UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
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 Executive Offices)
(Zip Code)
(414) 768-4000
(Registrant's Telephone Number, Including Area Code)
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding May 10, 2002
Common Stock, $.01 par value 1,435,600
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION:
Item 1 - Financial Statements (Unaudited)
Consolidated Condensed Statements of Operations -
Quarters ended March 31, 2002 and 2001 3
Consolidated Condensed Statements of
Comprehensive Loss - Quarters ended
March 31, 2002 and 2001 4
Consolidated Condensed Balance Sheets -
March 31, 2002 and December 31, 2001 5-6
Consolidated Condensed Statements of Cash Flows -
Quarters ended March 31, 2002 and 2001 7
Notes to Consolidated Condensed Financial
Statements 8-17
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 18-24
PART II. OTHER INFORMATION:
Item 6 - Exhibits and Reports on Form 8-K 25
Signature Page 26
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
Quarter Ended March 31,
2002 2001
Revenues:
Net sales $ 64,430 $ 64,702
Other income 54 105
__________ __________
64,484 64,807
__________ __________
Costs and Expenses:
Cost of products sold 52,171 52,699
Engineering and field service,
selling, administrative and
miscellaneous expenses 9,692 11,192
Interest expense 4,599 5,421
__________ __________
66,462 69,312
__________ __________
Loss before income taxes (1,978) (4,505)
Income taxes 606 100
__________ __________
Net loss $ (2,584) $ (4,605)
Net loss per share
of common stock:
Basic $ (1.80) $ (3.21)
Diluted $ (1.80) $ (3.21)
See notes to consolidated condensed financial statements.
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF
COMPREHENSIVE LOSS
(Dollars in Thousands)
Quarter Ended March 31,
2002 2001
Net loss $ (2,584) $ (4,605)
Other comprehensive loss -
foreign currency translation
adjustments (324) (3,448)
________ ________
Comprehensive loss $ (2,908) $ (8,053)
See notes to consolidated condensed financial statements.
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
March 31, December 31, March 31, December 31,
2002 2001 2002 2001
LIABILITIES AND COMMON
ASSETS SHAREHOLDERS' INVESTMENT
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash Accounts payable and
equivalents $ 5,331 $ 7,218 accrued expenses $ 52,383 $ 47,760
Receivables 49,433 55,554 Liabilities to customers
Inventories 110,535 102,008 on uncompleted contracts
Prepaid expenses and and warranties 3,679 6,008
other current assets 8,657 5,827 Income taxes 1,696 1,205
________ ________ Borrowings under revolving
credit facility and
Total Current Assets 173,956 170,607 other short-term
obligations 66,691 566
OTHER ASSETS: Current maturities of
Restricted funds long-term debt 669 732
on deposit 1,331 582 ________ ________
Goodwill - net 55,660 55,660
Intangible assets - net 39,189 39,601 Total Current Liabilities 125,118 56,271
Other assets 13,234 12,092
________ ________ LONG-TERM LIABILITIES:
Liabilities to customers on
109,414 107,935 uncompleted contracts
and warranties 2,000 2,000
PROPERTY, PLANT AND EQUIPMENT: Postretirement benefits 13,060 13,277
Cost 105,057 115,730 Deferred expenses,
Less accumulated pension and other 30,037 33,775
depreciation (37,783) (38,527) Interest payable to
________ ________ Holdings 12,905 11,062
________ ________
67,274 77,203
58,002 60,114
LONG-TERM DEBT, less
current maturities 153,260 222,188
COMMON SHAREHOLDERS' INVESTMENT:
Common stock - par value
$.01 per share, authorized
1,700,000 shares, issued
shares 1,444,650 14 14
Additional paid-in capital 147,715 147,715
Treasury stock -
9,050 shares, at cost (851) (851)
Accumulated deficit (93,000) (90,416)
Accumulated other
comprehensive loss (39,614) (39,290)
________ ________
14,264 17,172
________ ________ ________ ________
$350,644 $355,745 $350,644 $355,745
<FN>
See notes to consolidated condensed financial statements.
</FN>
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Quarter Ended March 31,
2002 2001
Net Cash Used In Operating Activities $ (5,612) $ (5,536)
________ ________
Cash Flows From Investing Activities
Increase in restricted funds
on deposit (749) (421)
Proceeds from sale of The Principal
Financial Group shares 2,974 -
Purchases of property, plant
and equipment (1,036) (779)
Net proceeds from sale and leaseback
transaction 6,657 -
Proceeds from sale of property, plant
and equipment 67 474
________ ________
Net cash provided by (used in)
investing activities 7,913 (726)
________ ________
Cash Flows From Financing Activities
Net proceeds from (repayments of)
revolving credit facilities (2,779) 4,056
Net decrease in long-term debt
and other bank borrowings (87) (144)
Payment of refinancing expenses (1,451) -
________ ________
Net cash provided by (used in)
financing activities (4,317) 3,912
________ ________
Effect of exchange rate changes on cash 129 (406)
________ ________
Net decrease in cash
and cash equivalents (1,887) (2,756)
Cash and cash equivalents at
beginning of period 7,218 6,948
________ ________
Cash and cash equivalents at
end of period $ 5,331 $ 4,192
Supplemental Disclosures of Cash Flow Information
2002 2001
Cash paid (received) during the
period for:
Interest $ 4,429 $ 5,486
Income taxes - net of refunds 254 (279)
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.
See notes to consolidated condensed financial statements.
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of Bucyrus International, Inc. (the "Company"), the
consolidated condensed financial statements contain all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
financial results for the interim periods. Certain items are included in
these statements based on estimates for the entire year. The Company's
operations are classified as one operating segment. The Company is
currently substantially wholly-owned by Bucyrus Holdings, LLC
("Holdings").
2. Certain notes and other information have been condensed or omitted from
these interim consolidated condensed financial statements. Therefore,
these statements should be read in conjunction with the Company's 2001
Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 29, 2002.
3. Inventories consist of the following:
March 31, December 31,
2002 2001
(Dollars in Thousands)
Raw materials and parts $ 16,279 $ 13,646
Costs relating to
uncompleted contracts 252 -
Work in process 11,300 12,837
Finished products (primarily
replacement parts) 82,704 75,525
________ ________
$110,535 $102,008
4. Basic and diluted net loss per share of common stock were 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
numerators and the denominators of the basic and diluted net loss per
share of common stock calculations are as follows:
Quarter Ended March 31,
2002 2001
(Dollars in Thousands, Except
Per Share Amounts)
Basic and Diluted
Net loss $ (2,584) $ (4,605)
Weighted average shares outstanding 1,435,600 1,435,600
Net loss per share $ (1.80) $ (3.21)
5. 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 is no longer subject to
amortization, but instead is subject to an evaluation for impairment at
least annually by applying a two-step fair-value-based test.
Additionally, intangible assets with indefinite lives are also no longer
amortized but are subject to an evaluation for impairment at least
annually by applying a lower-of-cost-or-market test. Intangible assets
with finite lives 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 decreased goodwill amortization expense in the first quarter of
2002 by $540,000 or $.38 per share. The Company has completed an
impairment analysis of its indefinite life intangible assets in
accordance with the provisions of SFAS 142 and has determined that an
impairment charge is not required. Intangible asset amortization expense
in the first quarter of 2002 decreased by approximately $121,000 or $.08
per share.
6. 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 Company is leasing back the property under an operating
lease over a period of twenty years with options for renewals. Net
proceeds received from this transaction were $7,157,000 less $500,000
required as a security deposit. No gain or loss was recognized on this
transaction.
7. The Company's payment obligations under its 9-3/4% Senior Notes due 2007
(the "Senior Notes") are guaranteed by certain of the Company's wholly-
owned subsidiaries (the "Guarantor Subsidiaries"). Such guarantees are
full, unconditional and joint and several. Separate financial statements
of the Guarantor Subsidiaries are not presented because the Company's
management has determined that they would not be material to investors.
The following supplemental financial information sets forth, on an
unconsolidated basis, statement of operations, balance sheet and
statement of cash flow information for the Company (the "Parent
Company"), for the Guarantor Subsidiaries and for the Company's non-
guarantor subsidiaries (the "Other Subsidiaries"). The supplemental
financial information reflects the investments of the Company in the
Guarantor and Other Subsidiaries using the equity method of accounting.
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
Quarter Ended March 31, 2002
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
Revenues:
Net sales $ 34,376 $ 12,080 $ 31,777 $(13,803) $ 64,430
Other income 1,569 - 177 (1,692) 54
________ ________ ________ ________ ________
35,945 12,080 31,954 (15,495) 64,484
________ ________ ________ ________ ________
Costs and Expenses:
Cost of products sold 28,933 11,453 25,588 (13,803) 52,171
Engineering and field
service, selling,
administrative and
miscellaneous expenses 5,463 465 3,764 - 9,692
Interest expense 4,610 317 1,364 (1,692) 4,599
________ ________ ________ ________ ________
39,006 12,235 30,716 (15,495) 66,462
________ ________ ________ ________ ________
Earnings (loss) before
income taxes and equity
in net loss of
consolidated subsidiaries (3,061) (155) 1,238 - (1,978)
Income taxes (benefit) 184 (1) 423 - 606
________ ________ ________ ________ ________
Earnings (loss) before
equity in net loss of
consolidated subsidiaries (3,245) (154) 815 - (2,584)
Equity in net earnings of
consolidated subsidiaries 661 - - (661) -
________ ________ ________ ________ ________
Net earnings (loss) $ (2,584) $ (154) $ 815 $ (661) $ (2,584)
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Operations
Quarter Ended March 31, 2001
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
Revenues:
Net sales $ 37,441 $ 9,498 $ 30,147 $(12,384) $ 64,702
Other income 2,437 43 191 (2,566) 105
________ ________ ________ ________ ________
39,878 9,541 30,338 (14,950) 64,807
________ ________ ________ ________ ________
Costs and Expenses:
Cost of products sold 31,790 8,470 24,903 (12,464) 52,699
Engineering and field
service, selling,
administrative and
miscellaneous expenses 7,018 213 3,961 - 11,192
Interest expense 5,331 485 2,171 (2,566) 5,421
________ ________ ________ ________ ________
44,139 9,168 31,035 (15,030) 69,312
________ ________ ________ ________ ________
Earnings (loss) before
income taxes and equity
in net loss of
consolidated subsidiaries (4,261) 373 (697) 80 (4,505)
Income taxes (benefit) 112 150 (162) - 100
________ ________ ________ ________ ________
Earnings (loss) before
equity in net loss of
consolidated subsidiaries (4,373) 223 (535) 80 (4,605)
Equity in net loss of
consolidated subsidiaries (312) - - 312 -
________ ________ ________ ________ ________
Net earnings (loss) $ (4,685) $ 223 $ (535) $ 392 $ (4,605)
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Balance Sheets
March 31, 2002
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ 28 $ 5,303 $ - $ 5,331
Receivables 20,188 8,067 21,178 - 49,433
Intercompany receivables 85,477 1,168 10,689 (97,334) -
Inventories 58,460 9,408 44,045 (1,378) 110,535
Prepaid expenses and
other current assets 2,438 811 5,408 - 8,657
________ ________ ________ _________ ________
Total Current Assets 166,563 19,482 86,623 (98,712) 173,956
OTHER ASSETS:
Restricted funds on deposit 767 - 564 - 1,331
Goodwill - net 55,660 - - - 55,660
Intangible assets - net 39,189 - - - 39,189
Other assets 11,119 - 2,115 - 13,234
Investment in subsidiaries 7,122 - - (7,122) -
________ ________ ________ _________ ________
113,857 - 2,679 (7,122) 109,414
PROPERTY, PLANT AND
EQUIPMENT - net 50,194 6,188 10,892 - 67,274
________ ________ ________ _________ ________
$330,614 $ 25,670 $100,194 $(105,834) $350,644
LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 36,024 $ 2,779 $ 13,731 $ (151) $ 52,383
Intercompany payables - 30,262 60,828 (91,090) -
Liabilities to customers
on uncompleted contracts
and warranties 1,052 7 2,620 - 3,679
Income taxes 263 24 1,409 - 1,696
Borrowings under revolving
credit facility and other
short-term obligations 66,054 - 637 - 66,691
Current maturities of
long-term debt 221 8 440 - 669
________ ________ ________ _________ ________
Total Current Liabilities 103,614 33,080 79,665 (91,241) 125,118
LONG-TERM LIABILITIES:
Liabilities to customers
on uncompleted contracts
and warranties 2,000 - - - 2,000
Postretirement benefits 12,655 - 405 - 13,060
Deferred expenses,
pension and other 28,021 347 1,669 - 30,037
Interest payable
to Holdings 12,905 - - - 12,905
________ ________ ________ _________ ________
55,581 347 2,074 - 58,002
LONG-TERM DEBT, less
current maturities 150,084 349 2,827 - 153,260
COMMON SHAREHOLDERS'
INVESTMENT 21,335 (8,106) 15,628 (14,593) 14,264
________ ________ ________ _________ ________
$330,614 $ 25,670 $100,194 $(105,834) $350,644
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 Statements of Cash Flows
Quarter Ended March 31, 2002
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
Net Cash Provided By (Used
In) Operating Activities $ (9,869) $ 234 $ 4,023 $ - $ (5,612)
________ ________ ________ ________ ________
Cash Flows From Investing
Activities
Increase in restricted
funds on deposit (725) - (24) - (749)
Proceeds from sale of
The Principal Financial
Group shares 2,974 - - - 2,974
Purchases of property,
plant and equipment (507) (231) (298) - (1,036)
Net proceeds from sale and
leaseback transaction 6,657 - - - 6,657
Proceeds from sale of
property, plant and
equipment 25 - 42 - 67
________ ________ ________ ________ ________
Net cash provided by (used
in)investing activities 8,424 (231) (280) - 7,913
________ ________ ________ ________ ________
Cash Flows From Financing
Activities
Net proceeds from
(repayments of) revolving
credit facilities 2,953 - (5,732) - (2,779)
Net decrease in long-term
debt and other bank
borrowings (57) (3) (27) - (87)
Payment of refinancing
expenses (1,451) - - - (1,451)
________ ________ ________ ________ ________
Net cash provided by (used
in) financing activities 1,445 (3) (5,759) - (4,317)
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - 129 - 129
________ ________ ________ ________ ________
Net decrease in cash
and cash equivalents - - (1,887) - (1,887)
Cash and cash equivalents
at beginning of period - 28 7,190 - 7,218
________ ________ ________ ________ ________
Cash and cash equivalents
at end of period $ - $ 28 $ 5,303 $ - $ 5,331
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Cash Flows
Quarter Ended March 31, 2001
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
Net Cash Provided By (Used
In) Operating Activities $ (3,316) $ 38 $ (2,258) $ - $ (5,536)
________ ________ ________ ________ ________
Cash Flows From Investing
Activities
Increase in restricted
funds on deposit (500) - 79 - (421)
Purchases of property,
plant and equipment (562) (37) (180) - (779)
Proceeds from sale of
property, plant and
equipment 50 - 424 - 474
________ ________ ________ ________ ________
Net cash provided by (used
in)investing activities (1,012) (37) 323 - (726)
________ ________ ________ ________ ________
Cash Flows From Financing
Activities
Proceeds from revolving
credit facilities 4,425 - - - 4,425
Net decrease in long-term
debt and other bank
borrowings (97) - (416) - (513)
________ ________ ________ ________ ________
Net cash provided by (used
in) financing activities 4,328 - (416) - 3,912
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - (406) - (406)
________ ________ ________ ________ ________
Net increase (decrease) in
cash and cash equivalents - 1 (2,757) - (2,756)
Cash and cash equivalents
at beginning of period - 36 6,912 - 6,948
________ ________ ________ ________ ________
Cash and cash equivalents
at end of period $ - $ 37 $ 4,155 $ - $ 4,192
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information is provided to assist in the understanding of
the Company's operations for the quarters ended March 31, 2002 and 2001.
In connection with acquisitions involving the Company, assets and
liabilities were adjusted to their estimated fair values. The consolidated
condensed 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 March 31, 2002 and December 31, 2001 were
as follows:
March 31, December 31,
2002 2001
(Dollars in Thousands)
Working capital $ 48,838 $114,336
Current ratio 1.4 to 1 3.0 to 1
The decrease in working capital and current ratio in 2002 was primarily
due to the classification of borrowings under the Company's new Loan and
Security Agreement with GMAC Business Credit, LLC (the "Loan and Security
Agreement") at March 31, 2002 as a current liability since these borrowings
are due January 2, 2003. At December 31, 2001, borrowings under a previous
credit agreement were classified as long-term debt. Also, fees payable to
American Industrial Partners of $4,727,000 under a management services
agreement are included in current liabilities at March 31, 2002. At
December 31, 2001, these accrued fees totalled $4,364,000 and were classified
as long-term. Payment of these fees is subject to certain restrictions in the
Loan and Security Agreement
The Company is presenting below a calculation of loss before interest
expense, income taxes, depreciation, amortization and (gain) loss on sale of
fixed assets ("Adjusted EBITDA"). The Company is required to maintain certain
minimum EBITDA levels under its revolving credit facility agreement and EBITDA
as defined under this agreement does not differ materially from Adjusted
EBITDA as calculated below. The Adjusted EBITDA calculation is not an
alternative to operating income under generally accepted accounting principles
as an indicator of operating performance or to cash flows as a measure of
liquidity. The following table reconciles Loss Before Income Taxes to
Adjusted EBITDA:
Quarter Ended March 31,
2002 2001
(Dollars in Thousands)
Loss before income taxes $ (1,978) $ (4,505)
Non-cash expenses:
Depreciation 2,631 2,803
Amortization 833 1,319
(Gain) loss on sale of fixed assets (8) 659
Interest expense 4,599 5,421
________ ________
Adjusted EBITDA $ 6,077 $ 5,697
On March 7, 2002, the Company entered into 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. Borrowings under the Loan and Security Agreement
at March 31, 2002 were $66,054,000 at a weighted average interest rate of 5.9%
and were classified as a current liability. Proceeds from the Loan and
Security Agreement were used to repay in full all outstanding borrowings under
the Bucyrus Canada Limited revolving term loan (see below) and to pay
$3,625,000 of interest due March 15 on the Senior Notes (see below).
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. At March 31, 2002, the amount
available for borrowings under the Loan and Security Agreement was $7,938,000.
This amount has been reduced by $5,000,000 which is the minimum availability
the Company must maintain at all times.
The Company previously had a credit agreement with Bank One, Wisconsin
(the "Credit Agreement"). Borrowings under the Credit Agreement at
December 31, 2001 were $63,100,000 at a weighted average interest rate of 5.3%
and were classified as long-term debt. Proceeds from the Loan and Security
Agreement were used to repay in full all outstanding borrowings under the
Credit Agreement.
The Company has outstanding $150,000,000 of 9-3/4% Senior Notes due 2007
(the "Senior Notes"). Interest thereon is payable each March 15 and
September 15. During 2000, Holdings acquired $75,635,000 of the Company's
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 March 31, 2002 and
December 31, 2001, $12,905,000 and $11,062,000, respectively, of interest was
accrued and payable to Holdings. An 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.
Both the Loan and Security Agreement and the Senior Notes indenture
contain certain covenants which may affect the Company's liquidity and capital
resources. The Loan and Security Agreement contains a number of financial
covenants which, among other items, 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). At March 31, 2002, the Company was in compliance with all
covenants.
Bucyrus Canada Limited, a wholly-owned subsidiary of the Company, had a
C$15,000,000 credit facility with The Bank of Nova Scotia. On March 7, 2002,
the outstanding balance of C$9,083,000 under the C$10,000,000 revolving term
loan portion of this facility was paid in full with proceeds from the Loan and
Security Agreement and this portion of the facility was terminated. The
amount outstanding under the C$5,000,000 non-revolving term loan portion was
C$3,880,000 and C$3,960,000 at March 31, 2002 and December 31, 2001,
respectively. On April 30, 2002, Bucyrus Canada Limited paid the non-
revolving term loan portion in full with proceeds from a new C$3,510,000
mortgage loan on its facility. The term of the mortgage loan is 15 years at
an initial interest rate of 7.55% which is fixed for the first five years.
In December 2001, 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. 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 Condensed 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 and funds available from the Loan and Security
Agreement, 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 March 31, 2002, the Company had approximately $1,801,000 of open
capital appropriations. The Company's capital expenditures for the quarter
ended March 31, 2002 were $1,036,000 compared with $779,000 for the quarter
ended March 31, 2001. In the near term, the Company anticipates spending
close to current levels.
Capitalization
The long-term debt to equity ratio at March 31, 2002 and December 31,
2001 was 10.7 to 1 and 12.9 to 1, respectively. The long-term debt to total
capitalization ratio at March 31, 2002 and December 31, 2001 was .7 to 1 and
...9 to 1, respectively. If borrowings under the Loan and Security Agreement at
March 31, 2002 were classified as long-term, the long-term debt to equity
ratio and long-term debt to total capitalization ratio at March 31, 2002 would
have been 15.4 to 1 and .9 to 1, respectively. Total capitalization is
defined as total common shareholders' investment plus long-term debt plus
current maturities of long-term debt and other short-term borrowings and
obligations.
Results of Operations
Net Sales
Net sales for the first quarter of 2002 were $64,430,000 compared with
$64,702,000 for the first quarter of 2001. Net sales of repair parts and
services for the first quarter of 2002 were $51,400,000, which was an increase
of 4.2% from $49,310,000 in the first quarter of 2001. Machine sales for the
first quarter of 2002 were $13,030,000, which was a decrease of 15.3% from
$15,392,000 in the first quarter of 2001. The changes between years were
primarily due to fluctuations in volume.
Cost of Products Sold
Cost of products sold for the first quarter of 2002 was $52,171,000 or
81.0% of net sales compared with $52,699,000 or 81.4% of net sales for the
first quarter of 2001. Included in cost of products sold for 2002 and 2001
was $1,292,000 and $1,301,000, 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 the first quarter of 2002 were $9,692,000 or 15.0% of net sales
compared with $11,192,000 or 17.3% of net sales for the first quarter of 2001.
Included in the amount for the first quarter of 2001 was $659,000 of losses on
disposals of fixed assets. Also, as the result of the adoption of SFAS 142,
goodwill and intangible asset amortization expense decreased by $661,000 in
the first quarter of 2002. Excluding the effect of these items, engineering
and field service, selling, administrative and miscellaneous expenses for the
first quarter of 2001 were 15.3% of net sales.
Interest Expense
Interest expense for the first quarter of 2002 was $4,599,000 compared
with $5,421,000 for the first quarter of 2001. The decrease in interest
expense in 2002 was primarily due to reduced interest rates on revolver
borrowings. Included in interest expense for 2002 and 2001 was $3,656,000
related to the Senior Notes. The interest expense in 2002 and 2001 on the
Senior Notes includes $1,844,000 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. For United States tax purposes, there were losses for which
no income tax benefit was recorded.
Net Loss
Net loss for the first quarter of 2002 was $2,584,000 compared with net
loss of $4,605,000 for the first quarter of 2001. Non-cash depreciation and
amortization charges included in the net loss for the first quarter of 2002
and 2001 were $3,464,000 and $4,122,000, respectively.
New Orders and Backlog
New orders for the first quarter of 2002 were $56,918,000 compared with
$49,277,000 for the first quarter of 2001. There were no new machine orders
in the first quarter of 2002 compared with new machine orders of $2,822,000 in
the first quarter of 2001. New repair parts and service orders for the first
quarter of 2002 increased 22.3% from the first quarter of 2001. The increase
was primarily at foreign locations. 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 March 31, 2002 was $222,240,000
compared with $229,752,000 at December 31, 2001 and $148,983,000 at March 31,
2001. Machine backlog at March 31, 2002 was $19,628,000, which is a decrease
of 39.7% from December 31, 2001 and an increase of 91.2% from March 31, 2001.
Repair parts and service backlog at March 31, 2002 was $202,612,000, which is
an increase of 2.7% from December 31, 2001 and an increase of 46.1% from
March 31, 2001. The increase from March 31, 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.
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 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 rate.
If market conditions warrant, interest rate swaps may be used to adjust
interest rate exposures, although none have been used to date. The Company
believes that a 10% change in the Company's weighted average interest rate at
March 31, 2002 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 and other
foreign currency sensitive instruments outstanding at March 31, 2002, the
Company believes that 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.
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 this section and
elsewhere within this Report. Forward-looking statements include statements
regarding the intent, belief or current expectations of the Company, primarily
with respect to the future operating performance of the Company or related
industry developments. When used in this Report, terms such as "anticipate,"
"believe," "estimate," "expect," "indicate," "may be," "objective," "plan,"
"predict," and "will be" are intended to identify such statements. Readers
are cautioned that any such forward-looking statements are not guarantees of
future performance and involve risks and uncertainties, and that actual
results may differ from those described in the forward-looking statements as a
result of various factors, many of which are beyond the control of the
Company. Forward-looking statements are based upon management's expectations
at the time they are made. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from
such expectations ("Cautionary Statements") are described generally below and
disclosed elsewhere in this Report. All subsequent written or oral forward-
looking statements attributable to the Company or persons acting on behalf of
the Company are expressly qualified in their entirety by the Cautionary
Statements.
Factors that could cause actual results to differ materially from those
contemplated include:
Factors affecting customers' purchases of new equipment, rebuilds,
parts and services such as: production capacity, stockpiles, and
production and consumption rates of coal, copper, iron, gold and other
ores and minerals; the cash flows of customers; the cost and availability
of financing to customers and the ability of customers to obtain
regulatory approval for investments in mining projects; consolidations
among customers; work stoppages at customers or providers of
transportation; and the timing, severity and duration of customer buying
cycles.
Factors affecting the Company's general business, such as: 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; our success in
recruiting and retaining managers and key employees; and our wage
stability and cooperative labor relations; plant capacity and
utilization.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: See Exhibit Index on last page of this report,
which is incorporated herein by reference.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the first quarter of
2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUCYRUS INTERNATIONAL, INC.
(Registrant)
Date May 10, 2002 /s/Craig R. Mackus
Craig R. Mackus
Secretary and Controller
Principal Accounting Officer
Date May 10, 2002 /s/Theodore C. Rogers
Theodore C. Rogers
Chief Executive Officer
BUCYRUS INTERNATIONAL, INC.
EXHIBIT INDEX
TO
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2002
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
2.1 Agreement and Plan of Exhibit 1 to
Merger dated August 21, Registrant's
1997, between Registrant, Tender Offer
American Industrial Solicitation/
Partners Acquisition Recommendation
Company, LLC and Bucyrus Statement on
Acquisition Corp. Schedule 14D-9
filed with the
Commission on
August 26, 1997.
2.2 Certificate of Merger Exhibit 2.2 to
dated September 26, 1997, Registrant's
issued by the Secretary Current Report
of State of the State of on Form 8-K
Delaware. filed with the
Commission on
October 10, 1997.
2.3 Second Amended Joint Plan Exhibit 2.1 to
of Reorganization of B-E Registrant's
Holdings, Inc. and Bucyrus- Current Report
Erie Company under Chapter on Form 8-K,
11 of the Bankruptcy Code, filed with the
as modified December 1, Commission and
1994, including Exhibits. dated December 1,
1994.
2.4 Order dated December 1, Exhibit 2.2 to
1994 of the U.S. Bankruptcy Registrant's
Court, Eastern District of Current Report
Wisconsin, confirming the on Form 8-K
Second Amended Joint Plan filed with the
of Reorganization of B-E Commission and
Holdings, Inc. and Bucyrus- dated December 1,
Erie Company under Chapter 1994.
11 of the Bankruptcy Code,
as modified December 1, 1994,
including Exhibits.
3.1 Restated Certificate Exhibit 3.6 to
of Incorporation of Registrant's
Registrant. Annual Report on
Form 10-K for
the year ended
December 31, 1998.
3.2 By-laws of Registrant. Exhibit 3.5 to
Registrant's
Annual Report on
Form 10-K for
the year ended
December 31, 1998.
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 to Registrant's
Credit 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 Exhibit 10.1(h)
January 4, 2002 to Credit to Registrant's
Agreement. Annual Report on
Form 10-K for
the year ended
December 31, 2001.
(i) Ninth amendment dated Exhibit 10.1(i)
January 22, 2002 to Credit to Registrant's
Agreement. Annual Report on
Form 10-K for
the year ended
December 31, 2001.
10.2 Employment Agreement Exhibit 10.16
between Registrant and to Registrant's
M. W. Salsieder dated Annual Report on
June 23, 1999. Form 10-K for
the year ended
December 31, 1999.
10.3 Secured Promissory Note Exhibit 10.17
between Registrant and to Registrant's
M. W. Salsieder dated Annual Report on
June 23, 1999. Form 10-K for
the year ended
December 31, 1999.
10.4 Pledge Agreement Exhibit 10.18
between Registrant and to Registrant's
M. W. Salsieder dated Annual Report on
June 23, 1999. Form 10-K for
the year ended
December 31, 1999.
10.5 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.
10.6 Letter Agreement Exhibit 10.7
between Registrant and to Registrant's
Timothy W. Sullivan Quarterly Report
dated August 8, 2000. on Form 10-Q
filed with the
Commission on
August 14, 2000.
10.7 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.
10.8 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.
10.9 Agreement to Purchase and Exhibit 10.18
Sell Industrial Property to Registrant's
between Registrant and Annual Report on
InSite Real Estate Form 10-K for
Development, L.L.C. the year ended
dated October 25, 2001. December 31, 2001.
10.10 Industrial Lease Agreement Exhibit 10.19
between Registrant and to Registrant's
InSite South Milwaukee, L.L.C. Annual Report on
dated January 4, 2002. Form 10-K for
the year ended
December 31, 2001.
10.11 Termination Benefits Agreement Exhibit 10.20
between Registrant and to Registrant's
John F. Bosbous dated Annual Report on
March 5, 2002. Form 10-K for
the year ended
December 31, 2001.
10.12 Termination Benefits Agreement Exhibit 10.21
between Registrant and to Registrant's
Thomas B. Phillips dated Annual Report on
March 5, 2002. Form 10-K for
the year ended
December 31, 2001.
10.13 Loan and Security Agreement Exhibit 10.22
by and among Registrant, to Registrant's
Minserco, Inc., Boonville Annual Report on
Mining Services, Inc. and Form 10-K for
GMAC Business Credit, LLC, the year ended
and Bank One, Wisconsin December 31, 2001.
dated March 7, 2002.