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
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-871
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 ]
As of March 25, 2002, 1,435,600 shares of common stock of the Registrant
were outstanding. Of the total outstanding shares of common stock on
March 25, 2002, 1,430,300 were held of record by Bucyrus Holdings, LLC, which
is controlled by American Industrial Partners Capital Fund II, L.P. and may be
deemed an affiliate of Bucyrus International, Inc., and 4,800 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
FORWARD-LOOKING STATEMENTS
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 ITEM 1 - BUSINESS,
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 Bucyrus International, Inc. (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 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:
unforeseen 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; success in recruiting and retaining managers and key employees;
and wage stability and cooperative labor relations; plant capacity and
utilization.
ITEM 1. BUSINESS
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 Bucyrus Holdings, LLC
("Holdings"). Holdings is controlled by American Industrial Partners Capital
Fund II, L.P.
The Company designs, manufactures and markets large excavation machinery
used for surface mining, and has a comprehensive aftermarket business that
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,
oil sands, diamonds, phosphate, bauxite and other minerals throughout the
world.
Industry Overview
The large-scale surface mining equipment manufactured and serviced by the
Company is used primarily in coal, copper, oil sands and iron ore mines
throughout the world. Growth in demand for these commodities is a function
of, among other things, 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 regions may assume
greater importance.
Markets Served
The Company's products are used in a variety of different types of mining
operations, including coal, copper, iron ore, gold, phosphate, bauxite,
diamonds and oil sands, as well as for land reclamation. The Company
manufactures surface mining equipment primarily for large companies and
certain governmental entities engaged in the mining of coal, iron ore, oil
sands 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 and oil sands mining
operations have accounted for an increasingly greater share of new machine
sales.
Copper. The copper industry has seen a consolidation of large
producers in recent years. 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 dropped to an eleven-year low in early 1999 but increased
later in 1999 and during 2000 due to increasing world demand. In 2001,
the price of copper dropped again due to reduced demand and increased
inventory levels. Copper prices have recovered in recent months and are
forecasted to rise in 2002 and 2003.
Oil Sands. A unique geological formation of oil sands exists in the
Athabasca region of northern Alberta, Canada. Although these sands were
discovered many years ago, oil companies did not actively pursue
exploiting these potential oil reserves in earnest until the Arab oil
embargo of 1973. Various methods to mine the sands, separate the oil
from the sands and process the resultant bitumen into crude oil were
tried with varying degrees of success between 1973 and 1993. The
commercial viability of mining these reserves remained in question until
two pioneering companies began employing electric mining shovels to
exploit these reserves. Since the implementation of these new extraction
methods, the cost to produce a barrel of oil has dropped to as low as
$10. Clearly this has made the exploitation of these reserves very
economical. Since 1993, both companies have engaged in major expansions
of their previous operations. There is further expansion planned and
there are two new "greenfield" operations in various phases of
construction. The Company expects that the Athabasca oil sands will
evolve into a major market for electric mining shovels in years to come.
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 Africa. 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
demand for coal is improving due to increases in the price of oil and
natural gas in recent years. This improved demand has resulted in price
increases for coal.
Iron Ore. Iron ore is the only source of primary iron and is mined
in more than 50 countries. In recent years, the five largest producers,
accounting for approximately 75% of world production, have been China,
Brazil, Australia, Russia and India. Demand for iron ore has declined
recently due to a decrease in steel prices.
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 electric mining shovel offers the lowest cost per ton
of mineral mined. Its use is determined by size of operation and the
availability of electricity. 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 1,400 tons and having dipper capacities from 12 to
90 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
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 $70,000,000 per
dragline. The average life of a dragline is 20 to 30 years.
Draglines are one of the industry's largest and most expensive type
of equipment, but offer the customer the lowest cost per ton of material
moved. 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 complete equipment management under Maintenance
and Repair Contracts ("MARCs"), 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, Peru and South Africa.
Minserco, Inc. ("Minserco"), a wholly-owned subsidiary of the Company with
offices in Florida, Kentucky, Texas and Wyoming, provides repair and
maintenance services. These services include comprehensive structural and
mechanical engineering, non-destructive testing, repairs and rebuilds of
machine components, product and component upgrades, contract maintenance,
turnkey erections, machine moves and dragline operation.
To meet the increasing aftermarket demands of larger mining customers,
the Company offers comprehensive 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 Argentina,
Australia, Canada, Chile and Peru are the Company's 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.
Acquisitions
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 strengthened the Company's
position in the oil sands area of Western Canada.
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.
On August 21, 1997, the Company entered into an Agreement and Plan of
Merger (the "AIP Agreement") with Holdings and Bucyrus Acquisition Corp.
("BAC"), a wholly-owned subsidiary of Holdings. 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 Holdings resulted in a change in control of voting interest.
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
2001, 2000 and 1999, one customer accounted for approximately 11%, 11% and
16%, 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, 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
Minserco. 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 generally 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 2001, 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 outside the United States. Over the
past five years, over 80% 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
$209,108,000 in 2001, $213,972,000 in 2000 and $250,735,000 in 1999.
Approximately $201,872,000 or 88% of the Company's backlog of firm orders at
December 31, 2001 represented orders for export sales compared with
$148,258,000 or 90% at December 31, 2000 and $165,762,000 or 89% at
December 31, 1999.
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 Joy Global, Inc., 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 Joy Global, Inc. 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 ensure 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 $229,752,000 at December 31, 2001 and
$164,408,000 at December 31, 2000. Approximately 53% of the backlog at
December 31, 2001 is not expected to be filled during 2002.
Inventories
Inventories at December 31, 2001 were $102,008,000 compared with
$101,126,000 at December 31, 2000. At December 31, 2001 and December 31,
2000, finished goods inventory (primarily replacement parts) totalled
$75,525,000 and $75,924,000, respectively.
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
$5,900,000 in 2001, $7,299,000 in 2000 and $7,646,000 in 1999. 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 to date. 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, 2001, the Company employed approximately 1,600 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, 2005 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. 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. On January 4, 2002, the Company
completed a sale and leaseback transaction for a portion of the land and
buildings in South Milwaukee. The term of the lease is twenty years with
options for renewals. The remainder of the land and buildings in South
Milwaukee continue to be owned by the Company.
The Company leases a facility in Memphis, Tennessee, which has
approximately 90,000 square feet of floor space and is used as a central parts
warehouse. The current lease is for three years commencing in July 2001.
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
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.
To the date of this Report, the Company has been named as a co-defendant
in 275 personal injury liability asbestos cases, involving approximately 1,400
plaintiffs, which are pending in various state courts. In all of these cases,
insurance carriers have accepted or are expected to accept the defense of such
cases. These cases are in preliminary stages and the Company does not believe
that costs associated with these matters will 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 1970's. 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 PRP's, including the Company,
received Administrative Orders issued by the EPA pursuant to Section 106a of
CERCLA to perform site capping and flood control remediation at the Millcreek
site. The Company was one of eighteen parties responsible for a share of the
cost of such work. Final remedial work in the form of the installation of a
municipal golf course as cover is substantially complete and is expected to be
fully performed in 2002. The remaining parties have shared such cost per
capita to date but such cost may be subject to reallocation before the
conclusion of the case. The former remediation contractor, IT Corporation,
commenced suit against the Millcreek Dumpsite Group, an unincorporated
association including the Company and other cooperating Millcreek PRP's (the
"Group"), for breach of contract claims in an amount in excess of $1,000,000.
The Group is defending and negotiating settlement of IT's claim. At
December 31, 2001, the Company does not believe that its remaining potential
liability in connection with this site will have a material effect on the
Company's financial position or results of operations, although no assurance
can be given to that effect.
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. It is
possible that 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.
The Company has previously been named as a potentially responsible party
under CERCLA and analogous state laws at other sites throughout the United
States. The Company believes it has determined its cleanup liabilities with
respect to these sites and it does not believe that any such remaining
liabilities, if any, either individually or in the aggregate, will have a
material adverse effect on the Company's business, financial condition or
results of operations. The Company cannot, however, guarantee that it will
not incur additional liabilities with respect to these sites in the future,
the costs of which could be material, nor can the Company 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
disposal 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.
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 2001.
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 Holdings 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.
ITEM 6. SELECTED FINANCIAL DATA
Predecessor
September 24- January 1-
Years Ended December 31, December 31, September 23,
2001 2000 1999 1998 1997 1997(a)
(Dollars In Thousands, Except Per Share Amounts)
Consolidated Statements
of Operations Data:
Net sales $290,576 $280,443 $318,635 $315,838 $ 95,212 $211,465
Net earnings (loss) $(10,463) $(32,797) $(22,575) $ (8,264) $ (7,158) $ (4,874)
Net earnings (loss)
per share of
common stock (b):
Basic $ (7.29) $ (22.76) $ (15.65) $ (5.75) $ (5.00) $ (.48)
Diluted $ (7.29) $ (22.76) $ (15.65) $ (5.75) $ (5.00) $ (.47)
Adjusted
EBITDA (c) $ 31,236 $ 9,583 $ 20,742 $ 35,967 $ 9,936 $ 18,704
Cash dividends per
common share $ - $ - $ - $ - $ - $ -
Consolidated Balance
Sheets Data:
Total assets $355,745 $367,766 $416,987 $417,195 $406,107 N/A
Long-term debt $222,188 $217,813 $214,009 $202,308 $174,612 N/A
<FN>
(a) As a result of purchase accounting due to the acquisition of the Company by Holdings 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.
(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 and inventory fair value
adjustment charged to cost of products sold. Adjusted EBITDA for the year ended December 31, 2001 includes
$8,704,000 of income from the sale of shares the Company received as a result of the demutualization of The
Principal Financial Group.
</FN>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Acquisition
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 acquisitions involving the Company, assets and
liabilities were adjusted to their estimated fair values. 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, 2001, 2000 and 1999 were as
follows:
2001 2000 1999
(Dollars in Thousands)
Working capital $114,336 $101,342 $122,194
Current ratio 3.0 to 1 2.4 to 1 2.6 to 1
The increase in working capital and current ratio in 2001 was primarily
due to reduced accounts payable and the reclassification of borrowings under
the revolving term loan at Bucyrus Canada Limited from current to long-term
liabilities (see below). The decrease in working capital and current ratio in
2000 was primarily due to a decrease in inventories as a result of the sale of
two stock shovels in the fourth quarter of 2000 and reduced finished parts
inventories.
The Company is presenting below a calculation of earnings (loss) before
interest expense, income taxes, depreciation, amortization, loss on sale of
fixed assets and loss on fixed asset impairment ("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 the Loan and Security Agreement (and previously
the Credit Agreement (see below)). EBITDA as defined under these agreements
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 Loss Before Income Taxes to Adjusted EBITDA:
Years Ended December 31,
2001 2000 1999
(Dollars in Thousands)
Loss before income taxes $ (7,053) $(29,732) $(20,196)
Depreciation 11,240 11,393 11,200
Amortization 5,414 5,821 5,648
Loss on sale of fixed
assets and loss on
fixed asset impairment(1) 750 7 4,392
Interest expense 20,885 22,094 19,698
________ ________ ________
Adjusted EBITDA(2)(3) $ 31,236 $ 9,583 $ 20,742
(1) The 1999 amount includes a fixed asset impairment charge of
$4,372,000 at the manufacturing facility in Boonville, Indiana.
(2) Adjusted EBITDA for the years ended December 31, 2001, 2000 and
1999 was reduced by restructuring charges of $899,000, $2,689,000 and
$1,212,000, respectively, primarily related to severance payments and related
matters.
(3) Adjusted EBITDA for the year ended December 31, 2001 includes
$8,704,000 of income from the sale of shares the Company received as a result
of the demutualization of The Principal Financial Group (see below).
On March 7, 2002, the Company entered into a Loan and Security Agreement
with GMAC Business Credit, LLC (the "Loan and Security Agreement") which
provides the Company with an $85,000,000 senior secured revolving credit
facility. The Loan and Security Agreement expires on January 2, 2003.
Outstanding borrowings bear interest equal to either the prime rate plus an
applicable margin (2% to 2.25%) or LIBOR plus an applicable margin (3.5% to
3.75%) and are subject to a borrowing base formula based on receivables and
inventory. The Company must maintain at all times a minimum availability of
$5,000,000. Substantially all of the domestic assets of the Company
(excluding real property) and the receivables and inventory of the Company's
Canadian subsidiary are pledged as collateral under the Loan and Security
Agreement. In addition, all outstanding capital stock of the Company and its
domestic subsidiaries as well as 65% of the capital stock of the Company's
foreign subsidiaries are pledged as collateral. Proceeds from the Loan and
Security Agreement were used to repay in full all outstanding borrowings under
the Revolving Credit Facility and Bucyrus Canada Limited revolving term loan
(see below).
The Company previously had a Credit Agreement with Bank One, Wisconsin
(the "Credit Agreement") which provided 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. Borrowings under the
Revolving Credit Facility were at variable interest rates and were subject to
a borrowing base formula based on receivables, inventory and machinery and
equipment. Direct borrowings under the Revolving Credit Facility at
December 31, 2001 and 2000 were $63,100,000 and $64,450,000, respectively, at
a weighted average interest rate of 5.3% and 10.0%, respectively. At
December 31, 2001 and 2000, there were $1,200,000 and $12,391,000,
respectively, of standby letters of credit outstanding under all Company bank
facilities. The amount available for direct borrowings under the Revolving
Credit Facility at December 31, 2001 was $8,444,000, which was net of
$2,900,000 that was used for the March 15, 2002 interest payment on the Senior
Notes (see below). The Credit Agreement contained a number of financial
covenants and other covenants with respect to the Company's liquidity and
capital resources. At December 31, 2001, the Company was in compliance with
these covenants.
The Company has outstanding $150,000,000 of its 9-3/4% Senior Notes due
2007 (the "Senior Notes") which were issued pursuant to an indenture among the
Company, certain of its domestic subsidiaries (the "Guarantor Subsidiaries"),
and BNY Midwest Trust Company, as Trustee (the "Senior Notes Indenture"). The
Senior Notes mature on September 15, 2007. Interest thereon is payable each
March 15 and September 15. During 2000, Holdings acquired $75,635,000 of the
Company's $150,000,000 issue of Senior Notes. Holdings has agreed as part of
the Loan and Security Agreement (and previously the Credit Agreement) to defer
the receipt of interest on these Senior Notes during the life of the
agreement. At December 31, 2001 and 2000, $11,062,000 and $5,859,000,
respectively, of interest was accrued and payable to Holdings. The amendment
to the Credit Agreement dated March 20, 2001 required Holdings to contribute
to equity of the Company a portion of the accrued interest. As a result, on
March 20, 2001, the Company recorded an equity contribution from Holdings and
a corresponding reduction in interest payable to Holdings in the amount of
$2,171,000, which represented accrued interest as of June 30, 2000 on the
Senior Notes acquired by Holdings. In addition, in 2001 Holdings made a cash
capital contribution to the Company in the amount of $1,093,000.
Both the Loan and Security Agreement and the Senior Notes Indenture
contain certain covenants which may affect the Company's liquidity and capital
resources. Also, both the Loan and Security Agreement 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 Loan and Security Agreement also contains a number of financial
covenants that require the Company (A) to maintain certain financial ratios,
including: (i) leverage ratio (as defined); and (ii) fixed charge coverage
ratio; and (B) to maintain minimum levels of EBITDA (as defined). Other
covenants exist which limit the ability of the Company 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 Guarantor Subsidiaries 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. At December 31, 2001, the Company was in compliance with these
covenants.
A failure to comply with the obligations contained in the Loan and
Security Agreement or the Senior Notes Indenture could result in an Event of
Default (as defined) under the Loan and Security Agreement 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.
In 1999, Bucyrus Canada Limited entered into a C$15,000,000 credit
facility with The Bank of Nova Scotia which was used to acquire certain assets
of Bennett & Emmott. The C$10,000,000 revolving term loan portion of this
facility incurred interest at the bank's prime lending rate plus 1.50%. The
amount outstanding under the revolving term loan portion was C$9,124,693 and
C$8,145,000 at December 31, 2001 and 2000, respectively. On March 7, 2002,
proceeds from the Loan and Security Agreement were used to repay The Bank of
Nova Scotia revolving term loan in full and this portion of the facility was
terminated. As a result, borrowings under the revolving term loan were
classified as long-term at December 31, 2001. The C$5,000,000 non-revolving
term loan portion is payable in monthly installments to 2004 and bears
interest at the bank's prime lending rate plus 2%. The amount outstanding
under the non-revolving term loan portion was C$3,960,000 and C$4,400,000 at
December 31, 2001 and 2000, respectively. This credit facility contains
covenants which, among other things, require Bucyrus Canada Limited to
maintain a minimum current ratio and tangible net worth. At December 31,
2001, Bucyrus Canada Limited was in compliance with these covenants.
The Company, as a policyholder, received an allocation of 369,918 shares
as a result of the demutualization of The Principal Financial Group. Net
proceeds from the sale of these shares by the Company were $8,704,000 and is
recognized as Other Income in the Consolidated Statement of Operations for the
year ended December 31, 2001. Of the net proceeds, $2,974,000 was received on
January 2, 2002 for shares sold in 2001 and is included in Receivables in the
Consolidated Balance Sheet at December 31, 2001.
On January 4, 2002, the Company completed a sale and leaseback
transaction for a portion of its land and buildings in South Milwaukee,
Wisconsin. The term of the lease is twenty years with options for renewals.
Net proceeds received from this transaction were $7,157,000 less $500,000
required as a security deposit.
Operating Losses
The Company is highly leveraged and low sales volumes in recent years
have had an adverse effect on the Company's liquidity. While the Company
believes that current levels of cash and liquidity, together with funds
generated by operations, funds available from the Loan and Security Agreement
and funds received from the sale of shares in The Principal Financial Group
and sale and leaseback of the South Milwaukee land and buildings, will be
sufficient to permit the Company to satisfy its debt service requirements and
fund operating activities for the foreseeable future, there can be no
assurances to this effect and the Company continues to closely monitor its
operations. The Company is currently exploring additional financing
alternatives to extend or replace the Loan and Security Agreement.
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 performance will be sufficient for the Company to
maintain compliance with the financial covenants under the Loan and Security
Agreement and the Senior Notes Indenture, satisfy its debt service obligations
and fund operating activities under all circumstances. At this time, the
Company continues to believe that future cash flows will be sufficient to
recover the carrying value of its long-lived assets.
Capital Resources
At December 31, 2001, the Company had approximately $1,579,000 of open
capital appropriations. The Company's capital expenditures for the year ended
December 31, 2001 were $4,127,000 compared with $3,501,000 for the year ended
December 31, 2000. In the near term, the Company anticipates spending close
to current levels.
Capitalization
The long-term debt to equity ratio at December 31, 2001 and 2000 was
12.9 to 1 and 4.7 to 1, respectively. The increase in 2001 was primarily due
to the adjustment to record a minimum pension liability. Excluding this
adjustment, the long-term debt to equity ratio would have been 6.9 to 1. The
long-term debt to total capitalization ratio at December 31, 2001 and 2000 was
.9 to 1 and .8 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
Net Sales
Net sales for 2001 were $290,576,000 compared with $280,443,000 for 2000.
Net sales of repair parts and services for 2001 were $226,024,000 which was an
increase of 6.9% from 2000. Net machine sales for 2001 were $64,552,000,
which was a decrease of 6.3% from 2000. The changes between years were
primarily due to fluctuations in volume.
Net sales for 2000 were $280,443,000 compared with $318,635,000 for 1999.
Net sales of repair parts and services for 2000 were $211,518,000, which was
an increase of 3.5% from 1999. Net machine sales for 2000 were $68,925,000,
which was a decrease of 39.6% from 1999. The decrease in machine sales was
primarily due to low demand for new machines which the Company believes is
attributable to low mineral prices and to a reduction in dragline volume of
$22,911,000 as a result of the completion of a dragline in Australia in 1999.
Other Income
Other income for 2001 includes $8,704,000 from the aforementioned sale of
shares of The Principal Financial Group.
Cost of Products Sold
Cost of products sold for 2001 was $243,791,000 or 83.9% of net sales
compared with $239,134,000 or 85.3% of net sales for 2000 and $267,323,000 or
83.9% of net sales for 1999. The decrease in the cost of products sold
percentage for 2001 was primarily due to reduced warranty expense and
favorable manufacturing variances resulting from higher manufacturing
activity. Included in cost of products sold in 2000 was approximately
$1,300,000 of costs associated with the closing of the manufacturing facility
in Boonville, Indiana which was effective June 30, 2000. Cost of products
sold in 2000 was reduced by a $1,800,000 favorable adjustment related to
commercial issues. Also included in cost of products sold for 2001, 2000 and
1999 was $5,248,000, $5,038,000 and $4,856,000, 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 2001 were $42,095,000 or 14.5% of net sales compared with
$50,161,000 or 17.9% of net sales in 2000 and $53,631,000 or 16.8% of net
sales in 1999. Included in the amount for 2001 was $750,000 of losses on
disposals of fixed assets. Also, due to a reduction in new orders, the
Company has reduced a portion of its manufacturing production workforce
through layoffs and also reduced the number of its salaried employees. As a
result, restructuring charges of $899,000, $2,689,000 and $1,212,000 were
included in the amounts for 2001, 2000 and 1999, respectively. These charges
primarily related to severance payments and related matters. Included in
engineering and field service, selling, administrative and miscellaneous
expenses in 1999 was a fixed asset impairment charge of $4,372,000 related
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. In 2000, the Company closed its
manufacturing facility in Boonville, Indiana.
Interest Expense
Interest expense for 2001 was $20,885,000 compared with $22,094,000 for
2000 and $19,698,000 for 1999. The decrease in interest expense in 2001 was
primarily due to reduced interest rates on borrowings under the Revolving
Credit Facility. The increase in interest expense in 2000 compared to 1999
was primarily due to increased borrowings and higher interest rates under the
Revolving Credit Facility. Included in interest expense for 2001, 2000 and
1999 was $14,625,000 related to the Senior Notes. The interest expense in
2001 and 2000 on the Senior Notes includes $7,374,000 and $5,859,000,
respectively, related to the Senior Notes acquired by Holdings. Holdings has
agreed as part of the Loan and Security Agreement (and previously the Credit
Agreement) to defer the receipt of interest on these Senior Notes during the
life of the agreement.
Income Taxes
Income tax expense consists primarily of foreign taxes at applicable
statutory rates.
Net Loss
The net loss for 2001 was $10,463,000 compared with net losses of
$32,797,000 for 2000 and $22,575,000 for 1999. The improvement in 2001 was
due to the $8,704,000 of income from the sale of shares of The Principal
Financial Group and improvements in margin as a result of increased volume and
cost reduction efforts. The incremental loss for 2000 was primarily
attributable to lower volumes. Non-cash depreciation and amortization charges
were $16,654,000 in 2001 compared with $17,214,000 in 2000 and $16,848,000 in
1999.
New Orders and Backlog
New orders for 2001 were $355,920,000, which was an increase of 38.2%
from 2000. New machine orders for 2001 were $74,255,000, which was an
increase of 46.3% from 2000. The increase was in electric mining shovels.
New repair parts and service orders for 2001 were $281,665,000, which was an
increase of 36.2% from 2000. The increase for 2001 was primarily due to
orders received related to two long-term maintenance and repair contracts, a
machine move and a long-term mining contract. Revenues related to these
contracts will be recognized over multiple years. While copper prices remain
at low levels compared to the mid 1990's, coal has maintained a higher price
compared with recent years.
The Company's consolidated backlog at December 31, 2001 was $229,752,000
compared with $164,408,000 at December 31, 2000 and $187,278,000 at
December 31, 1999. Machine backlog at December 31, 2001 was $32,538,000,
which is an increase of 42.5% from December 31, 2000. Repair parts and
service backlog at December 31, 2001 was $197,214,000, which is an increase of
39.3% from December 31, 2000.
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 and Loan and Security Agreement through the
selection of LIBOR based borrowings or prime-rate based borrowings. The
Company also has certain other prime rate based borrowings. The Company's
Senior Notes are at a fixed interest rate. 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, 2001, 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, 2001 would have the effect of changing the
Company's interest expense on an annual basis by approximately $400,000.
Foreign Currency
Changes in foreign exchange rates can impact the Company's financial
position, results of operations and cash flow. 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 derivative instruments outstanding at December 31,
2001, 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.
New Accounting Pronouncement
On June 30, 2001 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). SFAS 142 establishes accounting and
reporting standards associated with goodwill and other intangible assets.
With the adoption of SFAS 142, goodwill will no longer be subject to
amortization, but instead will be subject to an evaluation for impairment at
least annually by applying a two-step fair-value-based test. Additionally,
intangible assets with indefinite lives will also no longer be amortized but
will be subject to an evaluation for impairment at least annually by applying
a lower-of-cost-or-market test. Intangible assets with finite lives will
continue to be amortized. The Company adopted SFAS 142 on January 1, 2002.
For goodwill, the Company must complete Step 1 of the goodwill transition
impairment test by June 30, 2002; if the fair value of the Company's reporting
units is below the carrying amounts, Step 2 of the goodwill transition
impairment test must be completed, and an impairment loss recognized, by
December 31, 2002. The adoption of SFAS 142 is expected to decrease goodwill
amortization expense in 2002 by $2,162,000. The Company is in the process of
completing an impairment analysis of its recorded intangible assets in
accordance with the provisions of SFAS 142. Intangible asset amortization
expense in 2002 will decrease by approximately $483,000.
Critical Accounting Policies
The Company's accounting policies are more fully described in Note A of
the Notes to Consolidated Financial Statements. As disclosed in Note A, the
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
about future events that affect the amounts reported in the financial
statements and accompanying footnotes. Future events and their affects cannot
be determined with absolute certainty. Therefore, the determination of
estimates requires the exercise of judgment. Actual results inevitably will
differ from those estimates, and such differences may be material to the
financial statements.
The most significant accounting estimates inherent in the preparation of
the Company's consolidated financial statements include estimates as to the
recovery of receivables, anticipated repayment dates of intercompany advances
to foreign subsidiaries, realizability of inventories, property, plant and
equipment and intangible assets, as well as those used in the estimation of
margin on the Company's contracts accounted for using the percentage-of-
completion method. Significant assumptions are also used in the determination
of liabilities related to product liability, warranty obligations and pension
and postretirement benefits. The process of determining significant estimates
is fact specific and takes into account factors such as historical experience,
current and expected economic conditions, product mix, and in some cases,
actuarial techniques. The Company re-evaluates these significant factors as
facts and circumstances dictate. Historically, actual results have not
differed significantly from those determined using the estimates described
above.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF OPERATIONS
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands, Except Per Share Amounts)
Years Ended December 31,
2001 2000 1999
REVENUES:
Net sales $290,576 $280,443 $318,635
Other income 9,142 1,214 1,821
________ ________ ________
299,718 281,657 320,456
________ ________ ________
COSTS AND EXPENSES:
Cost of products sold 243,791 239,134 267,323
Engineering and field
service, selling,
administrative and
miscellaneous expenses 42,095 50,161 53,631
Interest expense 20,885 22,094 19,698
________ ________ ________
306,771 311,389 340,652
________ ________ ________
Loss before income taxes (7,053) (29,732) (20,196)
Income taxes 3,410 3,065 2,379
________ ________ ________
Net loss $(10,463) $(32,797) $(22,575)
Net loss per share
of common stock:
Basic $(7.29) $(22.76) $(15.65)
Diluted $(7.29) $(22.76) $(15.65)
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands)
Years Ended December 31,
2001 2000 1999
Net loss $(10,463) $(32,797) $(22,575)
________ ________ ________
Other comprehensive
loss:
Foreign currency
translation
adjustments (6,300) (6,147) (3,223)
Minimum pension
liability adjustment (15,245) - -
________ ________ ________
Other comprehensive loss (21,545) (6,147) (3,223)
________ ________ ________
Comprehensive loss $(32,008) $(38,944) $(25,798)
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands, Except Per Share Amounts)
December 31, December 31,
2001 2000 2001 2000
LIABILITIES AND COMMON
ASSETS SHAREHOLDERS' INVESTMENT
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents $ 7,218 $ 6,948 Accounts payable and
Receivables 55,554 58,797 accrued expenses $ 47,760 $ 57,528
Inventories 102,008 101,126 Liabilities to customers on
Prepaid expenses and uncompleted contracts and
other current assets 5,827 5,993 warranties 6,008 5,459
________ ________ Income taxes 1,205 1,677
Short-term obligations 566 295
Total Current Assets 170,607 172,864 Current maturities of long-
term debt 732 6,563
OTHER ASSETS: ________ ________
Restricted funds on
deposit 582 550 Total Current Liabilities 56,271 71,522
Goodwill - net 55,660 57,821
Intangible assets - net 39,601 38,180 LONG-TERM LIABILITIES:
Other assets 12,092 11,798 Liabilities to customers
________ ________ on uncompleted contracts
and warranties 2,000 2,412
107,935 108,349 Postretirement benefits 13,277 13,869
Deferred expenses,
PROPERTY, PLANT AND EQUIPMENT: pension and other 33,775 10,375
Land 2,294 3,206 Interest payable to
Buildings and improvements 11,755 11,654 Holdings 11,062 5,859
Machinery and equipment 101,681 100,356 ________ ________
Less accumulated
depreciation (38,527) (28,663) 60,114 32,515
________ ________
LONG-TERM DEBT, less
77,203 86,553 current maturities 222,188 217,813
COMMON SHAREHOLDERS'
INVESTMENT:
Common stock - par
value $.01 per share,
authorized 1,700,000
shares, issued
1,444,650 shares 14 14
Additional paid-in
capital 147,715 144,451
Treasury stock, at cost -
9,050 shares (851) (851)
Accumulated deficit (90,416) (79,953)
Accumulated other
comprehensive loss (39,290) (17,745)
________ ________
17,172 45,916
________ ________ ________ ________
$355,745 $367,766 $355,745 $367,766
<FN>
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' INVESTMENT
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands)
Notes Accumulated
Additional Receivable Other
Common Paid-In Treasury From Accumulated Comprehensive
Stock Capital Stock Shareholders Deficit Loss
Balance at January 1, 1999 $ 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)
Purchase of treasury
stock (6,550 shares) - - (655) 524 - -
Net loss - - - - (32,797) -
Utilization of net operating
loss carryforwards by
Bucyrus Holdings, LLC - - - - (9,159) -
Translation adjustments - - - - - (6,147)
______ ________ ________ ________ ________ ________
Balance at December 31, 2000 14 144,451 (851) - (79,953) (17,745)
Capital contributions from
Bucyrus Holdings, LLC - 3,264 - - - -
Net loss - - - - (10,463) -
Translation adjustments - - - - - (6,300)
Minimum pension liability
adjustment - - - - - (15,245)
______ ________ ________ ________ ________ ________
Balance at December 31, 2001 $ 14 $147,715 $ (851) $ - $(90,416) $(39,290)
<FN>
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands)
Years Ended December 31,
2001 2000 1999
Cash Flows From Operating Activities
Net loss $(10,463) $(32,797) $(22,575)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Depreciation 11,240 11,393 11,200
Amortization 5,414 5,821 5,648
Loss on sale of
property, plant and
equipment 750 7 20
Gain on sale of The
Principal Financial
Group shares (8,704) - -
Loss on fixed asset
impairment - - 4,372
Changes in assets and
liabilities, net of
effects of acquisitions:
Receivables 3,860 (75) 134
Inventories (5,843) 19,972 (11,539)
Other current assets (12) (953) 551
Other assets (1,431) (1,650) (817)
Current liabilities other
than income taxes, short-
term obligations and
current maturities of
long-term debt 157 (4,920) 11,801
Income taxes (546) 1,007 213
Long-term liabilities
other than deferred
income taxes 4,269 1,596 (3,762)
________ ________ ________
Net cash used in
operating activities (1,309) (599) (4,754)
________ ________ ________
Cash Flows From Investing Activities
(Increase) decrease in restricted
funds on deposit (32) (461) 387
Proceeds from sale of The Principal
Financial Group shares 5,730 - -
Purchases of property, plant
and equipment (4,127) (3,501) (6,792)
Proceeds from sale of property,
plant and equipment 536 1,449 215
Purchase of Bennett & Emmott
(1986) Ltd. - - (7,050)
________ ________ ________
Net cash provided by (used
in) investing activities 2,107 (2,513) (13,240)
________ ________ ________
Cash Flows From Financing Activities
Net proceeds from (repayments of)
revolving credit facilities (1,052) 5,100 9,400
Net increase (decrease)
in other bank borrowings 271 (150) (69)
Proceeds from issuance of
long-term debt 1,237 - 9,986
Payment of long-term debt (1,641) (2,251) (1,172)
Capital contribution from
Bucyrus Holdings, LLC 1,093 - -
Proceeds from issuance of
common stock - - 31
Purchase of treasury stock - (131) (196)
________ ________ ________
Net cash provided by (used in)
financing activities (92) 2,568 17,980
________ ________ ________
Effect of exchange rate
changes on cash (436) (877) (438)
________ ________ ________
Net increase (decrease) in
cash and cash equivalents 270 (1,421) (452)
Cash and cash equivalents at
beginning of year 6,948 8,369 8,821
________ ________ ________
Cash and cash equivalents at
end of year $ 7,218 $ 6,948 $ 8,369
Supplemental Disclosures of
Cash Flow Information
Cash paid during the period for:
Interest $ 14,297 $ 18,367 $ 19,727
Income taxes - net of refunds 1,522 1,551 2,624
Supplemental Schedule of Non-Cash Investing and Financing Activities
On March 20, 2001, the Company recorded an equity contribution from Bucyrus
Holdings, LLC ("Holdings"), the Company's parent, and a corresponding
reduction in interest payable to Holdings, in the amount of $2,171,000, which
represented accrued interest as of June 30, 2000 on the 9-3/4% Senior Notes
due 2007 acquired by Holdings.
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.
Major markets for the surface mining industry are coal, copper, oil
sands and iron ore. The Company also has a comprehensive aftermarket
business that includes replacement parts, maintenance and other
services.
Basis of Presentation and Use of Estimates
The consolidated financial statements as of December 31, 2001 and
2000 and for the years ended December 31, 2001, 2000 and 1999 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 Bucyrus Holdings, LLC ("Holdings") in 1997.
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
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
Through 2001, goodwill was being amortized on a straight-line basis
over 30 years. During 2000, goodwill was reduced by $9,159,000 to
reflect the utilization of previously unrecognized federal net
operating loss carryforwards which existed at the date the Company
was acquired by Holdings (see Note H). Accumulated amortization was
$10,191,000 and $8,029,000 at December 31, 2001 and 2000,
respectively.
Intangible assets consist of engineering drawings, bill-of-material
listings, software, trademarks and trade names and are being
amortized on a straight-line basis over 10 to 30 years. Accumulated
amortization was $9,094,000 and $6,964,000 at December 31, 2001 and
2000, respectively. At December 31, 2001, intangible assets also
include $3,551,000 related to an adjustment to record an additional
minimum pension liability (see Note I).
On June 30, 2001 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142"). SFAS 142 establishes
accounting and reporting standards associated with goodwill and other
intangible assets. With the adoption of SFAS 142, goodwill will no
longer be subject to amortization, but instead will be subject to an
evaluation for impairment at least annually by applying a two-step
fair-value-based test. Additionally, intangible assets with
indefinite lives will also no longer be amortized but will be subject
to an evaluation for impairment at least annually by applying a
lower-of-cost-or-market test. Intangible assets with finite lives
will continue to be amortized. The Company adopted SFAS 142 on
January 1, 2002. For goodwill, the Company must complete Step 1 of
the goodwill transition impairment test by June 30, 2002; if the fair
value of the Company's reporting units is below the carrying amounts,
Step 2 of the goodwill transition impairment test must be completed,
and an impairment loss recognized, by December 31, 2002. The
adoption of SFAS 142 is expected to decrease goodwill amortization
expense in 2002 by $2,162,000. The Company has completed an
impairment analysis of its recorded intangible assets in accordance
with the provisions of SFAS 142 and has concluded that an impairment
charge related to intangible assets with indefinite lives is not
required. The Company is in the process of completing an impairment
analysis of its recorded intangible assets in accordance with the
provisions of SFAS 142. Intangible asset amortization expense in
2002 will decrease by approximately $483,000.
Property, Plant and Equipment
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 recorded an impairment of fixed asset charge of
$4,372,000 in the fourth quarter of 1999. The impairment related
primarily to the manufacturing facility in Boonville, Indiana, which
saw declining operating results in the second half of 1999 as volume
declined. The charge represented the difference between book value
and estimated fair value based on expected proceeds. The Company
closed its manufacturing facility in Boonville, Indiana during 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.
In addition, certain of the Company's intercompany advances to
foreign subsidiaries are evaluated as not likely to be repaid in the
foreseeable future. Transaction gains and losses on these advances
are deferred and reflected as a component of Common Shareholders'
Investment.
Revenue Recognition
Revenue from long-term sales contracts is recognized using the
percentage-of-completion method. Revenue on service contracts is
recognized pursuant to the contract as the services are provided. 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 $3,249,000 and $3,321,000 at December 31,
2001 and 2000, respectively.
Derivative Financial Instruments
The Company manages foreign currency exchange rate exposure by
utilizing some natural hedges to mitigate some of its transactions
and commitment exposures, and may utilize forward contracts in
certain situations.
NOTE B - 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, 2001 and 2000 include $959,000 and
$9,039,000, 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
$1,134,000 and $1,159,000 at December 31, 2001 and 2000,
respectively.
NOTE D - INVENTORIES
Inventories consist of the following:
2001 2000
(Dollars in Thousands)
Raw materials and parts $ 13,646 $ 12,287
Costs relating to
uncompleted contracts - 1,181
Customers' advances offset
against costs incurred on
uncompleted contracts - (1,207)
Work in process 12,837 12,941
Finished products (primarily
replacement parts) 75,525 75,924
________ ________
$102,008 $101,126
NOTE E - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
2001 2000
(Dollars in Thousands)
Trade accounts payable $ 27,538 $ 30,349
Wages and salaries 4,918 5,670
Interest 2,335 3,095
Other 12,969 18,414
________ ________
$ 47,760 $ 57,528
Other accrued expenses at December 31, 2000 include $2,914,000
payable to an affiliate related to a management services agreement.
(See Note N for classification at December 31, 2001.)
NOTE F - LONG-TERM DEBT AND FINANCING ARRANGEMENTS
Long-term debt consists of the following:
2001 2000
(Dollars in Thousands)
9-3/4% Senior Notes due 2007 $150,000 $150,000
Revolving credit facility 63,100 64,450
Revolving term loan at
Bucyrus Canada Limited 5,732 5,434
Non-revolving term loan at
Bucyrus Canada Limited 2,488 2,936
Other 1,600 1,556
________ ________
222,920 224,376
Less current maturities of
long-term debt (732) (6,563)
________ ________
$222,188 $217,813
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 "Guarantor Subsidiaries"), and BNY Midwest
Trust Company, as Trustee (the "Senior Notes Indenture"). The Senior
Notes mature on September 15, 2007. Interest thereon is payable each
March 15 and September 15. During 2000, Holdings acquired
$75,635,000 of the Company's $150,000,000 issue of Senior Notes.
Holdings has agreed as a part of the Loan and Security Agreement (and
previously the Credit Agreement (see below)) to defer the receipt of
interest on these Senior Notes during the life of the agreement. At
December 31, 2001 and 2000, $11,062,000 and $5,859,000, respectively,
of interest was accrued and payable to Holdings. The amendment to
the Credit Agreement dated March 20, 2001 required Holdings to
contribute to equity of the Company a portion of the accrued
interest. As a result, on March 20, 2001, the Company recorded an
equity contribution from Holdings and a corresponding reduction in
interest payable to Holdings in the amount of $2,171,000, which
represented accrued interest as of June 30, 2000 on the Senior Notes
acquired by Holdings.
The Senior Notes Indenture contains certain covenants that, among
other things, limit the ability of the Company and the Guarantor
Subsidiaries 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. At December 31, 2001, the Company was in compliance
with these covenants.
On March 7, 2002, the Company entered into a Loan and Security
Agreement with GMAC Business Credit, LLC (the "Loan and Security
Agreement") which provides the Company with an $85,000,000 senior
secured revolving credit facility. The Loan and Security Agreement
expires on January 2, 2003. Outstanding borrowings bear interest
equal to either the prime rate plus an applicable margin (2% to
2.25%) or LIBOR plus an applicable margin (3.5% to 3.75%) and are
subject to a borrowing base formula based on receivables and
inventory. The Company must maintain at all times a minimum
availability of $5,000,000. Substantially all of the domestic assets
of the Company (excluding real property) and the receivables and
inventory of the Company's Canadian subsidiary are pledged as
collateral under the Loan and Security Agreement. In addition, all
outstanding capital stock of the Company and its domestic
subsidiaries as well as 65% of the capital stock of the Company's
foreign subsidiaries are pledged as collateral. The Loan and
Security Agreement contains covenants which, among other things,
require the Company to maintain certain financial ratios and minimum
levels of EBITDA, as defined. Proceeds from the Loan and Security
Agreement were used to repay in full all outstanding borrowings under
the Revolving Credit Facility and Bucyrus Canada Limited revolving
term loan (see below).
The Company previously had a Credit Agreement with Bank One,
Wisconsin (the "Credit Agreement") which provided 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. Borrowings under the Revolving Credit Facility were at
variable interest rates and were subject to a borrowing base formula
based on receivables, inventory and machinery and equipment. Direct
borrowings under the Revolving Credit Facility at December 31, 2001
and 2000 were $63,100,000 and $64,450,000, respectively, at a
weighted average interest rate of 5.3% and 10.0%, respectively. At
December 31, 2001 and 2000, there were $1,200,000 and $12,391,000,
respectively, of standby letters of credit outstanding under all
Company bank facilities. The Credit Agreement contained covenants
which, among other things, required the Company to maintain certain
financial ratios and a minimum net worth. At December 31, 2001, the
Company was in compliance with these covenants. The average
borrowing under the Revolving Credit Facility during 2001 was
$68,642,000 at a weighted average interest rate of 7.7%, and the
maximum borrowing outstanding was $73,375,000. The average borrowing
under the Revolving Credit Facility during 2000 was $64,512,000 at a
weighted average rate of 9.9%, and the maximum borrowing outstanding
was $71,200,000. The average borrowing under the Revolving Credit
Facility during 1999 was $52,407,000 at a weighted average interest
rate of 8.3%, and the maximum borrowing outstanding was $65,350,000.
The amount available for direct borrowings under the Revolving Credit
Facility at December 31, 2001 was $8,444,000, which is net of
$2,900,000 that was used for the March 15, 2002 interest payment on
the Senior Notes.
A failure to comply with the obligations contained in the Loan and
Security Agreement or the Senior Notes Indenture could result in an
Event of Default (as defined) under the Loan and Security Agreement
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. While
the Company believes that current levels of cash and liquidity,
together with funds generated by operations, funds available from the
Loan and Security Agreement and funds received from the sale of
shares in The Principal Financial Group (see Note Q) and sale and
leaseback of the South Milwaukee land and buildings (see Note R),
will be sufficient to permit the Company to satisfy its debt service
requirements for the foreseeable future, there can be no assurance
that the Company's performance will be sufficient for the Company to
maintain compliance with the financial covenants under the Loan and
Security Agreement and satisfy its debt service obligations under all
circumstances. The Company is currently exploring additional
financing alternatives to extend or replace the Loan and Security
Agreement.
In 1999, Bucyrus Canada Limited entered into a C$15,000,000 credit
facility with The Bank of Nova Scotia which was used to acquire
certain assets of Bennett & Emmott. The C$10,000,000 revolving term
loan portion of this facility incurred interest at the bank's prime
lending rate plus 1.50%. The amount outstanding under the revolving
term loan portion was C$9,124,693 and C$8,145,000 at December 31,
2001 and 2000, respectively. On March 7, 2002, proceeds from the
Loan and Security Agreement were used to repay The Bank of Nova
Scotia revolving term loan in full and this portion of the facility
was terminated. As a result, borrowings under the revolving term
loan were classified as long-term at December 31, 2001. The
C$5,000,000 non-revolving term loan portion is payable in monthly
installments to 2004 and bears interest at the bank's prime lending
rate plus 2%. The amount outstanding under the non-revolving term
loan portion was C$3,960,000 and C$4,400,000 at December 31, 2001 and
2000, respectively. 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, 2001,
Bucyrus Canada Limited was in compliance with these covenants.
Maturities of long-term debt after giving effect to the new Loan and
Security Agreement are as follows for each of the next five years:
(Dollars in Thousands)
2002 $ 732
2003 69,453
2004 2,079
2005 195
2006 149
At December 31, 2001, the Senior Notes were bid at 30%. Based on
this information, management believes the fair value of the Senior
Notes is approximately $45,000,000.
NOTE G - COMMON SHAREHOLDERS' INVESTMENT
In 2001, Holdings made capital contributions to the Company in the
amount of $1,093,000 of cash and $2,171,000 of accrued interest on
Senior Notes owned by Holdings (see Note F).
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. Other than the options granted
on August 1, 2001, all other 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 goals. 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. Options granted under the 1998 Option
Plan on August 1, 2001 are targeted to vest at the rate of 25% of the
total option shares covered by the grant per year for the four (4)
years subsequent to the date of the grant. 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
Balances at January 1, 1999 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
Options forfeited ($100 per share) (19,950) 19,950
________ ________
Balances at December 31, 2000 58,350 141,650
Options forfeited (1,750) 1,750
($100 per share)
Granted on August 1, 2001
($1 per share) 143,400 (143,400)
________ ________
Balances at December 31, 2001 200,000 0
At December 31, 2001, none of the options outstanding were vested.
The options had a weighted average remaining contractual life of
8.6 years.
The Company accounted for the 1998 Option 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 this plan been determined
consistent with SFAS 123, the Company's net loss and net loss per
share would have been reduced to the following pro forma amounts:
Years Ended December 31,
2001 2000 1999
(Dollars in Thousands,
Except Per Share Amounts)
Net loss:
As reported $(10,463) $(32,797) $(22,575)
Pro forma (10,721) (32,957) (22,753)
Net loss per share
of common stock
(basic and diluted):
As reported (7.29) (22.76) (15.65)
Pro forma (7.47) (22.87) (15.77)
The weighted average grant date fair value of stock options granted
in 2001 and 1999 under the 1998 Option Plan was $.80 and $75 per
option, respectively. No options were granted in 2000. 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
2001 1999
Risk-free interest rate 4.7% 5.8%
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:
Years Ended December 31,
2001 2000 1999
(Dollars in Thousands)
United States $(12,719) $(34,193) $(23,730)
Foreign 5,666 4,461 3,534
________ ________ ________
Total $ (7,053) $(29,732) $(20,196)
The provision for income tax expense consists of the following:
Years Ended December 31,
2001 2000 1999
(Dollars in Thousands)
Foreign income taxes:
Current $ 2,581 $ 2,433 $ 2,369
Deferred 737 33 (113)
________ ________ ________
Total 3,318 2,466 2,256
________ ________ ________
Federal income taxes:
Current - 424 -
Deferred - - -
________ ________ ________
Total - 424 -
________ ________ ________
Other (state and
local taxes):
Current 92 175 123
Deferred - - -
________ ________ ________
Total 92 175 123
________ ________ ________
Total income
tax expense $ 3,410 $ 3,065 $ 2,379
Total income tax expense differs from amounts expected by applying
the federal statutory income tax rate to loss before income taxes as
set forth in the following table:
Years Ended December 31,
2001 2000 1999
Tax Tax Tax
Expense Expense Expense
(Benefit) Percent (Benefit) Percent (Benefit) Percent
(Dollars in Thousands)
Tax expense (benefit) at federal
statutory rate $ (2,469) (35.0)% $(10,406) (35.0)% $ (7,069) (35.0)%
Valuation allowance adjustments 2,750 39.0 9,828 33.0 5,450 27.0
Impact of foreign subsidiary income,
tax rates and tax credits 2,902 41.1 2,201 7.4 2,865 14.2
State income taxes net of federal
income tax benefit 60 .9 114 .4 256 1.3
Nondeductible goodwill amortization 757 10.7 824 2.8 875 4.3
Extraterritorial income exclusion (560) (7.9) - - - -
Other items (30) (.5) 504 1.7 2 -
________ ______ ________ ______ ________ ______
Total income tax expense $ 3,410 48.3 $ 3,065 10.3% $ 2,379 11.8%
Significant components of deferred tax assets and deferred tax
liabilities are as follows:
December 31,
2001 2000
(Dollars in Thousands)
Deferred tax assets:
Postretirement benefits $ 5,785 $ 6,004
Inventory valuation
provisions 6,181 6,844
Accrued and other
liabilities 4,500 5,960
Research and development
expenditures 3,413 4,591
Tax loss carryforward 27,176 27,765
Tax credit carryforward 900 903
Other items 727 780
________ ________
Total deferred tax assets 48,682 52,847
Deferred tax liabilities:
Excess of book basis over
tax basis of property,
plant and equipment and
intangible assets (33,460) (36,639)
Valuation allowance (13,599) (13,848)
________ ________
Net deferred tax asset $ 1,623 $ 2,360
The classification of the net deferred tax assets and liabilities is
as follows:
December 31,
2001 2000
(Dollars in Thousands)
Current deferred tax asset $ 1,429 $ 1,346
Long-term deferred tax asset 863 1,371
Current deferred tax liability (279) (121)
Long-term deferred tax
liability (390) (236)
________ ________
Net deferred tax asset $ 1,623 $ 2,360
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 2001, the valuation allowance decreased by $249,000 to offset a
decrease in net deferred tax assets for which no tax benefit was
previously recognized.
During 2000, Holdings elected to be treated as a corporation for
income tax purposes. As a result, the Company, along with its
domestic subsidiaries, and Holdings began filing consolidated federal
income tax returns. The consolidated tax liability of the affiliated
group was allocated based on each company's positive contribution to
consolidated federal taxable income.
As discussed in Note F, during 2000, Holdings acquired $75,635,000 of
the Company's $150,000,000 issue of Senior Notes. This transaction
resulted in taxable income which was offset by the use of previously
unrecognized NOL's for federal regular tax purposes. Approximately
$9,159,000 of the NOL's utilized existed at the date the Company was
acquired by Holdings. As a result, the utilization of the NOL and
the reversal of the valuation allowance was accounted for as a
reduction in goodwill and a distribution to Holdings.
As of December 31, 2001, the Company has available approximately
$66,300,000 of federal NOL's from the years 1990 through 1999 and
2001, expiring in the years 2005 through 2019 and 2021, respectively,
to offset against future federal taxable income. Because both the
1997 acquisition of the Company by Holdings 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 2002 is approximately
$40,900,000.
As of December 31, 2001, the Company also has a total federal AMT
credit carryforward of $900,000 of which $479,000 arose prior to the
effective date of the Amended Plan 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 2002 through 2014 and 2016) 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 $69,000,000.
Cumulative undistributed earnings of foreign subsidiaries that are
considered to be permanently reinvested, and on which U.S. income
taxes have not been provided by the Company, amounted to
approximately $12,900,000 at December 31, 2001. 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. Effective January 1, 2000, the pension
plan covering salaried employees was converted to a cash balance
formula for all employees except for those who, on December 31, 1999,
were either age 60 and above or age 55 with 10 years or more years of
credited service. The actuarial equivalent of benefits earned as of
December 31, 1999 was used to establish each employee's opening
account balance under the cash balance plan.
The following tables set forth the domestic plans' funded status and
amounts recognized in the consolidated financial statements at
December 31, 2001 and 2000:
Years Ended December 31,
2001 2000
(Dollars in Thousands)
Change in projected benefit
obligation:
Projected benefit obligation
at beginning of year $ 71,912 $ 69,573
Service cost 1,439 1,590
Interest cost 5,270 5,274
Amendments 3,551 (70)
Actuarial loss 2,020 828
Benefits paid (6,230) (5,283)
________ ________
Projected benefit obligation
at end of year 77,962 71,912
________ ________
Change in plan assets:
Fair value of plan assets
at beginning of year 69,896 78,174
Actual loss on
plan assets (4,993) (4,101)
Employer contributions 1,178 1,106
Benefits paid (6,230) (5,283)
________ ________
Fair value of plan assets
at end of year 59,851 69,896
________ ________
Net amount recognized:
Funded status (18,111) (2,016)
Unrecognized prior
service cost 2,571 (1,131)
Unrecognized net
actuarial loss 17,413 4,178
________ ________
Net amount recognized $ 1,873 $ 1,031
Amounts recognized in
consolidated balance
sheets:
Long-term prepaid benefit
costs $ 5,289 $ 4,960
Accrued benefit
liabilities (22,212) (3,929)
Intangible asset 3,551 -
Accumulated other
comprehensive loss 15,245 -
________ ________
Net amount recognized $ 1,873 $ 1,031
Weighted-average assumptions
at end of year:
Discount rate 7.25% 7.75%
Expected return on
plan assets 9% 9%
Rate of compensation
increase 4.5% 4.5%
Years Ended December 31,
2001 2000 1999
(Dollars in Thousands)
Components of
net periodic
benefit cost:
Service cost $ 1,439 $ 1,590 $ 2,112
Interest cost 5,270 5,274 5,120
Expected return
on plan assets (6,090) (6,847) (6,127)
Amortization of
prior service cost (86) (91) -
Recognized net
actuarial
loss - 24 100
________ ________ ________
Total benefit
cost (credit) $ 533 $ (50) $ 1,205
The Company was required to record an additional minimum pension
liability of $18,796,000 at December 31, 2001. This liability
represented the amount by which the accumulated benefit obligation
exceeded the sum of the fair market value of plan assets and accrued
amounts previously recorded. The additional liability was offset by
an intangible asset of $3,551,000, which was equal to the previously
unrecognized prior service cost. The remaining amount of $15,245,000
was recorded as a component of Accumulated Other Comprehensive Loss
in Common Shareholders' Investment. At December 31, 2001, a
long-term pension liability of $21,520,000, including the minimum
liability, was included in Deferred Expenses and Other in the
Consolidated Balance Sheet.
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 $77,962,000,
$76,773,000 and $59,851,000, respectively, at December 31, 2001.
These amounts were $27,132,000, $25,383,000 and $21,914,000,
respectively, at December 31, 2000.
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 $743,000, $848,000, and
$939,000 in 2001, 2000 and 1999, 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 following tables set forth the plan's status and amounts
recognized in the consolidated financial statements at December 31,
2001 and 2000:
Years Ended December 31,
2001 2000
(Dollars in Thousands)
Change in benefit obligation:
Benefit obligation at
beginning of year $ 13,031 $ 14,410
Service cost 409 420
Interest cost 929 970
Plan participants'
contributions 95 74
Net actuarial (gain) loss 3,368 (1,486)
Benefits paid (1,805) (1,357)
________ ________
Benefit obligation
at end of year 16,027 13,031
________ ________
Change in plan assets:
Fair value of plan assets
at beginning of year - -
Employer contributions 1,710 1,283
Plan participants'
contributions 95 74
Benefits paid (1,805) (1,357)
________ ________
Fair value of plan assets
at end of year - -
________ ________
Net amount recognized:
Funded status (16,027) (13,031)
Unrecognized net
actuarial (gain) loss 3,359 (9)
Unrecognized prior
service cost (2,219) (2,440)
________ ________
Net amount recognized $(14,887) $(15,480)
Amounts recognized in
consolidated balance
sheets:
Accrued benefit liability $ 1,610 $ 1,611
Long-term benefit liability 13,277 13,869
________ ________
Net amount recognized $ 14,887 $ 15,480
Weighted-average assumptions
at end of year:
Discount rate 7.25% 7.75%
Expected return on
plan assets N/A N/A
Rate of compensation
increase N/A N/A
For measurement purposes, a 10% gross health care trend rate was used
for benefits for 2002. Trend rates were assumed to decrease
gradually to 5% in 2007 and remain at that level thereafter.
Years Ended December 31,
2001 2000 1999
(Dollars in Thousands)
Components of
net periodic
benefit cost:
Service cost $ 409 $ 420 $ 457
Interest cost 929 970 1,049
Recognized net
actuarial
loss - - 71
Amortization
of prior
service cost (221) (221) (203)
________ ________ ________
Net periodic
benefit cost $ 1,117 $ 1,169 $ 1,374
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 $ 114 $ (99)
Effect on postretirement
benefit obligation 1,180 (1,042)
NOTE K - RESEARCH AND DEVELOPMENT
Expenditures for design and development of new products and
improvements of existing mining machinery products, including
overhead, aggregated $5,900,000 in 2001, $7,299,000 in 2000 and
$7,646,000 in 1999. 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 and diluted net loss per share of common stock was computed by
dividing net loss by the weighted average number of shares of common
stock outstanding. Stock options outstanding were not included in
the per share calculations because they did not have a dilutive
effect. The following is a reconciliation of the numerators and the
denominators of the basic and diluted net loss per share of common
stock calculations:
Years Ended December 31,
2001 2000 1999
(Dollars in Thousands,
Except Per Share Amounts)
Basic and Diluted
Net loss $ (10,463) $ (32,797) $ (22,575)
Weighted
average shares
outstanding 1,435,600 1,441,158 1,442,466
Net loss
per share $ (7.29) $ (22.76) $ (15.65)
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, oil sands 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 70% 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,
2001 2000 1999
(Dollars in Thousands)
Machines $ 64,552 $ 68,925 $114,207
Parts and services 226,024 211,518 204,428
________ ________ ________
$290,576 $280,443 $318,635
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)
2001
United States $153,805 $ 66,075
Australia 35,870 269
South America 49,132 5,334
Canada 30,910 4,719
Other Foreign 20,859 806
________ ________
$290,576 $ 77,203
2000
United States $151,841 $ 73,390
Australia 33,598 342
South America 44,257 5,780
Canada 26,459 5,245
Other Foreign 24,288 1,796
________ ________
$280,443 $ 86,553
1999
United States $166,585 $ 81,099
Australia 66,496 1,122
South America 35,837 6,177
Canada 16,055 5,554
Other Foreign 33,662 1,853
________ ________
$318,635 $ 95,805
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 2001, 2000 and 1999, one customer accounted
for approximately 11%, 11% and 16%, respectively, of the Company's
consolidated net sales.
NOTE N - COMMITMENTS, CONTINGENCIES AND CREDIT RISKS
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.
Asbestos Liability
The Company has been named as a co-defendant in 275 personal injury
liability asbestos cases, involving approximately 1,400 plaintiffs,
which are pending in various state courts. In all of these cases,
insurance carriers have accepted or are expected to accept the
defense of such cases. These cases are in preliminary stages and the
Company does not believe that costs associated with these matters
will 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
$3,616,000 in 2001, $4,170,000 in 2000 and $6,244,000 in 1999.
Future minimum annual payments under noncancellable agreements,
including the sale and leaseback agreement (see Note R), are as
follows:
(Dollars in Thousands)
2002 $ 6,193
2003 5,542
2004 4,399
2005 3,122
2006 1,641
After 2006 18,527
________
$ 39,424
Management Services Agreement
American Industrial Partners ("AIP") provides substantial ongoing
financial and management services to the Company utilizing the
extensive operating and financial experience of AIP's principals.
Pursuant to a management services agreement among AIP, the Company
and the Guarantor Subsidiaries, AIP provides general management,
financial and other corporate advisory services to the Company for an
annual fee of $1,450,000 and is reimbursed for out-of-pocket
expenses. Payment of the annual fee is currently being deferred and
is subordinated in right of payment to the Loan and Security
Agreement. At December 31, 2001, $4,364,000 of fees was payable to
AIP under this agreement and is included in Deferred Expenses and
Other in the Consolidated Balance Sheet.
AIP has agreed to waive its right to receive interest on unpaid
management fees as defined in the current Management Services
Agreement through December 31, 2001. If the lenders under the Loan
and Security Agreement were to permit retroactive accretion of
interest, there may be a retroactive amount due to AIP of $552,000 as
of December 31, 2001.
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:
2001 $ 64,702 $ 67,646 $ 82,219 $ 76,009
2000 65,992 67,481 69,260 77,710
1999 74,610 90,549 75,977 77,499
Gross profit:
2001 $ 12,003 $ 9,571 $ 13,540 $ 11,671
2000 8,009 5,913 14,880 12,507
1999 14,251 16,986 14,077 5,998
Net earnings (loss):
2001(1) $ (4,605) $ (6,021) $ (3,438) $ 3,601
2000(2) (11,496) (11,849) (3,585) (5,867)
1999(3) (2,096) (756) (2,798) (16,925)
Basic and diluted
net earnings (loss)
per common share:
2001 $ (3.21) $ (4.19) $ (2.39) $ 2.50
2000 (7.97) (8.22) (2.49) (4.07)
1999 (1.45) (.52) (1.94) (11.74)
Weighted average shares
outstanding - basic and
diluted (in thousands):
2001 1,436 1,436 1,436 1,436
2000 1,442 1,442 1,442 1,442
1999 1,442 1,442 1,442 1,443
(1) Included in net earnings for the fourth quarter of 2001 was
$8,704,000 as a result of the sale of shares in The Principal
Financial Group (see Note Q).
(2) Included in the net loss for the first quarter of 2000 was
$2,695,000 of restructuring charges. The net loss for the third
quarter of 2000 was reduced by a $1,800,000 favorable adjustment
related to commercial issues.
(3) 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.
NOTE P - RESTRUCTURING
Due to a reduction in new orders, the Company has reduced a portion
of its manufacturing production workforce through layoffs and also
reduced the number of its salaried employees. These activities
resulted in restructuring charges of $899,000, $2,689,000 and
$1,212,000 during the years ended December 31, 2001, 2000 and 1999,
respectively. Such charges primarily relate to severance payments
and related matters and are included in Engineering and Field
Service, Selling, Administrative and Miscellaneous Expenses in the
Consolidated Statement of Operations. Substantially all of these
restructuring charges were paid as of December 31, 2001.
NOTE Q - OTHER INCOME
The Company, as a policyholder, received an allocation of 369,918
shares as a result of the demutualization of The Principal Financial
Group. Net proceeds from the sale of these shares by the Company
were $8,704,000 and is recognized as Other Income in the Consolidated
Statement of Operations for the year ended December 31, 2001. Of the
net proceeds $2,974,000 was received on January 2, 2002 for shares
sold in 2001 and is included in Receivables in the Consolidated
Balance Sheet at December 31, 2001.
NOTE R - SUBSEQUENT EVENT - SALE AND LEASEBACK
On January 4, 2002, the Company completed a sale and leaseback
transaction for a portion of its land and buildings in South
Milwaukee, Wisconsin. The term of this operating lease is twenty
years with options for renewals. Net proceeds received from this
transaction were $7,157,000 less $500,000 required as a security
deposit.
NOTE S - SUPPLEMENTAL CONSOLIDATING CONDENSED FINANCIAL INFORMATION
The Company's payment obligations under the Senior Notes are
guaranteed by 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. The Company has determined that it is not
practicable to allocate goodwill, intangible assets and deferred
income taxes to the Guarantor Subsidiaries and Other Subsidiaries.
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.
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Operations
For the Year Ended December 31, 2001
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
Revenues:
Net sales $151,036 $ 51,080 $144,616 $(56,156) $290,576
Other income 12,757 51 851 (4,517) 9,142
________ ________ ________ ________ ________
163,793 51,131 145,467 (60,673) 299,718
________ ________ ________ ________ ________
Costs and Expenses:
Cost of products sold 130,495 49,354 120,023 (56,081) 243,791
Engineering and field
service, selling,
administrative
and miscellaneous
expenses 24,511 937 16,647 - 42,095
Interest expense 20,697 1,679 3,026 (4,517) 20,885
________ ________ ________ ________ ________
175,703 51,970 139,696 (60,598) 306,771
________ ________ ________ ________ ________
Earnings (loss) before
income taxes and equity
in net earnings of
consolidated subsidiaries (11,910) (839) 5,771 (75) (7,053)
Income taxes 511 23 2,876 - 3,410
________ ________ ________ ________ ________
Earnings (loss) before
equity in net earnings of
consolidated subsidiaries (12,421) (862) 2,895 (75) (10,463)
Equity in net earnings of
consolidated subsidiaries 2,033 - - (2,033) -
________ ________ ________ ________ ________
Net earnings (loss) $(10,388) $ (862) $ 2,895 $ (2,108) $(10,463)
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Operations
For the Year Ended December 31, 2000
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
Revenues:
Net sales $159,376 $ 37,866 $137,408 $(54,207) $280,443
Other income 5,177 4 726 (4,693) 1,214
________ ________ ________ ________ ________
164,553 37,870 138,134 (58,900) 281,657
________ ________ ________ ________ ________
Costs and Expenses:
Cost of products sold 142,589 35,593 115,134 (54,182) 239,134
Engineering and field
service, selling,
administrative
and miscellaneous
expenses 34,421 1,225 14,515 - 50,161
Interest expense 21,476 1,889 3,422 (4,693) 22,094
________ ________ ________ ________ ________
198,486 38,707 133,071 (58,875) 311,389
________ ________ ________ ________ ________
Earnings (loss) before
income taxes and equity
in net earnings (loss) of
consolidated subsidiaries (33,933) (837) 5,063 (25) (29,732)
Income taxes 848 74 2,143 - 3,065
________ ________ ________ ________ ________
Earnings (loss) before equity
in net earnings (loss) of
consolidated subsidiaries (34,781) (911) 2,920 (25) (32,797)
Equity in net earnings
(loss) of consolidated
subsidiaries 2,009 - - (2,009) -
________ ________ ________ ________ ________
Net earnings (loss) $(32,772) $ (911) $ 2,920 $ (2,034) $(32,797)
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Operations
For the Year Ended December 31, 1999
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
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)
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Balance Sheets
December 31, 2001
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ 28 $ 7,190 $ - $ 7,218
Receivables 24,407 7,146 24,001 - 55,554
Intercompany receivables 79,336 1,127 12,529 (92,992) -
Inventories 53,365 9,025 43,237 (3,619) 102,008
Prepaid expenses and
other current assets 542 282 5,003 - 5,827
________ ________ ________ _________ ________
Total Current Assets 157,650 17,608 91,960 (96,611) 170,607
OTHER ASSETS:
Restricted funds on deposit 42 - 540 - 582
Goodwill 55,660 - - - 55,660
Intangible assets - net 39,601 - - - 39,601
Other assets 10,203 - 1,889 - 12,092
Investment in subsidiaries 7,103 - - (7,103) -
________ ________ ________ _________ ________
112,609 - 2,429 (7,103) 107,935
PROPERTY, PLANT AND
EQUIPMENT - net 60,172 5,904 11,127 - 77,203
________ ________ ________ _________ ________
$330,431 $ 23,512 $105,516 $(103,714) $355,745
LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 30,732 $ 2,533 $ 14,730 $ (235) $ 47,760
Intercompany payables 44 27,771 60,532 (88,347) -
Liabilities to customers
on uncompleted contracts
and warranties 2,800 522 2,686 - 6,008
Income taxes 234 29 942 - 1,205
Short-term obligations - - 566 - 566
Current maturities of
long-term debt 237 8 487 - 732
________ ________ ________ _________ ________
Total Current Liabilities 34,047 30,863 79,943 (88,582) 56,271
LONG-TERM LIABILITIES:
Liabilities to customers
on uncompleted contracts
and warranties 2,000 - - - 2,000
Postretirement benefits 12,863 - 414 - 13,277
Deferred expenses,
pension and other 32,032 249 1,494 - 33,775
Interest payable to
Holdings 11,062 - - - 11,062
________ ________ ________ _________ ________
57,957 249 1,908 - 60,114
LONG-TERM DEBT, less
current maturities 213,226 352 8,610 - 222,188
COMMON SHAREHOLDERS'
INVESTMENT 25,201 (7,952) 15,055 (15,132) 17,172
________ ________ ________ _________ ________
$330,431 $ 23,512 $105,516 $(103,714) $355,745
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Balance Sheets
December 31, 2000
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ 36 $ 6,912 $ - $ 6,948
Receivables 32,641 9,343 16,813 - 58,797
Intercompany receivables 70,534 2,292 17,953 (90,779) -
Inventories 53,665 4,418 45,627 (2,584) 101,126
Prepaid expenses and
other current assets 562 296 5,135 - 5,993
________ ________ ________ _________ ________
Total Current Assets 157,402 16,385 92,440 (93,363) 172,864
OTHER ASSETS:
Restricted funds on deposit 350 - 200 - 550
Goodwill 57,821 - - - 57,821
Intangible assets - net 38,180 - - - 38,180
Other assets 9,072 - 2,726 - 11,798
Investment in subsidiaries 12,735 - - (12,735) -
________ ________ ________ _________ ________
118,158 - 2,926 (12,735) 108,349
PROPERTY, PLANT AND
EQUIPMENT - net 67,524 5,624 13,405 - 86,553
________ ________ ________ _________ ________
$343,084 $ 22,009 $108,771 $(106,098) $367,766
LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 38,011 $ 2,430 $ 17,343 $ (256) $ 57,528
Intercompany payables 1,456 25,665 58,370 (85,491) -
Liabilities to customers
on uncompleted contracts
and warranties 3,483 623 1,353 - 5,459
Income taxes 158 128 1,391 - 1,677
Short-term obligations 52 - 243 - 295
Current maturities of
long-term debt 317 - 6,246 - 6,563
________ ________ ________ _________ ________
Total Current Liabilities 43,477 28,846 84,946 (85,747) 71,522
LONG-TERM LIABILITIES:
Liabilities to customers
on uncompleted contracts
and warranties 2,412 - - - 2,412
Postretirement benefits 13,409 - 460 - 13,869
Deferred expenses,
pension and other 9,563 253 559 - 10,375
Interest payable to
Holdings 5,859 - - - 5,859
________ ________ ________ _________ ________
31,243 253 1,019 - 32,515
LONG-TERM DEBT, less
current maturities 214,832 - 2,981 - 217,813
COMMON SHAREHOLDERS'
INVESTMENT 53,532 (7,090) 19,825 (20,351) 45,916
________ ________ ________ _________ ________
$343,084 $ 22,009 $108,771 $(106,098) $367,766
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Cash Flows
For the Year Ended December 31, 2001
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
Net Cash Provided By (Used
In) Operating Activities $ (3,626) $ 600 $ 1,717 $ - $ (1,309)
________ ________ ________ ________ ________
Cash Flows From Investing
Activities
Decrease (increase)in
restricted funds on deposit 308 - (340) - (32)
Proceeds from sale of
The Principal Financial
Group shares 5,730 - - - 5,730
Purchases of property,
plant and equipment (1,990) (968) (1,169) - (4,127)
Proceeds from sale of
property, plant and
equipment 23 - 513 - 536
Dividends paid to parent 200 - (200) - -
________ ________ ________ ________ ________
Net cash provided by (used
in) investing activities 4,271 (968) (1,196) - 2,107
________ ________ ________ ________ ________
Cash Flows From Financing
Activities
Proceeds from (repayments
of) revolving credit
facilities (1,350) - 298 - (1,052)
Net (increase) decrease
in other bank borrowings (52) - 323 - 271
Proceeds from issuance of
long-term debt - 360 877 - 1,237
Payment of long-term debt (336) - (1,305) - (1,641)
Capital contribution from
Holdings 1,093 - - - 1,093
________ ________ ________ ________ ________
Net cash provided by (used
in) financing activities (645) 360 193 - (92)
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - (436) - (436)
________ ________ ________ ________ ________
Net increase (decrease) in
cash and cash equivalents - (8) 278 - 270
Cash and cash equivalents
at beginning of year - 36 6,912 - 6,948
________ ________ ________ ________ ________
Cash and cash equivalents
at end of year $ - $ 28 $ 7,190 $ - $ 7,218
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Cash Flows
For the Year Ended December 31, 2000
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
Net Cash Provided By (Used
In) Operating Activities $ (6,332) $ 3,201 $ 2,532 $ - $ (599)
________ ________ ________ ________ ________
Cash Flows From Investing
Activities
Increase in restricted
funds on deposit (350) - (111) - (461)
Purchases of property,
plant and equipment (1,903) (210) (1,388) - (3,501)
Proceeds from sale of
property, plant and
equipment 54 522 873 - 1,449
Dividends paid to parent 4,130 (3,500) (630) - -
________ ________ ________ ________ ________
Net cash provided by (used
in) investing activities 1,931 (3,188) (1,256) - (2,513)
________ ________ ________ ________ ________
Cash Flows From Financing
Activities
Net proceeds from revolving
credit facility 5,100 - - - 5,100
Net decrease in other bank
borrowings (98) - (52) - (150)
Payment of long-term debt (470) - (1,781) - (2,251)
Purchase of treasury stock (131) - - - (131)
________ ________ ________ ________ ________
Net cash provided by (used
in) financing activities 4,401 - (1,833) - 2,568
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - (877) - (877)
________ ________ ________ ________ ________
Net increase (decrease) in
cash and cash equivalents - 13 (1,434) - (1,421)
Cash and cash equivalents
at beginning of year - 23 8,346 - 8,369
________ ________ ________ ________ ________
Cash and cash equivalents
at end of year $ - $ 36 $ 6,912 $ - $ 6,948
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Cash Flows
For the Year Ended December 31, 1999
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
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 proceeds from revolving
credit facility 9,400 - - - 9,400
Net increase (decrease) in
long-term debt and other
bank borrowings (159) - 8,904 - 8,745
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
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) and subsidiaries as of December 31,
2001 and 2000 and the related consolidated statements of operations,
comprehensive loss, common shareholders' investment and cash flows for the
three years ended December 31, 2001. 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 auditing standards generally
accepted 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 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. and subsidiaries as of December 31, 2001 and 2000, and the
results of its operations and its cash flows for the three years ended
December 31, 2001 in conformity with accounting principles generally accepted
in the United States.
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 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 three years ended December 31,
2001 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
February 8, 2002 (except with respect to the matter
discussed in Note F, as to which the date is
March 7, 2002.)
Bucyrus International, Inc. and Subsidiaries
Schedule II - Valuation and Qualifying Accounts and Reserves
For the Years Ended December 31, 2001, 2000 and 1999
(Dollars in Thousands)
Charges
Balance At (Credits) (Charges) Balance At
Beginning To Costs Credits End
Of Period And Expenses To Reserves(1) Of Period
Allowance for possible losses:
Year ended December 31, 2001:
Notes and accounts receivable - current $1,159 $ 14 $ (39) $1,134
Year ended December 31, 2000:
Notes and accounts receivable - current $1,090 $ 3 $ 66 $1,159
Year ended December 31, 1999:
Notes and accounts receivable - current $ 918 $ 95 $ 77 $1,090
<FN>
(1) Includes uncollected receivables written off, net of recoveries, and translation adjustments at the foreign
Subsidiaries.
</FN>
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 seven 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 66 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, 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 68 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 62 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 is currently a
director of Qualitor, Inc.
Mr. Hildebrand has been a director of
the Company since March 1996.
Kim A. Marvin 40 Mr. Marvin is a Managing Director of
American Industrial Partners
Corporation. Mr. Marvin joined
American Industrial Partners in 1997
from the Mergers & Acquisitions
Department of Goldman, Sachs & Co.
where he had been employed since 1994.
Mr. Marvin is also a director of
Consoltex Group, Great Lakes Carbon
Corporation, Stanadyne Corporation and
Sweetheart Holdings. Mr. Marvin has
been a director of the Company since
September 1997.
Robert L. Purdum 66 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 67 Mr. Rogers has served as Chief
Executive Officer of the Company since
December 23, 1999. Mr. Rogers also
served as President of the Company from
December 1999 to August 2000. 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 is also a
director of Great Lakes Carbon
Corporation and Stanadyne Automotive.
Mr. Rogers has been a director of the
Company since November 1997.
Timothy W. Sullivan 48 Mr. Sullivan has served as President
and Chief Operating Officer of the
Company since August 14, 2000.
Mr. Sullivan 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. Mr. Sullivan has been a
director of the Company since August
2000.
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 and
Mackus 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 67, has served as Chief Executive
Officer since December 23, 1999. Mr. Rogers also
served as President from December 1999 to August
2000. 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 49, 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 65, 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 50, 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 56, has served as Executive Vice
President since August 2000. Mr. Phillips 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.
Timothy W. Sullivan Mr. Sullivan, age 48, has served as President and
Chief Operating Officer of the Company since August
2000. Mr. Sullivan 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. Mr. Sullivan has been a director of the
Company since August 2000.
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 $25,000. Directors are reimbursed for out-of-pocket
expenses.
Summary Compensation Table
The following table sets forth certain information for each of the last
three fiscal years concerning compensation awarded to, earned by or paid to
each person who served as the Company's Chief Executive Officer during fiscal
2001 and each of the four most highly compensated executive officers other
than the Chief Executive Officer who were in office on December 31, 2001. The
persons named in the table are sometimes referred to herein as the "named
executive officers".
Long-Term
Annual Compensation
Compensation(1) Awards
Securities All Other
Name and Underlying Compensation
Principal Position Year Salary($) Bonus($) Options(#) ($)(2)
Theodore C. Rogers (3) 2001 - - - -
Chief Executive Officer 2000 - - - -
1999 - - - -
Frank P. Bruno 2001 $ 138,150 $ 39,690 11,974 $ 5,721
Vice President- 2000 133,602 26,578 - 4,651
Human Resources 1999 128,694 - - 5,015
Craig R. Mackus 2001 154,728 44,580 13,408 5,666
Secretary and 2000 148,902 29,768 - 4,905
Controller 1999 145,011 - - 5,440
Thomas B. Phillips(4) 2001 207,004 85,862 35,850 6,546
Executive Vice 2000 185,001 56,250 - 94,653
President 1999 80,770 - - 98,001
Timothy W. Sullivan(5) 2001 329,169 240,000 71,700 6,060
President and Chief 2000 259,126 200,000 - 120,234
Operating Officer 1999 13,522 - - 78
<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 2001, 2000 and 1999, respectively: Mr. Bruno ($4,575, $3,990 and $4,219), Mr. Mackus ($5,250,
$4,467 and $4,866), Mr. Phillips ($5,250, $5,250 and $5,000), and Mr. Sullivan ($5,250, $5,250 and $0); (ii)
imputed income from life insurance for 2001, 2000 and 1999, respectively: Mr. Bruno ($1,146, $661 and
$796), Mr. Mackus ($416, $438 and $574), Mr. Phillips ($1,296, $1,374 and $1,126) and Mr. Sullivan ($810,
$742 and $78); (iii) relocation allowance paid to Mr. Sullivan for 2000 ($114,242); (iv) supplemental
pension payment to Mr. Phillips for 2000 ($85,000) and severance of $3,029 paid before his return to the
Company in January 2000; severance payment to Mr. Phillips in 1999 ($91,875).
(3) Mr. Rogers became the Chief Executive Officer on December 23, 1999. No compensation has been paid to
Mr. Rogers during his tenure as Chief Executive Officer.
(4) Mr. Phillips was Executive Vice President - Operations during a portion of 1999. He rejoined the Company in
January 2000.
(5) Mr. Sullivan was Executive Vice President - Marketing and had resigned from the Company in 1999. He
rejoined the Company in January 2000.
</FN>
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. Other than options granted on August 1, 2001, all other
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. 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. 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. Options granted under the 1998 Option Plan on
August 1, 2001 are targeted to vest at the rate of 25% of the total option
shares covered by the grant per year for the four (4) years subsequent to the
date of the grang. None of the options granted under the 1998 Option Plan
have vested as of the date of this report.
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.
Option Grants Table
The following table sets forth information concerning the grant of stock options under the Company's
1998 Option Plan during 2001 to the named executive officers.
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 (#) 2001(1) ($/share)(2) Date 5% 10%
F. P. Bruno 11,974 8.4 $1.00 08/01/11 $ 7,531 $ 19,084
C. R. Mackus 13,408 9.4 1.00 08/01/11 8,432 21,369
T. B. Phillips 35,850 25.0 1.00 08/01/11 22,546 57,136
T. W. Sullivan 71,700 50.0 1.00 08/01/11 45,093 114,272
<FN>
(1) A total of 143,400 options were granted to employees under the 1998 Option Plan during 2001.
(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.
(3) The option values presented were calculated based on a per share price of $1.00 on the date of grant
at assumed 5% and 10% annualized rates of appreciation for the term of the grant. The actual value,
if any, that an optionee could realize upon exercise depends on the excess of the market price of the
common stock over the option exercise price on the date the option is exercised. There was no
assurance at the time of grant that the actual value which may be realized by an optionee upon the
exercise of an option will be at or near the value estimated under the model described above.
</FN>
Aggregate Option Exercises in 2001 and Year-End Option Values
The following table sets forth information regarding the exercise of stock options by each of the
named executive officers during 2001 and the fiscal year-end value of the unexercised stock options held by
such officers.
Value of Unexercised
Number of Securities In-The-Money
Shares Underlying Unexercised Options at End of
Acquired Options at End of Fiscal Year 2001 (1)
On Value Fiscal Year 2001 (#) ($)
Exercise Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
T. C. Rogers 0 N/A 0 0 0 0
F. P. Bruno 0 N/A 0 18,074 0 0
C. R. Mackus 0 N/A 0 20,908 0 0
T. B. Phillips 0 N/A 0 35,850 0 0
T. W. Sullivan 0 N/A 0 71,700 0 0
<FN>
(1) Substantially all of the Company's common stock is owned by Holdings 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, 2001, as so established, was $1 per share, which is equal to
or less than 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, 2001.
</FN>
Pension Plan Table
Effective January 1, 2000, the pension plan covering salaried employees
was converted to a cash balance formula for all employees except for those
who, on December 31, 1999, were either age 60 and above or age 55 with 10
years or more years of credited service. The actuarial equivalent of benefits
earned as of December 31, 1999 was used to establish an opening account
balance. Each month a percentage of the employee's earnings is credited to
the account in accordance with the following table:
Service at the Beginning of Year Pay Credits
Less than 5 4.0%
5 but less than 10 4.5%
10 but less than 15 5.0%
15 but less than 20 5.5%
20 but less than 25 6.0%
25 but less than 30 6.5%
30 or more 7.0%
In addition, employees hired prior to January 1, 1999 receive transition
pay-based credits of 1.5% to 2.5% for the next five years. Each account is
also credited with interest using the average annual rate of U.S. 30-year
Treasury Securities for the November preceding the plan year.
Upon termination of employment, the employee may receive benefits in the
form of a lump sum equal to the value of the cash balance account or a monthly
annuity equal to the actuarial equivalent of the cash account balance.
For salaried employees who were not converted to the cash balance
formula, 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 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 pension plan for each of the
named executive officers are as follows: Mr. Bruno (4), Mr. Mackus (22),
Mr. Sullivan (22), and Mr. Phillips (25). 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 2001
Management Incentive Plan. Under the 2001 Management Incentive Plan, the
Board established a management incentive budget based on achievement in
several critical areas that combine to determine the overall Company
performance and in consultation with the CEO, established target incentive
bonus percentages of between 10% and 50% of base salary for executive officers
(other than the CEO, who is not a participant) 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 achievement was less than 80% of budgeted
goals, and a maximum bonus of two times the target incentive bonus percentage
would be paid if actual achievement was 120% or more of budgeted goals. In
2001, the Company's actual achievement in certain categories did meet or
exceed budgeted goals, and bonuses were awarded under this plan.
Chief Executive Officer Compensation
Mr. Rogers does not receive any compensation directly from the Company.
Internal 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. 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
Timothy W. Sullivan
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 26, 2002:
Amount and Nature
Name and Address of of Beneficial Ownership Percent of Class
Beneficial Owner (# of Shares) Class
Bucyrus Holdings, LLC 1,430,300 99.6%
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 26,
2002:
Amount and Nature
Name of of Beneficial Ownership (1) Percent of Class
Beneficial Owner (# of Shares) Class (2)
W. R. Bingham 0 (3) *
W. T. Ewing 0 *
W. R. Hildebrand 4,000 *
K. A. Marvin 0 (3) *
R. L. Purdum 0 (3) *
T. C. Rogers 0 (3) *
F. P. Bruno 300 *
C. R. Mackus 500 *
T. B. Phillips 0 *
T. W. Sullivan 0 *
All directors and
executive officers
as a group (11 persons) 4,800 *
(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 and Rogers are members of Holdings which is the
beneficial owner of 1,430,300 shares of common stock of the Company.
Messrs. Marvin and Purdum are managing directors of American Industrial
Partners Corporation, Holdings' general partner. Messrs. Bingham,
Marvin, Purdum and Rogers each disclaim beneficial ownership of all such
shares.
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. Hildebrand
Mr. Hildebrand served as President and Chief Executive Officer of the
Company until December 9, 1998 under an employment agreement with the Company
dated March 11, 1996, as amended March 5, 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 was advised that the Company
elected not to renew his employment agreement after the initial term expired
on March 11, 2000. Commencing on March 11, 2000, Mr. Hildebrand received
severance in the amount of $10,000 per month for a period of one year
following a two month notice requirement. In addition, Mr. Hildebrand was
entitled to participate in the Company's medical and retirement programs
during this period. Under the retirement programs, Mr. Hildebrand is entitled
to receive a retirement amount equal to the non-vested accrued portion of the
benefit from the Company's salaried employee retirement benefit plan and
supplemental retirement benefit plan. In 2001, Mr. Hildebrand received
payments totalling $8,315 under these 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.
Mr. Sullivan
In August 2000, the Company entered into an agreement with Mr. Sullivan
to serve as President of the Company. Simultaneous with that agreement,
Mr. Sullivan was elected to the Board of Directors and assumed the additional
position as Chief Operating Officer. The agreement provides for a base salary
which is subject to increase at the discretion of the Board. Mr. Sullivan is
eligible to participate in the 2001 Management Incentive Plan and is the only
named executive officer to participate in the Company's Incentive Program for
Sales and Marketing Personnel, pursuant to which in Mr. Sullivan's case he
will be entitled to receive a bonus based on the outcome of sales of machines
and parts. In addition, Mr. Sullivan is entitled to participate in employee
and fringe benefit plans that the Company provides to similarly situated
management employees.
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. On March 5, 2002,
the Company entered into a Termination Benefit Agreement with Mr. Phillips
which is intended to provide benefits to the executive only in the event of a
change of control or ownership of the Company or any of its subsidiaries prior
to December 31, 2005.
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
American Industrial Partners ("AIP") provides substantial ongoing
financial and management services to the Company utilizing the extensive
operating and financial experience of AIP's principals. Pursuant to a
management services agreement among AIP, the Company and the Guarantor
Subsidiaries, AIP provides general management, financial and other corporate
advisory services to the Company for an annual fee of $1,450,000 and is
reimbursed for out-of-pocket expenses. Payment of the annual fee is currently
being deferred and is subordinated in right of payment to the Loan and
Security Agreement (and previously the Credit Agreement). At December 31,
2001, $4,364,000 of fees was payable to AIP under this agreement.
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, 2001, 2000
and 1999.
Consolidated Statements of Comprehensive Loss 27
for the years ended December 31, 2001, 2000 and 1999.
Consolidated Balance Sheets as of December 31, 28-29
2001 and 2000.
Consolidated Statements of Common Shareholders' 30
Investment for the years ended December 31, 2001
2000 and 1999.
Consolidated Statements of Cash Flows for the 31-32
years ended December 31, 2001, 2000 and 1999.
Notes to Consolidated Financial Statements 33-66
for the years ended December 31, 2001, 2000
and 1999.
Report of Arthur Andersen LLP 67
2. FINANCIAL STATEMENT SCHEDULE
Schedule II - Valuation and Qualifying 68
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 2001.
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 27, 2002
Theodore C. Rogers,
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 25, 2002
W. Richard Bingham, Director
/s/ Wayne T. Ewing March 25, 2002
Wayne T. Ewing, Director
/s/ W. R. Hildebrand March 25, 2002
Willard R. Hildebrand, Director
/s/ Kim A. Marvin March 25, 2002
Kim A. Marvin, Director
/s/ Robert L. Purdum March 25, 2002
Robert L. Purdum, Director
/s/ T. C. Rogers March 27, 2002
Theodore C. Rogers, Director
/s/ T. W. Sullivan March 25, 2002
Timothy W. Sullivan, Director
/s/ Craig R. Mackus March 25, 2002
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
2001 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 11 on Form 8-K,
of the Bankruptcy Code, as filed with the
modified December 1, 1994, Commission and
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 11 1994.
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.
3.3 Certificate of Amendment Exhibit 3.3
to Certificate of to Registrant's
Formation of Bucyrus Quarterly Report
Holdings, LLC, effective on Form 10-Q
March 25, 1999. filed with the
Commission on
May 15, 2000.
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)
(a) Letter dated Exhibit 4.1(a)
February 15, 2000 to Registrant's
evidencing change of Quarterly Report
Indenture Trustee. on Form 10-Q
filed with the
Commission on
November 6, 2000.
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 Exhibit 10.1(e)
March 14, 2000 to Credit to Registrant's
Agreement. Annual Report on
Form 10-K for
the year ended
December 31, 1999.
(f) Sixth amendment dated Exhibit 10.1(f)
September 8, 2000 to Credit to Registrant's
Agreement. Quarterly Report
on Form 10-Q
filed with the
Commission on
November 6, 2000.
(g) Seventh amendment dated Exhibit 10.1(g)
March 20, 2001 to Credit to Registrant's
Agreement. Annual Report on
Form 10-K for
the year ended
December 31, 2000.
(h) Eighth amendment dated X
January 4, 2002 to Credit
Agreement.
(i) Ninth amendment dated X
January 22, 2002 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 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.
10.5 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.
10.6 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.
10.7 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.
10.8 1998 Management Stock Option Exhibit 10.17 to
Plan. Registrant's
Annual Report on
Form 10-K for
the year ended
December 31, 1997.
10.9 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.
10.10 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.
10.11 Employment Agreement Exhibit 10.16 to
between Registrant and Registrant's
M. W. Salsieder dated Annual Report on
June 23, 1999. Form 10-K for
the year ended
December 31, 1999.
10.12 Secured Promissory Note Exhibit 10.17 to
between Registrant and Registrant's
M. W. Salsieder dated Annual Report on
June 23, 1999. Form 10-K for
the year ended
December 31, 1999.
10.13 Pledge Agreement Exhibit 10.18 to
between Registrant and Registrant's
M. W. Salsieder dated Annual Report on
June 23, 1999. Form 10-K for
the year ended
December 31, 1999.
10.14 Consulting Agreement Exhibit 10.19
between Registrant and to Registrant's
Wayne T. Ewing dated Annual Report on
February 1, 2000. Form 10-K for
the year ended
December 31, 1999.
10.15 Letter Agreement Exhibit 10.7
between Registrant and to Registrant's
T. W. Sullivan Quarterly Report
dated August 8, 2000. on Form 10-Q
filed with the
Commission on
August 14, 2000.
10.16 Agreement of Debt Exhibit 10.21
Conversion between to Registrant's
Registrant and Annual Report on
Bucyrus Holdings, LLC Form 10-K for
dated March 22, 2001. the year ended
December 31, 2000.
10.17 Consulting Agreement Exhibit 10.8
between Registrant and to Registrant's
Willard R. Hildebrand Quarterly Report
dated July 25, 2001. on Form 10-Q
filed with the
Commission on
November 14, 2001.
10.18 Agreement to Purchase and X
Sell Industrial Property
between Registrant and
InSite Real Estate
Development, L.L.C.
dated October 25, 2001.
10.19 Industrial Lease Agreement X
between Registrant and
InSite South Milwaukee, L.L.C.
dated January 4, 2002.
10.20 Termination Benefits Agreement X
between Registrant and
John F. Bosbous dated
March 5, 2002.
10.21 Termination Benefits Agreement X
between Registrant and
Thomas B. Phillips dated
March 5, 2002.
10.22 Loan and Security Agreement X
by and among Registrant,
Minserco, Inc., Boonville
Mining Services, Inc. and
GMAC Business Credit, LLC,
and Bank One, Wisconsin dated
March 7, 2002.
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*
99.1 Letter from Registrant X
to Securities and
Exchange Commission
dated March 27, 2002
with respect to
representations
received from Arthur
Andersen LLP.
*Included as part of the signature pages to this Annual Report on Form 10-K.