SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________
Form 10-Q
QUARTERLY REPORT
PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1995
Commission File Number: 1-871
__________________________________________
BUCYRUS-ERIE COMPANY
DELAWARE 39-0188050
P. O. BOX 500
1100 MILWAUKEE AVENUE
SOUTH MILWAUKEE, WISCONSIN 53172
(414) 768-4000
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 has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding November 9, 1995
Common Stock, par value $.01 per share 10,234,574
BUCYRUS-ERIE COMPANY AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information:
Consolidated Condensed Balance Sheets -
September 30, 1995 and December 31, 1994 3-4
Consolidated Condensed Statements of Operations -
Quarters and nine months ended September 30, 1995
and 1994 5-6
Consolidated Condensed Statements of Cash Flows -
Nine months ended September 30, 1995 and 1994 7-8
Notes to Consolidated Condensed Financial Statements 9-11
Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-17
Part II. Other Information 18
Signature Page 19
Exhibit Index EI-1
BUCYRUS-ERIE COMPANY AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars In Thousands, Except Per Share Amounts)
September 30, December 31, September 30, December 31,
1995 1994 1995 1994
ASSETS LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash Accounts payable and
equivalents $ 11,816 $ 16,209 accrued expenses $ 41,203 $ 32,703
Receivables 31,312 26,220 Liabilities to customers
Inventories 77,098 82,393 on uncompleted contracts
Prepaid expenses and and warranties 7,568 6,239
other current assets 1,585 1,856 Income taxes 2,476 2,820
________ ________ Short-term obligations 2,880 -
Total Current Assets 121,811 126,678 Current maturities of
long-term debt 1,152 7,123
OTHER ASSETS: ________ ________
Restricted funds Total Current
on deposit 2,877 3,675 Liabilities 55,279 48,885
Intangible assets - net 9,140 9,497
Other assets 2,468 2,414 DEFERRED LIABILITIES:
________ ________ Income taxes 514 122
14,485 15,586 Liabilities to customers on
uncompleted contracts
PROPERTY, PLANT AND EQUIPMENT: and warranties 3,211 3,261
Cost 38,239 35,897 Postretirement benefits 11,542 11,828
Less accumulated Deferred plant closing
depreciation (2,863) (207) expenses and other 7,465 7,071
________ ________ ________ ________
35,376 35,690 22,732 22,282
LONG-TERM DEBT, less
current maturities 57,330 53,170
COMMON SHAREHOLDERS' INVESTMENT:
Common stock - par value
$.01 per share, authorized
20,000,000 shares, issued
and outstanding 10,234,574
shares in 1995 and 10,170,417
shares in 1994 102 102
Additional paid-in capital $ 54,259 $ 53,898
Accumulated deficit (17,647) (552)
Cumulative foreign
currency translation
adjustments (383) 169
________ ________
36,331 53,617
________ ________ ________ ________
$171,672 $177,954 $171,672 $177,954
<FN>
See accompanying notes to consolidated condensed financial statements.
BUCYRUS-ERIE COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars In Thousands, Except Per Share Amounts)
Quarter Ended September 30, Nine Months Ended September 30,
1995 1994 1995 1994
(Predecessor (Predecessor
Company) Company)
Revenues:
Net shipments $ 61,408 $ 50,648 $173,990 $144,611
Interest, royalties and
miscellaneous 314 157 933 2,018
________ ________ ________ ________
61,722 50,805 174,923 146,629
________ ________ ________ ________
Costs and Expenses:
Cost of products sold 58,625 41,668 156,102 120,904
Product development, selling,
administrative, and
miscellaneous expenses 9,761 7,778 26,188 22,943
Interest expense (Predecessor
Company contractual
interest not recognized
in 1994 - $6,986 and
$16,835, respectively) 1,558 2,674 4,574 11,324
Restructuring expenses 2,577 - 2,577 -
Reorganization items 446 1,385 919 6,514
________ ________ ________ ________
72,967 53,505 190,360 161,685
________ ________ ________ ________
Loss before income taxes (11,245) (2,700) (15,437) (15,056)
Income taxes 806 458 1,658 1,196
________ ________ ________ ________
Net loss (12,051) (3,158) (17,095) (16,252)
Redeemable preferred stock
accretion - - - (106)
Redeemable preferred stock
dividends - - - (40)
Redeemable preferred stock
reorganization item - - - (40,555)
________ ________ ________ ________
Net loss attributable to
common shareholders $(12,051) $ (3,158) $(17,095) $(56,953)
Weighted average number of
common shares outstanding 10,234,574 9,269,859 10,192,978 9,268,293
Net loss per share of
common stock:
Net loss $ (1.18) $ (.34) $ (1.68) $ (1.75)
Redeemable preferred stock
dividends, accretion and
reorganization item - - - (4.39)
__________ __________ __________ __________
Net loss per share
attributable to
common shareholders $ (1.18) $ (.34) $ (1.68) $ (6.14)
<FN>
See accompanying notes to consolidated condensed financial statements.
BUCYRUS-ERIE COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
Nine Months Ended September 30,
1995 1994
(Predecessor
Company)
Cash Flows From Operating Activities
Net loss $ (17,095) $ (16,252)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Inventory obsolescence
adjustment 4,416 -
Depreciation 2,773 5,832
Amortization of goodwill,
intangible assets and
other items 896 2,914
Deferred rent (interest) on
sale and leaseback
financing arrangement - 5,189
Payment in kind interest on the
Secured Notes due
December 14, 1999 4,180 -
Amortization of debt discount - 71
Gain on sale of property,
plant and equipment (26) (14)
Non-cash reorganization items - 1,080
Changes in assets and liabilities:
Increase in receivables (5,233) (3,385)
Decrease (increase) in
inventories 404 (4,325)
Decrease (increase) in other
current assets 260 (294)
(Increase) decrease in
other assets (53) 103
Increase in current liabilities
other than income taxes,
short-term obligations
and current maturities
of long-term debt 10,209 16,336
Increase in income taxes 53 589
Decrease in deferred
liabilities other than
income taxes (731) (776)
_________ _________
Net cash provided by
operating activities 53 7,068
_________ _________
Cash Flows From Investing Activities
Decrease in restricted funds
on deposit 798 948
Purchases of property, plant
and equipment (2,205) (2,054)
Proceeds from sale of property,
plant and equipment 76 75
_________ _________
Net cash used in
investing activities (1,331) (1,031)
_________ _________
Cash Flows From Financing Activities
Proceeds from issuance of project
financing obligations 3,581 7,239
Reduction of project financing
obligations (6,861) (4,340)
Net increase (decrease) in other
bank borrowings 179 (308)
Payments of current maturities of
long-term debt (30) (27)
_________ _________
Net cash (used in) provided by
financing activities (3,131) 2,564
_________ _________
Effect of exchange rate
changes on cash 16 (15)
_________ _________
Net (decrease) increase in cash
and cash equivalents (4,393) 8,586
Cash and cash equivalents at
beginning of period 16,209 13,696
_________ _________
Cash and cash equivalents at
end of period $ 11,816 $ 22,282
Supplemental Disclosures of Cash Flow Information
1995 1994
Cash paid (received) during
the period for:
Interest on long-term debt
and bank borrowings $ 171 $ 222
Income taxes - net of refunds 1,079 (395)
Supplemental Schedule of Non-Cash Investing and Financing Activities
(A) On June 27, 1995, the Company issued 64,157 shares of common stock as
payment in full of $362 of liabilities for certain legal and professional
fees incurred in connection with the Company's reorganization under
chapter 11 of the Bankruptcy Code.
(B) Prior to February 18, 1994 (the "Petition Date"), the Predecessor Company
increased the carrying amount of the Series A redeemable preferred stock
by amounts representing the estimated fair value of the pre-petition
dividends not declared or paid, but which were payable under mandatory
redemption features. The Predecessor Company also recorded preferred
stock discount accretion on these securities prior to the Petition Date.
As of the Petition Date, the Predecessor Company increased the carrying
amount of the Series A redeemable preferred stock to the amount of the
allowed claim in the Amended Plan. The amounts as reflected in the
consolidated condensed financial statements were as follows:
1994
Redeemable preferred stock dividends at
net book value $ 129
Redeemable preferred stock accretion 106
Write-up of redeemable preferred stock issued
at a discount to amount of allowed claim
in the Amended Plan 40,555
________
$ 40,790
See accompanying notes to consolidated condensed financial statements.
BUCYRUS-ERIE COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars In Thousands, Except Per Share Amounts)
1. In the opinion of Bucyrus-Erie Company (the "Company"), the accompanying
consolidated condensed financial statements contain all adjustments
(consisting of normal recurring accruals and other adjustments as stated
in Notes 3, 4 and 5) 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. Also, certain warranty expenses
previously included in product development and selling expense are now
included in cost of products sold, and certain engineering expenses
previously included in cost of products sold are now included in product
development expense. Reclassifications have been made to the 1994
consolidated condensed financial statements to present them on a basis
consistent with the current year.
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 1994
annual report on Form 10-K filed with the Securities and Exchange
Commission on April 17, 1995.
3. Restructuring expenses of $2,577 for the quarter and nine months ended
September 30, 1995 consist of employee severance expenses recorded to
reflect the cost of reduced employment and the resignation of three
former officers of the Company.
4. On February 18, 1994 (the "Petition Date"), B-E Holdings, Inc.
("Holdings" or the "Predecessor Company") and the Company, which at such
time was a wholly-owned subsidiary of Holdings, commenced voluntary
petitions under chapter 11 of the Bankruptcy Code and filed a prepackaged
joint plan of reorganization in the United States Bankruptcy Court,
Eastern District of Wisconsin (the "Bankruptcy Court"). On December 1,
1994, the Bankruptcy Court entered an order confirming the Second Amended
Joint Plan of Reorganization of Holdings and the Company as modified on
December 1, 1994 (the "Amended Plan"). The Amended Plan was effective on
December 14, 1994 (the "Effective Date") and on such date Holdings was
merged with and into the Company.
The Company and Holdings accounted for the reorganization by using the
principles of fresh start reporting as required by AICPA Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code". Accordingly, the consolidated financial statements
of the Company for periods subsequent to the Effective Date are not
comparable to the consolidated financial statements of prior periods.
The Predecessor Company consolidated financial statements are those of
Holdings which include the accounts and operating results of the Company.
The acquisition of the Company by the Predecessor Company on February 4,
1988 was accounted for as a purchase and, accordingly, the assets and
liabilities were recorded at their estimated fair values as of the
acquisition date. The excess of the related purchase cost over the fair
value of identifiable net assets was allocated to goodwill. The
Predecessor Company consolidated financial statements for periods
subsequent to the date of the acquisition included the related
depreciation and amortization charges associated with the fair value
adjustments.
Reorganization items included in the Consolidated Condensed Statements of
Operations consist of the following:
Quarter Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
(Predecessor (Predecessor
Company) Company)
Legal and
professional
fees $ 446 $1,520 $ 919 $ 5,688
Net adjustment of
debt to amount of
allowed claim in
the Amended Plan - - - (33)
Interest income - (135) - (254)
Write-off
previously
recorded
capitalized
financing costs - - - 1,113
______ ______ ______ _______
$ 446 $1,385 $ 919 $ 6,514
Write-up of
redeemable
preferred stock
issued at a
discount to
amount of allowed
claim in the
Amended Plan $ - $ - $ - $40,555
5. Inventories are summarized as follows:
September 30, December 31,
1995 1994
Raw materials and parts $ 10,028 $ 13,529
Inventoried costs relating to
uncompleted contracts 4,103 6,525
Customers' advances offset
against costs incurred on
uncompleted contracts (1,309) (2,619)
Work in process 15,717 13,069
Finished products (primarily
replacement parts) 48,559 51,889
________ ________
$ 77,098 $ 82,393
The remaining fair value adjustment included in inventory as of
September 30, 1995 and December 31, 1994 was $1,535 and $10,065,
respectively. The Company completed an evaluation of its inventory and
recorded a charge of $4,416 to cost of products sold for the quarter
ended September 30, 1995 for the eventual scrapping and disposal of
excess inventory which existed for certain older and discontinued machine
models.
6. Net loss per share of common stock is based on the weighted average
number of common shares outstanding during the period. Net loss
attributable to common shareholders for the Predecessor Company includes
redeemable preferred stock dividends earned but not declared.
7. On March 7, 1995, Jackson National Life Insurance Company ("JNL"),
currently the holder of approximately 41.31% of the Company's common
stock, amended a complaint (the "JNL Complaint") previously filed in a
civil action (the "JNL Suit") in the United States District Court,
Southern District of New York, to name as defendants certain of the
Company's current and/or former officers and directors (the "Management
Defendants") and others (collectively with the Management Defendants, the
"Defendants"). The JNL Complaint sought unspecified money damages and
other equitable relief from the Management Defendants in connection with
(i) JNL's purchase of the Predecessor Company's Resettable Senior Notes
and (ii) certain of the Defendants' alleged orchestration of a series of
financings for the Predecessor Company which are alleged to have had the
effect of rendering the Predecessor Company insolvent, incapable of
competing in its markets and unable to pay its creditors, including JNL.
The Management Defendants have rights to indemnification from the Company
for any costs and expenses incurred by them in connection with the JNL
Complaint pursuant to the Amended Plan and the Company's Restated Bylaws.
As previously reported in the Company's Report on Form 8-K dated May 31,
1995 (the "May 31, 1995 8-K"), the Company and JNL entered into a
Settlement Agreement (the "Settlement Agreement") dated May 23, 1995,
pursuant to which JNL agreed: (a) to execute general releases of all
claims, known or unknown, arising at any time through the date of such
releases, in favor of the Management Defendants, and (b) to discontinue
with prejudice, and without costs as against any party, the JNL Suit as
it relates to the Management Defendants. On June 8, 1995, JNL executed
releases in favor of the Management Defendants. A Stipulation and Order
of Dismissal, with prejudice and without costs and attorneys' fees to any
party, was entered by the judge in the JNL Suit on June 13, 1995.
In addition, JNL has filed a claim (the "JNL 503(b) Claim") against the
Company for reimbursement of approximately $3,300 for professional fees
and disbursements incurred in connection with the Company's chapter 11
proceedings pursuant to Section 503(b) of the Bankruptcy Code. As
previously reported in the May 31, 1995 8-K, pursuant to the Settlement
Agreement JNL agreed that, in the event that the JNL 503(b) Claim is
allowed in whole or in part by the Bankruptcy Court, in lieu of requiring
payment of any award in cash JNL will accept payment in common stock of
the Company at a price equal to $5.6375 per share (the average closing
price of such stock on the Nasdaq National Market on June 20, 21, 22, 23
and 26, 1995). The Company has filed an objection to the JNL 503(b)
Claim and a trial has been scheduled by the Bankruptcy Court to begin on
November 29, 1995. The Company has been advised by legal counsel that in
said counsel's opinion the JNL 503(b) Claim is without merit; however,
the ultimate outcome of this matter cannot presently be determined.
Accordingly, no provision for any loss that may result upon resolution of
this matter has been made in the accompanying consolidated financial
statements.
BUCYRUS-ERIE COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars In Thousands)
The following information is provided to assist in the understanding of
Bucyrus-Erie Company's (the "Company") operations for the quarter and nine
months ended September 30, 1995.
The reorganization of the Company under chapter 11 of the Bankruptcy Code
was effective December 14, 1994 (the "Effective Date"). The reorganization
was accounted for using the principles of fresh start reporting, as required
by AICPA Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code". Under the principles of fresh
start reporting, total assets were recorded at their assumed reorganization
value, with the reorganization value allocated to identifiable tangible and
intangible assets on the basis of their estimated fair value, and liabilities
were adjusted to the present values of amounts to be paid where appropriate.
The consolidated financial statements for periods subsequent to the Effective
Date include the related amortization charges associated with the fair value
adjustments.
As a result of the implementation of fresh start reporting, the
consolidated financial statements of the Company for periods subsequent to the
Effective Date are not comparable to the consolidated financial statements of
prior periods. The consolidated financial statements presented for prior
periods are not the Company's, but instead are those of B-E Holdings, Inc.
(the "Predecessor Company"), the former parent of the Company which was merged
with and into the Company on the Effective Date.
The acquisition of the Company by the Predecessor Company on February 4,
1988 was accounted for as a purchase and, accordingly, the assets and
liabilities were recorded at their estimated fair values as of the acquisition
date. The excess of the related purchase cost over the fair value of
identifiable net assets was allocated to goodwill. The Predecessor Company
consolidated financial statements for periods subsequent to the date of the
acquisition included the related depreciation and amortization charges
associated with the fair value adjustments.
Net Shipments and Net Loss
Net shipments for the quarter and nine months ended September 30, 1995
were $61,408 and $173,990, respectively, compared with $50,648 and $144,611
for the quarter and nine months ended September 30, 1994, respectively.
Shipments of repair parts and services for the quarter ended September 30,
1995 were $39,234, which is an increase of 0.9% from the quarter ended
September 30, 1994. Shipments of repair parts and services for the nine
months ended September 30, 1995 were $117,144, which is an increase of 6.9%
from the nine months ended September 30, 1994. Both increases were due to
increased shipments at foreign locations. Machine shipments for the quarter
ended September 30, 1995 were $22,174, which is an increase of 88.6% from the
quarter ended September 30, 1994. Machine shipments for the nine months ended
September 30, 1995 were $56,846, which is an increase of 62.2% from the nine
months ended September 30, 1994. Both increases were due to increased blast
hole drill and electric mining shovel shipments, primarily in copper, coal and
iron markets. The pricing for machines and repair parts has continued to
remain steady with the changes primarily related to increased sales volume.
Net loss for the quarter and nine months ended September 30, 1995 was
$12,051 and $17,095, respectively, compared with a net loss of $3,158 and
$16,252 for the quarter and nine months ended September 30, 1994,
respectively. The increase in net loss for the quarter ended September 30,
1995 was primarily due to the recording of inventory obsolescence adjustments
of $4,416, an increase in customer warranty reserves of $1,018 and
restructuring expenses of $2,577. Net loss for the quarter and nine months
ended September 30, 1995 includes charges of $2,813 and $8,530, respectively,
which were charged to cost of products sold reflecting the effects of fresh
start reporting for inventories which were written up by $10,427 on the
Effective Date. Non-cash depreciation and amortization charges included in
the net loss for the quarter and nine months ended September 30, 1995 were
$1,252 and $3,669, respectively, compared with $2,805 and $8,746 for the
quarter and nine months ended September 30, 1994, respectively.
The Company's consolidated backlog on September 30, 1995 was $90,879
compared with $72,346 on December 31, 1994 and $74,299 on September 30, 1994.
Machine backlog increased 21.2% from December 31, 1994 and increased 19.7%
from September 30, 1994. Repair parts and service backlog increased 28.0%
from December 31, 1994 and increased 23.7% from September 30, 1994. The
increases in repair parts and service backlog were primarily at foreign
locations.
New orders for the quarter ended September 30, 1995 increased 81.1% from
the quarter ended September 30, 1994 and for the nine months ended
September 30, 1995 increased 32.9% from the nine months ended September 30,
1994. New machine orders for the quarter ended September 30, 1995 increased
307.2% from the quarter ended September 30, 1994 and for the nine months ended
September 30, 1995 increased 77.1% from the nine months ended September 30,
1994. The increases were both in electric mining shovel and blast hole drill
volume and represent strong machine sales activity. New repair parts and
service orders for the quarter ended September 30, 1995 increased 24.9% from
the quarter ended September 30, 1994 and for the nine months ended
September 30, 1995 increased 18.7% from the nine months ended September 30,
1994. Both increases in repair parts and service orders were at foreign
locations. Blast hole drill and electric mining shovel inquiries remained at
a relatively high level for the quarter. The Company believes that new
machine sales activity will improve in the near term as a result of the high
inquiry levels. These inquiries are primarily from South America and China as
a result of the continued strength of mineral prices. New walking dragline
activity is also expected in the near term in coal applications in Australia.
The North American market for electric mining shovels and blast hole drills
remains steady in iron ore, copper and the low sulphur coal fields in the
Western United States.
Interest, Royalties and Miscellaneous
Interest, royalties and miscellaneous for the quarter and nine months
ended September 30, 1995 were $314 and $933, respectively, compared with $157
and $2,018 for the quarter and nine months ended September 30, 1994,
respectively. Included in the amount for the nine months ended September 30,
1994 was an insurance settlement of $1,350 received in the second quarter of
1994.
Cost of Products Sold
Cost of products sold for the quarter ended September 30, 1995 was
$58,625 or 95.5% of net shipments compared with $41,668 or 82.3% of net
shipments for the quarter ended September 30, 1994. For the nine months ended
September 30, 1995, cost of products sold was $156,102 or 89.7% of net
shipments compared with $120,904 or 83.6% of net shipments for the nine months
ended September 30, 1994. Included in cost of products sold for the quarter
and nine months ended September 30, 1995 was $2,813 and $8,530, respectively,
as a result of the fair value adjustment to inventory. This adjustment was
made in accordance with the principles of fresh start reporting and is being
charged to cost of products sold as the inventory is sold. The Company
expects the remaining adjustment of $1,535 to be charged to cost of products
sold during the fourth quarter of 1995.
The Company has completed an evaluation of its inventory and determined
that excess levels existed for certain older and discontinued machine models.
Accordingly, a charge of $4,416 was made to cost of products sold for the
quarter ended September 30, 1995 for the eventual scrapping and disposal of
this inventory. The Company also recorded a charge to cost of products sold
of $1,018 for the quarter ended September 30, 1995 as a result of the
reestimation of certain customer warranty reserves.
Product Development, Selling, Administrative and Miscellaneous Expenses
Product development, selling, administrative and miscellaneous expenses
for the quarter ended September 30, 1995 were $9,761 or 15.9% of net shipments
compared with $7,778 or 15.4% of net shipments for the quarter ended
September 30, 1994. The amounts for the nine months ended September 30, 1995
and 1994 were $26,188 or 15.1% of net shipments and $22,943 or 15.9% of net
shipments, respectively.
Interest Expense
Interest expense for the quarter and nine months ended September 30, 1995
was $1,558 and $4,574, respectively, compared with $2,674 and $11,324 for the
quarter and nine months ended September 30, 1994, respectively. The decrease
was primarily due to the exchange of unsecured debt securities of the
Predecessor Company and the Company for shares of the Company's common stock
in connection with the Company's reorganization pursuant to the Amended Plan.
Restructuring Expenses
Restructuring expenses of $2,577 for the quarter and nine months ended
September 30, 1995 consist of employee severance expenses recorded to reflect
the cost of reduced employment and the resignation of three former officers of
the Company.
Income Taxes
Income tax expense for the quarter and nine months ended September 30,
1995 and 1994 consists primarily of foreign taxes at applicable statutory
rates.
Capitalization
The long-term debt to equity ratio as of September 30, 1995 and
December 31, 1994 was 1.6 to 1 and 1.0 to 1, respectively. The increase in
the ratio is due to net losses incurred in 1995.
Liquidity and Capital Resources
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 September 30, 1995 and December 31, 1994
were as follows:
September 30, December 31,
1995 1994
Working capital $ 66,532 $ 77,793
Current ratio 2.2 to 1 2.6 to 1
The decrease in working capital was primarily due to the inventory fair
value adjustment of $8,530 being charged to cost of products sold as the
inventory is sold and the inventory obsolescence adjustment of $4,416.
The table below summarizes the Company's cash position at September 30,
1995:
Restricted Unrestricted
Location Cash Cash Total
United States $ - $ 4,177 $ 4,177
Foreign Subsidiaries 21 6,248 6,269
Equipment Assurance Limited 2,856 1,391 4,247
________ ________ ________
$ 2,877 $ 11,816 $ 14,693
The decrease in the Company's cash balances from December 31, 1994 was
primarily due to the payment of reorganization items and an increase in
receivables.
Approximately $1,658 of cash is required for payment of expenses that
were incurred in connection with the reorganization (primarily legal and
professional fees) and approximately $2,700 is required to be refunded to the
Internal Revenue Service for an excess refund received in 1993. Approximately
$1,000 of the legal and professional fees is expected to be paid in the fourth
quarter of 1995 and the remaining fees are expected to be paid in 1996. The
amount to be refunded to the Internal Revenue Service is expected to be paid
in the fourth quarter of 1995 or first quarter of 1996. A portion of the
unrestricted cash at the foreign subsidiaries and Equipment Assurance Limited
("EAL"), an off-shore insurance subsidiary of the Company, is not readily
repatriatable because it is required for working capital purposes at these
respective locations.
Pursuant to the Amended Plan, the Company entered into a Credit Agreement
dated as of December 14, 1994 (the "Credit Agreement"), with Bank One,
Milwaukee, National Association ("Bank One"). The Credit Agreement, as
amended, contains a credit facility for working capital and general corporate
purposes (the "Loan Facility"), a letter of credit facility (the "L/C
Facility") and a project financing loan facility (the "Project Financing
Facility"). Under the Loan Facility, the Company may borrow up to $5,000
through December 31, 1995, and from January 1, 1996 through December 31, 1996,
the Company may borrow up to $2,500, provided that it meets certain earnings
before interest, taxes, depreciation and amortization tests, as defined.
Borrowings under the Loan Facility mature on December 31, 1996 and interest is
payable at the Company's option either at a rate equal to Bank One's reference
rate plus 0.75% per annum or an adjusted LIBOR rate plus 2.75% per annum.
Under the L/C Facility, Bank One has agreed to issue letters of credit for the
benefit of the Company through April 30, 1997 in an aggregate amount not in
excess of $15,000 minus the then outstanding aggregate borrowings by the
Company under the Loan Facility, provided that no letter of credit may expire
after April 30, 1998. Under the Project Financing Facility, Bank One may make
project financing loans to the Company from time to time. Borrowings under
the Project Financing Facility bear interest at the Company's option either at
a rate equal to Bank One's reference rate or an adjusted LIBOR rate plus 2.25%
per annum. As of September 30, 1995, the Company had $179 of borrowings
outstanding under the Loan Facility and $3,467 of the L/C Facility was being
used. There were no borrowings under the Bank One Project Financing Facility.
The agreements relating to the Company's Secured Notes due December 14,
1999 and the Credit Agreement permit additional project financing which
enables the Company to borrow money to pay costs associated with the
manufacture of mining machinery or other products pursuant to binding purchase
contracts. Project financing borrowings are secured by the inventory being
financed and any accounts receivable relating to such inventory. Project
financing borrowings mature not later than the date of the final payment by
the customer under the applicable purchase contract. As of September 30,
1995, the Company had $2,957 of outstanding project financing borrowings not
related to the Bank One Project Financing Facility.
The Company believes that current levels of liquidity, together with
funds available from its Credit Agreement and other project financing
arrangements and funds generated by operations, will be sufficient to permit
the Company to satisfy its debt service requirements and fund operating
activities for the foreseeable future. The Company is subject to significant
business, economic and competitive uncertainties that are beyond its control.
Accordingly, there can be no assurance that the Company's financial resources
will be sufficient for the Company to satisfy its debt service obligations and
fund operating activities under all circumstances.
As required under various agreements, EAL has pledged $2,856 of its cash
to secure its reimbursement obligations for outstanding letters of credit at
September 30, 1995. This collateral amount is classified as Restricted Funds
on Deposit in the Consolidated Condensed Balance Sheets.
At September 30, 1995, the Company had approximately $1,974 of open
approved capital appropriations. The Company does not anticipate any
substantial increase in the level of capital expenditures for the remainder of
1995 or 1996.
The following table reconciles Loss Before Income Taxes to earnings
before interest, income taxes, depreciation, amortization, inventory fair
value adjustment charged to cost of products sold, restructuring expenses and
reorganization items ("Adjusted EBITDA"):
Quarter Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
(Predecessor (Predecessor
Company) Company)
Loss before income
taxes $(11,245) $ (2,700) $(15,437) $(15,056)
Restructuring
expenses 2,577 - 2,577 -
Reorganization items 446 1,385 919 6,514
Inventory fair value
adjustment charged
to cost of products
sold 2,813 - 8,530 -
Non-cash expenses:
Depreciation 953 1,860 2,773 5,832
Amortization of
goodwill, intangible
assets and other
items 299 945 896 2,914
Deferred rent
(interest) on sale
and leaseback
financing
arrangement - 1,848 - 5,189
Payment in kind
interest on the
Secured Notes due
December 14, 1999 1,445 - 4,180 -
Amortization of
debt discount - - - 71
________ ________ ________ ________
Cash available for
use before non-cash
interest expense
and income taxes (2,712) 3,338 4,438 5,464
Cash interest
expense (1) 113 826 394 6,064
________ ________ ________ ________
Adjusted EBITDA (2) $ (2,599) $ 4,164 $ 4,832 $ 11,528
<FN>
(1) Cash interest expense for the Predecessor Company includes all
accrued but unpaid interest prior to the Petition Date. Contractual interest
for the quarter and nine months ended September 30, 1994 of $6,986 and
$16,835, respectively, on the unsecured debt of the Predecessor Company did
not accrue subsequent to the Petition Date. Excludes amortization of debt
discount, deferred rent (interest) on the sale and leaseback financing
arrangement and interest on the Company's Secured Notes due December 14, 1999
that will be paid in kind.
(2) Adjusted EBITDA for the quarter and nine months ended September 30,
1995 is reduced by a $4,416 charge to cost of products sold for the eventual
scrapping and disposal of excess inventory which existed for certain older and
discontinued machine models.
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) Report on Form 8-K
1. Items Reported:
A. Press release, dated July 25, 1995, of Bucyrus-Erie
Company announcing the resignation of certain members
of management and the appointment of interim
management.
B. Management Agreement, dated July 21, 1995, between
Bucyrus-Erie Company and Miller Associates.
2. Financial Statements: None.
3. Date: July 25, 1995
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-ERIE COMPANY
(Registrant)
Date November 13, 1995 /s/Craig R. Mackus
Craig R. Mackus
Controller
Principal Accounting Officer
Date November 13, 1995 /s/Frank W. Miller
Frank W. Miller
Interim President and CEO
BUCYRUS-ERIE COMPANY
EXHIBIT INDEX
TO
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 1995
Incorporated Sequential
Exhibit Herein By Filed Page
Number Description Reference Herewith Number
3.2 Restated Bylaws of X
Bucyrus-Erie Company,
as amended on
August 1-2, 1995.
(a) Amendment to X
Section 5.3 and 5.4
of Article V of the
Restated Bylaws of
Bucyrus-Erie Company
adopted by Board of
Directors at its
meeting of August 1-2,
1995.
10.1 Credit Agreement, Exhibit 10.1 to
dated as of Registrant's
December 14, 1994, December 14, 1994
between Bank One, 8-K
Milwaukee, National
Association and
Bucyrus-Erie Company
("1994 Credit
Agreement")
(a) First Amendment X
to 1994 Credit
Agreement dated
June 22, 1995.
(b) Second Amendment X
to 1994 Credit
Agreement dated
August 31, 1995.
10.2 Separation Agreement X
and Mutual Release
between Bucyrus-Erie
Company and P. W. Mork
dated July 25, 1995.
10.3 Separation Agreement X
and Mutual Release
between Bucyrus-Erie
Company and N. J.
Verville dated
July 25, 1995.
10.4 Separation Agreement X
and Mutual Release
between Bucyrus-Erie
Company and D. M.
Goelzer dated
July 25, 1995.
10.5 Becor Western Exhibit 10.11 to
Salaried Employees' B-E Holdings, Inc.
Retirement Plan Annual Report on
("BSERP"), as Form 10-K dated
restated through March 29, 1988.
June 4, 1987.
(a) Amendment Exhibit 10.6(b)
to BSERP, to Registrant's
Section 13.01(iii) Annual Report on
Form 10-K dated
March 29, 1990.
("Registrant's
1989 10-K")
(b) Amendments to Exhibit 10.6(c)
BSERP, Sections 1.23 to Registrant's
and new Supplements 1989 10-K.
No. 6 and 10.
(c) Amendment to Exhibit 10.6(d)
BSERP per U.S. to Registrant's
Internal Revenue 1989 10-K.
Service
Notice 88-131.
(d) Amendment to Exhibit 10.6(e)
BSERP, Section 1.06. to Registrant's
Annual Report
on Form 10-K dated
March 27, 1991.
(e) Amendment to X
BSERP, Section 1.06.
10.6 Restated Bucyrus-Erie X
Salaried Employees'
Savings Plan
27 Financial Data Schedule X