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, 2004
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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [ ] No [X]
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, 2004
Common Stock, $.01 par value 1,507,300
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, 2004 and 2003 4
Consolidated Condensed Statements of
Comprehensive Income (Loss) - Quarters ended
March 31, 2004 and 2003 5
Consolidated Condensed Balance Sheets -
March 31, 2004 and December 31, 2003 6-7
Consolidated Condensed Statements of Cash Flows -
Quarters ended March 31, 2004 and 2003 8
Notes to Consolidated Condensed Financial
Statements 9-22
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 23-32
Item 3 - Quantitative and Qualitative Disclosures
About Market Risk 33
Item 4 - Controls and Procedures 34
Forward-Looking Statements 35
PART II. OTHER INFORMATION:
Item 1 - Legal Proceedings 36
Item 2 - Changes in Securities, Use of Proceeds
and Issuer Purchases of Equity Securities 36
Item 3 - Defaults Upon Senior Securities 36
Item 4 - Submission of Matters to a Vote of
Security Holders 36
Item 5 - Other Information 36
Item 6 - Exhibits and Reports on Form 8-K 36
Signature Page 37
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
Quarters Ended March 31,
2004 2003
Sales $ 97,128 $ 60,882
Cost of products sold 77,471 46,324
__________ __________
Gross profit 19,657 14,558
Selling, general and administrative
expenses 14,056 8,791
Research and development expenses 1,354 1,154
Amortization of intangible assets 412 412
__________ __________
Operating earnings 3,835 4,201
Interest expense 4,125 4,523
Other (income) expense - net 345 204
__________ __________
Loss before income taxes (635) (526)
Income tax expense 1,380 806
__________ __________
Net loss $ (2,015) $ (1,332)
Basic and diluted loss per share data:
Net loss per share $ (1.34) $ (.93)
Weighted average shares 1,507,300 1,435,600
See notes to consolidated condensed financial statements.
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS) (Unaudited)
(Dollars in Thousands)
Quarters Ended March 31,
2004 2003
Net loss $ (2,015) $ (1,332)
Other comprehensive income (loss)-
Foreign currency translation
adjustments (995) 1,576
________ ________
Comprehensive income (loss) $ (3,010) $ 244
See notes to consolidated condensed financial statements.
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
March 31, December 31, March 31, December 31,
2004 2003 2004 2003
<Cl
LIABILITIES AND COMMON
ASSETS SHAREHOLDERS' INVESTMENT
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash Accounts payable and
equivalents $ 4,450 $ 6,075 accrued expenses $ 59,475 $ 59,591
Receivables - net 60,603 73,111 Liabilities to customers
Inventories 121,296 115,898 on uncompleted contracts
Prepaid expenses and and warranties 9,131 19,030
other current assets 8,598 8,209 Income taxes 4,977 4,314
________ ________ Borrowings under senior
secured revolving credit
Total Current Assets 194,947 203,293 facility and other
short-term obligations 35,318 37,420
OTHER ASSETS: Current maturities of
Restricted funds long-term debt 317 376
on deposit 583 578 ________ ________
Goodwill 55,860 55,860
Intangible assets - net 35,312 35,724 Total Current Liabilities 109,218 120,731
Other assets 7,888 9,255
________ ________ LONG-TERM LIABILITIES:
Liabilities to customers on
99,643 101,417 uncompleted contracts
and warranties 800 800
PROPERTY, PLANT AND EQUIPMENT: Postretirement benefits 13,274 13,130
Cost 113,483 112,955 Deferred expenses,
Less accumulated pension and other 32,427 32,449
depreciation (58,273) (55,522) Payable to American
________ ________ Industrial Partners 5,665 5,527
Interest payable to
55,210 57,433 Holdings 23,660 25,810
________ ________
75,826 77,716
LONG-TERM DEBT, less
current maturities 153,895 153,973
(including $75,635 of
Senior Notes held by
Holdings)
COMMON SHAREHOLDERS'
INVESTMENT:
Common stock - par value
$.01 per share, authorized
1,700,000 shares, issued
1,516,350 shares 15 15
Additional paid-in capital 153,726 149,578
Treasury stock -
9,050 shares, at cost (851) (851)
Accumulated deficit (106,798) (104,783)
Accumulated other
comprehensive loss (35,231) (34,236)
________ ________
10,861 9,723
________ ________ ________ ________
$349,800 $362,143 $349,800 $362,143
<FN>
See notes to consolidated condensed financial statements.
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in Thousands)
Quarters Ended March 31,
2004 2003
Net Cash Provided By (Used In)
Operating Activities $ 1,455 $ (78)
________ ________
Cash Flows From Investing Activities
(Increase) decrease in restricted funds
on deposit (5) 72
Purchases of property, plant
and equipment (704) (389)
Proceeds from sale of property, plant
and equipment 8 15
________ ________
Net cash used in investing activities (701) (302)
________ ________
Cash Flows From Financing Activities
Net proceeds from (repayments of)
revolving credit facilities (2,365) 2,735
Net increase (decrease) in long-term
debt and other bank borrowings 127 (480)
Payment of refinancing expenses (166) (976)
________ ________
Net cash provided by (used in)
financing activities (2,404) 1,279
________ ________
Effect of exchange rate changes
on cash 25 86
________ ________
Net increase (decrease) in cash
and cash equivalents (1,625) 985
Cash and cash equivalents at
beginning of period 6,075 4,189
________ ________
Cash and cash equivalents at
end of period $ 4,450 $ 5,174
Supplemental Disclosures of Cash Flow Information
2004 2003
Cash paid during the period for:
Interest $ 7,836 $ 4,421
Income taxes - net of refunds 661 702
See notes to consolidated condensed financial statements.
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
1. In the opinion of Bucyrus International, Inc. (the "Company"), the
consolidated condensed financial statements contain all adjustments
(consisting only 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 2003
Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 30, 2004.
3. Inventories consist of the following:
March 31, December 31,
2004 2003
(Dollars in Thousands)
Raw materials and parts $ 11,451 $ 11,655
Work in process 20,443 20,433
Finished products (primarily
replacement parts) 89,402 83,810
________ ________
$121,296 $115,898
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. The shares outstanding used to compute the diluted
loss per share for the quarters ended March 31, 2004 and 2003 exclude
outstanding options to purchase 127,250 and 199,500 shares, respectively,
of the Company's common stock. The options were excluded because their
inclusion would have been antidilutive.
5. The Company accounts for stock options 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"). The
following table illustrates the effect on net loss and net loss per share
as if the fair value-based method provided by SFAS 123 had been applied
for all outstanding and unvested awards in each period:
Quarters Ended March 31,
2004 2003
(Dollars in Thousands, Except
Per Share Amounts)
Reported net loss $ (2,015) $ (1,332)
Add: Non-cash stock-based
employee compensation expense
recorded for stock options,
net of related tax effects 4,148 -
Deduct: Total non-cash stock-based
employee compensation expense
determined under fair value based
method for all awards, net of
related tax effects (4) (72)
________ ________
Pro forma net earnings (loss) $ 2,129 $ (1,404)
Net earnings (loss) per share of
common stock:
As reported - basic and diluted $ (1.34) $ (.93)
Pro forma:
Basic 1.41 (.98)
Diluted 1.35 (.98)
6. Intangible assets consist of the following:
March 31, 2004 December 31, 2003
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
(Dollars in Thousands)
Amortized intangible
assets:
Engineering drawings $ 25,500 $ (8,312) $ 25,500 $ (7,994)
Bill of material
listings 2,856 (931) 2,856 (895)
Software 2,288 (1,492) 2,288 (1,434)
________ ________ ________ ________
$ 30,644 $(10,735) $ 30,644 $(10,323)
Unamortized intangible
assets:
Trademarks/Trade names $ 12,436 $ 12,436
Intangible pension
asset 2,967 2,967
________ ________
$ 15,403 $ 15,403
The aggregate intangible amortization expense for the quarters ended
March 31, 2004 and 2003 was $412,000. The estimated future amortization
expense of intangible assets as of March 31, 2004 is as follows:
(Dollars in Thousands)
2004 (remaining nine months) $ 1,235
2005 1,647
2006 1,647
2007 1,585
2008 1,418
2009 1,418
Future 10,959
________
$ 19,909
7. 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 the Company's
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.
Environmental problems have not interfered in any material respect with
the Company's manufacturing operations to date. The Company has an
ongoing program to address any potential environmental problems. 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.
The Company recognizes the cost associated with its warranty policies on
its products at the time of sale. The amount recognized is based on
historical experience. The following is a reconciliation of the changes
in accrued warranty costs for the quarters ended March 31, 2004 and 2003:
Quarters Ended March 31,
2004 2003
(Dollars in Thousands)
Balance at January 1 $ 4,311 $ 3,597
Provision 1,256 263
Charges (544) (381)
________ ________
Balance at March 31 $ 5,023 $ 3,479
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 up 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, results of operations or cash flows, although no
assurance to that effect can be given.
Asbestos Liability
The Company has been named as a co-defendant in approximately 290
personal injury liability cases alleging damages due to exposure to
asbestos and other substances, involving approximately 1,478 plaintiffs.
The cases are pending in courts in nine states. In all of these cases,
insurance carriers have accepted or are expected to accept defense.
These cases are in various pre-trial stages. The Company does not
believe that costs associated with these matters will have a material
effect on its financial position, results of operations or cash flows,
although no assurance to that effect can be given.
Other Litigation
A wholly-owned Australian subsidiary of the Company is a defendant in a
suit pending in the Supreme Court of Queensland in Australia, brought on
May 5, 2002, relating to a contractual claim. The plaintiff, pursuant to
a contract with the Company's subsidiary, agreed to erect a dragline sold
by the Company to a customer for use at its mine site. The plaintiff
asserts various contractual claims related to breach of contract damages
and other remedies for approximately $3,600,000 Australian dollars
related to its contention that it is owed amounts for services rendered
under the contract. The Company's subsidiary has asserted counterclaims
against the plaintiff in connection with certain aspects of the work
performed. The Company has established a reserve for its estimate of the
resolution of this matter. At this time discovery is ongoing and it is
not possible to evaluate the outcome of the claim nor the range of
potential loss, if any.
8. Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," requires the reporting of comprehensive income
(loss) in addition to net income (loss) from operations. Comprehensive
income (loss) is a more inclusive financial reporting method that
includes disclosure of financial information that historically has not
been recognized in the calculation of net income (loss). The Company
reports comprehensive income (loss) and accumulated other comprehensive
loss which includes net loss, foreign currency translation adjustments
and minimum pension liability adjustments. Information on accumulated
other comprehensive loss is as follows:
Minimum Accumulated
Cumulative Pension Other
Translation Liability Comprehensive
Adjustments Adjustments Loss
(Dollars in Thousands)
Balance at December 31, 2003 $ (9,028) $(25,208) $(34,236)
Changes - Quarter ended
March 31, 2004 (995) - (995)
________ ________ ________
Balance at March 31, 2004 $(10,023) $(25,208) $(35,231)
9. The Company has several pension and retirement plans covering
substantially all of its employees in the United States. The Company
also provides certain health care benefits to age 65 and life insurance
benefits for certain eligible retired United States employees.
The components of net periodic pension cost consisted of the following:
Quarters Ended March 31,
2004 2003
(Dollars in Thousands)
Service cost $ 443 $ 392
Interest cost 1,310 1,269
Expected return on plan assets (1,256) (1,007)
Amortization of prior service cost 51 49
Amortization of actuarial loss 171 482
________ ________
Net cost $ 719 $ 1,185
The components of other net periodic postretirement benefits cost (health
care and life insurance) consisted of the following:
Quarters Ended March 31,
2004 2003
(Dollars in Thousands)
Service cost $ 190 $ 136
Interest cost 264 236
Amortization of prior service cost (55) (46)
Amortization of actuarial loss 91 58
________ ________
Net cost $ 490 $ 384
During the first quarter of 2004, the Company contributed approximately
$625,000 to its pension plans and $354,000 for the payment of benefits
from its postretirement benefit plan. The Company presently anticipates
contributing an additional $4,233,000 to its pension plans and $1,353,000
for the payment of benefits from its postretirement benefit plan during
the remainder of 2004.
10. 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 Subsidiaries 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 Statement of Operations
Quarter Ended March 31, 2004
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
Sales $ 61,142 $ 12,540 $ 46,114 $(22,668) $ 97,128
Cost of products sold 46,854 11,696 40,866 (21,945) 77,471
________ ________ ________ ________ ________
Gross profit 14,288 844 5,248 (723) 19,657
Selling, general and
administrative expenses 9,163 612 4,354 (73) 14,056
Research and development
expenses 1,354 - - - 1,354
Amortization of
intangible assets 412 - - - 412
________ ________ ________ ________ ________
Operating earnings 3,359 232 894 (650) 3,835
Interest expense 4,338 339 540 (1,092) 4,125
Other (income) expense - net (397) - (350) 1,092 345
________ ________ ________ ________ ________
Earnings (loss) before
income taxes and equity
in net loss of
consolidated subsidiaries (582) (107) 704 (650) (635)
Income tax expense 341 3 1,036 - 1,380
________ ________ ________ ________ ________
Loss before equity in
net loss of consolidated
subsidiaries (923) (110) (332) (650) (2,015)
Equity in net loss of
consolidated subsidiaries (442) - - 442 -
________ ________ ________ ________ ________
Net loss $ (1,365) $ (110) $ (332) $ (208) $ (2,015)
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statement of Operations
Quarter Ended March 31, 2003
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
Sales $ 34,975 $ 7,550 $ 33,429 $(15,072) $ 60,882
Cost of products sold 26,240 7,936 26,712 (14,564) 46,324
________ ________ ________ ________ ________
Gross profit (loss) 8,735 (386) 6,717 (508) 14,558
Selling, general and
administrative expenses 3,434 546 4,862 (51) 8,791
Research and development
expenses 1,154 - - - 1,154
Amortization of
intangible assets 412 - - - 412
________ ________ ________ ________ ________
Operating earnings (loss) 3,735 (932) 1,855 (457) 4,201
Interest expense 4,751 333 1,286 (1,847) 4,523
Other (income) expense - net (1,301) - (342) 1,847 204
________ ________ ________ ________ ________
Earnings (loss) before
income taxes and equity
in net earnings of
consolidated subsidiaries 285 (1,265) 911 (457) (526)
Income taxes 167 6 633 - 806
________ ________ ________ ________ ________
Earnings (loss) before equity
in net loss of consolidated
subsidiaries 118 (1,271) 278 (457) (1,332)
Equity in net loss of
consolidated subsidiaries (993) - - 993 -
________ ________ ________ ________ ________
Net earnings (loss) $ (875) $ (1,271) $ 278 $ 536 $ (1,332)
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Balance Sheet
March 31, 2004
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ 15 $ 4,435 $ - $ 4,450
Receivables - net 21,498 8,519 29,822 764 60,603
Intercompany receivables 83,867 1,650 30,067 (115,584) -
Inventories 59,878 6,699 58,232 (3,513) 121,296
Prepaid expenses and
other current assets 2,046 161 6,391 - 8,598
________ ________ ________ _________ ________
Total Current Assets 167,289 17,044 128,947 (118,333) 194,947
OTHER ASSETS:
Restricted funds on deposit 245 - 338 - 583
Goodwill 55,660 - 200 - 55,860
Intangible assets - net 35,312 - - - 35,312
Other assets 5,729 - 2,159 - 7,888
Investment in subsidiaries 25,394 - - (25,394) -
________ ________ ________ _________ ________
122,340 - 2,697 (25,394) 99,643
PROPERTY, PLANT AND
EQUIPMENT - net 38,164 5,806 11,240 - 55,210
________ ________ ________ _________ ________
$327,793 $ 22,850 $142,884 $(143,727) $349,800
LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
(DEFICIT)
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 41,777 $ 2,959 $ 14,939 $ (200) $ 59,475
Intercompany payables 653 30,251 76,069 (106,973) -
Liabilities to customers
on uncompleted contracts
and warranties 3,370 628 5,133 - 9,131
Income taxes 559 46 4,372 - 4,977
Borrowings under senior
secured revolving credit
facility and other short-
term obligations 35,055 - 263 - 35,318
Current maturities of
long-term debt - 48 269 - 317
________ ________ ________ _________ ________
Total Current Liabilities 81,414 33,932 101,045 (107,173) 109,218
LONG-TERM LIABILITIES:
Liabilities to customers
on uncompleted contracts
and warranties 800 - - - 800
Postretirement benefits 12,952 - 322 - 13,274
Deferred expenses,
pension and other 31,281 654 492 - 32,427
Payable to American
Industrial Partners 5,665 - - - 5,665
Interest payable
to Holdings 23,660 - - - 23,660
________ ________ ________ _________ ________
74,358 654 814 - 75,826
LONG-TERM DEBT, less current
maturities (including
$75,635 of Senior Notes
held by Holdings) 150,000 1,165 2,730 - 153,895
COMMON SHAREHOLDERS'
INVESTMENT (DEFICIT) 22,021 (12,901) 38,295 (36,554) 10,861
________ ________ ________ _________ ________
$327,793 $ 22,850 $142,884 $(143,727) $349,800
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Balance Sheet
December 31, 2003
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ 16 $ 7,222 $ (1,163) $ 6,075
Receivables - net 24,325 8,687 39,335 764 73,111
Intercompany receivables 84,418 632 31,833 (116,883) -
Inventories 58,405 5,980 60,132 (8,619) 115,898
Prepaid expenses and
other current assets 1,722 56 6,431 - 8,209
________ ________ ________ _________ ________
Total Current Assets 168,870 15,371 144,953 (125,901) 203,293
OTHER ASSETS:
Restricted funds on deposit 245 - 333 - 578
Goodwill 55,660 - 200 - 55,860
Intangible assets - net 35,724 - - - 35,724
Other assets 7,184 - 2,071 - 9,255
Investment in subsidiaries 26,618 - - (26,618) -
________ ________ ________ _________ ________
125,431 - 2,604 (26,618) 101,417
PROPERTY, PLANT AND
EQUIPMENT - net 39,701 6,028 11,704 - 57,433
________ ________ ________ _________ ________
$334,002 $ 21,399 $159,261 $(152,519) $362,143
LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
(DEFICIT)
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 39,929 $ 2,584 $ 17,097 $ (19) $ 59,591
Intercompany payables - 29,311 88,178 (117,489) -
Liabilities to customers
on uncompleted contracts
and warranties 11,522 628 6,880 - 19,030
Income taxes 478 45 3,791 - 4,314
Borrowings under senior
secured revolving credit
facility and other short-
term obligations 37,420 - - - 37,420
Current maturities of
long-term debt - 49 327 - 376
________ ________ ________ _________ ________
Total Current Liabilities 89,349 32,617 116,273 (117,508) 120,731
LONG-TERM LIABILITIES:
Liabilities to customers
on uncompleted contracts
and warranties 800 - - - 800
Postretirement benefits 12,801 - 329 - 13,130
Deferred expenses,
pension and other 31,599 397 453 - 32,449
Payable to American
Industrial Partners 5,527 - - - 5,527
Interest payable to
Holdings 25,810 - - - 25,810
________ ________ ________ _________ ________
76,537 397 782 - 77,716
LONG-TERM DEBT, less
current maturities
(including $75,635
of Senior Notes held
by Holdings) 150,000 1,176 2,797 - 153,973
COMMON SHAREHOLDERS'
INVESTMENT (DEFICIT) 18,116 (12,791) 39,409 (35,011) 9,723
________ ________ ________ _________ ________
$334,002 $ 21,399 $159,261 $(152,519) $362,143
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statement of Cash Flows
Quarter Ended March 31, 2004
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
Net Cash Provided By (Used
In) Operating Activities $ 3,058 $ 11 $ (2,777) $ 1,163 $ 1,455
________ ________ ________ ________ ________
Cash Flows From Investing
Activities
Increase in restricted
funds on deposit - - (5) - (5)
Purchases of property,
plant and equipment (533) (3) (168) - (704)
Proceeds from sale of
property, plant and
equipment 6 2 - - 8
________ ________ ________ ________ ________
Net cash provided by (used
in) investing activities (527) 1 (173) - (701)
________ ________ ________ ________ ________
Cash Flows From Financing
Activities
Payments of revolving
credit facilities (2,365) - - - (2,365)
Net increase (decrease)
in other long-term debt
and bank borrowings - (11) 138 - 127
Payment of refinancing
expenses (166) - - - (166)
________ ________ ________ ________ ________
Net cash provided by (used
in) financing activities (2,531) (11) 138 - (2,404)
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - 25 - 25
________ ________ ________ ________ ________
Net decrease in cash
and cash equivalents - (1) (2,787) 1,163 (1,625)
Cash and cash equivalents
at beginning of period - 16 7,222 (1,163) 6,075
________ ________ ________ ________ ________
Cash and cash equivalents
at end of period $ - $ 15 $ 4,435 $ - $ 4,450
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statement of Cash Flows
Quarter Ended March 31, 2003
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
Net Cash Provided By (Used
In) Operating Activities $ (1,602) $ 191 $ 1,333 $ - $ (78)
________ ________ ________ ________ ________
Cash Flows From Investing
Activities
Decrease in restricted
funds on deposit 23 - 49 - 72
Purchases of property,
plant and equipment (120) (1) (268) - (389)
Proceeds from sale of
property, plant and
equipment 3 2 10 - 15
________ ________ ________ ________ ________
Net cash provided by (used
in) investing activities (94) 1 (209) - (302)
________ ________ ________ ________ ________
Cash Flows From Financing
Activities
Proceeds from revolving
credit facilities 2,735 - - - 2,735
Net decrease in other
long-term debt and
bank borrowings (63) (11) (406) - (480)
Payment of refinancing
expenses (976) - - - (976)
________ ________ ________ ________ ________
Net cash provided by (used
in) financing activities 1,696 (11) (406) - 1,279
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - 86 - 86
________ ________ ________ ________ ________
Net increase in cash and
cash equivalents - 181 804 - 985
Cash and cash equivalents
at beginning of period - 24 4,165 - 4,189
________ ________ ________ ________ ________
Cash and cash equivalents
at end of period $ - $ 205 $ 4,969 $ - $ 5,174
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Business
The Company designs, manufactures and markets large excavation machinery
used for surface mining, and provides comprehensive aftermarket services,
supplying replacement parts and offering maintenance and repair contracts and
services for these machines. The Company manufactures its OEM products and
the majority of aftermarket parts at its facility in South Milwaukee,
Wisconsin. The Company's principal OEM products are draglines, electric
mining shovels and rotary blasthole drills, which are used primarily by
customers who mine copper, coal, oil sands and iron ore throughout the world.
In addition, the Company provides aftermarket services in mining centers
throughout the world, including Argentina, Australia, Brazil, Canada, Chile,
China, England, India, Peru and South Africa and the United States. The
largest markets for this mining equipment have been in the United States,
South America, Australia, South Africa and Canada. In the future, China,
India and Canada are expected to be increasingly important markets.
The market for OEM machines is closely correlated with customer
expectations of sustained strength in prices of surface-mined commodities.
Growth in demand for these commodities is a function of, among other things,
economic activity, population increases and continuing improvements in
standards of living in many areas of the world. In 2001 and 2002, the market
prices of many surface-mined commodities were generally weak. In 2003 and
during the first quarter of 2004, market prices for copper, coal, iron ore and
oil increased. Factors that could support sustained demand for these key
commodities include continued economic growth in China, India and the
developing world, and renewed economic strength in industrialized countries.
The Company's aftermarket parts and service operations, which have
accounted for approximately 70% of sales over the past ten years, tend to be
more consistent than OEM machine sales. The Company's complex machines are
typically kept in continuous operation from 15 to 40 years, requiring regular
maintenance and repair throughout their productive lives. The size of the
Company's installed base of surface mining equipment and its ability to
provide on-time delivery of reliable parts and prompt service are important
drivers of aftermarket sales.
While the Company is continuing to forecast increased revenues
attributable to increased demand related to both aftermarket parts sales and
OEM machines, the Company maintains ongoing efforts to improve efficiency and
contain costs. The Company has recorded restructuring charges in recent years.
While the Company does not anticipate significant restructuring charges in
future years, the Company does continually evaluate all opportunities for
reductions of headcount. The Company does not believe these previous
reductions will impact its ability to respond to increased demand for its
products.
A substantial portion of the Company's sales and operating earnings is
attributable to operations located outside the United States. The Company
sells OEM machines, including those sold directly to foreign customers, and
most of its aftermarket parts in United States dollars, with limited
aftermarket parts sales denominated in the local currencies of Australia,
Canada, South Africa, Brazil, Chile and the United Kingdom. Aftermarket
services are paid for primarily in local currency which is naturally hedged by
the Company's payment of local labor in local currency. In the aggregate,
approximately 70% of the Company's 2003 sales were priced in United States
dollars.
Over the past three years, during a period of generally weak commodity
prices, the Company increased gross profits by improving manufacturing
overhead variances, achieving productivity gains and growing its high margin
aftermarket parts and services business.
Following is a discussion of key measures which contributed to the
Company's operating results.
Key Measures
Commodity Prices
Demand for the Company's OEM machines is driven in large part by the
prices of certain commodities, such as copper, coal, oil and iron ore. The
prices of these commodities have risen in recent periods, particularly in the
fourth quarter of 2003, although prices moderated in the beginning of the
second quarter of 2004. The following table shows selected commodity prices
at March 31, 2004 and as of December 31, 2003, 2002 and 2001:
March 31, December 31,
2004 2003 2002 2001
Copper $/lb.(1) $ 1.39 $ 1.05 $ .70 $ .66
Japanese coking coal $/tonne(2) $52.87 $42.97 $40.97 $42.23
Asian steam coal marker $/tonne(3) $72.17 $54.82 $30.57 $31.46
Heavy oil $/barrel(4) $21.92 $19.61 $17.57 $11.66
South American iron ore $/tonne (5) $37.90 $31.95 $29.31 $30.03
__________
(1) Source: London Metal Exchange.
(2) Source: The Institute for Energy Economics, Japan.
(3) Source: McCloskey Coal News.
(4) Source: Sproule Associates, Ltd. The prices quoted are for Hardisty
(Canada) Heavy Crude Oil and were converted from Canadian to United
States dollars based on the prevailing exchange rate on each applicable
measurement date.
(5) Source: Skillings Mining Review.
On-Time Delivery and Lead Times
Due to the high fixed cost structure of the Company's customers, it is
critical that they avoid equipment down-time. On-time delivery and reduced
lead time of aftermarket parts and services allow customers to reduce downtime
and is therefore a key measure of customer service, and the Company believes
they are fundamental drivers of aftermarket customer demand. The Company's
on-time delivery percentage in the aftermarket, based on achieved promised
delivery dates to customers, has increased from approximately 74% in 2001 to
92% for 2003 and 93% for the first quarter of 2004.
The Company increased on-time deliveries and shortened lead times by
focusing on development of key shop floor metrics, improved communication
between sales, manufacturing and shipping, daily or weekly meetings to resolve
issues, changing of shipment methods and the hiring of an additional
supervisory person dedicated to on-time delivery. The information to
accomplish much of these improvements is now available from the Company's new
ERP system.
Productivity
Sales per full time equivalent employee is a measure of the Company's
operational efficiency. Sales per full time equivalent employee were $239,000
for the first quarter of 2004 and $219,000 for 2003 compared with $186,000 for
2001. This productivity increase is primarily due to the application of
worldwide sales and inventory enterprise resource planning ("e.r.p.") systems,
and personnel upgrade which collectively allowed sales to grow with minimal
changes in headcount.
Warranty Claims
Product quality is another key driver of customer satisfaction and, as a
result, sales. Management uses warranty claims as a percentage of total sales
as one objective benchmark to evaluate product quality. During 2003 and the
first quarter of 2004, warranty claims as a percentage of total sales were
less than 1%.
Backlog
Backlog is a tool which allows management to forecast sales and
production requirements. Due to the high cost of some OEM products, backlog
is subject to volatility, particularly over relatively short periods. A
portion of the Company's backlog is related to multi-year contracts that will
generate revenue in future years. The following table shows backlog at
March 31, 2004 and December 31, 2003 as well as the portion of backlog which
is or was expected to be recognized within 12 months of these dates:
March 31, December 31,
2004 2003
(Dollars in Thousands)
Next 12 months $ 153,554 $ 122,263
Total $ 283,962 $ 233,642
Inventory
Inventory is one of the Company's significant assets. As of March 31,
2004 the Company had $121,296,000 in inventory. Inventory turned at a rate of
approximately 2.3 times in 2003 and 2.4 times in the first quarter of 2004,
which the Company believes is in line with other manufacturers of surface
mining equipment. The Company believes that it has appropriately recorded at
the lower of cost or market any slow moving or obsolete inventory in its
financial statements. The factors that could reduce the carrying value of
inventory include reduced demand for aftermarket parts due to decreased sales
volumes attributable to new or improved technology or customers discontinuing
the use of older model machines, which could render inventory obsolete or
excess. With the exception of the normal inventory obsolescence provision
recorded in the ordinary course of business, the Company does not anticipate
recording any inventory impairments.
Results of Operations
Quarter Ended March 31, 2004 Compared to Quarter Ended March 31, 2003
Sales
Sales for the first quarter of 2004 were $97,128,000 compared with
$60,882,000 for the first quarter of 2003. Sales of aftermarket parts and
services for the first quarter of 2003 were $69,464,000, an increase of 29.5%
from $53,637,000 in the first quarter of 2003. The increase was primarily due
to an increase in customer equipment utilization and increased discretionary
spending. Machine sales for the first quarter of 2004 were $27,664,000, an
increase of 281.8% from $7,245,000 for the first quarter of 2003. The
increase in the first quarter of 2004 was primarily due to the recognition of
sales on draglines. Dragline sales were $13,531,000 in the first quarter
of 2004 and $2,628,000 in the first quarter of 2003. There was also an
increase in sales of electric mining shovels in the first quarter of 2004.
Approximately $4,215,000 of the increase in sales for the first quarter of
2004 was attributable to a weakening United States dollar, which primarily
impacted aftermarket sales (see "Foreign Currency Fluctuations" below).
Gross Profit
Gross profit for the first quarter of 2004 was $19,657,000 or 20.2% of
sales compared with $14,558,000 or 23.9% of sales for the first quarter of
2003. The increase in gross profit was primarily due to an increase in sales.
The decrease in the gross profit percentage for 2004 was primarily due to an
increase in lower margin OEM sales which was partially offset by manufacturing
overhead variance improvements of approximately $2,100,000 compared with 2003
due to continuing cost controls and higher manufacturing volumes. Also
included in gross profit for 2004 and 2003 was $1,286,000 and $1,260,000,
respectively, of additional depreciation expense as a result of purchase price
allocation to plant and equipment in connection with American Industrial
Partners' ("AIP") acquisition of the Company. Approximately $713,000 of the
increase in gross profit in the first quarter of 2004 was attributable to a
weakening United States dollar (see "Foreign Currency Fluctuations" below).
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the first quarter of
2004 were $14,056,000 or 14.5% of sales compared with $8,791,000 or 14.4% of
sales for 2003. Selling, general and administrative expenses in 2004 included
$4,148,000 related to non-cash stock-based employee compensation compared to
$0 in 2003. This expense represents the charge recorded relating to the
existing book value stock option plan accounted for in accordance with
Emerging Issues Task Force ("EITF") Issue No. 87-23. Selling expenses
increased by $1,038,000 in 2004 primarily due to increased sales efforts in
South America and higher foreign costs as a result of the weakened U.S.
dollar, but remained constant as a percentage of sales. In 2004, management
incentive accruals increased by $271,000 from 2003. AIP expenses pursuant to
the Management Services Agreement were $500,000 in 2004 compared with $410,000
in 2003. Foreign currency transaction gains totaled $645,000 in the first
quarter of 2004 compared with a loss of $243,000 in the first quarter of 2003.
Research and Development Expenses
Research and development expenses for the first quarter of 2004 were
$1,354,000 compared with $1,154,000 for 2003.
Amortization of Intangible Assets
Amortization of intangible assets, consisting of engineering drawings,
bill of material listings and software, for each of the first quarters of 2004
and 2003 was $412,000.
Operating Earnings
Operating earnings for the first quarter of 2004 were $3,835,000 or 3.9%
of sales, compared with $4,201,000 of 6.9% of sales, for the first quarter of
2003. The decline was primarily due to the increase in non-cash stock-based
employee compensation of $4,148,000.
Interest Expense
Interest expense for the first quarter of 2004 was $4,125,000 compared
with $4,523,000 for the first quarter of 2003. The decrease in interest
expense in 2004 was primarily due to reduced borrowings.
Other Income and Expense - Net
Other income and expense - net was $345,000 of expense for the first
quarter of 2004 compared with $204,000 of expense for the first quarter of
2003. Debt issuance cost amortization was $410,000 and $249,000 for 2004 and
2003, respectively. These amounts include costs related to the Loan and
Security Agreement entered into on March 7, 2002 (see "Liquidity and Capital
Resources - Financing Cash Flows" below).
Income Taxes
Income tax expense for the first quarters of 2004 and 2003 consists
primarily of foreign taxes at applicable statutory rates. As of March 31,
2004, the Company had approximately $31,196,000 of federal net operating loss
carryforwards that expire in the years 2006 through 2021 to offset against
future federal taxable income.
Foreign Currency Fluctuations
The following table summarizes the approximate effect of changes in
foreign currency exchange rates on the Company's sales, gross profit and
operating earnings for the quarters ended March 31, 2004 and 2003, in each
case compared to the same quarter in the prior year:
Quarters Ended March 31,
2004 2003
(Dollars in Thousands)
Increase in sales $ 4,215 $ 2,079
Increase in gross profit 713 305
Increase in operating earnings 53 75
EBITDA
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
for the quarters ended March 31, 2004 and 2003 was $7,008,000 and $7,309,000,
respectively. EBITDA is presented (i) because EBITDA is used by the Company
to measure its liquidity and financial performance and (ii) because the
Company believes EBITDA is frequently used by securities analysts, investors
and other interested parties in evaluating the performance and enterprise
value of companies in general, and in evaluating the liquidity of companies
with significant debt service obligations and their ability to service their
indebtedness. The EBITDA calculation is not an alternative to operating
earnings under generally accepted accounting principles, or GAAP, as an
indicator of operating performance or of cash flows as a measure of liquidity.
The following table reconciles Net Loss as shown in the Consolidated Condensed
Statements of Operations to EBITDA and reconciles EBITDA to Net Cash Provided
by (Used in) Operating Activities as shown in the Consolidated Condensed
Statements of Cash Flows:
Quarters Ended March 31,
2004 2003
(Dollars in Thousands)
Net loss $ (2,015) $ (1,332)
Interest income (65) (27)
Interest expense 4,125 4,523
Income taxes 1,380 806
Depreciation 2,761 2,672
Amortization (1) 822 667
________ ________
EBITDA (2) 7,008 7,309
Changes in assets and liabilities (4,269) (2,142)
Non-cash stock compensation expense (3) 4,148 -
Loss on sale of fixed assets 8 57
Interest income 65 27
Interest expense (4,125) (4,523)
Income tax expense (1,380) (806)
________ ________
Net cash provided by (used in)
operating activities $ 1,455 $ (78)
Net cash used in
investing activities $ (701) $ (302)
Net cash provided by (used in)
financing activities $ (2,404) $ 1,279
(1) Includes amortization of intangible assets and debt issuance costs.
(2) This calculation varies from the calculation in the Company's Loan and
Security Agreement.
(3) Non-cash stock compensation expense represents the charge recorded
relating to the Company's book value stock option plan accounted for in
accordance with EITF Issue No. 87-23.
Liquidity and Capital Resources
Cash Requirements
During 2004, the Company anticipates strong cash flows from operations
due to continued strength in aftermarket parts sales as well as increased
demand for new machines. In expanding markets, customers are contractually
obligated to make progress payments under purchase contracts for machine
orders. As a result, the Company does not anticipate significant outside
financing requirements to fund production of these machines and does not
believe that new machine sales will have a negative effect on its liquidity.
If additional borrowings are necessary during 2004, the Company believes it
has sufficient capacity under its senior secured credit facility.
The terms of the Company's senior secured revolving credit agreement
limit capital expenditures for 2004 to $4,800,000. The Company believes that
this limitation will not hinder its ability to make appropriate capital
expenditures. The Company believes cash flows from operating activities will
be sufficient to fund capital expenditures.
At March 31, 2004, there were $8,952,000 of standby letters of credit
outstanding under all Company bank facilities.
The Company believes that cash flows from operations will be sufficient
to fund its cash requirements in 2004.
During the first quarter of 2004, the Company repaid $2,365,000 in
borrowings under its senior secured credit facility. The Company believes
that cash flows from operations will be sufficient to repay additional
borrowings under its senior secured credit facility.
Sources and Uses of Cash
While the Company had $4,450,000 of cash and cash equivalents as of
March 31, 2004, this cash is located at various foreign subsidiaries and is
used for working capital purposes. Cash receipts in the United States are
applied against the revolving portion of the Company's senior secured credit
facility as discussed below.
Operating Cash Flows
During the first quarter of 2004, the Company generated cash from
operating activities of $1,455,000 compared to cash used of $78,000 in the
first quarter of 2003. The increase in cash flows from operating activities
was driven primarily by increased profitability and reduced working capital
requirements.
Receivables
The Company recognizes revenues on its machine orders using the
percentage-of-completion method. Accordingly, accounts receivable are
generated when revenue is recognized, which can be before the funds are
collected or in some cases, before the customer is billed. As of March 31,
2004 the Company had $60,603,000 of accounts receivable compared to
$73,111,000 of accounts receivable at December 31, 2003. This decrease was
primarily due to high fourth quarter sales that were collected in the first
quarter of 2004.
Liabilities to Customers on Uncompleted Contracts and Warranties
Customers generally make down payments at the time of the order for a
new machine as well as progress payments throughout the manufacturing process.
In accordance with SOP No. 81-1, these payments are recorded as Liabilities to
Customers on Uncompleted Contracts and Warranties. The decrease of $9,900,000
from December 31, 2003 to March 31, 2004 was due to the recognition of revenue
on long-term machine contracts for which customer payments were received in
2003.
Financing Cash Flows
The Company's primary source of financing is a Loan and Security
Agreement with GMAC Commercial Finance, LLC (the "Loan and Security
Agreement"), which as of March 31, 2004 provides the Company with a
$73,000,000 senior secured revolving credit facility. The Loan and Security
Agreement also provides an additional $7,400,000 senior secured term loan to
enable the Company to pay certain interest during 2004 on its Senior Notes as
discussed below. The Loan and Security Agreement, as amended, expires on
January 8, 2005. Outstanding borrowings under the revolving loan portion of
the Loan and Security Agreement 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 term loan portion bear
interest equal to either the prime rate plus 1.5% or LIBOR plus 2.5%. Total
borrowings at March 31, 2004 were $35,055,000 at a weighted average interest
rate of 5.1%. At March 31, 2004, the amount available for borrowings under
the revolving portion of the Loan and Security Agreement, net of mandatory
reserves, was $22,387,000.
The Company also has outstanding $150,000,000 of its Senior Notes. The
Senior Notes mature on September 15, 2007 and interest thereon is payable each
March 15 and September 15. During 2000, Holdings acquired $75,635,000 of the
Company's Senior Notes. Holdings agreed as part of the Loan and Security
Agreement and a previous credit agreement to defer the receipt of interest on
these Senior Notes. However, in connection with the amendment of the Loan and
Security Agreement on November 13, 2003, Holdings is permitted to receive the
interest payable on the Senior Notes held by it on March 15, 2004 and
September 15, 2004 from borrowings under the $7,400,000 term loan portion of
the Loan and Security Agreement. On March 15, 2004, the Company borrowed
$3,687,000 under the term loan portion of the Loan and Security Agreement and
the required interest payment of the same amount was made to Holdings.
The terms of the Loan and Security Agreement and the Senior Notes require
the Company to maintain compliance with certain covenants. The Company was in
compliance with these covenants as of March 31, 2004. While certain of these
covenants limit the Company's ability to incur additional indebtedness or to
pay dividends, among other restrictions, the Company does not believe that
such limitations will impact the financial condition of the Company or results
of operations in light of the current availability under the Loan and Security
Agreement and cash flows to be generated from operations.
Critical Accounting Policies and Estimates
See the Company's critical accounting policies discussed in the
Management's Discussion and Analysis of the Company's 2003 Annual Report on
Form 10-K. There have been no material changes to these policies.
ITEM 3. 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 floating rate
debt obligations in the United States. The Company manages its borrowings
under the Loan and Security Agreement through selecting LIBOR-based borrowings
or 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 March 31, 2004, a sensitivity analysis was performed for the Company s
floating rate debt obligations. Based on this sensitivity analysis, the
Company has determined that a 10% change in the Company's weighted average
interest rate at March 31, 2004 would have the effect of changing the
Company's interest expense on an annual basis by approximately $180,000.
Foreign Currency
The Company sells new machines, including those sold directly to foreign
customers, and most of its aftermarket parts in United States dollars. A
limited amount of aftermarket parts sales are denominated in the local
currencies of Australia, Canada, Chile, South Africa, Brazil and the United
Kingdom which subjects the Company to foreign currency risk. Aftermarket sales
and a portion of the labor costs associated with such activities are
denominated or paid in local currencies. As a result, a relatively strong
United States dollar could decrease the United States dollar equivalent of the
Company's sales without a corresponding decrease of the United States dollar
value of certain related expenses. The Company utilizes some foreign currency
derivatives to mitigate foreign exchange risk.
Currency controls, devaluations, trade restrictions and other disruptions
in the currency convertibility and in the market for currency exchange could
limit the Company's ability to timely convert sales earned abroad into United
States dollars, which could adversely affect the Company's ability to service
its United States dollar indebtedness, fund its United States dollar costs and
finance capital expenditures and pay dividends on its common stock.
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.
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 4 - CONTROLS AND PROCEDURES
As of the end of the period covered by this Report, an evaluation was
carried out under the supervision and with the participation of the Company's
management, including its Chief Executive Officer and President and its Vice
President - Finance and Secretary, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange
Act")). Based upon their evaluation of these disclosure controls and
procedures, the Chief Executive Officer and President and Vice President -
Finance and Secretary concluded that the disclosure controls and procedures
were effective as of the end of the quarter ended March 31, 2004 to ensure
that material information relating to the Company including its consolidated
subsidiaries, was made known to them by others within those entities,
particularly during the period in which this Report was being prepared.
There were no changes in the Company's internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) that occurred during the quarter ended March 31, 2004 that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
It should be noted that any system of controls, however well designed and
operated, can provide only reasonable, and not absolute, assurance that the
objectives of the system are met. In addition, the design of any control
system is based in part upon certain assumptions about the likelihood of
future events. Because of these and other inherent limitations of control
systems, there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions, regardless of how
remote.
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 1. Legal Proceedings.
There have been no material changes to the information set forth
in Item 3 - Legal Proceedings and Other Contingencies of the
Company's Annual Report on Form 10-K for the year ended
December 31, 2003 except as included in Other Litigation in
Note 7 to the March 31, 2004 consolidated condensed financial
statements.
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of
Equity Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during
the quarter covered by this Report.
Item 5. Other Information.
Not applicable.
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 2004.
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 14, 2004 /s/Craig R. Mackus
Craig R. Mackus
Vice President - Finance and Secretary
Principal Accounting Officer
Date May 14, 2004 /s/Timothy W. Sullivan
Timothy W. Sullivan
President and Chief Executive Officer
BUCYRUS INTERNATIONAL, INC.
EXHIBIT INDEX
TO
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2004
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.
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. X
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)
filed with the
Commission on
November 3, 1997.
(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 Included as
9-3/4% Senior Note due 2007. Exhibit B
to Exhibit 4.1
above.
10.1 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.
10.2 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.
10.3 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.
10.4 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.
10.5 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.
10.6 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.
10.7 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.
(a) First amendment dated Exhibit 10.16 (a)
December 31, 2002 to Loan to Registrant's
and Security Agreement. Annual Report on
Form 10-K for
the year ended
December 31, 2002.
(b) Second amendment dated Exhibit 10.16 (b)
January 9, 2003 to Loan to Registrant's
and Security Agreement. Annual Report on
Form 10-K for
the year ended
December 31, 2002.
(c) Letter agreement dated Exhibit 10.16 (c)
December 31, 2002 amending to Registrant's
Loan and Security Agreement. Annual Report on
Form 10-K for
the year ended
December 31, 2002.
(d) Third amendment dated Exhibit 10.10(d)
November 13, 2003 to Loan to Registrant's
and Security Agreement. Quarterly Report
on Form 10-Q
filed with the
Commission on
November 13, 2003.
(e) Fourth amendment dated Exhibit 10.28
March 8, 2004 to Loan and to Registrant's
Security Agreement. Annual Report on
Form 10-K for
the year ended
December 31, 2003.
10.8 Consulting Agreement Exhibit 10.30
between Registrant and to Registrant's
Wayne T. Ewing dated Form 10-K for
January 1, 2003. the year ended
December 31, 2003.
10.9 Stockholders Agreement, Exhibit 10.11
dated as of March 17, 1998, to Registrant's
among Registrant, American Form 10-K for
Industrial Partners the year ended
Acquisition Company, LLC December 31, 2003.
and each individual who
executes a counterpart
thereto.
10.10 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),
filed November 3, 1997.
10.11 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
filed with the
Commission on
August 14, 1997.
10.12 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.
10.13 1998 Management Stock Option Exhibit 10.17 to
Plan. Registrant's
Annual Report on
Form 10-K for
the year ended
December 31, 1997.
10.14 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.
10.15 Board of Directors Exhibit 10.17
Resolution dated to Registrant's
December 16, 1998 Annual Report on
amending the 1998 Form 10-K for
Management Stock the year ended
Option Plan. December 31, 2002.
14 Bucyrus International, Inc. Exhibit 14 to
Business Ethics and Conduct Registrant's
Policy. Annual Report on
Form 10-K for
the year ended
December 31, 2003.
31.1 Certification of President X
and Chief Executive Officer
pursuant to Section 302
of the Sarbanes-Oxley
Act and Rules 13a-14(a)/
15d-14(a).
31.2 Certification of Vice X
President-Finance and
Secretary pursuant to
Section 302 of the
Sarbanes-Oxley Act
and Rules 13a-14(a)/
15d-14(a).
32 Certifications pursuant to X
18 U.S.C. Section 1350,
as adopted pursuant to
Section 906 of the
Sarbanes-Oxley Act of 2002.
99.1 Letter from Registrant to Exhibit 99.1
Securities and Exchange to Registrant's
Commission dated March 27, Annual Report on
2002, with respect to Form 10-K for
representations received the year ended
from Arthur Andersen LLP. December 31, 2001.