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, 2000 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 1-2199
ALLIS-CHALMERS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 39-0126090
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4180 Cherokee Drive
Brookfield, Wisconsin 53045
(Address of principal executive offices) (Zip code)
(414) 475-2000
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
At May 5, 2000 were 1,588,128 shares of Common Stock outstanding.
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF OPERATIONS
Three Months Ended
March 31
--------------------------
2000 1999
-------- --------
(thousands, except per share)
Sales $ 824 $ 1,052
Cost of sales 629 713
------- -------
Gross Margin 195 339
Marketing and administrative expense 295 390
------- -------
Loss from Operations (100) (51)
------- -------
Other income (expense)
Interest income 2 1
Interest expense (6) (8)
Other 0 1
------- -------
Net Loss $ (104) $ (57)
======= =======
Net Loss per Common Share $ (.07) $ (.06)
======= =======
STATEMENT OF ACCUMULATED DEFICIT
Three Months Ended March 31 2000 1999
--------------------------- ------- -------
(thousands)
Accumulated deficit - beginning of year $ (75,786) $ (75,673)
Net loss (104) (57)
--------- ---------
Accumulated deficit - March 31 $ (75,890) $ (75,730)
========= =========
This interim statement is unaudited.
The accompanying Notes are an integral part of the Financial Statements.
3
ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF FINANCIAL CONDITION
March 31, December 31,
2000 1999
(thousands)
Assets
Cash and short-term investments $ 230 $ 501
Trade receivables, net 534 570
Inventories, net 184 157
Other current assets 41 66
--------- ---------
Total Current Assets 989 1,294
Net property, plant and equipment 1,129 1,170
--------- ---------
Total Assets $ 2,118 $ 2,464
========= =========
Liabilities and Shareholders' Deficit
Current maturities of long-term debt $ 52 $ 60
Trade accounts payable 207 461
Accrued employee benefits 157 120
Accrued pension liability 66,877 66,877
Other current liabilities 270 281
--------- ---------
Total Current Liabilities 67,563 67,799
Accrued postretirement benefit obligations 930 927
Long-term debt 184 193
Shareholders' deficit
Common stock, ($.15 par value,
authorized 2,000,000 shares, outstanding
1,588,128 at March 31, 2000 and 1,003,028
at December 31, 1999) 238 238
Capital in excess of par value 9,093 9,093
Accumulated deficit (accumulated deficit of
$424,208 eliminated on December 2, 1988) (75,890) (75,786)
--------- ---------
Total Shareholders' Deficit (66,559) (66,455)
--------- ---------
Total Liabilities and Shareholders'
Deficit $ 2,118 $ 2,464
========= =========
This interim statement is unaudited.
The accompanying Notes are an integral part of the Financial Statements.
4
ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CASH FLOWS
Three Months Ended
March 31
2000 1999
(thousands)
Cash flows from operating activities:
Net loss $ (104) $ (57)
Adjustments to reconcile net loss
to net cash (used) provided by
operating activities:
Depreciation and amortization 41 42
Change in working capital:
Decrease in receivables, net 36 192
Increase in inventories (27) (145)
Decrease in trade accounts payable (254) (66)
Increase in other current items 51 78
Other 3 (18)
------- --------
Net cash (used) provided by
operating activities (254) 26
Cash flows from investing activities:
Capital expenditures 0 (39)
Cash flows from financing activities:
Net proceeds from issuance of
long-term debt 0 29
Payment of long-term debt (17) (17)
------- -------
Net cash (used) provided by
financing activities (17) 12
------- -------
Net (decrease) in cash and cash equivalents (271) (1)
Cash and cash equivalents at
beginning of period 501 223
------- -------
Cash and cash equivalents at end of period $ 230 $ 222
======= =======
Supplemental information - interest paid $ 6 $ 8
======= =======
This interim statement is unaudited.
The accompanying Notes are an integral part of the Financial Statements.
5
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING POLICIES
This interim financial data should be read in conjunction with the consolidated
financial statements and related notes, management's discussion and analysis and
other information included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1999.
All adjustments considered necessary for a fair presentation of the results of
operations have been included in the unaudited financial statements. The results
of operations for any interim period are not necessarily indicative of
Allis-Chalmers operating results for a full year.
NOTE 2 - POSTRETIREMENT OBLIGATIONS--PENSION PLAN
In 1994, the Company's independent pension actuaries changed the assumptions for
mortality and administrative expenses used to determine the liabilities of the
Allis-Chalmers Consolidated Pension Plan (Consolidated Plan). Primarily as a
result of the changes in mortality assumptions to reflect decreased mortality
rates of the Company's retirees, the Consolidated Plan was underfunded on a
present value basis. In the first quarter of 1996, the Company made a required
cash contribution to the Consolidated Plan in the amount of $205,000. The
Company did not, however, have the financial resources to make the other
required payments during 1996 and 1997. Given the inability of the Company to
fund such obligations with its current financial resources, in February 1997,
Allis-Chalmers applied to the Pension Benefit Guaranty Corporation (PBGC) for a
"distress" termination of the Consolidated Plan under section 4041(c) of the
Employee Retirement Income Security Act of 1974, as amended (ERISA). The PBGC
approved the distress termination application in September 1997 and agreed to a
plan termination date of April 14, 1997. The PBGC became trustee of the
terminated Consolidated Plan on September 30, 1997.
Upon termination of the Consolidated Plan, Allis-Chalmers and its subsidiaries
incurred a liability to the PBGC for an amount equal to the Consolidated Plan's
unfunded benefit liabilities. Allis-Chalmers and its subsidiaries also have a
liability to the PBGC, as trustee of the terminated Consolidated Plan, for the
outstanding balance of the Consolidated Plan's accumulated funding deficiencies.
The PBGC has estimated that the unfunded benefit liabilities and the accumulated
funding deficiencies (together, the PBGC Liability) total approximately $67.9
million. Effective March 31, 1999, the Company issued 585,100 shares reducing
the pension liability by the estimated fair market value of the shares to $66.9
million.
In September 1997, Allis-Chalmers and the PBGC entered into an agreement in
principle for the settlement of the PBGC Liability which required, among other
things, satisfactory resolution of the Company's tax obligations with respect to
the Consolidated Plan under Section 4971 of the Internal Revenue Code of 1986,
as amended (Code). Section 4971(a) of the Code imposes, for each taxable year, a
first-tier tax of 10% on the amount of the accumulated funding deficiency under
a plan like the Consolidated Plan. Section 4971(b) of the Code imposes an
additional, second-tier tax equal to 100% of such accumulated funding deficiency
if the deficiency is not "corrected" within a specified period. Liability for
the taxes imposed under section 4971 extends, jointly and severally, to the
Company and to its commonly-controlled subsidiary corporations.
Prior to its termination, the Consolidated Plan had an accumulated funding
deficiency in the taxable years 1995, 1996, and 1997. Those deficiencies
resulted in estimated first-tier taxes under Code section 4971(a) of
approximately $900,000.
6
On July 16, 1998, the Company and the Internal Revenue Service (IRS) reached an
agreement in principal to settle the Company's tax liability under Code Section
4971 for $75,000. Following final IRS approval, payment of this amount was made
on August 11, 1998.
In June 1999, but effective as of March 31, 1999, the Company and the PBGC
entered into an agreement for the settlement of the PBGC Liability (the PBGC
Agreement).
Pursuant to the terms of the PBGC Agreement, the Company issued 585,100 shares
of its common stock to the PBGC, or 35% of the total number of shares issued and
outstanding on a fully-diluted basis, and the Company has a right of first
refusal with respect to the sale of the shares of common stock owned by the
PBGC. In conjunction with the share issuance, the Company reduced the pension
liability to the PBGC based on the estimated fair market value of the shares
issued on the effective date of March 31, 1999. In accordance with the terms of
the PBGC Agreement, the Company was required to and has (i) decreased the size
of the Board of Directors of the Company (the Board) to seven members; (ii)
caused a sufficient number of then current directors of the Company to resign
from the Board and all committees thereof; and (iii) caused Thomas M. Barnhart,
II, Alexander P. Sammarco and David A. Groshoff, designees of the PBGC, to be
elected to the Board. The PBGC has caused the Company to amend its By-laws
(By-laws) to conform to the terms of the PBGC Agreement. Furthermore, the
Company agreed to pay the PBGC's reasonable professional fees on the 90th day
after a Release Event (as hereinafter defined), which is currently evidenced by
a Company promissory note in favor of the PBGC in the amount of $75,000. During
the term of the PBGC Agreement, the Company has agreed not to issue or agree to
issue any common stock of the Company or any "common stock equivalent" for less
than fair value (as determined by a majority of the Board). The Company also
agreed not to merge or consolidate with any other entity or sell, transfer or
convey more than 50% of its property or assets without majority Board approval
and agreed not to amend its Amended and Restated Certificate of Incorporation
(Certificate) or By-laws.
In order to satisfy and discharge the PBGC Liability, the PBGC Agreement
provides that the Company must either: (i) receive, in a single transaction or
in a series of related transactions, debt financing which makes available to the
Company at least $10 million of borrowings or (ii) consummate an acquisition, in
a single transaction or in a series of related transactions, of assets and/or a
business where the purchase price (including funded debt assumed) is at least
$10 million (Release Event). If the 585,100 shares are disposed of by the PBGC
prior to a Release Event and the final satisfaction and discharge of the PBGC
Liability, the liability will be accreted by the estimated fair market value,
$1,024,000, of the shares issued to the PBGC.
In connection with the PBGC Agreement, and as additional consideration for
settling the PBGC Liability, the following agreements, each dated as of March
31, 1999 were also entered into: (i) a Registration Rights Agreement between the
Company and PBGC (the Registration Rights Agreement); and (ii) a Lock-Up
Agreement by and among the Company, the PBGC, AL-CH Company, L.P., a Delaware
limited partnership (AL-CH), Wells Fargo Bank, as trustee under that certain
Amended and Restated Retiree Health Trust Agreement for UAW Retired Employees of
Allis-Chalmers Corporation (the UAW Trust), and Firstar Trust Company, as
trustee under that certain Amended and Restated Retiree Health Trust Agreement
for Non-UAW Retired Employees of Allis-Chalmers Corporation (the Non-UAW Trust)
(the Lock-Up Agreement).
The Registration Rights Agreement grants each holder of Registrable Shares
(defined in the Registration Rights Agreement to basically mean the shares of
common stock issued to the PBGC under the PBGC Agreement) the right to have
their shares registered pursuant to the
7
Securities Act of 1933, as amended, on demand or incidental to a registration
statement being filed by the Company. In order to demand registration of
Registrable Shares, a request for registration by holders of not less than 20%
of the Registrable Shares is necessary. The Company may deny a request for
registration of such shares if the Company contemplates filing a registration
statement within 90 days of receipt of notice from the holders. The Registration
Rights Agreement also contains provisions that allow the Company to postpone the
filing of any registration statement for up to 180 days. The Registration Rights
Agreement contains indemnification language similar to that usually contained in
agreements of this kind.
The Lock-Up Agreement governs the transfer and disposition of shares of the
Company's common stock and the voting of such shares, as well as grants the PBGC
a right of sale of its shares prior to AL-CH, the UAW Trust and the Non-UAW
Trust.
Pursuant to the Lock-Up Agreement, unless the Board has terminated the common
stock transfer restrictions set forth in Article XIII of the Company's
Certificate, AL-CH, the UAW Trust and the Non-UAW Trust each agreed that, during
the period commencing on March 31, 1999 and ending on the third anniversary of
the Release Event, it will not, directly or indirectly, sell, transfer, assign
or dispose of any shares of Company stock it beneficially owns. Commencing with
the third anniversary of the Release Event and continuing until the fifth
anniversary of the Release Event, each of AL-CH, the UAW Trust and the Non-UAW
Trust agreed not to sell, transfer or dispose of any shares of Company stock
without first giving the PBGC an opportunity to sell all or any portion of the
shares of Company stock the PBGC owns. The foregoing right of the PBGC applies
to the sale of Company stock in a public offering or otherwise.
The Lock-Up Agreement also contains a voting component. During the term of the
Lock-Up Agreement, each party to the agreement agreed to vote, at any meeting of
the Company stockholders and in any written consent, all shares of Company stock
owned by it in favor of the election as directors of the Company the persons
nominated by the Nominating Committee of the Board and to refrain from taking
any action contrary to or inconsistent with such obligation. During the term of
the Lock-Up Agreement, each party to the agreement further agreed not to vote
its shares of Company stock or take any other action to amend the Company's
Certificate or By-laws in a manner that is inconsistent with, or in breach of,
the PBGC Agreement. Each party further agreed that it will vote all of its
shares (i) in favor of certain specified amendments to the Company's
Certificate, (ii) for the election of the persons designated by the PBGC (each,
a PBGC Director) to serve on the Board and (iii) in favor of the election of
Company directors who are committed to cause, and who do cause, one PBGC
Director to be appointed to the Nominating Committee of the Board and one PBGC
Director to be appointed as the Chairman of the Compensation Committee of the
Board.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Operations of the Company consist of Houston Dynamic Service, Inc. (HDS), the
Company's machinery repair and service subsidiary.
Sales in the first quarter of 2000 totaled $824,000 a decrease from $1,052,000
in the first quarter of 1999. HDS continues to be affected by volatile market
conditions that prevail in the oil related fields of refining, processing,
chemicals and petrochemical operations throughout the Gulf Coast.
8
Gross margin, as a percentage of sales, was 23.7% in the first quarter of 2000,
a decrease from 32.2% in 1999 due to the lower sales, fixed cost and competitive
pricing.
Marketing and administrative expense was $295,000 in the first quarter of 2000
compared with $390,000 in the prior year. A significant portion of the Company's
administrative expenses relates to expenses for Securities and Exchange
Commission and other governmental reporting as well as legal, accounting and
audit, tax, insurance and other corporate requirements of a publicly held
company.
The Company incurred a net loss of $104,000, or $.07 per common share, in the
first quarter of 2000 compared with a loss of $57,000, or $.06 per common share,
in the same period of 1999.
Financial Condition and Liquidity
Cash and short term investments totaled $230,000 at March 31, 2000, a decrease
from $501,000 at December 31, 1999.
Net trade receivables at March 31, 2000 were $534,000, reflecting a slight
decrease from the December 31, 1999 level of $570,000, due to lower sales in the
first three months of 2000.
Inventory at March 31, 2000 was $184,000, an increase from $157,000 at year end
1999, due to a job that was not shipped until the second quarter.
Net property, plant and equipment was $1,129,000 at March 31, 2000, a decrease
from $1,170,000 at year end 1999. For the first three months ending March 31,
2000, there were no capital expenditures made.
Trade accounts payable was $207,000 at March 31, 2000, a decrease from $461,000
at December 31, 1999 due to a reduction in purchasing as a result of lower
sales.
The A-C Reorganization Trust, pursuant to the Plan of Reorganization, funds all
costs incurred by Allis-Chalmers which relate to implementation of the Plan of
Reorganization, thus avoiding additional demands on the liquidity of the
Company. Such costs include an allocated share of certain expenses for Company
employees, professional fees and certain other administrative expenses.
In 1994, the Company's independent pension actuaries changed the assumptions for
mortality and administrative expenses used to determine the liabilities of the
Consolidated Plan. Primarily as a result of the changes in mortality assumptions
to reflect decreased mortality rates of the Company's retirees, the Consolidated
Plan was underfunded on a present value basis. In the first quarter of 1996, the
Company made a required cash contribution to the Consolidated Plan in the amount
of $205,000. The Company did not, however, have the financial resources to make
the other required payments during 1996 and 1997. Given the inability of the
Company to fund such obligations with its current financial resources, in
February 1997, Allis-Chalmers applied to the PBGC for a "distress" termination
of the Consolidated Plan under section 4041(c) of ERISA. The PBGC approved the
distress termination application in September 1997 and agreed to a plan
termination date of April 14, 1997. The PBGC became trustee of the terminated
Consolidated Plan on September 30, 1997.
Upon termination of the Consolidated Plan, Allis-Chalmers and its subsidiaries
incurred a liability to the PBGC for an amount equal to the Consolidated Plan's
unfunded benefit liabilities. Allis-Chalmers and its subsidiaries also have a
liability to the PBGC, as trustee of the terminated Consolidated Plan, for the
outstanding balance of the Consolidated Plan's accumulated funding deficiencies.
The PBGC has estimated that the unfunded benefit liabilities and the accumulated
9
funding deficiencies (together, the PBGC Liability) total approximately $67.9
million. Effective March 31, 1999, the Company issued 585,100 shares reducing
the pension liability by the estimated fair market value of the shares to $66.9
million.
In September 1997, Allis-Chalmers and the PBGC entered into an agreement in
principle for the settlement of the PBGC Liability which required, among other
things, satisfactory resolution of the Company's tax obligations with respect to
the Consolidated Plan under Section 4971 of the Internal Revenue Code of 1986,
as amended (Code). Section 4971(a) of the Code imposes, for each taxable year, a
first-tier tax of 10% on the amount of the accumulated funding deficiency under
a plan like the Consolidated Plan. Section 4971(b) of the Code imposes an
additional, second-tier tax equal to 100% of such accumulated funding deficiency
if the deficiency is not "corrected" within a specified period. Liability for
the taxes imposed under section 4971 extends, jointly and severally, to the
Company and to its commonly-controlled subsidiary corporations.
Prior to its termination, the Consolidated Plan had an accumulated funding
deficiency in the taxable years 1995, 1996, and 1997. Those deficiencies
resulted in estimated first-tier taxes under Code section 4971(a) of
approximately $900,000.
On July 16, 1998, the Company and the Internal Revenue Service (IRS) reached an
agreement in principal to settle the Company's tax liability under Code Section
4971 for $75,000. Following final IRS approval, payment of this amount was made
on August 11, 1998.
In June 1999, but effective as of March 31, 1999, the Company and the PBGC
entered into an agreement for the settlement of the PBGC Liability (the PBGC
Agreement).
Pursuant to the terms of the PBGC Agreement, the Company issued 585,100 shares
of its common stock to the PBGC, or 35% of the total number of shares issued and
outstanding on a fully-diluted basis, and the Company has a right of first
refusal with respect to the sale of the shares of common stock owned by the
PBGC. In conjunction with the share issuance, the Company reduced the pension
liability to the PBGC based on the estimated fair market value of the shares
issued on the effective date of March 31, 1999. In accordance with the terms of
the PBGC Agreement, the Company was required to and has (i) decreased the size
of the Board of Directors of the Company (the Board) to seven members; (ii)
caused a sufficient number of then current directors of the Company to resign
from the Board and all committees thereof; and (iii) caused Thomas M. Barnhart,
II, Alexander P. Sammarco and David A. Groshoff, designees of the PBGC, to be
elected to the Board. The PBGC has caused the Company to amend its By-laws
(By-laws) to conform to the terms of the PBGC Agreement. Furthermore, the
Company agreed to pay the PBGC's reasonable professional fees on the 90th day
after a Release Event (as hereinafter defined), which is currently evidenced by
a Company promissory note in favor of the PBGC in the amount of $75,000. During
the term of the PBGC Agreement, the Company has agreed not to issue or agree to
issue any common stock of the Company or any "common stock equivalent" for less
than fair value (as determined by a majority of the Board). The Company also
agreed not to merge or consolidate with any other entity or sell, transfer or
convey more than 50% of its property or assets without majority Board approval
and agreed not to amend its Amended and Restated Certificate of Incorporation
(Certificate) or By-laws.
In order to satisfy and discharge the PBGC Liability, the PBGC Agreement
provides that the Company must either: (i) receive, in a single transaction or
in a series of related transactions, debt financing which makes available to the
Company at least $10 million of borrowings or (ii) consummate an acquisition, in
a single transaction or in a series of related transactions, of assets and/or a
business where the purchase price (including funded debt assumed) is at least
$10 million (Release Event). If the 585,100 shares are disposed of by the PBGC
prior to a Release Event and the final satisfaction and discharge of the PBGC
Liability, the liability will be accreted by the estimated fair market value,
$1,024,000, of the shares issued to the PBGC.
10
In connection with the PBGC Agreement, and as additional consideration for
settling the PBGC Liability, the following agreements, each dated as of March
31, 1999 were also entered into: (i) a Registration Rights Agreement between the
Company and PBGC (the Registration Rights Agreement); and (ii) a Lock-Up
Agreement by and among the Company, the PBGC, AL-CH Company, L.P., a Delaware
limited partnership (AL-CH), Wells Fargo Bank, as trustee under that certain
Amended and Restated Retiree Health Trust Agreement for UAW Retired Employees of
Allis-Chalmers Corporation (the UAW Trust), and Firstar Trust Company, as
trustee under that certain Amended and Restated Retiree Health Trust Agreement
for Non-UAW Retired Employees of Allis-Chalmers Corporation (the Non-UAW Trust)
(the Lock-Up Agreement).
The Registration Rights Agreement grants each holder of Registrable Shares
(defined in the Registration Rights Agreement to basically mean the shares of
common stock issued to the PBGC under the PBGC Agreement) the right to have
their shares registered pursuant to the Securities Act of 1933, as amended, on
demand or incidental to a registration statement being filed by the Company. In
order to demand registration of Registrable Shares, a request for registration
by holders of not less than 20% of the Registrable Shares is necessary. The
Company may deny a request for registration of such shares if the Company
contemplates filing a registration statement within 90 days of receipt of notice
from the holders. The Registration Rights Agreement also contains provisions
that allow the Company to postpone the filing of any registration statement for
up to 180 days. The Registration Rights Agreement contains indemnification
language similar to that usually contained in agreements of this kind.
The Lock-Up Agreement governs the transfer and disposition of shares of the
Company's common stock and the voting of such shares, as well as grants the PBGC
a right of sale of its shares prior to AL-CH, the UAW Trust and the Non-UAW
Trust.
Pursuant to the Lock-Up Agreement, unless the Board has terminated the common
stock transfer restrictions set forth in Article XIII of the Company's
Certificate, AL-CH, the UAW Trust and the Non-UAW Trust each agreed that, during
the period commencing on March 31, 1999 and ending on the third anniversary of
the Release Event, it will not, directly or indirectly, sell, transfer, assign
or dispose of any shares of Company stock it beneficially owns. Commencing with
the third anniversary of the Release Event and continuing until the fifth
anniversary of the Release Event, each of AL-CH, the UAW Trust and the Non-UAW
Trust agreed not to sell, transfer or dispose of any shares of Company stock
without first giving the PBGC an opportunity to sell all or any portion of the
shares of Company stock the PBGC owns. The foregoing right of the PBGC applies
to the sale of Company stock in a public offering or otherwise.
The Lock-Up Agreement also contains a voting component. During the term of the
Lock-Up Agreement, each party to the agreement agreed to vote, at any meeting of
the Company stockholders and in any written consent, all shares of Company stock
owned by it in favor of the election as directors of the Company the persons
nominated by the Nominating Committee of the Board and to refrain from taking
any action contrary to or inconsistent with such obligation. During the term of
the Lock-Up Agreement, each party to the agreement further agreed not to vote
its shares of Company stock or take any other action to amend the Company's
Certificate or By-laws in a manner that is inconsistent with, or in breach of,
the PBGC Agreement. Each party further agreed that it will vote all of its
shares (i) in favor of certain specified amendments to the Company's
Certificate, (ii) for the election of the persons designated by the PBGC (each,
a PBGC Director) to serve on the Board and (iii) in favor of the election of
Company directors who are committed to cause, and who do cause, one PBGC
Director to be appointed to the Nominating Committee of the Board and one PBGC
Director to be appointed as the Chairman of the Compensation Committee of the
Board.
11
The Environmental Protection Agency (EPA) and certain state environmental
protection agencies have requested information in connection with several
potential hazardous waste disposal sites in which products manufactured by
Allis-Chalmers before consummation of the Plan of Reorganization were disposed.
The EPA has claimed that Allis-Chalmers is liable for cleanup costs associated
with several additional sites. In addition, certain third parties have asserted
that Allis-Chalmers is liable for cleanup costs or associated EPA fines in
connection with additional sites. In each instance the environmental claims
asserted against the Company involve its prebankruptcy operations. Accordingly,
Allis-Chalmers has taken the position that all cleanup costs or other
liabilities related to these sites were discharged in the bankruptcy. No
environmental claims have been asserted against the Company involving its
postbankruptcy operations.
The Company's principal sources of cash include earnings from the operations of
HDS. The cash requirements needed for the administrative expenses associated
with being a publicly held company are significant, and the Company will
continue to use cash generated by operations to fund such expenses.
The necessity to assure liquidity emphasizes the need for the Company to
continue in a prudent manner its search for appropriate acquisition candidates
in order to increase the Company's operating base and generate positive cash
flow.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See PART I. Item 2, "Management's Discussion and Analysis."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: (27) - Financial Data Schedule
(b) Reports on Form 8-K - No report on Form 8-K was filed during the first
quarter of 2000.
12
SIGNATURE
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.
Allis-Chalmers Corporation
(Registrant)
/s/ John T. Grigsby, Jr.
John T. Grigsby, Jr.
Executive Vice President and
Chief Financial Officer
May 14, 2000