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, 1998
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 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 May 13, 1998
Common Stock, $.01 par value 1,438,100
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, 1998 and 1997 3
Consolidated Condensed Statements of
Comprehensive Income (Loss) - Quarters ended
March 31, 1998 and 1997 4
Consolidated Condensed Balance Sheets -
March 31, 1998 and December 31, 1997 5-6
Consolidated Condensed Statements of Cash Flows -
Quarters ended March 31, 1998 and 1997 7
Notes to Consolidated Condensed Financial
Statements 8-20
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 21-25
PART II. OTHER INFORMATION:
Item 2 - Changes in Securities and Use of Proceeds 26
Item 6 - Exhibits and Reports on Form 8-K 26
Signature Page 27
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
Quarter Ended March 31,
1998 1997
(Predecessor)
Revenues:
Net sales $ 73,700 $ 59,886
Other income 235 264
__________ __________
73,935 60,150
__________ __________
Costs and Expenses:
Cost of products sold 66,581 48,005
Product development, selling,
administrative and miscellaneous
expenses 12,173 8,653
Interest expense 4,469 1,914
__________ __________
83,223 58,572
__________ __________
Earnings (loss) before income taxes (9,288) 1,578
Income taxes (benefit) (219) 663
__________ __________
Net earnings (loss) $ (9,069) $ 915
Net earnings (loss) per share
of common stock:
Basic $ (6.33) $ .09
Diluted $ (6.33) $ .09
See notes to consolidated condensed financial statements.
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in Thousands)
Quarter Ended March 31,
1998 1997
(Predecessor)
Net earnings (loss) $ (9,069) $ 915
Other comprehensive income (loss) -
foreign currency translation
adjustments, net of income taxes (381) 292
________ ________
Comprehensive income (loss) $ (9,450) $ 1,207
See notes to consolidated condensed financial statements.
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
March 31, December 31, March 31, December 31,
1998 1997 1998 1997
ASSETS LIABILITIES AND COMMON
CURRENT ASSETS: SHAREHOLDERS' INVESTMENT
Cash and cash CURRENT LIABILITIES:
equivalents $ 16,132 $ 15,071 Accounts payable and
Receivables 55,900 49,443 accrued expenses $ 44,919 $ 51,906
Inventories 112,680 115,015 Liabilities to customers
Prepaid expenses and on uncompleted contracts
other current assets 5,648 4,496 and warranties 6,629 8,316
________ ________ Income taxes 2,212 2,070
Short-term obligations 524 583
Total Current Assets 190,360 184,025 Current maturities of
long-term debt 267 267
OTHER ASSETS: ________ ________
Restricted funds
on deposit 1,056 1,056 Total Current Liabilities 54,551 63,142
Goodwill 63,788 65,929
Intangible assets - net 44,240 44,796 LONG-TERM LIABILITIES:
Other assets 12,560 12,677 Liabilities to customers on
________ _______ uncompleted contracts
and warranties 3,814 3,850
121,644 124,458 Postretirement benefits 14,889 14,665
Deferred expenses and other 16,853 17,585
PROPERTY, PLANT AND EQUIPMENT: ________ ________
Cost 102,704 99,339
Less accumulated 35,556 36,100
depreciation (4,118) (1,715) LONG-TERM DEBT, less
________ ________ current maturities 196,900 174,612
98,586 97,624 COMMON SHAREHOLDERS' INVESTMENT:
Common stock - par value
$.01 per share, authorized
1,600,000 shares, issued
and outstanding 1,438,100
shares at March 31, 1998;
authorized 1,000 shares,
issued and outstanding
1,000 shares at
December 31, 1997 14 -
Additional paid-in capital 143,796 143,030
Accumulated deficit (16,227) (7,158)
Cumulative translation
adjustment (4,000) (3,619)
________ ________
123,583 132,253
________ ________ ________ ________
$410,590 $406,107 $410,590 $406,107
<FN>
See notes to consolidated condensed financial statements.
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Quarter Ended March 31,
1998 1997
(Predecessor)
Net Cash Used in Operating Activities $(19,676) $ (8,275)
________ ________
Cash Flows From Investing Activities
Purchases of property, plant
and equipment (3,095) (1,178)
Proceeds from sale of property, plant
and equipment 988 12
________ ________
Net cash used in investing activities (2,107) (1,166)
________ ________
Cash Flows From Financing Activities
Proceeds from issuance of project
financing obligations - 2,431
Net increase in long-term debt and
other bank borrowings 22,310 438
Proceeds from issuance of common stock 780 -
________ ________
Net cash provided by financing activities 23,090 2,869
________ ________
Effect of exchange rate changes on cash (246) (53)
________ ________
Net increase (decrease) in cash
and cash equivalents 1,061 (6,625)
Cash and cash equivalents at
beginning of period 15,071 15,763
________ ________
Cash and cash equivalents at
end of period $ 16,132 $ 9,138
Supplemental Disclosures of Cash Flow Information
1998 1997
Cash paid during the
period for:
Interest $ 7,739 $ 220
Income taxes - net of refunds 50 777
See notes to consolidated condensed financial statements.
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of Bucyrus International, Inc. (the "Company"), the
consolidated condensed financial statements contain all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
financial results for the interim periods. Certain items are included in
these statements based on estimates for the entire year.
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 1997
Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 30, 1998.
3. On August 21, 1997, the Company entered into an Agreement and Plan of
Merger (the "AIP Agreement") with American Industrial Partners
Acquisition Company, LLC ("AIPAC"), which is wholly-owned by American
Industrial Partners Capital Fund II, L.P. ("AIP"), and Bucyrus
Acquisition Corp. ("BAC"), a wholly-owned subsidiary of AIPAC. On
August 26, 1997, pursuant to the AIP Agreement, BAC commenced an offer to
purchase for cash 100% of the outstanding shares of common stock of the
Company at a price of $18.00 per share (the "AIP Tender Offer").
Consummation of the AIP Tender Offer occurred on September 24, 1997, and
BAC was merged with and into the Company on September 26, 1997 (the "AIP
Merger"). The Company was the surviving entity in the AIP Merger and is
currently wholly-owned by AIPAC. The purchase of all of the Company's
outstanding shares of common stock by AIPAC resulted in a change in
control of voting interest.
The consolidated condensed financial statements as of March 31, 1998 and
December 31, 1997 and for the quarter ended March 31, 1998 were prepared
under a basis of accounting that reflects the fair value of the assets
acquired and liabilities assumed, and the related expenses and all debt
incurred in connection with the acquisition of the Company by AIPAC. The
Predecessor consolidated condensed financial statements for the quarter
ended March 31, 1997 were prepared using the Company's previous basis of
accounting which was based on the principles of fresh start reporting
adopted in 1994 upon emergence from bankruptcy. Accordingly, the
consolidated condensed financial statements for periods subsequent to the
date of the consummation of the AIP Tender Offer are not comparable to
the consolidated condensed financial statements of the Predecessor.
On August 26, 1997, the Company consummated the acquisition (the "Marion
Acquisition") of certain assets and liabilities of The Marion Power
Shovel Company, a subsidiary of Global Industrial Technologies, Inc.
("Global"), and of certain subsidiaries and divisions of Global that
represented Global's surface mining equipment business in Australia,
Canada and South Africa (collectively referred to herein as "Marion").
The acquisition of Marion by the Company was accounted for as a purchase
and, accordingly, the assets acquired and liabilities assumed by the
Company were recorded at their estimated fair values.
4. Inventories consist of the following:
March 31, December 31,
1998 1997
(Dollars in Thousands)
Raw materials and parts $ 16,172 $ 14,896
Costs relating to
uncompleted contracts 5,668 4,861
Customers' advances offset
against costs incurred on
uncompleted contracts (3,416) (2,976)
Work in process 22,789 21,238
Finished products (primarily
replacement parts) 71,467 76,996
________ ________
$112,680 $115,015
In connection with the acquisition of the Company by AIPAC, inventories
were adjusted to estimated fair value. This adjustment was charged to
cost of products sold as the inventory was sold. At December 31, 1997,
the remaining estimated fair value adjustment included in inventory was
$6,925,000, all of which was charged to cost of products sold during the
quarter ended March 31, 1998.
5. On March 17, 1998, the Company's Board of Directors authorized a stock
split which increased the number of authorized shares of common stock of
the Company to 1,600,000 shares. Simultaneous with this authorization,
AIPAC cancelled 9.976% of its interest in its 1,000 shares of common
stock of the Company and received 1,430,300 shares for its remaining
interest (the "Stock Split"). Also on this date, certain members of
management of the Company purchased 7,800 shares of common stock of the
Company which increased the number of issued and outstanding common
shares to 1,438,100. In addition, on March 17, 1998, the Company's Board
of Directors adopted the Bucyrus International, Inc. 1998 Management
Stock Option Plan which authorizes the granting of stock options to key
employees for up to a total of 150,400 shares of common stock of the
Company. As of March 31, 1998, 113,850 of these stock options have been
granted at an exercise price of $100 per share which is the estimated
fair market value at the date of grant.
6. Basic net earnings per share of common stock were computed by dividing
net earnings (loss) by the weighted average number of shares of common
stock outstanding. Diluted net earnings (loss) per share of common stock
were calculated after giving effect to dilutive securities. The
following is a reconciliation of the numerators and the denominators of
the basic and diluted net earnings (loss) per share of common stock
calculations:
Quarters Ended March 31,
1998 1997
(Predecessor)
(Dollars in Thousands, Except
Per Share Amounts)
Basic
Net earnings (loss) $ (9,069) $ 915
Weighted average shares outstanding 1,431,600 10,242,352
Net earnings (loss) per share $ (6.33) $ .09
Diluted
Net earnings (loss) $ (9,069) $ 915
Weighted average shares
outstanding - basic 1,431,600 10,242,352
Effect of dilutive securities -
stock options, stock appreciation
rights and restricted stock - 40,372
Weighted average shares
outstanding - diluted 1,431,600 10,282,724
Net earnings (loss) per share $ (6.33) $ .09
7. Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
No. 130"), which requires companies to report all changes in equity
during a period, except those resulting from investment by owners and
distributions to owners. The Company has chosen to disclose
comprehensive income, which encompasses net earnings (loss) and foreign
currency translation adjustments, in a separate Consolidated Condensed
Statement of Comprehensive Income (Loss). Prior periods have been
restated to conform to the SFAS No. 130 requirements.
8. The Company's payment obligations under its 9-3/4% Senior Notes due 2007
(the "Senior Notes") are guaranteed by certain of the Company's wholly-
owned subsidiaries (the "Guarantor Subsidiaries"). Such guarantees are
full, unconditional and joint and several. Separate financial statements
of the Guarantor Subsidiaries are not presented because the Company's
management has determined that they would not be material to investors.
The following supplemental financial information sets forth, on an
unconsolidated basis, statement of operations, balance sheet and
statement of cash flow information for the Company (the "Parent
Company"), for the Guarantor Subsidiaries and for the Company's non-
guarantor subsidiaries (the "Other Subsidiaries"). The supplemental
financial information reflects the investments of the Company in the
Guarantor and Other Subsidiaries using the equity method of accounting.
Parent Company amounts for net earnings (loss) and common shareholders'
investment differ from consolidated amounts as intercompany profit in
subsidiary inventory has not been eliminated in the Parent Company
statement but has been eliminated in the Consolidated Totals.
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Operations
Quarter Ended March 31, 1998
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
Revenues:
Net sales $ 44,754 $ 8,164 $ 33,303 $(12,521) $ 73,700
Other income 750 1 200 (716) 235
________ ________ ________ ________ ________
45,504 8,165 33,503 (13,237) 73,935
________ ________ ________ ________ ________
Costs and Expenses:
Cost of products sold 41,953 7,380 29,619 (12,371) 66,581
Product development,
selling, administrative
and miscellaneous
expenses 7,316 774 4,083 - 12,173
Interest expense 4,375 120 690 (716) 4,469
________ ________ ________ ________ ________
53,644 8,274 34,392 (13,087) 83,223
________ ________ ________ ________ ________
Loss before income taxes
and equity in net
loss of consolidated
subsidiaries (8,140) (109) (889) (150) (9,288)
Income taxes (benefit) 181 (43) (357) - (219)
________ ________ ________ ________ ________
Loss before equity
in net loss of
consolidated
subsidiaries (8,321) (66) (532) (150) (9,069)
Equity in net loss of
consolidated
subsidiaries (598) - - 598 -
________ ________ ________ ________ ________
Net earnings (loss) $ (8,919) $ (66) $ (532) $ 448 $ (9,069)
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Operations
Quarter Ended March 31, 1997 - Predecessor
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
Revenues:
Net sales $ 34,254 $ 8,158 $ 24,312 $ (6,838) $ 59,886
Other income 415 - 84 (235) 264
________ ________ ________ ________ ________
34,669 8,158 24,396 (7,073) 60,150
________ ________ ________ ________ ________
Costs and Expenses:
Cost of products sold 28,553 6,898 19,449 (6,895) 48,005
Product development,
selling, administrative
and miscellaneous
expenses 4,962 514 3,175 2 8,653
Interest expense 1,859 75 215 (235) 1,914
________ ________ ________ ________ ________
35,374 7,487 22,839 (7,128) 58,572
________ ________ ________ ________ ________
Earnings (loss) before
income taxes and equity
in net earnings (loss) of
consolidated subsidiaries (705) 671 1,557 55 1,578
Income taxes (benefit) (130) 262 531 - 663
________ ________ ________ ________ ________
Earnings (loss) before equity
in net earnings of
consolidated subsidiaries (575) 409 1,026 55 915
Equity in net earnings
of consolidated
subsidiaries 1,435 - - (1,435) -
________ ________ ________ ________ ________
Net earnings $ 860 $ 409 $ 1,026 $ (1,380) $ 915
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Balance Sheets
March 31, 1998
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents $ - $ 330 $ 15,802 $ - $ 16,132
Receivables 28,707 3,655 23,538 - 55,900
Intercompany
receivables 55,060 3,208 1,312 (59,580) -
Inventories 69,951 1,433 41,863 (567) 112,680
Prepaid expenses and
other current assets 1,161 454 4,033 - 5,648
________ ________ ________ ________ ________
Total Current Assets 154,879 9,080 86,548 (60,147) 190,360
OTHER ASSETS:
Restricted funds
on deposit - - 1,056 - 1,056
Goodwill 63,788 - - - 63,788
Intangible assets - net 44,037 203 - - 44,240
Other assets 9,934 33 2,593 - 12,560
Investment in
subsidiaries 35,561 - - (35,561) -
________ ________ ________ ________ ________
153,320 236 3,649 (35,561) 121,644
PROPERTY, PLANT AND
EQUIPMENT - net 83,229 4,104 11,253 - 98,586
________ ________ ________ ________ ________
$391,428 $ 13,420 $101,450 $(95,708) $410,590
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Balance Sheets (Continued)
March 31, 1998
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 30,451 $ 2,416 $ 12,207 $ (155) $ 44,919
Intercompany payables 446 7,398 48,291 (56,135) -
Liabilities to customers
on uncompleted contracts
and warranties 5,083 500 1,046 - 6,629
Income taxes 318 74 1,820 - 2,212
Short-term obligations 420 - 104 - 524
Current maturities of
long-term debt - - 267 - 267
________ ________ ________ ________ ________
Total Current
Liabilities 36,718 10,388 63,735 (56,290) 54,551
LONG-TERM LIABILITIES:
Liabilities to customers
on uncompleted contracts
and warranties 3,239 - 575 - 3,814
Postretirement benefits 14,323 - 566 - 14,889
Deferred expenses and
other 15,208 377 1,268 - 16,853
________ ________ ________ ________ ________
32,770 377 2,409 - 35,556
LONG-TERM DEBT, less
current maturities 194,500 - 2,400 - 196,900
COMMON SHAREHOLDERS'
INVESTMENT 127,440 2,655 32,906 (39,418) 123,583
________ ________ ________ ________ ________
$391,428 $ 13,420 $101,450 $(95,708) $410,590
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Balance Sheets
December 31, 1997
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents $ - $ 103 $ 14,968 $ - $ 15,071
Receivables 27,583 3,695 18,856 (691) 49,443
Intercompany
receivables 53,751 1,763 847 (56,361) -
Inventories 67,958 1,890 46,888 (1,721) 115,015
Prepaid expenses and
other current assets 978 354 3,164 - 4,496
________ ________ ________ ________ ________
Total Current Assets 150,270 7,805 84,723 (58,773) 184,025
OTHER ASSETS:
Restricted funds
on deposit - - 1,056 - 1,056
Goodwill 65,929 - - - 65,929
Intangible assets - net 44,570 226 - - 44,796
Other assets 10,101 33 2,543 - 12,677
Investment in
subsidiaries 34,093 - - (34,093) -
________ ________ ________ ________ ________
154,693 259 3,599 (34,093) 124,458
PROPERTY, PLANT AND
EQUIPMENT - net 83,218 3,563 10,843 - 97,624
________ ________ ________ ________ ________
$388,181 $ 11,627 $ 99,165 $(92,866) $406,107
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Balance Sheets (Continued)
December 31, 1997
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 38,858 $ 2,362 $ 10,550 $ 136 $ 51,906
Intercompany payables 105 6,042 49,055 (55,202) -
Liabilities to customers
on uncompleted contracts
and warranties 7,086 31 1,199 - 8,316
Income taxes 359 59 1,652 - 2,070
Short-term obligations 409 - 174 - 583
Current maturities of
long-term debt - - 267 - 267
________ ________ ________ ________ ________
Total Current
Liabilities 46,817 8,494 62,897 (55,066) 63,142
LONG-TERM LIABILITIES:
Liabilities to customers
on uncompleted contracts
and warranties 3,270 - 580 - 3,850
Postretirement benefits 14,099 - 566 - 14,665
Deferred expenses
and other 15,820 412 1,353 - 17,585
________ ________ ________ ________ ________
33,189 412 2,499 - 36,100
LONG-TERM DEBT, less
current maturities 172,215 - 2,397 - 174,612
COMMON SHAREHOLDERS'
INVESTMENT 135,960 2,721 31,372 (37,800) 132,253
________ ________ ________ ________ ________
$388,181 $ 11,627 $ 99,165 $(92,866) $406,107
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Cash Flows
Quarter Ended March 31, 1998
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
Net Cash (Used In) Provided
By Operating Activities $(21,044) $ 834 $ 534 $ - $(19,676)
________ ________ ________ ________ ________
Cash Flows From Investing
Activities
Purchases of property,
plant and equipment (2,032) (607) (456) - (3,095)
Proceeds from sale of
property, plant and
equipment - - 988 - 988
________ ________ ________ ________ ________
Net cash (used in)
provided by investing
activities (2,032) (607) 532 - (2,107)
________ ________ ________ ________ ________
Cash Flows From Financing
Activities
Net increase in other
bank borrowings 22,296 - 14 - 22,310
Capital contribution 780 - - - 780
________ ________ ________ ________ ________
Net cash provided by
financing activities 23,076 - 14 - 23,090
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - (246) - (246)
________ ________ ________ ________ ________
Net increase in cash
and cash equivalents - 227 834 - 1,061
Cash and cash equivalents
at beginning of period - 103 14,968 - 15,071
________ ________ ________ ________ ________
Cash and cash equivalents
at end of period $ - $ 330 $ 15,802 $ - $ 16,132
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Cash Flows
Quarter Ended March 31, 1997 - Predecessor
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
Net Cash (Used In) Provided
By Operating Activities $ (6,174) $ 294 $ (2,395) $ - $ (8,275)
________ ________ ________ ________ ________
Cash Flows From Investing
Activities
Purchases of property,
plant and equipment (197) (86) (895) - (1,178)
Proceeds from sale of
property, plant and
equipment - - 12 - 12
________ ________ ________ ________ ________
Net cash used in
investing activities (197) (86) (883) - (1,166)
________ ________ ________ ________ ________
Cash Flows From Financing
Activities
Proceeds from issuance
of project financing
obligations 2,431 - - - 2,431
Net increase in other
bank borrowings 11 - - - 11
Proceeds from issuance
of long-term debt - - 427 - 427
________ ________ ________ ________ ________
Net cash provided by
financing activities 2,442 - 427 - 2,869
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - (53) - (53)
________ ________ ________ ________ ________
Net (decrease) increase
in cash and cash
equivalents (3,929) 208 (2,904) - (6,625)
Cash and cash equivalents
at beginning of period 9,072 149 6,542 - 15,763
________ ________ ________ ________ ________
Cash and cash equivalents
at end of period $ 5,143 $ 357 $ 3,638 $ - $ 9,138
BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information is provided to assist in the understanding of
the Company's operations for the quarters ended March 31, 1998 and 1997.
This Report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, each as amended. Discussions containing such forward-
looking statements may be found in this section, as well as 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 disclosed 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.
In connection with the acquisition of the Company by AIPAC and the Marion
Acquisition, the assets and liabilities of the acquired companies have been
adjusted to their estimated fair values. Also, upon emergence from bankruptcy
in 1994, 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 include the related amortization charges
associated with the fair value adjustments.
Liquidity and Capital Resources
Liquidity
Working capital and current ratio are two financial measurements which
provide an indication of the Company's ability to meet its short-term
obligations. These measurements at March 31, 1998 and December 31, 1997 were
as follows:
March 31, December 31,
1998 1997
(Dollars in Thousands)
Working capital $135,809 $120,883
Current ratio 3.5 to 1 2.9 to 1
The increase in the current ratio was primarily due to the payment of
interest on the Senior Notes which was financed through long-term debt
borrowings and other reductions in accounts payable and accrued expenses.
Equipment Assurance Limited has pledged $1,056,000 of its cash to secure
its reimbursement obligations for outstanding letters of credit at March 31,
1998. This collateral amount is classified as Restricted Funds on Deposit in
the Consolidated Condensed Balance Sheets.
The Company is presenting below a calculation of earnings (loss) before
interest expense, income taxes, depreciation, amortization, non-cash stock
compensation, (gain) loss on sale of fixed assets and inventory fair value
adjustment charged to cost of products sold ("Adjusted EBITDA"). Since cash
flow from operations is very important to the Company's future, the Adjusted
EBITDA calculation provides a summary review of cash flow performance. In
addition, the Company is required to maintain certain minimum Adjusted EBITDA
levels under the Revolving Credit Facility (see below). The Adjusted EBITDA
calculation is not an alternative to operating income under generally accepted
accounting principles as an indicator of operating performance or to cash
flows as a measure of liquidity. The following table reconciles Earnings
(Loss) Before Income Taxes to Adjusted EBITDA:
Quarter Ended March 31,
1998 1997
(Predecessor)
(Dollars in Thousands)
Earnings (loss) before income taxes $ (9,288) $ 1,578
Non-cash expenses:
Depreciation 2,500 1,087
Amortization 1,315 267
Non-cash stock compensation - 210
(Gain) loss on sale of fixed assets (23) (5)
Inventory fair value adjustment
charged to cost of products sold 6,925 -
Interest expense 4,469 1,914
________ ________
Adjusted EBITDA $ 5,898 $ 5,051
The Company entered into a three-year credit agreement with Bank One,
Wisconsin on September 24, 1997 which provides the Company with a $75,000,000
senior secured revolving credit facility (the "Revolving Credit Facility")
with a $25,000,000 sublimit for standby letters of credit. Borrowings under
the Revolving Credit Facility bear interest at variable rates and are subject
to a borrowing base formula based on receivables, inventory and machinery and
equipment. Direct borrowings under the Revolving Credit Facility at March 31,
1998 were $44,500,000 at a weighted average interest rate of 8.6%. The
issuance of standby letters of credit reduces the amount available for direct
borrowings under the Revolving Credit Facility. At March 31, 1998, there were
$4,023,000 of standby letters of credit outstanding under the Revolving Credit
Facility. The Revolving Credit Facility is secured by substantially all of
the assets of the Company, other than real property and 35% of the stock of
its foreign subsidiaries, and is guaranteed by the Guarantor Subsidiaries who
have also pledged substantially all of their assets as security. The amount
available for direct borrowings under the Revolving Credit Facility at March
31, 1998 was $26,477,000.
The Company has outstanding $150,000,000 of its Senior Notes which were
issued pursuant to an indenture dated as of September 24, 1997 among the
Company, the Guarantors, and Harris Trust and Savings Bank, as Trustee (the
"Senior Notes Indenture"). Interest thereon is payable each March 15 and
September 15.
The Company believes that current levels of cash and liquidity, together
with funds generated by operations and funds available from the Revolving
Credit Facility, 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.
Capital Resources
At March 31, 1998, the Company had approximately $4,696,000 of open
capital appropriations. Of this amount, approximately $1,952,000 relates to
the installation of Marion equipment being transferred to the Company's South
Milwaukee, Wisconsin manufacturing facility and to Boonville Mining Services,
Inc., a wholly-owned subsidiary of the Company located in Boonville, Indiana.
In 1996, a machine shop modernization program began at the Company's South
Milwaukee, Wisconsin manufacturing facility that involves a $20,000,000
investment in the latest technology in the machine tool industry. The program
is aimed at reduced lead times, quicker turnaround, reduced in-process
inventory and overall cost reduction. The Company has spent approximately
$5,700,000 to date on this program with the remaining amount to be spent in
the next several years.
Capitalization
The long-term debt to equity ratio at March 31, 1998 and December 31,
1997 was 1.6 to 1 and 1.3 to 1, respectively. The long-term debt to total
capitalization ratio at March 31, 1998 and December 31, 1997 was .6 to 1.
Total capitalization is defined as total common shareholders' investment plus
long-term debt plus current maturities of long-term debt and short-term
obligations.
Results of Operations
Net Sales
Net sales for the first quarter of 1998 were $73,700,000 compared with
$59,886,000 for the first quarter of 1997. Sales of repair parts and services
were $51,415,000, which is an increase of $14,023,000 or 37.5% from
$37,392,000 for the first quarter of 1997. The increase in repair parts and
service sales was primarily due to the acquisition of Marion. Machine sales
were $22,285,000, which is a decrease of .9% from the first quarter of 1997.
Cost of Products Sold
Cost of products sold for the first quarter of 1998 was $66,581,000 or
90.3% of net sales compared with $48,005,000 or 80.2% of net sales for the
first quarter of 1997. Included in cost of products sold for 1998 were
charges of $6,925,000 as a result of fair value adjustments to inventory being
charged to cost of products sold as the inventory was sold. The fair value
adjustment was made as a result of the acquisition of the Company by AIPAC.
Excluding the effects of the inventory fair value adjustment, cost of products
sold as a percentage of net sales was 80.9%. Also included in cost of
products sold for 1998 was $1,022,000 of additional depreciation expense as a
result of the fair value adjustment to plant and equipment in connection with
the acquisition of the Company by AIPAC.
Product Development, Selling, Administrative and Miscellaneous Expenses
Product development, selling, administrative and miscellaneous expenses
for the first quarter of 1998 were $12,173,000 or 16.5% of net sales compared
with $8,653,000 or 14.4% of net sales for the first quarter of 1997. The
dollar increase for the first quarter of 1998 was primarily due to increased
expenses to support the Marion business acquired, and increased non-cash
amortizations of goodwill, intangible assets and financing fees that were
recorded in connection with the acquisition of the Company by AIPAC.
Interest Expense
Interest expense for the first quarter of 1998 was $4,469,000 compared
with $1,914,000 for the first quarter of 1997. Included in interest expense
for 1998 was $3,616,000 related to the Senior Notes.
Income Taxes (Benefit)
Income tax expense (benefit) consists primarily of foreign taxes at
applicable statutory rates, and is net of a $658,000 benefit related to the
foreign fair value adjustment to inventory charged to cost of products sold in
the first quarter of 1998. For United States tax purposes, there were losses
for which no income tax benefit was recorded.
Net Earnings (Loss)
Net loss for the first quarter of 1998 was $9,069,000 compared with net
earnings of $915,000 for the first quarter of 1997. Net loss for the first
quarter of 1998 includes $6,267,000 (net of tax) of the inventory fair value
adjustment which was charged to cost of products sold. Non-cash depreciation
and amortization charges included in the net loss for the first quarter of
1998 and 1997 were $3,815,000 and $1,354,000, respectively.
Backlog and New Orders
The Company's consolidated backlog at March 31, 1998 was $207,537,000
compared with $216,021,000 at December 31, 1997 and $160,155,000 at March 31,
1997. Machine backlog at March 31, 1998 was $83,892,000, which is a decrease
of 13.7% from December 31, 1997 and an increase of 86.7% from March 31, 1997.
The decrease in machine backlog from December 31, 1997 was in both electric
mining shovel and blast hole drill volume. During the second quarter of 1997,
the Company executed a contract with an Australian mining company for the sale
of a Model 2570WS dragline which is scheduled for completion by December 31,
1999. Included in backlog at March 31, 1998 and December 31, 1997 was
$50,096,000 and $51,644,000, respectively, related to this machine. Repair
parts and service backlog at March 31, 1998 was $123,645,000, which is an
increase of 4.0% from December 31, 1997 and an increase of 7.3% from March 31,
1997.
New orders for the first quarter of 1998 were $65,216,000, which is an
increase of 6.4% from the first quarter of 1997. New machine orders were
$9,022,000, which is a decrease of 51.0% from the first quarter of 1997. As a
result of a decline in copper and coal prices in 1997 from historically high
levels, the demand for machines from these market segments has been low. New
repair parts and service orders for the first quarter of 1998 were
$56,194,000, which is an increase of 30.9% from the first quarter of 1997.
The increase in new orders was primarily due to the acquisition of Marion.
Year 2000 Issues
The Company is in the process of implementing a plan to improve its
existing computer system. While the primary purpose of the change is to
improve the efficiency and effectiveness of the Company's system, year 2000
issues are also being addressed at this time. Implementation of the plan is
expected to be completed by the first quarter of 1999, primarily through the
redeployment of internal Company personnel. The estimated incremental cost of
this project is $2,600,000.
Translation of Brazil Financial Statements
The Company has operations in Brazil, whose economy has been considered
highly inflationary by management through December 31, 1997 for purposes of
translating Brazilian financial statements from Brazilian Reals into U.S.
dollars. Effective January 1, 1998, the Company no longer believes that
Brazil's economy is highly inflationary. The effect of this change on the
consolidated financial statements was not material.
Marion Acquisition
As planned, the Company closed down the operations in Marion, Ohio at
year-end of 1997. During the first quarter of 1998, the Company moved certain
equipment to its South Milwaukee, Wisconsin and Boonville, Indiana locations,
sold the remaining Marion, Ohio equipment for approximately $4,000,000 and has
transitioned the manufacturing, engineering, selling and administrative
functions to South Milwaukee, Wisconsin.
PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On March 17, 1998, the Company sold 7,800 shares of common stock to
eight members of management of the Company at a price of $100 per
share. Exemption from registration of the shares sold under the
Securities Act of 1933 (the "Securities Act") is claimed under
Section 4(2) of the Securities Act because the offer and sale thereof
was restricted to a limited number of individuals, all of whom were
members of management of the Company, without any advertising or
other selling efforts commonly associated with a "public offering".
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
1998.
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 13, 1998 /s/Craig R. Mackus
Secretary and Controller
Principal Accounting Officer
Date May 13, 1998 /s/Willard R. Hildebrand
President and Chief Executive Officer
BUCYRUS INTERNATIONAL, INC.
EXHIBIT INDEX
TO
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1998
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
2.1 Agreement and Plan of Exhibit 1 to
Merger dated August 21, Registrant's
1997, between Registrant, Tender Offer
American Industrial Solicitation/
Partners Acquisition Recommendation
Company, LLC and Bucyrus Statement on
Acquisition Corp. Schedule 14D-9
filed with the
Commission on
August 26, 1997.
2.2 Certificate of Merger Exhibit 2.2 to
dated September 26, 1997, Registrant's
issued by the Secretary Current Report
of State of the State of on Form 8-K
Delaware. filed with the
Commission on
October 10, 1997.
2.3 Asset Purchase Agreement Exhibit 2.3 to
dated July 21, 1997, by Registration
and among The Marion Power Statement on
Shovel Company, Marion Form S-4 of
Power Shovel Pty Ltd, Registrant,
Intool International B.V., Boonville Mining
Global-GIX Canada Inc., Services, Inc.,
and Global Industrial Minserco, Inc., and
Technologies, Inc. (Sellers) Von's Welding, Inc.
and Registrant, Bucyrus (SEC Registration
(Australia) Proprietary No. 333-39359)
Ltd., Bucyrus (Africa)
(Proprietary) Limited, and
Bucyrus Canada Limited
(Buyers).
[OMITTED PROVISIONS SUBJECT
TO CONFIDENTIAL TREATMENT
BY ORDER OF THE SECURITIES
AND EXCHANGE COMMISSION.]
2.4 Second Amended Joint Plan Exhibit 2.1 to
of Reorganization of B-E Registrant's
Holdings, Inc. and Bucyrus- Current Report
Erie Company under Chapter on Form 8-K,
11 of the Bankruptcy Code, filed with the
as modified December 1, Commission and
1994, including Exhibits. dated December 1,
1994.
EI-1
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
2.5 Order dated December 1, Exhibit 2.2 to
1994 of the U.S. Bankruptcy Registrant's
Court, Eastern District of Current Report
Wisconsin, confirming the on Form 8-K
Second Amended Joint Plan filed with the
of Reorganization of B-E Commission and
Holdings, Inc. and Bucyrus- dated December 1,
Erie Company under Chapter 1994.
11 of the Bankruptcy Code,
as modified December 1, 1994,
including Exhibits.
3.1 Restated Certificate Exhibit 3.1 to
of Incorporation of Registrant's
Registrant. Current Report
on Form 8-K
filed with the
Commission on
October 10, 1997.
3.2 By-laws of Registrant. Exhibit 3.2 to
Registrant's
Current Report
on Form 8-K
filed with the
Commission on
October 10, 1997.
3.3 Amendment to By-laws of Exhibit 3.2 to
Registrant effective Registrant's
November 5, 1997. Quarterly Report
on Form 10-Q for
the quarter ended
September 30, 1997.
3.4 Certificate of Amendment Exhibit 3.4
to Restated Certificate to Registrant's
of Incorporation adopted Annual Report on
March 17, 1998. Form 10-K for
the year ended
December 31, 1997.
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)
EI-2
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
4.2 Form of Guarantee of Included as
Boonville Mining Services, Exhibit E
Inc., Minserco, Inc. and to Exhibit 4.1
Von's Welding, Inc. dated above.
as of September 24, 1997
in favor of Harris Trust
and Savings Bank as Trustee
under the Indenture.
4.3 Form of Registrant's Exhibit 4.3 to
9-3/4% Senior Note due 2007. Registration
Statement on
Form S-4 of
Registrant, Boonville
Mining Services, Inc.,
Minserco, Inc., and
Von's Welding, Inc.
(SEC Registration
No. 333-39359)
10.1 Credit Agreement dated Exhibit 3.2 to
September 24, 1997 between Registrant's
Bank One, Wisconsin and Current Report
Registrant. on Form 8-K
filed with the
Commission on
October 10, 1997.
10.2 Management Services Exhibit 10.2 to
Agreement by and among Registration
Registrant, Boonville Statement on
Mining Services, Inc., Form S-4 of
Minserco, Inc. and Registrant,
Von's Welding, Inc. and Boonville Mining
American Industrial Services, Inc.,
Partners. Minserco, Inc., and
Von's Welding, Inc.
(SEC Registration
No. 333-39359)
10.3 Registration Agreement dated Exhibit 10.3 to
September 24, 1997 by and Registration
among Registrant, Boonville Statement on
Mining Services, Inc., Form S-4 of
Minserco, Inc. and Von's Registrant,
Welding, Inc. and Salomon Boonville Mining
Brothers, Inc., Jefferies & Services, Inc.,
Company, Inc. and Donaldson, Minserco, Inc., and
Lufkin & Jenrette Securities Von's Welding, Inc.
Corporation. (SEC Registration
No. 333-39359)
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Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
10.4 Joint Prosecution Agreement Exhibit 9 to
dated as of August 21, 1997 Registrant's
by and among Registrant and Tender Offer
Jackson National Life Solicitation/
Insurance Company. Recommendation
Statement on
Schedule 14D-9
filed with the
Commission on
August 26, 1997.
10.5 Settlement Agreement dated Exhibit 10 to
as of August 21, 1997, by Registrant's
and between Jackson National Tender Offer
Life Insurance Company and Solicitation/
Registrant. Recommendation
Statement on
Schedule 14D-9
filed with the
Commission on
August 26, 1997.
10.6 Letter Agreement dated Exhibit 10.15
March 7, 1997 between to Registrant's
Jefferies & Company, Inc. Quarterly Report
and Registrant. on Form 10-Q for
the quarter ended
June 30, 1997.
10.7 Letter Agreement dated Exhibit 10.16
July 30, 1997 between to Registrant's
Jefferies & Company, Inc. Quarterly Report
and Registrant. on Form 10-Q for
the quarter ended
June 30, 1997.
10.8 Employment Agreement Exhibit 10.27 to
between Registrant and Registrant's
W. R. Hildebrand dated Annual Report on
as of March 11, 1996. Form 10-K for
the year ended
December 31, 1995.
10.9 Employment Agreement Exhibit 10.38 to
between Registrant and Registrant's
D. J. Smoke dated as of Annual Report on
November 7, 1996. Form 10-K for
the year ended
December 31, 1996.
10.10 Employment Agreement Exhibit 10.17 to
between Registrant and Registrant's
C. R. Mackus dated as of Quarterly Report
May 21, 1997. on Form 10-Q for
the quarter ended
June 30, 1997.
EI-4
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
10.11 Employment Agreement Exhibit 10.18 to
between Registrant and Registrant's
M. G. Onsager dated as of Quarterly Report
May 21, 1997. on Form 10-Q for
the quarter ended
June 30, 1997.
10.12 Employment Agreement Exhibit 10.19 to
between Registrant and Registrant's
T. B. Phillips dated as of Quarterly Report
May 21, 1997. on Form 10-Q for
the quarter ended
June 30, 1997.
10.13 Employment Agreement Exhibit 10.20 to
between Registrant and Registrant's
T. W. Sullivan dated as of Quarterly Report
May 21, 1997. on Form 10-Q for
the quarter ended
June 30, 1997.
10.14 Annual Management Incentive Exhibit 10.14
Plan for 1997, adopted by to Registrant's
Board of Directors Annual Report on
February 5, 1997. Form 10-K for
the year ended
December 31, 1997.
10.15 Amendment No. 1 dated Exhibit 10.15
March 5, 1998 to Employment to Registrant's
Agreement dated March 11, Annual Report on
1996 between Registrant Form 10-K for
and W. R. Hildebrand. the year ended
December 31, 1997.
10.16 Amendment No. 1 dated Exhibit 10.16
March 17, 1998 to Employment to Registrant's
Agreement dated November 7, Annual Report on
1996 between Registrant Form 10-K for
and D. J. Smoke. the year ended
December 31, 1997.
10.17 1998 Management Stock Option Exhibit 10.17
Plan. to Registrant's
Annual Report on
Form 10-K for
the year ended
December 31, 1997.
21.1 Subsidiaries of Registrant. Exhibit 21.1 to
Registration
Statement on
Form S-4 of
Registrant,
Boonville Mining
Services, Inc.,
Minserco, Inc., and
Von's Welding, Inc.
(SEC Registration
No. 333-39359)
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Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
27.1 Financial Data Schedule X
(Edgar filing only.)
99.1 Management Agreement, Exhibit 99.2 to
dated July 21, 1995, Registrant's
between Registrant Current Report on
and Miller Associates. Form 8-K, dated
July 25, 1995.
99.2 Amendment dated Exhibit 99.2(a)
December 21, 1995 to to Registrant's
Management Agreement Annual Report on
with Miller Associates Form 10-K for
dated July 21, 1995. the year ended
December 31, 1995.
EI-6