income (loss) $ 132.1 $ 30.0 $ (93.6)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 31.0 31.5 42.5
Effect of change in accounting for
income taxes - (12.3) -
(Gain) loss on sale of fixed assets
and subsidiaries (1.1) 0.3 (5.3)
Minority interest in net income 1.1 2.7 3.7
Undistributed losses
of affiliates - 0.3 0.2
Increase (decrease) in cash flow
from changes in:
Receivables (12.7) (32.9) 10.0
Inventories (23.3) 21.0 75.8
Accounts payable 16.2 25.6 23.5
Accrued expenses 80.9 16.8 (11.4)
Pension liability (27.9) 5.6 9.8
Deferred taxes 5.4 3.7 (36.1)
Other (9.5) (6.8) 0.7
Net cash provided by
operating activities 192.2 85.5 19.8
Cash flows from investing activities:
Proceeds from sale of fixed assets 2.6 14.1 19.2
Capital expenditures (24.7) (21.3) (29.8)
Contribution received for
joint venture interest 3.2 6.0 -
Sale of subsidiaries - - 2.6
Purchase of minority interest
in Zettelmeyer (39.9) - -
Decrease (increase) in other assets 5.2 7.4 (16.9)
Net cash provided by (used in)
investing activities (53.6) 6.2 (24.9)
Cash flows from financing activities:
Net payments on line of
credit borrowings (39.8) (178.7) (21.5)
Proceeds from issuance of debt 0.1 73.0 -
Debt repayment (80.9) (46.2) (59.5)
Proceeds from financing arrangements - - 59.1
Proceeds from shareholders' loans - - 70.0
Capital contribution - - 30.0
Net cash provided by (used in)
financing activities (120.6) (151.9) 78.1
Effect of exchange rate changes on cash 4.7 (4.9) (4.9)
Net increase (decrease) in cash and
cash equivalents 22.7 (65.1) 68.1
Cash and cash equivalents,
beginning of year 36.2 101.3 33.2
Cash and cash equivalents, end of year $ 58.9 $ 36.2 $ 101.3
======= ======= =======
The accompanying notes are an integral part of these financial statements.
-21-
Page 1
VME GROUP N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in millions)
Note 1 - Basis of Presentation and Principles of Consolidation
VME Group N.V. (the Company, VME) is a Netherlands holding company formed on
March 28, 1985 to hold, together with Clark Equipment Company (Clark) and AB
Volvo, the common stock of its two significant operating subsidiaries, VME
Americas Inc. (VMEA), a Delaware Corporation, and VME Holding Sweden AB
(VMEHS), a Swedish corporation. AB Volvo and Clark until December 22, 1993,
held equal cross-ownership positions in VMEA and VMEHS. On December 22, 1993,
Clark and AB Volvo contributed their respective ownership interests in VMEA
and VMEHS to VME Group N.V., which resulted in VMEA and VMEHS becoming
wholly-owned subsidiaries of the Company. Such contributions were accounted
for as transactions between entities under common control. Accordingly,
financial statements of the Company have been prepared on a historical cost
basis and reflect such contributions on a retroactive basis for all periods
presented.
Investments and results of operations of companies in which the Company holds
more than 50% of the issued capital stock, are included in the consolidated
accounts. Companies in which the Company holds investments between 20% and
50% are accounted for utilizing the equity method of accounting and investments
below 20% are accounted for at cost. All material balances and transactions
between the entities comprising the Company have been eliminated.
Note 2 - Description of Business
The Company is engaged in the design, manufacture and marketing of
off-highway construction and earth-moving equipment in most world markets. This
equipment is comprised of wheel loaders, articulated and rigid haulers and
hydraulic excavators. The majority of sales are made to end users through a
worldwide network of affiliated and independent distributors. The Company
does not have significant exposure to any individual customer or distributor.
The sale of replacement parts is an important component of the Company's
business.
Note 3 - Summary of Significant Accounting Policies
Revenue Recognition
Revenues are recognized upon shipment of units and service parts. A provision
is made for discounts, returns and recourse obligations under dealer financing
arrangements.
Inventories
Inventories of non-U.S. operations are valued at the lower of cost utilizing
the first-in, first-out (FIFO) method or market. Substantially all U.S.
owned inventories are valued at the lower of cost utilizing the last-in,
first-out (LIFO) method or market.
-22-
Page 2
Note 3 - Summary of Significant Accounting Policies (cont'd)
Properties and Depreciation
Property, plant and equipment are carried at cost. Expenditures for
maintenance and repairs are charged to income as incurred and expenditures for
major renewals and betterments are capitalized. Depreciation is provided
over the useful lives of the assets using primarily the straight-line method.
Properties retired or sold are removed from the property accounts with gains
or losses on disposal included in income.
The useful lives of the assets are primarily as follows :
Years
Buildings 25 - 50
Machinery and equipment 5 - 10
Motor vehicles 5
Furniture and fixtures 3
Goodwill
Goodwill represents the excess of the total costs of businesses acquired over
the fair market value of their net assets. Goodwill is being amortized on the
straight-line method over a period of 40 years. Accumulated amortization
expense was $10.4 in 1994 and $6.3 in 1993.
Management periodically assesses the need to record provisions for the
impairment of long-lived assets by comparing their best estimate of
undiscounted future cash flows before interest payments to the net book value
of significant assets or businesses, including goodwill. Management considers
current business plans, the cyclical nature of the global earth-moving and
construction equipment industry and other factors. If projected cash flows
are less than the assets' recorded value, impairment would be recorded using
a fair value concept. Fair value is computed utilizing a discounted cash flow
model.
Management also periodically considers the appropriateness of the remaining
economic life of goodwill.
Warranties
Provision is made currently for estimated future costs that are expected to
be incurred under product warranties presently in force.
Pension Plans
The Company accrues the cost of pension and retirement plans which cover
substantially all employees. Benefits are based on employees' years of
service and compensation. Pension costs, for defined benefit plans, are
primarily computed using the unit credit method. Non-U.S. plans are funded in
accordance with local laws and income tax regulations. The board of directors
adopted a plan in 1994 to substantially decrease its underfunded U.S. pension
status by 1996. U.S. plans' assets are invested primarily in listed stocks,
guaranteed investment contracts and corporate bonds.
Product Liability
The Company accrues its best estimate of the most likely amount of settlement
or claim liability for all asserted claims. For unasserted claims, the
Company records an estimate of liability for incurred but not reported claims
based on historical amounts of claims and settlements and reporting lag time.
-23-
Page 3
Note 3 - Summary of Significant Accounting Policies (cont'd)
Income Taxes
In January 1993, the Company adopted Statement of Financial Accounting
Standard No. 109 (FAS 109) "Accounting for Income Taxes". The adoption of FAS
109 changes the method of accounting for income taxes from the deferred
method (APB 11) to an asset and liability approach. Previously, the Company
deferred the past tax effects of timing differences between financial
reporting and taxable income. The asset and liability approach requires the
recognition of deferred tax liabilities and assets for the expected future
tax consequences or temporary differences between the carrying amount and the
tax bases of assets and liabilities. The adoption resulted in the recognition
of a net tax benefit of $12.3. No provision for income taxes is made on
$160.4 of undistributed earnings from consolidated subsidiaries, which have
been or will be reinvested, and it is not practicable to quantify the amount
of such taxes if remitted.
Derivative Financial Instruments
The Company attempts to limit its financial exposure to the effects of
potential currency exchange rate fluctuations on balance sheet positions and
cash flows corresponding to expected cross border transactions. The Company
utilizes currency swap contracts to hedge balance sheet positions, and
forward exchange and purchased option contracts to hedge future cash flows
and avoid speculative positions which may impact expected profitability. The
Company limits its use of financial instruments so that it is reasonably
assured that the transactions it intends to protect will occur. Because the
Company bases its hedging on expected net currency cash flows and does not
designate its currency contracts as hedges of specific balance sheet items or
firm currency commitments, it does not achieve hedge accounting treatment.
Accordingly, all exchange contracts are marked to market each period end and
recognized as Other income (expense).
Fair Value of Financial Instruments
Pursuant to Financial Accounting Standard No. 107, "Disclosures about Fair
Value of Financial Instruments", the carrying amount of cash, trade receivables
and payables approximates fair value because of the short maturity of
those instruments. The carrying value of the Company's long-term debt is
considered to approximate the fair value of these instruments based on the
borrowing rates currently available to the Company for loans with similar
terms and maturities.
The fair value of derivatives, which is equal to their carrying amount,
generally reflects the estimated amounts that the Company would receive or
pay to terminate the contracts at year end, thereby taking into account the
current unrealized gains or losses of open contracts. Market quotes are
available for all of the Company's derivative financial instruments.
-24-
Page 4
Note 3 - Summary of Significant Accounting Policies (cont'd)
Foreign Currency Translation
Foreign currency translation of substantially all assets and liabilities of
non-U.S. affiliates is computed using period end currency exchange rates;
equity is translated utilizing historical rates. Income and expenses are
tranlated using average exchange rates for the period. For subsidiaries whose
business activities are based mainly on the U.S. dollar or who operate in a
"highly inflationary economy", the financial statements are remeasured into
U.S. dollars using: (1) current exchange rates at the balance sheet date for
all liabilities and current assets except inventories and prepaid expenses,
(2) exchange rates at the time of acquisition for prepaid expenses, inven-
tories and properties, and (3) weighted average monthly exchange rates for
the year for income and expense amounts, except depreciation and cost of
goods sold. The resulting translation gains and losses are included in
income.
The dollar is the functional currency for the U.S., Canadian and Brazilian
subsidiaries. For all other subsidiaries, the local currency of the country
in which the subsidiary operates and transacts its principal business is the
relevant functional currency. Such countries include Sweden, Germany, Great
Britain, France and Spain.
Exchange (gains) and losses included in the Consolidated Statement of
Operations were $(3.0), $18.8 and $15.9 in 1994, 1993 and 1992, respectively.
Reclassifications
Certain reclassifications have been made for all years presented in the
Consolidated Financial Statements to conform to the classifications adopted
in 1994.
Note 4 - Acquisitions and Dispositions
On January 1, 1994, the Company increased its holding in Zettelmeyer
Baumaschinen GmbH (Zettelmeyer) to 100% by acquiring the remaining 30%
minority interest for $39.9. The fair value of the assets acquired and
obligations assumed approximated their net book values; accordingly, the
additional purchase consideration was charged principally to goodwill.
During 1993, the Company contributed stock and the book value of specific
assets and liabilities in return for an 80.5% ownership interest in a company
established as a joint venture with Hitachi Construction Machinery Company,
Ltd (HCMC). HCMC contributed cash equal to 19.5% of the total net assets. The
joint venture company, Euclid-Hitachi Heavy Equipment, Inc (Euclid-Hitachi),
is consolidated in the Company's financial statements. HCMC will increase its
ownership interest in Euclid-Hitachi by purchasing additional shares from the
Company and subscribing for new shares of Euclid-Hitachi prior to December
31, 1996. The terms of the joint venture agreement limit HCMC to an ownership
interest of less than 50% in Euclid-Hitachi.
-25-
Page 5
Note 5 - Statement of Cash Flows
VME considers all highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents.
The following payments were made for:
Year Ended December 31,
1994 1993 1992
Interest $ 18.4 $ 35.2 $ 63.7
Income taxes 9.1 6.3 6.4
Note 6 - Supplementary Information to Statement of Operations
Costs and expenses include :
Year Ended December 31,
1994 1993 1992
Research and development $ 49.3 $ 38.5 $ 59.9
Maintenance and repairs 26.3 21.8 28.0
Other Income (expense) includes :
1994 1993 1992
Exchange gains (losses) $ 10.0 $ (0.9) $ (11.3)
Gain (loss) on sales of assets 1.1 (0.3) 5.3
Other 1.5 (4.1) (0.6)
$ 12.6 $ (5.3) $ (6.6)
====== ====== =======
A charge in 1992 for restructuring costs of $18.7 has been made in costs and
expenses relating to the decision to restructure the Group's distribution
organization and production facilities in North America, to improve cost
efficiency and increase the manufacturing productivity and to relocate the
German distribution company. The remaining restructuring reserve relating to
these activities was $4.3 and $5.9 at year end 1994 and 1993, respectively. The
restructuring reserve relating to Akermans Verkstad AB aggregated $1.3 and $1.4
at year end 1994 and 1993, respectively.
Note 7 - Distributor Financing Arrangements
As a service to distributors in selected geographic areas, the Company
has financing agreements with certain financial institutions to assist in the
financing of distributor inventory. In general, these agreements require the
Company to make monthly interest payments to the financial institutions for a
predetermined period or until the inventory is sold by the distributor,
whichever occurs first.
Financing expenses incurred in conjunction with the above agreements were $8.7,
$5.7 and $5.5 in 1994, 1993 and 1992, respectively, and were reflected in
selling expenses. The interest rates charged on the above agreements are
adjusted based on changes in the prime rate. The financial institutions'
aggregate distributor receivable balances were $182.8 and $142.2 at December 31,
1994 and 1993, respectively. The Company's credit risk with respect to these
receivable balances is not significant.
-26-
Page 6
Note 8 - Income Taxes
The provision for income taxes is based on separate tax computations for each
entity. Income (loss) before income taxes and minority interests is reported
below:
Year Ended December 31,
1994 1993 1992
Netherlands $ 0.9 $ 0.1 $ 0.7
U.S. 15.4 4.1 (16.0)
Other, principally Sweden 183.4 34.1 (98.0)
$ 199.7 $ 38.3 $(113.3)
======= ======= =======
The provision (benefit) for income taxes consists of the following:
Year Ended December 31,
Current tax expense: 1994 1993 1992
Netherlands - - -
U.S. 3.8 7.9 -
Other, principally Sweden 56.1 8.2 13.2
59.9 16.1 13.2
Deferred tax expense (benefit):
Netherlands - - -
U.S. 4.6 (1.5) -
Other, principally Sweden 2.0 3.3 (36.6)
6.6 1.8 (36.6)
_______ _______ _______
Total income tax expense (benefit) $ 66.5 $ 17.9 $ (23.4)
======= ======= =======
Tax legislation in Sweden and certain other countries allows companies to
reduce their current taxable income through allocations to untaxed reserves
at which time, deferred tax provisions are recorded. Reversal of such
reserves generates current taxable income and a reduction of the deferred tax
liabilities. Deferred income taxes apply to temporary differences primarily
resulting from allocations to untaxed reserves (principally inventory and
fixed assets related) and other differences between income before income
taxes for financial reporting and tax purposes. Deferred tax benefits in 1992
are mainly comprised of the reversal of untaxed reserves of $21.6 and sale
and lease-back of property in the amount of $13.3.
Following is a reconciliation of income tax expense (benefit) from the U.S.
statutory rate to the effective tax rate (the U.S. statutory rate is utilized
as the Netherlands holding company does not generate significant taxable
income) :
Year Ended December 31,
1994 1993 1992
Provision (benefit) for taxes at
US statutory rate $ 69.9 $ 13.1 $ (38.5)
Effect of permanent differences
between tax and financial income (1.6) 2.0 (0.5)
Losses with no available tax benefits 1.2 2.0 17.6
Earnings taxed at other than U.S. rate (11.1) 0.1 (6.1)
Change in valuation allowance resulting
from utilization of net operating
loss carryforwards (2.2) (7.5) -
Accrual for potential disallowances 11.0 8.3 1.1
Other (0.7) (0.1) 3.0
Provision (benefit) for taxes at
effective tax rate $ 66.5 $ 17.9 $ (23.4)
======== ======== =======
-27-
Page 7
Note 8 - Income Taxes (continued)
Deferred tax assets and liabilities are comprised of the following:
1994 1993
Deferred tax assets relating to :
Accounts receivable $ 0.5 $ 0.3
Inventories 6.7 6.0
Fixed assets 8.3 8.0
Pension and postretirement benefits 11.1 14.7
Expense accruals and reserves 13.7 11.5
Net operating loss and credit carryforwards 14.4 17.0
Other 6.1 5.0
Total deferred tax assets before
valuation allowance 60.8 62.5
Deferred tax assets valuation allowance (27.2) (31.0)
Net tax asset $ 33.6 $ 31.5
====== ======
Deferred tax liabilties relating to :
Accounts receivable $ 0.1 $ -
Inventories 7.7 8.0
Fixed assets 13.0 12.7
Pensions 7.6 5.2
Other 11.9 5.2
Gross deferred tax liabilities $ 40.3 $ 31.1
====== ======
Euclid-Hitachi's Canadian subsidiary has $16 of loss carryforwards, which
expire in 1998, available to reduce future taxable income. In addition, for
Canadian income tax purposes, this subsidiary has available certain
depreciation allowances aggregating $5.7, which may be utilized to reduce future
taxable income in succeeding years. The amount of such depreciation allowance
that may be deducted in any one specific year is subject to certain limitations.
The Company's Brazilian subsidiary has $1.9 in tax credits that can be offset
against future income up to 1998.
Other subsidiaries in the Company have $6.9 of operating loss carryforwards
available to offset future taxable income, most of which expire in the years
1996 through 1998.
Note 9 - Receivables
December 31,
Receivables consist of the following: 1994 1993
Notes receivable - trade $ 24.5 $ 12.4
Trade receivables 196.2 158.8
Other receivables 6.1 6.9
Less: Allowance for doubtful accounts (13.8) (10.2)
$ 213.0 $ 167.9
======= =======
-28-
Page 8
Note 10 - Inventories
December 31,
Inventories consist of the following: 1994 1993
Sales products $ 198.9 $ 187.3
Work in process 80.7 57.4
Raw materials 73.0 59.5
Reserves (32.9) (33.0)
$ 319.7 $ 271.2
======= =======
FIFO values of U.S. inventories exceeded LIFO values by $6.8 in 1994 and $6.9
in 1993. Inventories valued using the LIFO method comprised 20% and 17% of
consolidated inventories in 1994 and 1993, respectively.
Note 11 - Property, Plant and Equipment
Property, plant and equipment consist of the following:
December 31, 1994
Accumulated Net
Cost Depreciation Book Value
Land and land improvements $ 16.1 $ 4.8 $ 11.3
Buildings 120.3 48.5 71.8
Machinery and equipment 260.4 184.6 75.8
$ 396.8 $ 237.9 $ 158.9
======= ======= =======
December 31, 1993
Accumulated Net
Cost Depreciation Book Value
Land and land improvements $ 14.6 $ 4.1 $ 10.5
Buildings 110.7 41.2 69.5
Machinery and equipment 234.7 161.9 72.8
$ 360.0 $ 207.2 $ 152.8
======= ======= =======
Depreciation expense, including amortization on capitalized leases, was
$27.8, $29.1 and $39.6 for the years 1994, 1993 and 1992, respectively.
-29-
Page 9
Note 12 - Short-term Debt
Short-term debt consists of the following:
December 31, 1994
Line of
Interest Credit Amount
Currencies Rate * Available Outstanding
North America - $ 2.5 $ -
Europe USD,FRF,ESP,DEM 7.37% 103.3 8.2
Brazil USD 11.88% 28.0 8.3
Australia - 5.5 -
$ 139.3 $ 16.5
======= =======
December 31, 1993
Line of
Interest Credit Amount
Currencies Rate * Available Outstanding
Europe DEM,USD,ESP,FRF 6.84% $ 83.1 $ 43.6
Brazil USD 8.06% 21.7 5.1
Australia AUD 5.85% 5.5 3.5
$ 110.3 $ 52.2
======= =======
* Represents weighted average year-end rates.
The line of credit arrangements require payment of variable interest rates and
commitment fees ranging from zero to 0.75% per year of the individual line of
credit.
Note 13 - Other Current Liabilities
Other current liabilities consist of the December 31,
following: 1994 1993
Salaries, wages and other employee costs $ 67.1 $ 50.7
Warranty obligations 35.1 28.7
Dealer discounts 5.8 5.4
Income taxes 71.1 18.1
Accrued expenses and deferred income 40.7 21.9
Other 22.3 27.3
$ 242.1 $ 152.1
======= =======
-30-
Page 10
Note 14 - Long-Term Debt
December 31,
The following is a summary of long-term debt: 1994 1993
Swedish Kronor Bank notes with fixed and
variable interest rates ranging
from 6.8% to 13.2% payable in annual
installments over a ten-year period $ 5.0 $ 5.6
Revolving Multi Currency Credit Agreement
of $250.0 with variable interest rates
ranging from 6.1% to 8.9% and for
a term of three years - 44.1
Credit Facility Agreement with a German
bank of DEM 45.0 with an interest
rate of 10.6% and for a term of
three years - 26.0
Capital lease obligations in various
currencies with fixed and variable
interest rates ranging from 6.8%
to 11.8% payable through 2035 14.9 14.4
Financing obligation in Swedish Kronor
under sale leaseback transaction to be
repaid over 20 years ending August, 2012
bearing interest fixed at 10.05%
through 1998 42.9 41.3
Total 62.8 131.4
Less: Current portion of long-term debt (8.3) (4.3)
Total long-term debt $ 54.5 $ 127.1
======= =======
The Company leases buildings, land and equipment under capital lease and
financing arrangements. The related net assets of $27.4 and $26.6 in 1994 and
1993, respectively, are recorded in property, plant and equipment.
Long-term debt at December 31, 1994 matures as follows:
1995 $ 8.3
1996 4.9
1997 5.0
1998 5.0
1999 5.1
Thereafter 34.5
$ 62.8
=======
On December 22, 1994, the Company signed an unsecured $150 multicurrency
revolving credit agreement with a group of banks for a term of five years.
Borrowings on this facility will bear interest in a range from LIBOR +0.5% to
LIBOR +0.9%. The Company is subject to leverage and cash flow covenants under
this facility. In addtion, the Company is obligated to pay a commitment fee
ranging from 0.25% to 0.45% on the undrawn and uncancelled amount of the
facility. Concurrently, the Company cancelled the $250 revolving credit facility
signed on February 22, 1993 and received release of assets pledged as security
to this agreement.
On December 30, 1994, the Company paid and cancelled the DEM 45 credit facility
agreement and thereby obtained release of the pledged shares in Zettelmeyer
Baumaschinen GmbH.
-31-
Page 11
Note 15 - Shareholders' loans
Shareholders' loans totalling $70.0 with a term of three years were made by the
shareholders to the Company at the end of 1992. The loans were subordinated to
the $250.0 Revolving Credit Facility agreement and the DEM 45.0 Credit Facility
agreement until 1994, at which time they were no longer subordinated. The loans
bear interest of LIBOR plus 1.3% per annum and are due January 31, 1996.
Note 16 - Leases and Commitments
The Company incurred rent expense of $ 20.1, $17.0 and $22.7 in 1994, 1993 and
1992, respectively. Future minimum rental commitments under noncancellable
operating leases at December 31, 1994 are as follows:
1995 $ 20.4
1996 16.5
1997 13.0
1998 6.5
1999 5.9
Thereafter 36.8
The Company rents equipment to others under operating lease agreements. In
1994, 1993 and 1992, the Company received rental income of $14.1, $11.9 and
$9.5, respectively. The net book value of property leased to others aggregated
$17.6 and $15.4 at December 31, 1994 and December 31, 1993, respectively.
Future minimum rental income under noncancellable operating leases at December
31, 1994 is as follows:
1995 $ 10.0
1996 1.4
1997 0.8
1998 0.5
1999 0.3
Thereafter 3.3
Note 17 - Derivative Financial Instruments and Risk Management
The Company operates internationally, giving rise to significant exposure to
fluctuations in currency exchange rates. Derivative financial instruments are
utilized by the Company to reduce those risks. The Company does not hold or
issue financial instruments for trading purposes.
Counterparty credit risk
The risk associated with counterparty default on financial instruments is
measured as the cost of replacing, at prevailing market prices, those contracts
with a fair value in excess of their contractual amount at period end. The
counterparties to the financial instruments listed below are major international
financial institutions with high credit ratings. Accordingly, the Company
believes its credit risk exposure to be insignificant.
-32-
Page 12
Note 17 - Derivative Financial Instruments and Risk Management (cont'd)
Currency risk management
The Company enters into various types of financial instruments in managing its
currency exchange risk, as indicated in the following table :
December 31, 1994 December 31, 1993
Contract Fair Contract Fair
Amount Value Amount Value
Forward exchange contracts $ 232.6 $ 3.6 $ 205.0 $ 2.0
Currency options 305.5 10.3 56.0 -
Currency swap contracts 135.6 (2.0) 53.4 0.9
See Note 3, "Summary of Significant Accounting Policies - Fair Value of
Financial Instruments" for definition of fair value. Positive carrying amounts
represent assets which are recorded in other current assets. Negative carrying
amounts represent liabilities which are recorded in other current liabilities.
There are no deferred gains or losses on the contracts, all of which expire in
the next year. The net unrealized currency gain recognized was $1.8 and $2.9 in
1994 and 1993, respectively.
Note 18 - Pensions
The total pension expense charged to operations for 1994, 1993 and 1992 was
$38.0, $33.8 and $47.8, respectively.
In Sweden, most of the plans are administered by governmental or
quasi-governmental organizations. Such plans are accounted for in accordance
with Financial Accounting Standard No. 87 (FAS 87). In Sweden, the Company
accrues pension costs, but is only required to fund a portion of these costs.
Annual pension costs include an interest factor on the unfunded obligations.
Actuarial information, as supplied by the governmental agency for the plans
they administer, indicates that the accrued pension costs approximate the
actuarially computed value of vested and non-vested plan benefits.
Pension expense for the defined contribution plans, principally Swedish, was
$28.1, $24.9 and $37.3 in 1994, 1993 and 1992, respectively. Certain employees
are also covered by insured plans which supplement the benefits received from
the defined contribution plans.
In the United States, Canada and for certain employee groups in Europe,
principally Sweden, employees are covered by defined benefit plans.
-33-
Page 13
Note 18 - Pensions (continued)
U.S. and European (Principally Swedish) Plans
Net periodic pension cost on defined benefit plans consists of the following:
Year ended December 31,
1994 1993 1992
Europe U.S. Europe U.S. Europe U.S.
Service cost - benefits earned
during the period $ 1.1 $ 0.9 $ 0.8 $ 1.0 $ 1.1 $ 0.9
Interest cost on projected
benefit obligation 4.4 8.1 5.3 8.3 6.6 8.3
Actual return on plan assets - 0.6 - (5.0) - (3.2)
Net amortization and deferral (0.7) (4.3) (0.6) (0.1) (0.7) (2.0)
$ 4.8 $ 5.3 $ 5.5 $ 4.2 $ 7.0 $ 4.0
===== ====== ====== ===== ====== ======
Assumptions used to develop the net periodic pension cost at the beginning of
each year were as follows:
Year ended December 31,
1994 1993 1992
Europe U.S. Europe U.S. Europe U.S.
Discount rate 10.0% 7.5% 10.0% 8.5% 10.0% 8.5%
Long term rate
of return on plan assets - 9.1 - 9.1 - 9.1
Rate of increase in compensation
levels 4.5 4.0 4.5 4.0 6.0 5.5
The following table sets forth the discount rates and funded
status of these plans at:
Year ended December 31,
1994 1993
Europe U.S. Europe U.S.
Weighted average discount rate used in
determining the
benefit obligations below : 8.5% 8.7% 10.0% 7.5%
==== ==== ===== ====
Actuarial present value of accumulated
benefit obligation:
Vested benefits $ 43.8 $ 94.7 $ 47.0 $ 99.8
Non-vested benefits - 3.7 - 5.3
Accumulated benefit obligation $ 43.8 $ 98.4 $ 47.0 $105.1
====== ====== ====== ======
Projected benefit obligation $(47.2)$(101.1) $(47.4)$(109.1)
Plan assets at fair value - 75.8 - 69.7
Projected benefit obligation in
excess of plan assets (47.2) (25.3) (47.4) (39.4)
Unrecognized net loss from actuarial
experiences - 26.7 - 29.0
Unrecognized prior service cost - 0.1 - 0.1
Unamortized net(asset) liability existing
at date of adoption of FAS 87 (5.5) 5.0 (5.5) 5.5
Liabilities for other plans (2.3) - (3.8) -
Adjustment required to recognize
minimum liability - (29.1) - (30.6)
Total pension liability (55.0) (22.6) (56.7) (35.4)
Less: current portion - 19.0 - 11.2
Total long-term pension liability $(55.0) $ (3.6) $(56.7) $(24.2)
====== ======= ======= =======
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Page 14
Note 18 - Pensions (continued)
Canadian Plans
Net periodic pension income included the following :
Year ended December 31,
1994 1993 1992
Service cost - benefits earned during
the period $ 0.3 $ 0.2 $ 0.3
Interest cost on projected benefit
obligation 0.5 0.3 1.0
Actual return on plan assets (0.8) (1.1) (1.5)
Net amortization and deferral (0.2) (0.2) (0.3)
Net periodic pension income $ (0.2) $ (0.8) $ (0.5)
======= ======= =======
Assumptions used to develop the net periodic pension income at the beginning of
each year were as follows :
1994 1993 1992
Discount rate 7.5% 9.5% 9.5%
Long-term rate of return on plan assets 7.5% 9.5% 9.5%
Rate of increase in compensation levels 4.0% 5.5% 5.5%
The following table sets forth the Plans' funded status at:
December 31,
Actuarial present value of accumulated 1994 1993
benefit obligation :
Vested benefits $ 5.3 $ 4.4
Non-vested benefits 0.4 0.3
Accumulated benefit obligation $ 5.7 $ 4.7
====== ======
Projected benefit obligation $ (6.0) $ (4.9)
Plan assets at fair value 10.7 8.2
Plan assets in excess of projected
benefit obligation 4.7 3.3
Unrecognized net gain from actuarial
experiences (2.3) (1.7)
Unrecognized prior service cost 0.9 0.7
Unamortized net asset existing at date
of adoption of FAS 87 (0.9) (0.8)
Prepaid pension asset $ 2.4 $ 1.5
====== ======
Other Plans
Certain subsidiaries' pension plans and postretirement benefits are funded by
a government-administered program. Contributions to the defined contribution
pension plans are based on payroll costs and have been fully provided for
through December 31, 1994.
-35-
Page 15
Note 19 - Postretirement and Postemployment Benefits
The Company adopted Statement of Financial Accounting Standard No. 106
"Employers Accounting for Postretirement Benefits Other Than Pensions" effective
January 1, 1993. This statement requires the Company to recognize, during the
working career of those employees who could become eligible for such benefits,
the estimated cost of providing certain postretirement benefit costs (other than
pensions) for those employees when they retire.
The Company and its subsidiaries provide certain health care and life insurance
benefits for its U.S. retired employees. Substantially all of the Company's U.S.
employees may become eligible for those benefits if they reach normal retirement
age while still working for the Company. Those benefits and similar benefits for
active employees are provided through an insurance company whose premiums are
based on the benefits paid during the year. The total postretirement health care
and life insurance expense charged to income was $11.7, $12.1 and $6.7 in 1994,
1993 and 1992, respectively.
Annual net postretirement benefit costs under the Company's benefit plan are
determined on an actuarial basis. The Company's current policy is to pay these
benefits as they become due. The Company has elected to recognize the transition
obligation of $84.9 over a 20-year period.
Net periodic postretirement benefit cost consists
of the following :
1994 1993
Service cost $ 0.7 $ 0.7
Interest cost on projected benefit obligations 6.8 7.1
Amortization of transition obligation 4.2 4.3
Total net periodic pension cost $ 11.7 $ 12.1
======= =======
The accumulated postretirement benefit obligation
is comprised as follows:
Retired participants $ 70.3 $ 79.3
Fully eligible active plan participants 4.9 6.5
Other active plan participants 7.5 11.6
Total accumulated postretirement benefit
obligation $ 82.7 $ 97.4
Unrecognized gain (loss) 5.1 (11.2)
Unrecognized transition obligation (76.4) (80.6)
Accrued postretirement benefit cost other
than pensions $ 11.4 $ 5.6
====== =======
The discount rate used in determining the accumulated benefit obligation was
8.8%. The assumed health care cost trend rates result in per capita net incurred
medical claims increasing 11% under age 65 and 9% over age 65. These rates
decrease to 7% for both over and under age 65 by the year 2005. If the assumed
health care cost trend rate were increased by 1%, the accumulated postretirement
benefit obligation as of December 31, 1994, would increase $10.4.
-36-
Page 16
Note 19 - Postretirement and Postemployment Benefits (continued)
In November 1992, the Financial Accounting Standards Board issued Statement of
Financial Accouting Standard No. 112 "Employers' Accounting for Postemployment
Benefits". This statement establishes accounting standards for employers who
provide benefits such as supplemental unemployment compensation, severance
benefits, salary continuation and other benefits to former or inactive employees
after employment but before retirement.
The Company adopted this statement effective January 1, 1994 and recognized a
liability of $0.5 for the year ended December 31, 1994.
Note 20 - Shareholders' Equity
VME Group N.V. acquired from AB Volvo and Clark Equipment Company all
outstanding shares in VMEA and VMEHS on December 22, 1993 in exchange for newly
issued shares in VME Group N.V. Shares of common stock in the amount of 250,000
were reflected as if outstanding for all periods reported.
Dividends are declared and paid in Dutch guilders. With the approval of the
Supervisory Board, the Managing Board may determine that distributions be made
payable in another currency.
-37-
Page 17
Note 20 - Shareholders' Equity (continued)
Changes in Shareholders' equity are as follows:
Retained Cumulative
Common Paid-In Earnings Tranlation Pension
Stock Capital (Deficit) Adjustments Adjustments Total
January 1, 1992 $129.0 $ 50.9 $ 29.4 $ 48.4 $ (4.6) $253.1
Capital contribution - 30.0 - - - 30.0
Pension liability
in excess of
unrecognized prior
service cost - - - - (7.4) (7.4)
Net loss - - (93.6) - - (93.6)
Cumulative
Translation
Adjustment - - - (27.3) - (27.3)
December 31, 1992 $129.0 $ 80.9 $(64.2) $ 21.1 $(12.0) $154.8
Pension liability
in excess of
unrecognized prior
service cost - - - - (12.3) (12.3)
Net income - - 30.0 - - 30.0
Cumulative
Translation
Adjustment - - - (14.1) - (14.1)
December 31, 1993 $129.0 $ 80.9 $(34.2) $ 7.0 $(24.3) $158.4
Pension liability
in excess of
unrecognized prior
service cost - - - - 0.8 0.8
Net income - - 132.1 - - 132.1
Cumulative
Translation
Adjustment - - - 19.1 - 19.1
December 31, 1994 $129.0 $ 80.9 $ 97.9 $ 26.1 $(23.5) $310.4
====== ====== ====== ====== ====== ======
<FN>
The capital contribution in 1992 of $30.0 was equally contributed by the two shareholders.
-38-
/TABLE
Page 18
Note 21 - Contingencies
The Company is engaged in a number of legal preceedings arising in the ordinary
course of business. Of these claims and lawsuits, some involve claims for
damages for injury, death or property damage arising from alleged defects in
products of the Company or products of Clark Equipment Company or its
subsidiaries for which the Company assumed responsibility at the time of its
formation. Most of the product-related cases are in varying stages of pretrial
completion.
The ultimate results of these claims and lawsuits at December 31, 1994, is not
determinable, but in the opinion of the management any ultimate loss resulting
therefrom will not materially affect the financial position or results of
operations of the Company.
The U.S. Internal Revenue Service (IRS) has completed its examination of VMEA's
federal income tax returns for the years 1988-1991. An examination report which
proposed substantial adjustments was issued by IRS in April 1994. During 1994,
the Company submitted its protest in challenge to the IRS report. Issues which
may give rise to examination adjustments include a worthless stock deduction,
acquired inventories and imputed interest on advances to subsidiaries. In addi-
tion, the Company has received notice of proposed tax adjustments from the
Belgian and Swedish tax authorities. If all of the proposed adjustments were
resolved unfavorably to the Company, the Company has estimated its total
liability with interest and penalties would be approximately $50. Management
believes that the ultimate outcome of those proposed adjustments will not have
a material adverse effect on the financial position or results of operations of
the Company.
The Company has agreements with selected distributors and customers to
repurchase a limited volume of parts at pre-established prices and conditions.
The liability for parts return was $6.9 and $5.6 at December 31, 1994 and 1993,
respectively, and is included in other current liabilities. The Company is also
obligated, under certain conditions, to repurchase some dealer or customer
inventory and rental assets funded by financial institutions aggregating $12.0
at December 31, 1994. In the opinion of management, adequate provisions have
been made for costs which might be incurred in connection with the agreements.
The Company has guaranteed secured obligations of others and discounted notes
with recourse in an aggregate amount of $65.6 at December 31, 1994.
-39-
Page 19
Note 22 - Segment Information
The Company operates in one industry segment, the manufacturing and marketing
of construction equipment and related parts. Intersegment geographic sales to
affiliated companies are invoiced at prices estimated to represent fair
market value to the affiliated company performing further manufacturing or
distribution activities. Following is financial information by geographic
segment:
North
Europe America Other Elimin. Total
Sales
Year ended December 31, 1994
Sales to unaffiliated
customers $1,001.2 $ 429.8 $ 135.0$ - $1,566.0
Intersegment sales 300.9 49.0 0.7 (350.6) -
$1,302.1 $ 478.8 $ 135.7$(350.6) $1,566.0
======== ======= ====== ======= ========
Year ended December 31, 1993
Sales to unaffiliated
customers $ 807.2 $ 327.6 $ 104.5$ - $1,239.3
Intersegment sales 185.9 61.1 0.5 (247.5) -
$ 993.1 $ 388.7 $ 105.0$(247.5) $1,239.3
======= ======= ====== ======= ========
Year ended December 31, 1992
Sales to unaffiliated
customers $ 936.4 $ 330.4 $ 90.5$ - $1,357.3
Intersegment sales 127.3 56.7 4.1 (188.1) -
$1,063.7 $ 387.1 $ 94.6$(188.1) $1,357.3
======== ======= ====== ======= ========
North
Europe America Other Total
Income before taxes and effect
of change in accounting
Year ended December 31, 1994 $ 169.8 $ 17.5 $ 11.3 $ 198.6
Year ended December 31, 1993 29.5 8.7 (2.6) 35.6
Year ended December 31, 1992 (68.3) (37.0) (11.7) (117.0)
North
Europe America Other Elimin. Total
Identifiable assets
Year ended December 31, 1994 $1,177.2 $ 212.6 $ 65.1$(501.8) $953.1
Year ended December 31, 1993 990.5 196.6 50.1 (458.9) 778.3
Year ended December 31, 1992 1,042.8 209.4 58.4 (340.7) 969.9
-40-
Page 20
Note 23 - Related Party Transactions
The following is a summary of related party transactions:
AB Volvo and Clark and
Subsidiaries Subsidiaries
1994 VME Transactions
Sales $ 30 $ -
Purchased materials 62 10
Parts distribution service fee - 8
Other expense 7 1
Interest expense 2 2
1994 VME Balances
Accounts receivable 5 -
Accounts payable 6 -
1993 VME Transactions
Sales $ 20 $ -
Purchased materials 39 19
Parts distribution service fee - 7
Other expense 10 1
Interest expense 2 2
1993 VME Balances
Accounts receivable 6 1
Accounts payable 2 -
1992 VME Transactions
Sales $ 18 $ 2
Purchased materials 51 23
Parts distribution service fee - 9
Other expense 13 -
1992 VME Balances
Accounts receivable 2 1
Accounts payable 2 2
Note 24 - Subsequent events
On March 6, 1995, AB Volvo and Clark Equipment Company announced an agreement
whereby Volvo will purchase Clark's 50 percent shareholding in the Company.
Approval from the EU commission and Canadian authorities are a prerequisite
for the acquisition and the objective is that the acquisition will become
effective on March 31, 1995. The Company will thereafter be a fully owned
subsidiary of Volvo.
-41-
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors
of VME Group N.V.
Our audits of the consolidated financial statements referred to in our
report dated February 27, 1995, except as to Note 24, which is as of
March 6, 1995 appearing in the 1994 consolidated financial statements of
VME Group N.V. (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included
an audit of the Financial Statement Schedule listed in Item 14(a) of this
Form 10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial statements.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Cleveland, Ohio
February 27, 1995, except
as to Note 24, which is as of
March 6, 1995
-42-
SCHEDULE II
VME GROUP N.V.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
Balance at Charged to
Beginning of Cost and Other Balance at
Description Period Expenses Add (Deduct) End of Period
Year ended December 31, 1994:
Allowance for doubtful accounts $ 10.2 $ 4.1 $ 0.9 * $ 13.8
(1.4) **
Year ended December 31, 1993:
Allowance for doubtful accounts $ 12.2 $ 2.4 $ (1.4) * $ 10.2
(3.0) **
Year ended December 31, 1992:
Allowance for doutbful accounts $ 15.4 $ (0.3) $ (2.3) * $ 12.2
(0.6) **
<FN>
* Primarily represents translation adjustments
** Write-offs and disposals
-43-
KPMG Bohlins
KPMG Bohlins AB Mail Address Telephone +46(31)614800
Norra Hamngatan 22 P.O. Box 11908 Telefax +46(31)152655
Gothenburg S-404 39 Gothenburg Telex 21762BJGS
Sweden Sweden Corporate identity number
556043-4465
Independent Auditor's Report
To the Board of Directors of VME Holding Sweden AB:
We have audited the consolidated balance sheets of VME Holding Sweden AB
and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income (loss) and cash flows for each of the
years in the three year period ended December 31, 1994 (expressed in U.S.
dollars and not presented separately herein). In connection with our audit
of the aforementioned consolidated financial statements, we also audited
the related consolidated financial statement schedule II, (expressed in
U.S. dollars and not presented separately herein). These consolidated
financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in Sweden which are similar in all material respects with
auditing standards in the United States. 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
included 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.
The consolidated financial statements and financial statement schedule have
been translated in accordance with the standards set forth in Statement of
Financial Accounting Standards No. 52 from Swedish Kronor (the currency of
the country where VME Holding Sweden AB is incorporated and in which it
operates) into U.S. dollars for purposes of inclusion in the consolidated
financial statements of VME Group N.V.
In our opinion, for purposes of inclusion in the consolidated financial
statements of VME Group N.V., the translated financial statements present
fairly, in all material respects, the consolidated financial position of
VME Holding Sweden AB and subsidiaries at December 31, 1994 and 1993 and
the consolidated results of their operations and their cash flows for each
of the years in the three-year period ended December 31, 1994 in conformity
with generally accepted accounting principles in the United States. Also,
-44-
in our opinion, the related consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements,
presents fairly in all material respects the information shown therein.
Gothenburg, Sweden
February 27, 1995
/s/ KPMG Bohlins AB
KPMG Bohlins AB
Head Office Mail address Tel +46+8+7239100
Member Firm of Tegelbacken 4, P.O. Box 16106 Fax +46+8+105258
Klynveld Peat Marwick Stockholm S-103 23 Stockholm
Goerdeler Sweden Sweden
-45-
EXHIBIT LIST AND INDEX
Filed Herewith Unless
Exhibit Description Otherwise Indicated
(2)(a) Underwriting Agreement Incorporated by reference
dated May 6, 1994 among to Exhibit (2)(a) to
Automotive Products Company, Registrant's Form 8-K
Clark Automotive Products filed on May 27, 1994
Corporation, and Clark with respect to
Equipment Company and CS Registrant's disposition
First Boston Corporation of Clark Automotive
and Merrill, Lynch, Pierce, Products Corporation
Fenner & Smith Incorporated
as representatives of the
Underwriters
(2)(b) Subscription Agreement dated Incorporated by reference
May 6, 1994 among Automotive to Exhibit (2)(b) to
Products Company, Clark Registrant's Form 8-K
Automotive Products Corporation, filed on May 27, 1994
Clark Equipment Company, CS with respect to
First Boston Limited, Merrill Registrant's disposition
Lynch International Limited, ABN of Clark Automotive
AMRO Bank N.V., Banque Bruxelles Products Corporation
Lambert S.A., Cazenove & Co.,
Dresdner Bank Aktiengesellschaft
and UBS Limited
(2)(c) Agreement of Purchase and Sale Incorporated by reference
dated April 20, 1994 between to Exhibit (2) to
Clark Equipment Company and Registrant's Form 8-K
White Consolidated Industries filed on May 27, 1994
Inc. with respect to
Registrant's acquisition
of Blaw-Knox Construction
Equipment Corporation
(2)(d) Agreement and Plan of Merger Incorporated by reference
dated as of February 3, 1995 by and to Exhibit (c)(1) to the
among Clark Equipment Company, Clark Registrant's Schedule
Acquisition Sub, Inc. and Club Car, 14D-1 and Schedule 13D
Inc. dated February 8, 1995
(2)(e) Stock Purchase Agreement dated as ---
of March 5, 1995 by and among
Aktiebolaget Volvo, Clark Equipment
Company and Clark Hurth Components
Marketing Company
(3)(a) Restated Certificate of Incorporated by reference
Incorporation to Exhibit (3)(a) to
Registrant's Form 10-K
for the year 1992
-46-
Filed Herewith Unless
Exhibit Description Otherwise Indicated
(3)(b) By-laws, as amended ---
(3)(c) Amended and Restated Rights Incorporated by reference
Agreement, dated as of to Exhibit (3)(c) to
August 14, 1990 between Registrant's Form 10-Q
Clark Equipment Company and for the period ended
Harris Trust and Savings Bank September 30, 1990
(4)(a) Indenture dated as of August 1, Incorporated by reference
1983 between Clark Equipment to Exhibit (4)(a) to
Company and Harris Trust and Registrant's Form 10-K
Savings Bank as trustee, as to for the year 1992
which Pittsburgh National Bank
is successor trustee, as
supplemented by a First
Supplemental Indenture dated as
of February 1, 1991 and a
Second Supplemental Indenture
dated as of April 1, 1993
(4)(b) Specimen form of 9-3/4% Note Incorporated by reference
issued pursuant to Exhibit to Exhibit (4)(b) to
(4)(a) Registrant's Form 10-K
for the year 1992
(4)(c) Master Credit Agreement with ---
Chemical Bank, as Agent,
dated as of April 6, 1994
(4)(d) Amendment No. 1 dated ---
February 21, 1995 to Master
Credit Agreement with
Chemical Bank, as Agent,
dated as of April 6, 1994
(4)(e) Registrant is a party to several Pursuant to paragraph
other long term debt agreements (4)(iii)(A) of Item
under which, in each case, the 601(b) of Regulation
total amount of securities S-K, Registrant agrees
authorized does not exceed 10% to furnish a copy of
of the assets of Registrant and these instruments to
its consolidated subsidiaries the Securities and
Exchange Commission
upon request
(10)(a) Employment contract with Leo Incorporated by reference
J. McKernan, Chairman, President to Exhibit (10)(a) to
and Chief Executive Officer, Registrant's Form 10-K
dated November 12, 1992 for the year 1992
(10)(b) Employment contract with Frank ---
M. Sims, Director and Senior
Vice President, dated
February 15, 1995
-47-
Filed Herewith Unless
Exhibit Description Otherwise Indicated
(10)(c) Employment contract with Thomas Incorporated by reference
L. Doepker, Vice President and to Exhibit (10)(d) to
Treasurer, dated November 12, Registrant's Form 10-K
1992 for the year 1992
(10)(d) Employment contract with Bernard Incorporated by reference
D. Henely, Vice President and to Exhibit (10)(e) to
General Counsel, dated Registrant's Form 10-K
November 12, 1992 for the year 1992
(10)(e) Employment contract with William Incorporated by reference
N. Harper, Vice President and to Exhibit (10)(f) to
Controller, dated November 12, Registrant's Form 10-K
1992 for the year 1992
(10)(f) Employment contract with Paul Incorporated by reference
R. Bowles, Vice President, to Exhibit (10)(i) to
dated March 13, 1992 Registrant's Form 10-K
for the year 1991
(10)(g) Employment contract with John Incorporated by reference
J. Reynolds, Vice President, to Exhibit 10(i) to
dated November 14, 1991 Registrant's Form 10-K
for the year 1992
(10)(h) 1985 Stock Option Plan Incorporated by reference
to Exhibit 10(j) to
Registrant's Form 10-K
for the year 1991
(10)(i) Stock Purchase Program (adopted Incorporated by reference
as of May 10, 1994) to Exhibit (10)(a) to
Registrant's Form 10-Q
for the period ended
June 30, 1994
(10)(j) Stock Acquisition Plan for Incorporated by reference
Non-Employee Directors to Exhibit A to
Registrant's Proxy
Statement for the Annual
Meeting of Stockholders
held on May 10, 1994
(10)(k) 1994 Long Term Incentive Plan Incorporated by reference
to Exhibit B to
Registrant's Proxy
Statement for the Annual
Meeting of Stockholders
held on May 10, 1994
-48-
Filed Herewith Unless
Exhibit Description Otherwise Indicated
(10)(l) Incentive Compensation Plan ---
for Corporate Office Management
(amended and restated effective
as of January 1, 1994)
(10)(m) Incentive Compensation Plan ---
for Business Unit Management
(amended and restated effective
as of January 1, 1994)
(10)(n) Performance Unit Plan Incorporated by reference
(effective November 9, 1992) to Exhibit (10)(s) to
Registrant's Form 10-K
for the year 1992
(10)(o) Form of Grant Letter used to Incorporated by reference
award Performance Units to Exhibit (10)(t) to
pursuant to the Performance Registrant's Form 10-K
Unit Plan (effective for the year 1992
November 9, 1992)
(10)(p) Form of Grant Letter used to Incorporated by reference
award Performance Units in to Exhibit (10)(u) to
1991 Registrant's Form 10-K
for the year 1992
(10)(q) Clark Equipment Company ---
Deferred Benefit Trust
(10)(r) Clark Equipment Company ---
Supplemental Retirement Income
Plan for Certain Executives
(10)(s) Amendment No. 1 to Clark ---
Equipment Company Supplemental
Retirement Income Plan for
Certain Executives
(10)(t) Amendment No. 2 to Clark ---
Equipment Company Supplemental
Retirement Income Plan for
Certain Executives
(10)(u) Clark Equipment Company ---
Supplemental Executive
Retirement Trust
(10)(v) Clark Equipment Company ---
Supplemental Executive
Retirement Plan
(10)(w) Amendment No. 1 to Clark ---
Equipment Company Supplemental
Executive Retirement Plan
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Filed Herewith Unless
Exhibit Description Otherwise Indicated
(10)(x) Amendment No. 2 to Clark ---
Equipment Company Supplemental
Executive Retirement Plan
(10)(y) Form of Participation Agreement ---
for Clark Equipment Company
Supplemental Retirement Income
Plan for Certain Executives
(10)(z) Form of Participation Agreement ---
for Clark Equipment Company
Supplemental Executive Retirement
Plan
(10)(aa) Retirement Plan for Outside ---
Directors
(13) Portions of Clark Equipment ---
Company 1994 Annual Report
to Stockholders which are
incorporated by reference
into this Form 10-K
(22) Subsidiaries of Clark Equipment ---
Company
(23)(a) Consent of Independent Accountants- ---
Price Waterhouse LLP
(23)(b) Consent of Independent Accountants- ---
KPMG Bohlins AB
(27) Financial Data Schedules ---
(99) Computation of Ratio of Earnings to ---
Fixed Charges for the twelve
months ended December 31, 1994
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