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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 the quarterly period ended January 31, 2001
Commission Registrant; State of Incorporation; IRS EMPLOYER
File Number Address; and Telephone Number Identification No.
333-52529 MMH HOLDINGS, INC. 39-1716155
(a Delaware Corporation)
315 W. Forest Hill Avenue
Oak Creek, Wisconsin 53154
(414) 764-6200
333-52527 MORRIS MATERIAL HANDLING, INC. 39-1924039
(a Delaware Corporation)
315 W. Forest Hill Avenue
Oak Creek, Wisconsin 53154
(414) 764-6200
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuers' classes of
common stock, as of the latest practicable date (March 31, 2001):
MMH Holdings, Inc. Nonvoting common stock, $.01 Par Value,
4,350 shares outstanding. Voting common
stock, $.01 Par Value, 10,169 shares
outstanding.
Morris Material Handling, Inc. Common stock, $.01 Par Value, 100 shares
outstanding. MMH Holdings, Inc. holds all
of the outstanding common stock of Morris
Material Handling, Inc.
MMH HOLDINGS, INC.
MORRIS MATERIAL HANDLING, INC.
INDEX
Introduction 3
PART I -FINANCIAL INFORMATION:
Item 1. Financial Statements
MMH Holdings, Inc.
CondensedBalance Sheets 4
Condensed Statements of Operations and Comprehensive Loss 5
Condensed Statements of Cash Flows 6
Statements of Preferred Stock and Shareholders'Equity 7
Morris Material Handling, Inc.
Condensed Balance Sheets 8
Condensed Statements of Operations and Comprehensive Loss 9
Condensed Statements of Cash Flows 10
Statements of Shareholder's Equity 11
Notes to Financial Statements of
MMH Holdings, Inc. and
Morris MaterialHandling, Inc. 12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations of
MMH Holdings, Inc. and Morris Material
Handling, Inc. 33
Item 3. Quantitative and Qualitative Disclosures about Market Risk 40
PART II - OTHER INFORMATION:
Item 1. Legal Proceedings 41
Item 2. Changes in Securities 41
Item 3. Defaults upon Senior Securities 41
Item 4. Submission of Matters to a Vote of Security Holders 42
Item 5. Other Information 42
Item 6. Exhibits and Reports on Form 8-K 42
2
INTRODUCTION
MMH Holdings, Inc. ("Holdings") is a holding company whose sole direct
subsidiary is Morris Material Handling, Inc. ("MMH"), which, together with its
operating subsidiaries, is a manufacturer, distributor and service provider of
"through-the-air" material handling equipment with operations in the United
States, United Kingdom, South Africa, Singapore, Canada, Australia, Thailand,
Chile and Mexico. Unless the context requires otherwise, references to the
"Company" in this combined 10-Q are to Holdings, MMH, its subsidiaries and their
predecessors. See also Note 14, Subsequent Events, of the financial statements.
This combined Form 10-Q is separately filed by MMH Holdings, Inc. and by Morris
Material Handling, Inc. The unaudited interim financial statements presented in
this combined report (collectively, the "Financial Statements") include the
financial statements of Holdings, as well as separate financial statements for
MMH. Information contained herein relating only to Holdings or MMH is filed by
Holdings or MMH as the case may be, on its own behalf.
Certain sections of this Form 10-Q, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations," contain various
forward looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, which represent management's expectations or beliefs
concerning future events. Holdings and MMH caution that those statements are
further qualified by important factors that could cause actual results to differ
from those in the forward looking statements. Factors that might cause such a
difference include, without limitation, general economic conditions and
competition in the markets in which the Registrants' operations are located and
are detailed herein under "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Cautionary Factors." Consequently, all
forward-looking statements made herein are qualified by these cautionary
statements. There can be no assurance that the actual results, events or
developments referenced herein will occur or be realized.
3
MMH HOLDINGS, INC.
(Debtors - in Possession as of May 17, 2000)
CONDENSED BALANCE SHEETS
(Dollars in Thousands)
ASSETS
January 31, October 31,
2001 2000
------------- ------------
(Unaudited)
Current Assets
Cash and cash equivalents $ 1,894 $ 2,607
Accounts receivable-net 53,478 57,795
Inventories 32,870 31,813
Other current assets 3,554 4,204
-------- ---------
91,796 96,419
-------- ---------
Property, Plant and Equipment
Land and improvements 3,348 3,328
Buildings 22,164 22,205
Machinery and equipment 42,219 42,832
-------- ---------
67,731 68,365
Less accumulated depreciation (33,830) (33,969)
-------- ---------
33,901 34,396
-------- ---------
Other Assets
Goodwill 22,029 22,164
Debt financing costs 13,703 14,242
Other 8,586 8,950
-------- ---------
44,318 45,356
-------- ---------
$170,015 $ 176,171
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
January 31, October 31,
2001 2000
-------------- --------------
(Unaudited)
Liabilities Not Subject to Compromise
Current Liabilities
Short-term notes payable and current
portion of long-term obligations (Note 8) $ 131 $ 134
Junior DIP Facility (Note 8) 38,000 38,000
DIP Facility (Note 8) 4,325 -
Bank overdrafts 546 1,233
Trade accounts payable 12,669 16,453
Employee compensation and benefits 5,887 6,628
Advance payments and progress billings 8,317 7,542
Accrued warranties 2,372 2,261
Accrued interest 741 682
Income taxes payable 2,031 1,921
Other current liabilities 11,366 8,599
-------- ---------
86,385 83,453
Other Long-Term Obligations 581 614
Other Long-Term Liabilities 235 229
Liabilities Subject to Compromise (Note 4) 285,848 286,481
Minority Interest 77 73
Commitments and Contingencies (Note 9)
Mandatorily Redeemable Preferred Stock 125,574 122,109
Shareholders' Equity (328,685) (316,788)
-------- ---------
$170,015 $ 176,171
======== =========
The accompanying notes are an integral part of the financial statements.
4
MMH HOLDINGS, INC.
(Debtors - in - Possesion as of May 17, 2000)
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
(Dollars in Thousands)
For the Three Months
Ended January 31,
---------------------------------
2001 2000
------------ ---------
Revenues
Equipment and Part Sales $ 40,700 $ 52,165
Service Sales 11,512 14,554
---------- --------
Net Sales 52,212 66,719
Cost of Sales 39,917 50,872
Selling, General and Administrative Expenses 14,233 16,860
Reorganization Items 2,979 -
---------- --------
Operating Loss (4,917) (1,013)
Gain on Sale of a Business - 6,380
Loss on Disposal of Fixed Assets (128) -
Interest Expense - Net (2,961) (7,750)
---------- --------
Loss Before Income Taxes and
Minority Interest (8,006) (2,383)
Provision for Income Taxes (105) (1,788)
Minority Interest 5 16
---------- --------
Net Loss (8,106) (4,155)
Foreign Currency Translation Adjustments (326) 243
---------- --------
Comprehensive Loss $ (8,432) $ (3,912)
========== ========
The accompanying notes are an integral part of the financial statements.
5
MMH HOLDINGS, INC.
(Debtors - in - Possession as of May 17, 2000)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
For the Three Months
Ended January 31,
--------------------------------
2001 2000
---------- ----------
Operating Activities
Net Loss $ (8,106) $ (4,155)
Add (deduct) - items not affecting cash provided by
operating activities:
Depreciation and amortization 1,716 2,445
Amortization of debt financing costs 604 585
Gain on sale of business - (6,380)
Loss on disposal of fixed assets 128 -
Other (5) (16)
Changes in working capital:
Accounts receivable 4,535 805
Inventories (943) (1,229)
Other current assets 207 (574)
Trade accounts payable and bank overdrafts (5,193) (6,587)
Advance payments and progress billings 756 2,319
Accrued interest 59 5,524
Other current liabilities 1,902 3,273
--------- --------
Net cash used for operating activities, including reorganization items (4,340) (3,990)
--------- --------
Investment and Other Transactions
Fixed asset additions - net (570) (334)
Capitalized software (82) (624)
Net proceeds on divestiture of business - 9,115
Other - net - 79
--------- --------
Net cash provided by (used for) investment and other transactions (652) 8,236
--------- --------
Financing Activities
Changes in short-term debt and notes payable - 1,920
Net (repayments of)/proceeds from DIP borrowings 4,325 -
Net (repayments of)/proceeds from Revolving Credit Facility borrowings - (6,200)
Repayment of Term Loans - (3,100)
Proceeds from/(repayments of) Acquisition Facility Line borrowings - (336)
Repayments of long-term debt (64) (87)
Payment of fees for amendment of Credit Facility - (133)
--------- --------
Net cash provided by (used for) financing activities 4,261 (7,936)
--------- --------
Effect of Exchange Rate Changes on
Cash and Cash Equivalents 18 (2)
--------- --------
Decrease in Cash and Cash Equivalents (713) (3,692)
Cash and Cash Equivalents
Beginning of Period 2,607 3,929
--------- --------
End of Period $ 1,894 $ 237
========= ========
The accompanying notes are an integral part of the financial statements.
6
MMH HOLDINGS, INC.
(Debtors - in - Possession as of May 17, 2000)
STATEMENTS OF PREFERRED STOCK AND SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JANUARY 31, 2001
(UNAUDITED)
(Dollars in Thousands)
Preferred Stock
------------------------------------------------------------------------------
Series A Series B Series C
---------------------- -------------------- -----------------------
Shares Carrying Shares Carrying Shares Carrying
Outstanding Value Outstanding Value Outstanding Value Total
---------------------- -------------------- ----------------------- ---------
BALANCE AT OCTOBER 31, 2000 76,990 $76,273 6,455 $6,513 38,962 $39,323 $122,109
Net loss
Change in foreign currency
translation
Preferred stock dividends 2,062 2,062 176 176 1,082 1,082 3,320
Amortization of preferred
stock discount 145 145
---------------------- -------------------- ----------------------- ---------
BALANCE AT JANUARY 31, 2001 79,052 $78,480 6,631 $6,689 40,044 $40,405 $125,574
====================== ==================== ======================= =========
Common Stock Parent Accumulated
------------------- Investment/ Other Total
Shares Par Additional Comprehensive Retained Shareholders'
Outstanding Value Paid-in-Capital Loss Earnings Equity
------------------- --------------- -------------- ------------ --------------
BALANCE AT OCTOBER 31, 2000 14,519 $ - $ (122,760) $ (9,638) $(184,390) $ (316,788)
Net loss (8,106) (8,106)
Change in foreign currency
translation (326) (326)
Preferred stock dividends (3,320) (3,320)
Amortization of preferred
stock discount (145) (145)
------- ----- ---------- --------- --------- ----------
BALANCE AT JANUARY 31, 2001 14,519 $ - $ (122,760) $ (9,964) $(195,961) $ (328,685)
======= ===== ========== ========= ========= ==========
The accompanying notes are an integral part of the financial statements.
7
MORRIS MATERIAL HANDLING, INC.
(Debtors - in - Possession as of May 17, 2000)
CONDENSED BALANCE SHEETS
(Dollars in Thousands)
ASSETS
January 31, October 31,
2001 2000
-------------- ---------------
(Unaudited)
Current Assets
Cash and cash equivalents $ 1,894 $ 2,607
Accounts receivable-net 53,478 57,795
Inventories 32,870 31,813
Other current assets 3,554 4,204
--------- ---------
91,796 96,419
--------- ---------
Property, Plant and Equipment
Land and improvements 3,348 3,328
Buildings 22,164 22,205
Machinery and equipment 42,219 42,832
--------- ---------
67,731 68,365
Less accumulated depreciation (33,830) (33,969)
--------- ---------
33,901 34,396
--------- ---------
Other Assets
Goodwill 22,029 22,164
Debt financing costs 13,703 14,242
Other 8,586 8,950
--------- ---------
44,318 45,356
--------- ---------
$ 170,015 $ 176,171
========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
January 31, October 31,
2001 2000
--------------- --------------
(Unaudited)
Liabilities Not Subject to Compromise
Current Liabilities
Short-term notes payable and current
portion of long-term obligations (Note 8) $ 131 $ 134
Junior DIP Facility (Note 8) 38,000 38,000
DIP Facility (Note 8) 4,325 -
Bank overdrafts 546 1,233
Trade accounts payable 12,669 16,453
Employee compensation and benefits 5,887 6,628
Advance payments and progress billings 8,317 7,542
Accrued warranties 2,372 2,261
Accrued interest 741 682
Income taxes payable 2,031 1,921
Other current liabilities 11,366 8,599
--------- ---------
86,385 83,453
Other Long-Term Obligations 581 614
Other Long-Term Liabilities 235 229
Liabilities Subject to Compromise (Note 4) 285,848 286,481
Minority Interest 77 73
Commitments and Contingencies (Note 9)
Shareholders' Equity (203,111) (194,679)
--------- ---------
$ 170,015 $ 176,171
========= =========
The accompanying notes are an integral part of the financial statements.
8
MORRIS MATERIAL HANDLING, INC.
(Debtors - in - Possession as of May 17, 2000)
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
(Dollars in Thousands)
For the Three Months
Ended January 31,
---------------------------
2001 2000
---------- ----------
Revenues
Equipment and Part Sales $ 40,700 $ 52,165
Service Sales 11,512 14,554
--------- --------
Net Sales 52,212 66,719
Cost of Sales 39,917 50,872
Selling, General and Administrative Expenses 14,233 16,860
Reorganization Items 2,979 -
--------- --------
Operating Loss (4,917) (1,013)
Gain on Sale of a Business - 6,380
Loss on Disposal of Fixed Assets (128) -
Interest Expense - Net (2,961) (7,750)
--------- --------
Loss Before Income Taxes and
Minority Interest (8,006) (2,383)
Provision for Income Taxes (105) (1,788)
Minority Interest 5 16
--------- --------
Net Loss (8,106) (4,155)
Foreign Currency Translation Adjustments (326) 243
--------- --------
Comprehensive Loss $ (8,432) $ (3,912)
========= ========
The accompanying notes are an integral part of the financial statements.
9
MORRIS MATERIAL HANDLING, INC.
(Debtors - in - Possession as of May 17, 2000)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
For the Three Months
Ended January 31,
------------------------------
2001 2000
--------- --------
Operating Activities
Net Loss $ (8,106) $ (4,155)
Add (deduct) - items not affecting cash provided by
operating activities:
Depreciation and amortization 1,716 2,445
Amortization of debt financing costs 604 585
Gain on sale of business - (6,380)
Loss on disposal of fixed assets 128 -
Other (5) (16)
Changes in working capital:
Accounts receivable 4,535 805
Inventories (943) (1,229)
Other current assets 207 (574)
Trade accounts payable and bank overdrafts (5,193) (6,587)
Advance payments and progress billings 756 2,319
Accrued interest 59 5,524
Other current liabilities 1,902 3,273
--------- --------
Net cash used for operating activities, including reorganization items (4,340) (3,990)
--------- --------
Investment and Other Transactions
Fixed asset additions - net (570) (334)
Capitalized software (82) (624)
Net proceeds on divestiture of business - 9,115
Other - net - 79
--------- --------
Net cash provided by (used for) investment and other transactions (652) 8,236
--------- --------
Financing Activities
Changes in short-term debt and notes payable - 1,920
Net (repayments of)/proceeds from DIP borrowings 4,325 -
Net (repayments of)/proceeds from Revolving Credit Facility borrowings - (6,200)
Repayment of Term Loans - (3,100)
Proceeds from/(repayments of) Acquisition Facility Line borrowings - (336)
Repayments of long-term debt (64) (87)
Payment of fees for amendment of Credit Facility - (133)
--------- --------
Net cash provided by (used for) financing activities 4,261 (7,936)
--------- --------
Effect of Exchange Rate Changes on
Cash and Cash Equivalents 18 (2)
--------- --------
Decrease in Cash and Cash Equivalents (713) (3,692)
Cash and Cash Equivalents
Beginning of Period 2,607 3,929
--------- --------
End of Period $ 1,894 $ 237
========= =======
The accompanying notes are an integral part of the financial statements.
10
MORRIS MATERIAL HANDLING, INC.
(Debtors - in - Possession as of May 17, 2000)
STATEMENTS OF SHAREHOLDER'S EQUITY
FOR THE THREE MONTHS ENDED JANUARY 31, 2001
(UNAUDITED)
(Dollars in Thousands)
Common Stock Parent Accumulated
------------------------ Investment/ Other Total
Shares Par Additional Comprehensive Retained Shareholders'
Outstanding Value Paid-in-Capital Loss Earnings Equity
----------- ------------ --------------- --------------- ------------ -------------
BALANCE AT OCTOBER 31, 2000 100 $ - $ (34,292) $ (9,638) $ (150,749) $ (194,679)
Net loss (8,106) (8,106)
Change in foreign currency (326) (326)
translation
----------- ------------ -------------- -------------- -------------- ---------------
BALANCE AT JANUARY 31, 2001 100 $ - $ (34,292) $ (9,964) $ (158,855) $ (203,111)
=========== ============ ============== ============== ============== ===============
The accompanying notes are an integral part of the financial statements.
11
MMH HOLDINGS, INC.
MORRIS MATERIAL HANDLING, INC.
(Debtors- in - Possession as of May 17, 2000)
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
(Dollar amounts in thousands unless indicated)
Note 1 - Reorganization under Chapter 11
On May 17, 2000, MMH Holdings, Inc. ("Holdings"), Morris Material Handling, Inc.
("MMH") and their domestic operating subsidiaries (collectively, the "Debtors")
filed voluntary petitions for reorganization under Chapter 11 of the U.S.
Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court"). The Debtors' Chapter 11
cases have been consolidated for the purpose of joint administration under case
number 00-2027(SLR). The Debtors are currently operating their businesses as
debtors-in-possession pursuant to the Bankruptcy Code. No trustee has been
appointed. An official committee of unsecured creditors (the "Creditors'
Committee") was appointed by the office of the United States Trustee on May 30,
2000. Pursuant to the Bankruptcy Code, actions to collect certain prepetition
indebtedness of the Debtors and other obligations against the Debtors may not be
enforced. These claims are reflected in the balance sheet as "liabilities
subject to compromise". In addition, under the Bankruptcy Code, the Debtors may
assume or reject executory contracts and unexpired leases. Additional claims may
arise from such rejection, and from the determination by the court (or agreed by
the parties in interest) to allow claims for contingencies and other disputed
amounts. However, the Debtors have not yet completed their review of all their
prepetition executory contracts and leases for assumption or rejection. See also
Note 4, Liabilities Subject to Compromise, and Note 8, Indebtedness.
The Debtors received approval from the Bankruptcy Court to pay or otherwise
honor certain of their prepetition obligations, including the authority to pay
employee wages and maintain their employee benefit programs.
The Debtors filed a Plan of Reorganization (the "Plan") and related Disclosure
Statement with the U.S. Bankruptcy Court on January 16, 2001. The Debtors are
continuing to negotiate with their creditor constituencies regarding the Plan
and anticipate making material amendments to the Plan. The Debtors are still
attempting to obtain a commitment by a lender to provide the Debtors with
financing to satisfy the Debtors' cash obligations under the Plan and to provide
the Debtors with working capital and letters of credit and anticipate
modifications to the Plan to reflect such financing. Subject to certain
exceptions set forth in the Bankruptcy Code, acceptance of a plan of
reorganization requires approval of the Bankruptcy Court and the affirmative
vote (i.e., more than 50% of the number and at least 66-2/3% of the dollar
amount, both based on claims actually voted) of each class of creditors whose
claims are impaired by the plan. Alternatively, absent the requisite approvals,
a debtor may seek Bankruptcy Court approval of its reorganization plan under
"cramdown" provisions of the Bankruptcy Code, assuming certain tests are met.
The Bankruptcy Court set September 20, 2000 as the last date creditors could
file proof of claims against the Debtors. There may be differences between the
amounts recorded in the Debtors' schedules and financial statements and the
amounts claimed by their respective creditors. Litigation may be required to
resolve such disputes.
The Debtors will continue to incur significant costs associated with the
reorganization. The amount of these expenses, which are being expensed as
incurred, is expected to significantly affect results while the Debtors operate
under Chapter 11. See Note 3, Reorganization Items.
Currently, it is not possible to predict the length of time the Debtors will
operate under the protection of Chapter 11, the outcome of the Chapter 11
proceedings in general, or the effect of the proceedings on the business of the
Company or on the interests of the various creditors and security holders.
Under the Bankruptcy Code, postpetition liabilities and prepetition liabilities
(i.e., liabilities subject to compromise) of the Debtors must be satisfied
before shareholders of the Debtors can receive any distribution. The ultimate
recovery to the Debtors'
12
shareholders, if any, will not be determined until the end of the case when the
fair value of the Debtors' assets is compared to the liabilities and claims
against the Debtors. The Plan as filed proposes that shareholders will not
receive or retain any property under the Plan.
Note 2 - Basis of Presentation
General. These consolidated interim financial statements should be read in
conjunction with the combined 2000 Annual Report on Form 10-K of Holdings and
the Company. In the opinion of management, all adjustments, normal and recurring
in nature, necessary for a fair presentation of results of operations and
financial position have been included in the accompanying balance sheets and
statements of operations. The results of operations for the three months ended
January 31, 2001 are not, however, necessarily indicative of the results which
may be expected for fiscal 2001.
All significant intercompany balances and transactions have been eliminated.
The Company adopted Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities", on November 1,
2000. The adoption of this Statement had no effect on the Company's financial
condition or results of operations.
Chapter 11 Filing. The accompanying consolidated interim financial statements
have been prepared on a going concern basis, which contemplates continuity of
operations, realization of assets and liquidation of liabilities in the ordinary
course of business and do not reflect any adjustments that might result if the
Debtors are unable to continue as a going concern. As a result of the Debtors'
Chapter 11 filings, however, such matters are subject to significant
uncertainty. Continuing on a going concern basis is dependent upon, among other
things, the approval by the Debtors' creditors of an amended Joint Plan of
Reorganization, the success of future business operations, and the generation of
sufficient cash from operations and financing sources to meet the Debtors'
obligations. The accompanying consolidated interim financial statements do not
reflect: (i) the realizable value of assets on a liquidation basis or their
availability to satisfy liabilities, (ii) aggregate prepetition liability
amounts that may be allowed for claims or contingencies, or their status or
priority, (iii) the effect of any changes to the Debtors' capital structure or
in the Debtors' business operations as the result of an approved plan of
reorganization; or (iv) adjustments to the carrying value or classification of
assets or liability amounts that may be necessary as the result of actions by
the Bankruptcy Court.
The Company's consolidated interim financial statements have been presented in
conformity with the AlCPA's Statement of Position 90-7, "Financial Reporting By
Entities In Reorganization Under the Bankruptcy Code" ("SOP 90-7"). SOP 90-7
requires a segregation of liabilities subject to compromise by the Bankruptcy
Court as of the bankruptcy filing date and identification of all transactions
and events that are directly associated with the reorganization of the Debtors.
Schedules have been filed by the Company with the Bankruptcy Court setting forth
the assets and liabilities of the Company as of May 17, 2000, the bankruptcy
filing date, as reflected in the Company's accounting records. Differences
between amounts reflected in such schedules and claims filed by creditors are
currently being investigated and either resolved by mutual consent or
adjudicated. The final amounts of such claims are not presently determinable.
Note 3 - Reorganization Items
Reorganization expenses are comprised of items of income, expense, gain or loss
that were realized or incurred by the Debtors as a result of their decision to
reorganize under Chapter 11 of the Bankruptcy Code. During the three months
ended January 31, 2001, reorganization expenses were as follows:
Three months
ended
January 31, 2001
------------------
Professional fees $2,379
Accrued retention plan costs 600
------
$2,979
======
13
Note 4 - Liabilities Subject to Compromise
The principal categories of claims classified as liabilities subject to
compromise under reorganization proceedings are identified below. All amounts
below may be subject to future adjustment depending on Bankruptcy Court action,
further developments with respect to disputed claims, or other events.
Additional prepetition claims may arise from rejection of additional executory
contracts or unexpired leases by the Debtors. Under a confirmed plan of
reorganization, prepetition claims may be paid and discharged at amounts
substantially less than their allowed amounts. Unless the Debtors are
substantively consolidated under a confirmed plan or plans of reorganization,
payment of prepetition claims of each Debtor may substantially differ from
payment of prepetition claims of other Debtors.
On a consolidated basis, recorded liabilities subject to compromise under
Chapter 11 proceedings consisted of the following at January 31, 2001:
Trade accounts payable $ 9,100
Accrued interest expense, as of May 16, 2000 12,591
Senior notes, at 9.5% due April 1, 2008 200,000
Bank term loan (Term Loan A) at LIBOR plus 3.5% (10.0625% at January 31, 2001) due
in quarterly installments through March 2003 8,938
Bank term loan (Term Loan B) at LIBOR plus 3.5% (10.0625% at January 31, 2001) due
in quarterly installments through March 2005 18,461
Bank acquisition loan (in combined draws), at LIBOR plus 3.5% (10.0625% at January 31, 2001)
due in eight quarterly installments beginning June 2003 through March 2005 4,016
Acquisition term loan (Sponsor Loan), at Eurodollar plus 6.0% (12.5625% at January 31, 2001)
due in eight quarterly installments beginning June 2003 through March 2005 5,000
Bank revolving credit loan, at LIBOR plus 3.5% (10.0625% at January 31, 2001) due March 2003 18,174
Deferred payments for purchases of companies, due in annual installments through 2006 1,805
Long-term capital leases with various expiration dates 17
Industrial revenue bonds, at 6.2% due in annual installments through June 2007 290
Income taxes payable 2,035
Royalty fee and credit support fee payable to Harnischfeger Industries, Inc. ("HII") 2,810
Other 2,611
--------
$285,848
========
Pursuant to SOP 90-7, certain of the amounts included above represent secured
claims about which there is uncertainty as to whether the liability is
undersecured, or will be impaired under a reorganization plan or plans.
As a result of the bankruptcy filings, principal and interest payments may not
be made on prepetition debt without Bankruptcy Court approval or until a
reorganization plan or plans defining the repayment terms have been confirmed.
Interest due under the Prepetition Credit Facility (see Note 8) is being paid by
the Debtors as "adequate protection" pursuant to an order of the Bankruptcy
Court. The total interest on unsecured prepetition debt that was not paid or
charged to earnings for the period from May 17, 2000 to January 31, 2001 was
$14.1 million. Such interest is not being accrued since it is not probable that
it will be treated as an allowed claim. The Bankruptcy Code generally disallows
the payment of interest that accrues postpetition with respect to unsecured
claims.
Note 5 - Liquidity and Capital Resources
On May 17, 2000, Holdings, MMH and their domestic operating subsidiaries filed
voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy
Code. See Note 1, Reorganization under Chapter 11. On May 18, 2000, the
Bankruptcy Court entered an order approving $10.0 million in interim
debtor-in-possession financing to the Debtors and authorizing the Debtors to
utilize their collections in the operation of their business. This $10 million
amount represented the initial portion under a commitment by the lenders to
provide $35 million in financing (including a letter of credit facility) in
connection with the Debtors' Chapter 11 cases. The complete $35 million facility
(which was subsequently reduced by agreement of the parties to $25 million) was
approved by the Bankruptcy Court on June 15, 2000 (see Note 8). This facility
matures on the earlier of the initial maturity date of December 1, 2000, which
was automatically extended to June 1, 2001, or upon confirmation of a plan of
reorganization.
14
The Company believes that the filing provides the Debtors with the opportunity
to restructure its indebtedness. The Company plans to continue to implement its
cost savings initiatives to bring costs in line with market requirements.
Although management believes that disruption of operations relating to the
Chapter 11 reorganization has not had a material adverse effect on the Debtors'
relationships with their creditors, suppliers or employees, however, sales and
bookings for modernizations, engineered and standard cranes, hoists and
components have been negatively impacted.
Note 6 - Acquisitions and Divestitures
Acquisitions- During the three month periods ended January 31, 2001 and 2000,
the Company did not make any acquisitions. During the three months ended January
31, 2000, a payment of $100,000 was made toward a fiscal 1998 purchase which was
partially financed by the seller.
Divestitures- On December 16, 1999, the Company completed the sale of the
Company's brake manufacturing operation (the "Brake Business") located in
Mississauga, Ontario, Canada, for a net sale price of $6.8 million after
deduction of certain transaction-related items, including taxes. During the
first quarter of fiscal year 2000, the Brake Business contributed $0.5 million
in sales and no operating income to the Company's results.
In accordance with the Prepetition Credit Facility, as amended by the Amendment,
the Company was permitted to apply half of the net proceeds of the sale of the
Brake Business (which amounted to $3.4 million) to general corporate purposes,
which the Company would otherwise have been required to use to prepay
indebtedness under the Prepetition Credit Facility. After consummation of the
sale, the Company repaid $3.1 million of the outstanding term loans ($2.4
million of which was applied to the final scheduled principal payment obligation
with respect to the term loans) and repaid $0.3 million on the Acquisition
Facility. A pre-tax gain of $6.4 million was recognized on this transaction.
Note 7 - Inventories
Inventories consisted of the following:
January 31, October 31,
2001 2000
------------------------------
Raw material $ 3,454 $ 3,268
Work-in-process 11,855 11,592
Finished parts 23,920 23,312
------------------------------
39,229 38,172
Less excess of current cost over
stated LIFO value (6,359) (6,359)
------------------------------
$ 32,870 $ 31,813
==============================
Note 8 - Indebtedness
On March 30, 1998 (the "Recapitalization Closing"), MMH issued $200 million
aggregate principal amount of 9.5% senior notes due April 1, 2008 (the "Senior
Notes"). Interest on the Senior Notes was payable semi-annually on each April 1
and October 1, commencing October 1, 1998. The Senior Notes are senior unsecured
obligations and are unconditionally guaranteed, jointly and severally, on a
senior unsecured basis by substantially all of MMH's subsidiaries. See further
discussion in Note 12.
At the Recapitalization Closing, MMH entered into a senior secured credit
facility (the "Prepetition Credit Facility") which consisted of a $70 million
revolving credit facility (the "Revolving Credit Facility"), a $30 million
acquisition facility (the "Acquisition Facility"), a $20 million term loan
("Term Loan A") and a $35 million term loan ("Term Loan B"). Amounts outstanding
under the Prepetition Credit Facility at May 17, 2000 are reflected as
liabilities subject to compromise in the January 31, 2001 balance sheet (see
Note 4).
15
Following the Company's Chapter 11 filing, on June 15, 2000 the Bankruptcy Court
approved a $35 million Debtor-in-Possession Facility ("DIP Facility") (which was
subsequently reduced by agreement of the parties to $25 million) and authorized
the Debtors to use their collections in the operations of their business.
Pursuant to such facility, cash collected by the Company is used to repay the
Term Loans, the Revolving Credit Facility Borrowings and the Acquisition
Facility Line Borrowings on a pro-rata basis and these amounts are re-loaned to
the Company under a Junior DIP Facility up to $38 million. The DIP and Junior
DIP Facilities contain a number of covenants that, among other things, limit the
Debtors' ability to create or assume liens, consolidate or merge with other
entities, create, incur, or assume additional indebtedness, dispose of certain
assets and make capital expenditures. The DIP and Junior DIP Facilities also
require the Debtors to comply with certain financial ratios and borrowing
condition tests based on monthly measurements of the latest twelve months
results of operations. The first measurement date was December 31, 2000. The
Company did not meet certain of the financial covenants under the DIP Facility
at December 31, 2000. The Company obtained a waiver of such financial covenants
through March 30, 2001. The waiver permits the Company to continue to borrow
under the DIP Facility to meet its working capital requirements. On March 30,
2001, the Company entered into an amendment to the DIP Facility which cured past
financial covenant violations and reset financial covenants beginning April 30,
2001. The Junior DIP Facility is junior to the DIP Facility. At January 31,
2001, $38.0 million in borrowings are outstanding under the Junior DIP Facility
and $4.3 million in borrowings are outstanding under the DIP Facility. Both are
classified as current obligations in the January 31, 2001 balance sheet.
The DIP and Junior DIP Facilities benefit from superpriority administrative
claim status and senior and junior liens as provided for under the Bankruptcy
Code. Under the Bankruptcy Code, a superpriority claim is senior to unsecured
prepetition claims and all other administrative expenses incurred in the Chapter
11 case. Borrowings under the DIP Facility are priced at the Alternate Base Rate
of the Post-Petition Agent under the DIP Facility plus 1.5% or, at the Debtors'
option, LIBOR plus 3 1/2%. Borrowings under the Junior DIP Facility are priced
at the Alternate Base Rate of the Post-Petition Agent under the DIP Facility
plus 2.0% or, at the Debtors' option, LIBOR plus 3 1/2%. The DIP and Junior DIP
Facilities mature on the earlier of the initial maturity date of December 1,
2000, which date was automatically extended to June 1, 2001, or upon
confirmation of a plan of reorganization.
The principal sources of liquidity for the Company's operating requirements have
been cash flows from operations and borrowings under the DIP Facility and Junior
DIP Facility. While the Company expects that such sources will provide
sufficient working capital to operate its businesses, there can be no assurances
that such sources will prove to be sufficient.
Note 9 - Commitments and Contingencies
Contingent liabilities as of the Chapter 11 filing date are subject to
compromise. At January 31, 2001, the Company was contingently liable to banks,
financial institutions and others for approximately $13.8 million for
outstanding letters of credit, bank guarantees and surety bonds securing
performance of sales contracts and other guarantees in the ordinary course of
business. Of the $13.8 million, approximately $8.0 million was issued at the
request of Debtor entities prior to the bankruptcy filing. Included in the $13.8
million outstanding as of January 31, 2001 were $2.4 million issued under the
DIP Facility.
The Debtors have not completed their review of prepetition executory contracts
to determine whether to assume or reject such contracts. Rejection of executory
contracts could result in additional prepetition claims against Debtors.
Accordingly, it is not possible to estimate the amount of additional prepetition
claims that could arise out of the rejection of executory contracts.
To secure the performance of sales contracts related to MMH operations, MMH was
contingently liable to financial institutions and others for the following at
January 31, 2001: (i) $7.5 million of outstanding letters of credit and surety
bonds under the Prepetition Credit Facility and the DIP Facility, (ii) $3.3
million under a surety arrangement for outstanding surety bonds and (iii) $3.0
million of surety bonds with other institutions. Prior to the Recapitalization
Closing, HII and its affiliates ("HII Group") provided credit support for the
MHE Business. As part of the Recapitalization (see Note 12), HII agreed to
maintain in place credit support (including letters of credit and surety bonds)
in existence at the Recapitalization Closing and the Company agreed to reimburse
HII for any payments made by the HII Group with respect to such credit support.
At January 31, 2001, approximately $2.0 million of HII Group letters of credit
and surety bonds remained outstanding.
As of the Recapitalization Closing, Harnischfeger Corporation ("HarnCo")
retained certain income and other tax liabilities relating to the MHE Business,
all environmental liabilities relating to previously shared facilities, any
liabilities for which HarnCo or its affiliates have been named as potentially
responsible parties with respect to Superfund sites, and any liabilities arising
in connection with claims alleging exposure to asbestos (to the extent there is
insurance coverage therefor) in connection with the MHE Business prior to the
Recapitalization Closing. Additionally, HarnCo retained all liability for
medical and disability benefit claims for current United States employees made
prior to the Recapitalization Closing and all claims with respect to any of the
HII benefit plans for former United States employees.
16
HarnCo has been and is currently a defendant to a number of asbestos related
lawsuits and will likely be named in future such actions. Most suits involve
multiple defendants including asbestos manufacturers. MMH has agreed to
indemnify HarnCo and its affiliates with respect to any liabilities in excess of
insurance arising in connection with past and future asbestos litigation
relating to the MHE Business. HII's insurance program included coverage for
asbestos related claim activity through 1986, when coverage for asbestos related
claims ceased to be available. HII's insurer has provided first dollar coverage
for policy periods through 1976. During the 1977 to 1985 policy periods, HII had
a variety of policies, with retention levels ranging from $100,000 to $15.0
million and total coverage limits ranging from $12.5 million to $50.0 million.
To date, HII's insurer has paid all liabilities relating to asbestos claims
(which amounts have not been material to the MHE Business) but there can be no
assurance such insurers will continue to do so in the future or that there will
be insurance coverage for such claims. In addition, policy primary aggregate
levels were exhausted in certain years, which would require the participation of
excess insurers for future claim activity. Given its experience to date with
such claims, the Company believes that its exposure to asbestos related claims
is not material, but there can be no assurance that such liability will not in
fact be material.
All of the Company's agreements and arrangements with HII and its affiliates
(including those referred to above and those relating to the provision of
services and materials by HII and its affiliates to the Company) could be
materially adversely affected by the fact that on June 7, 1999 (the "Petition
Date"), HII and certain of its United States affiliates (including HarnCo) filed
voluntary petitions for relief under Chapter 11 of the United States Bankruptcy
Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the
District of Delaware (the "HII Bankruptcy"). Certain provisions of the
Bankruptcy Code allow a debtor to avoid, delay and/or reduce its contractual and
other obligations to third parties. There can be no assurance that HII and its
affiliates will not attempt to utilize such provisions to cease performance
under their agreements with the Company. The inability of the Company to receive
the benefits of one or more of these agreements or the termination of ongoing
arrangements between the Company and affiliates of HII could materially
adversely affect the Company's operations and financial performance. In the
event that any of the liabilities retained by HII and its affiliates remain
unsatisfied as of the Petition Date, the Company's right to indemnification for
any such amounts it has paid on behalf of HII and its affiliates may also be
avoided, delayed or reduced.
Each of HII and certain of its affiliates on the one hand, and the Company and
certain of its affiliates, on the other hand, have receivables and payables to
the other which may be affected by the HII Bankruptcy.
On October 28, 1996, a strong windstorm caused significant damage to the Belview
container-handling terminal at the Port of Waterford in Ireland. One
container-handling crane sold by the Company's United Kingdom subsidiary was
destroyed and another was seriously damaged. The two cranes were sold to the
Waterford Harbour Commissioners in 1992 and commissioned for use in 1993. On
October 19, 1998, the Waterford Harbour Commissioners wrote to the Company and
provided a notice of arbitration, asserting breach of contract, negligence and
breach of duty against the Company's United Kingdom subsidiary in connection
with the destroyed and damaged cranes. The Waterford Harbour Commissioners
claimed direct damages of IR(pound)8.5 million ($10.0 million based on exchange
rates at January 31, 2001) and consequential damages of IR(pound)4.9 million
($5.7 million based on exchange rates at January 31, 2001. The port operator,
Bell Lines, Limited, filed a similar claim against the Company's United Kingdom
subsidiary in October 1999, asserting unspecified damages. Management intends to
vigorously defend both matters. The Company's insurance carriers have agreed to
provide defense coverage for the accident and limited indemnification if the
Company is unsuccessful in defending the claims. The Company and its United
Kingdom subsidiary have initiated litigation in the Milwaukee County Circuit
Court against Ace American Insurance Company, AON Risk Services, Inc. of
Illinois, and National Union Fire Insurance Company of Pittsburgh, Pennsylvania,
seeking additional insurance coverage for indemnification obligations. While the
Company believes that it will obtain a favorable resolution (either by
successfully defending the claim or by obtaining insurance coverage thereon), no
assurances can be made as to the final outcome of the claims. If the Company's
United Kingdom subsidiary is found liable for the claims and is unable to obtain
insurance coverage therefore, there could be a material adverse effect on the
Company's operations and financial performance. Based upon the current status of
this matter, no related liability has been accrued at January 31, 2001.
During fiscal year 2000, an environmental assessment was conducted at the
Company's Loughborough, England facility which included soil and groundwater
testing throughout the property. Results of this study warranted notification to
the Environmental Agency in West Bridgeford, Nottingham. It appears that certain
"hot spots" of hydrocarbon contamination on the property will require soil
removal and remediation for which costs may be material. Also, based on the test
results, there are other portions of the property which, if developed, may
require soil removal and remediation relative to heavy metals which costs may
also be material. The sale of this property was completed March 30, 2001, thus
the Company has no further liability for environmental remediation related to
this property.
17
In connection with the sale of substantially all assets of the Company's United
Kingdom Group in March 2001, (see also Note 14, Subsequent Events) the Company's
U.K. operating subsidiaries were placed in administrative receivership as a
result of their inability to satisfy claims made by creditors pursuant to
guarantees made by such subsidiaries under the Prepetition Credit Facility. It
is not yet certain as to the impact this will have on the litigation discussed
above; however, these subsidiaries will not have sufficient assets to settle all
third party liabilities.
The Company is a party to various other litigation matters, including product
liability and other claims, which are normal in the course of its operations.
Also, as a normal part of its operations, the Company undertakes certain
contractual obligations and warranties in connection with the sale of products
or services. Although the outcome of these matters cannot be predicted with
certainty, management believes that the resolution of such matters will not have
a material adverse effect on the consolidated results of operations, financial
position or cash flows of the Company. As a result of the Company's bankruptcy
filing described in Note 1, Reorganization under Chapter 11, litigation against
the Company and its subsidiaries that filed bankruptcy is stayed.
Under the terms of the Recapitalization Agreement, HarnCo retained all liability
for the only two open environmental clean-up claims brought against HarnCo in
the Milwaukee, Wisconsin area. The Company and its management are not aware of
any other material environmental clean-up claim which is pending or is
threatened against the Company, but there can be no assurance that any such
claim will not be asserted against the Company in the future. In addition, as
noted above, the Company's right to indemnification against HarnCo for such
liabilities may be avoided, delayed or reduced as a result of HarnCo's filing
for bankruptcy protection.
Note 10 - Segment Information
Pursuant to SFAS No. 131, the Company has identified its reportable segments
based on the Company's method of internal reporting which is utilized by its
chief operating decision-maker, the Chief Executive Officer. The reportable
operating segments are as follows:
o Equipment and Aftermarket - Americas
o Equipment and Aftermarket - Other
o Distribution and Service - North America
o Engineered Products and Automation - Europe
o Equipment and Aftermarket - Europe
o Equipment and Aftermarket - Asia Pacific
o Equipment and Aftermarket - South Africa
Each segment has a manager who is directly accountable to and maintains regular
contact with the Chief Executive Officer. The Company evaluates performance of
its segments based on operating income, determined on a basis consistent with
amounts reported in the consolidated financial statements.
The Equipment and Aftermarket - Americas segment designs and manufactures a
comprehensive line of engineered and standard overhead cranes, hoists and other
component products and repair parts at the Company's facilities located in Oak
Creek and Windsor, Wisconsin. This segment also modernizes products manufactured
by both the Company and its competitors. This segment is the main manufacturer
of the replacement parts sold by the Company's Distribution and Service - North
America segment as well as the manufacturer of component products used in that
segment's standard cranes. Repair parts and component products are purchased by
the Distribution and Service - North America segment at list price less standard
intercompany discounts.
The Equipment and Aftermarket - Other segment is the Company's brake
manufacturing operation in Canada. The Company sold this operation in December
1999.
The Distribution and Service - North America segment is the network of
Company-owned locations in key industrial markets in North America. The network
is the platform for the Company's sales activities, serving as distribution
centers for its original equipment and replacement parts as well as the focal
point for service activities. Some of the distribution centers also fabricate
and assemble standard cranes using components manufactured by the Equipment and
Aftermarket - Americas and the Equipment and Aftermarket - Europe segments.
The Engineered Products and Automation - Europe segment focuses on the
manufacture of highly engineered ship-to-shore and gantry cranes for use in
container handling and automated warehouse units at the Company's facility
located in Loughborough,
18
England, and provides software support for the automated warehouse units
installed at customer locations. The Company sold the Automation business of
this segment on March 6, 2001. See also Note 14, Subsequent Events.
The Equipment and Aftermarket - Europe segment consists of standard crane and
hoist manufacturing in the Loughborough, England facility as well as the network
of Company-owned distribution centers in key industrial markets in the United
Kingdom. The Equipment and Aftermarket - Europe segment provides services for
the Engineered Products and Automation segment at prices consistent with those
charged to external customers. In addition, this segment distributes hoists
through Distribution and Service - North America and Equipment and Aftermarket -
Asia Pacific and South Africa at prices consistent with those charged to
external customers. The Company sold substantially all of the assets of this
segment on March 6, 2001. See also Note 14, Subsequent Events.
The Equipment and Aftermarket - Asia Pacific and South Africa segments operate
in a manner similar to the Distribution and Service North America segment. The
Asia Pacific segment includes operations in Australia, Singapore, Thailand and
Saudi Arabia. The operations in Singapore and Thailand were sold on March 6,
2001. See also Note 14, Subsequent Events.
Within North America, certain centrally incurred costs such as insurance costs
and computer charges are allocated to operating segments based upon various
methods of allocation. In the United Kingdom, utilities, property taxes and
insurance costs are allocated to the segments based upon varying allocation
methods. Domestically, costs related to centralized accounting, marketing, human
resources, and IT functions are not allocated. Internationally, these costs, as
well as amortization of goodwill, are allocated amongst individual segments in
the three months ended January 31, 2001 and 2000.
19
MMH HOLDINGS, INC.
MORRIS MATERIAL HANDLING, INC.
(Debtors - in - Possession as of May 17, 2000)
Operating Segments
For the Three Months Ended January 31, 2001
----------------------------------------------------------
SALES
---------------------------------------------------------- ---------------------
External Intercompany Total Operating Income
(Loss)
--------------- ---------------- ---------------- ---------------------
Equipment & Aftermarket - Americas $ 2,019 $ 11,807 $ 13,826 $ (1,733)
Distribution & Service - North America 37,239 158 37,397 2,387
Eliminations & Other - (11,965) (11,965) 78
--------------- ---------------- ---------------- ---------------------
Total Americas 39,258 - 39,258 732
Engineered Products & Automation - Europe 1,740 - 1,740 128
Equipment & Aftermarket - Europe 7,457 1,469 8,926 (445)
Eliminations & Other - (218) (218) -
--------------- ---------------- ---------------- ---------------------
Total Europe 9,197 1,251 10,448 (317)
Equipment & Aftermarket - South Africa 1,911 - 1,911 31
Equipment & Aftermarket - Asia Pacific 1,846 - 1,846 (218)
Eliminations & Other - (279) (279) -
--------------- ---------------- ---------------- ---------------------
Total International 12,954 972 13,926 (504)
--------------- ---------------- ---------------- ---------------------
Corporate and Eliminations - (972) (972) (5,145)
--------------- ---------------- ---------------- ---------------------
Consolidated $ 52,212 $ - $ 52,212 $ (4,917)
=============== ================ ================ =====================
20
MMH HOLDINGS, INC.
MORRIS MATERIAL HANDLING, INC.
(Debtors - in - Possession as of May 17, 2000)
Operating Segments
For the Three Months Ended January 31, 2000
----------------------------------------------
SALES
---------------------------------------------- ----------------
External Intercompany Total Operating Income
(Loss)
------------ ------------ ----------- ----------------
Equipment & Aftermarket - Americas $ 11,196 $ 10,508 $ 21,704 $ 1,000
Equipment & Aftermarket - Other 423 111 534 (4)
------------ ----------- ----------- --------------
Total Equipment & Aftermarket 11,619 10,619 22,238 996
Distribution & Service - North America 40,424 157 40,581 1,883
Eliminations & Other 0 (10,776) (10,776) (117)
------------ ----------- ----------- --------------
Total Americas 52,043 0 52,043 2,762
------------ ----------- ----------- --------------
Engineered Products & Automation - Europe 2,070 17 2,087 177
Equipment & Aftermarket - Europe 6,937 1,288 8,225 (787)
Eliminations & Other - (206) (206) (197)
------------ ----------- ----------- --------------
Total Europe 9,007 1,099 10,106 (807)
Equipment & Aftermarket - South Africa 2,243 0 2,243 (91)
Equipment & Aftermarket - Asia Pacific 3,426 0 3,426 (336)
Eliminations & Other 0 (191) (191) (471)
------------ ----------- ----------- --------------
Total International 14,676 908 15,584 (1,705)
------------ ----------- ----------- --------------
Corporate and Eliminations 0 (908) (908) (2,070)
------------ ----------- ----------- --------------
Consolidated $ 66,719 $ - $ 66,719 $ (1,013)
============ =========== =========== ==============
21
Note 11 - Workforce Reductions
During the third and fourth quarters of fiscal 2000 the Company had incurred
employee termination costs to reduce employee staffing levels associated with
restructuring the Company's United Kingdom and United States manufacturing
operations. In fiscal 2000, approximately 84 hourly and salary positions were
eliminated at a cost of $1.8 million. Termination benefits paid and charged
against the liability as of October 31, 2000, were $1.4 million.
In an effort to further reduce costs and streamline its production base, the
Company announced additional terminations of approximately 26 hourly and salary
positions at its United Kingdom and United States operations during the first
quarter of fiscal 2001. Termination benefits accrued and charged to expense in
the first quarter totaled $0.7 million. Total termination benefits paid and
charged against these liabilities as of January 31, 2001 were $0.7 million. The
remaining severance benefits are anticipated to be paid primarily during the
fiscal year. Severance costs included severance pay, outplacement services and
insurance coverage.
Note 12 - Supplemental Condensed Financial Information
On January 28, 1998, HII reached an agreement with MHE Investments, Inc. ("MHE
Investments"), an affiliate of Chartwell Investments Inc. ("Chartwell"), for the
sale of an approximately 80 percent common ownership interest in HII's Material
Handling Equipment Business (the "MHE Business"). The resulting transactions
(the "Recapitalization"), which closed on March 30, 1998 (the "Recapitalization
Closing"), led to a significant change in the capital structure and a
reorganization of the underlying legal entities of the MHE Business. As a result
of the Recapitalization, Holdings, a pre-existing company engaged in the MHE
Business, became an indirect holding company for the operating entities engaged
in the MHE Business.
In connection with the Recapitalization, MMH, a direct wholly-owned subsidiary
of Holdings, issued Senior Notes that are guaranteed by certain of MMH's
subsidiaries (the "Guarantor Subsidiaries"). Each of the Guarantor Subsidiaries
is a wholly-owned subsidiary, directly or indirectly, of MMH and the guarantees
are full, unconditional and joint and several. Both Holdings and MMH are holding
companies with no material operating assets. All of the Company's business
operations are conducted through subsidiaries of MMH and accordingly, both
Holdings and MMH are dependent on the operating subsidiaries of MMH to fund
their cash needs, including debt service and tax obligations. The Guarantor
Subsidiaries include the domestic operating subsidiaries which filed voluntary
petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the
United States Bankruptcy Court for the District of Delaware (See Note 1).
Separate financial statements of the Guarantor Subsidiaries are not presented
because management has determined that they would not be material to investors.
The following supplemental financial information sets forth the balance sheet,
statement of operations and cash flow information for the Guarantor Subsidiaries
and for MMH's other subsidiaries (the "Non-Guarantor Subsidiaries"). The
supplemental financial information reflects the investments of the Guarantor
Subsidiaries in the Non-Guarantor Subsidiaries using the equity method of
accounting. For purposes of this presentation, it is assumed that, historically,
all of the assets of the MHE Business were wholly-owned by subsidiaries of MMH,
which is an entity that was formed by Holdings in connection with the
Recapitalization and accordingly, the historical financial statements of MMH and
Holdings are identical following completion of the Recapitalization.
22
MMH HOLDINGS, INC.
(Debtors-in-Possession as of May 17, 2000)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
JANUARY 31, 2001
(UNAUDITED)
(Dollars in Thousands)
Non- Consolidated
Guarantor Guarantor Morris Material Morris Material
Subsidiaries Subsidiaries Handling, Inc. Eliminations Handling, Inc.
------------ ------------ -------------- ------------ --------------
ASSETS
Current Assets
Cash and cash equivalents $ 1,559 335 $ - $ - $ 1,894
Accounts receivable - net 51,098 2,380 - - 53,478
Intercompany accounts receivable 23,760 180 29,789 (53,729) -
Inventories 31,433 1,437 - - 32,870
Other current assets 3,201 303 50 - 3,554
-------- ------- --------- --------- ---------
111,051 4,635 29,839 (53,729) 91,796
-------- ------- --------- --------- ---------
Property, Plant and Equipment - net 31,742 2,159 - - 33,901
-------- ------- --------- --------- ---------
Other Assets
Goodwill 22,029 - - - 22,029
Debt financing costs - - 13,703 - 13,703
Noncurrent intercompany receivable 3,059 - 74,267 (77,326) -
Investment in affiliates (2,811) - 15,850 (13,039) -
Other 8,053 - 533 - 8,586
-------- ------- --------- --------- ---------
30,330 - 104,353 (90,365) 44,318
-------- ------- --------- --------- ---------
$173,123 $ 6,794 $ 134,192 $(144,094) $ 170,015
======== ======= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities Not Subject to Compromise
Current Liabilities
Current portion of long-term obligations $ 89 $ 42 $ - $ - $ 131
Junior DIP Facility - - 38,000 - 38,000
DIP Facility - - 4,325 - 4,325
Bank overdrafts 546 - - - 546
Trade accounts payable 11,652 1,017 - - 12,669
Intercompany accounts payable 29,969 2,813 20,947 (53,729) -
Advance payments and progress billings 8,317 - - - 8,317
Accrued interest 69 - 672 - 741
Other current liabilities 16,838 2,081 2,737 - 21,656
-------- ------- --------- --------- ---------
67,480 5,953 66,681 (53,729) 86,385
-------- ------- --------- --------- ---------
Other Long-Term Debt 65 516 - - 581
Noncurrent Intercompany Payable 74,267 3,059 - (77,326) -
Other Long Term Liabilities 39 - 196 - 235
-------- ------- --------- --------- ---------
141,851 9,528 66,877 (131,055) 87,201
Liabilities Subject to Compromise 15,422 - 270,426 - 285,848
Minority Interest - - - 77 77
Mandatorily Redeemable Preferred Stock - - - - -
Shareholders' Equity 15,850 (2,734) (203,111) (13,116) (203,111)
-------- ------- --------- --------- ---------
$173,123 $ 6,794 $ 134,192 $(144,094) $ 170,015
======== ======= ========= ========= =========
Consolidated
MMH MMH
Holdings, Inc. Eliminations Holdings, Inc.
-------------- ------------ --------------
ASSETS
Current Assets
Cash and cash equivalents $ - $ - $ 1,894
Accounts receivable - net - - 53,478
Intercompany accounts receivable - - -
Inventories - - 32,870
Other current assets - - 3,554
--------- --------- ---------
- - 91,796
--------- --------- ---------
Property, Plant and Equipment - net - - 33,901
--------- --------- ---------
Other Assets
Goodwill - - 22,029
Debt financing costs - - 13,703
Noncurrent intercompany receivable - - -
Investment in affiliates (203,111) 203,111 -
Other - - 8,586
--------- --------- ---------
(203,111) 203,111 44,318
--------- --------- ---------
$(203,111) $ 203,111 $ 170,015
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities Not Subject to Compromise
Current Liabilities
Current portion of long-term obligations $ - $ - $ 131
Junior DIP Facility - - 38,000
DIP Facility - - 4,325
Bank overdrafts - - 546
Trade accounts payable - - 12,669
Intercompany accounts payable - - -
Advance payments and progress billings - - 8,317
Accrued interest - - 741
Other current liabilities - - 21,656
--------- --------- ---------
- - 86,385
--------- --------- ---------
Other Long-Term Debt - - 581
Noncurrent Intercompany Payable - - -
Other Long Term Liabilities - - 235
--------- --------- ---------
- - 87,201
Liabilities Subject to Compromise - - 285,848
Minority Interest - - 77
Mandatorily Redeemable Preferred Stock 125,574 - 125,574
Shareholders' Equity (328,685) 203,111 (328,685)
--------- --------- ---------
$(203,111) $ 203,111 $ 170,015
========= ========= =========
23
MMH HOLDINGS, INC.
(Debtors-in-Possession as of May 17, 2000)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
OCTOBER 31, 2000
(Dollars in Thousands)
Non- Consolidated
Guarantor Guarantor Morris Material Morris Material
Subsidiaries Subsidiaries Handling, Inc. Eliminations Handling, Inc.
------------ ------------ -------------- ------------ --------------
ASSETS
Current Assets
Cash and cash equivalents $ 1,141 $ 241 $ 1,225 $ - $ 2,607
Accounts receivable - net 55,626 2,169 - - 57,795
Intercompany accounts receivable 27,190 222 26,273 (53,685) -
Inventories 30,301 1,512 - - 31,813
Other current assets 4,010 144 50 - 4,204
--------- -------- --------- --------- ---------
118,268 4,288 27,548 (53,685) 96,419
--------- -------- --------- --------- ---------
Property, Plant and Equipment - net 32,165 2,231 - - 34,396
--------- -------- --------- --------- ---------
Other Assets
Goodwill 22,164 - - - 22,164
Debt financing costs - - 14,242 - 14,242
Noncurrent intercompany receivable 4,496 - 73,484 (77,980) -
Investment in affiliates (5,177) - 24,634 (19,457) -
Other 8,351 - 599 - 8,950
--------- -------- --------- --------- ---------
29,834 - 112,959 (97,437) 45,356
--------- -------- --------- --------- ---------
$ 180,267 $ 6,519 $ 140,507 $(151,122) $ 176,171
========= ======== ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities Not Subject to Compromise
Current Liabilities
Current portion of long-term obligations $ 92 $ 42 $ - $ - $ 134
Junior DIP Facility - - 38,000 - 38,000
Bank overdrafts 489 744 - - 1,233
Trade accounts payable 15,436 1,017 - - 16,453
Intercompany accounts payable 26,495 3,675 23,515 (53,685) -
Advance payments and progress billings 7,542 - - - 7,542
Accrued interest (17) - 699 - 682
Other current liabilities 15,915 1,126 2,368 - 19,409
--------- -------- --------- --------- ---------
65,952 6,604 64,582 (53,685) 83,453
--------- -------- --------- --------- ---------
Other Long-Term Debt 91 523 - - 614
Noncurrent Intercompany Payable 73,484 4,496 - (77,980) -
Other Long Term Liabilities 35 - 194 - 229
--------- -------- --------- --------- ---------
139,562 11,623 64,776 (131,665) 84,296
Liabilities Subject to Compromise 16,071 - 270,410 - 286,481
Minority Interest - - - 73 73
Mandatorily Redeemable Preferred Stock - - - - -
Shareholders' Equity 24,634 (5,104) (194,679) (19,530) (194,679)
--------- -------- --------- --------- ---------
$ 180,267 $ 6,519 $ 140,507 $(151,122) $ 176,171
========= ======== ========= ========= =========
Consolidated
MMH MMH
Holdings, Inc. Eliminations Holdings, Inc.
-------------- ------------ --------------
ASSETS
Current Assets
Cash and cash equivalents $ - $ - $ 2,607
Accounts receivable - net - - 57,795
Intercompany accounts receivable - - -
Inventories - - 31,813
Other current assets - - 4,204
--------- --------- ---------
- - 96,419
--------- --------- ---------
Property, Plant and Equipment - net - - 34,396
--------- --------- ---------
Other Assets
Goodwill - - 22,164
Debt financing costs - - 14,242
Noncurrent intercompany receivable - - -
Investment in affiliates (194,679) 194,679 -
Other - - 8,950
--------- --------- ---------
(194,679) 194,679 45,356
--------- --------- ---------
$(194,679) $ 194,679 $ 176,171
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities Not Subject to Compromise
Current Liabilities
Current portion of long-term obligations $ - $ - $ 134
Junior DIP Facility - - 38,000
Bank overdrafts - - 1,233
Trade accounts payable - - 16,453
Intercompany accounts payable - - -
Advance payments and progress billings - - 7,542
Accrued interest - - 682
Other current liabilities - - 19,409
--------- --------- ---------
- - 83,453
--------- --------- ---------
Other Long-Term Debt - - 614
Noncurrent Intercompany Payable - - -
Other Long Term Liabilities - - 229
--------- --------- ---------
- - 84,296
Liabilities Subject to Compromise - - 286,481
Minority Interest - - 73
Mandatorily Redeemable Preferred Stock 122,109 - 122,109
Shareholders' Equity (316,788) 194,679 (316,788)
--------- --------- ---------
$(194,679) $ 194,679 $ 176,171
========= ========= =========
24
MMH HOLDINGS, INC.
(Debtors-in-Possession as of May 17, 2000)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(UNAUDITED)
(Dollars in Thousands)
FOR THE THREE MONTHS ENDED JANUARY 31, 2001
-----------------------------------------------------------------------------
Non- Consolidated
Guarantor Guarantor Morris Material Morris Material
Subsidiaries Subsidiaries Handling, Inc. Eliminations Handling, Inc.
------------ ------------ -------------- ------------ ---------------
Revenues
Net Sales $ 49,760 $ 2,650 $ - $ (198) $ 52,212
Cost of Sales 38,222 1,893 - (198) 39,917
Selling, General
and Administrative expenses 13,112 749 372 - 14,233
Reorganization Items 2,979 - - - 2,979
-------- ------- ------- ------- --------
Operating Income (Loss) (4,553) 8 (372) - (4,917)
Gain on sale of business - - - - -
Loss on disposal of fixed assets (128) - - - (128)
Interest Income (Expense) - Net
Affiliates (2,481) (20) 2,501 - -
Third party 164 (68) (3,057) - (2,961)
-------- ------- ------- ------- --------
Income (Loss) Before Income Taxes, Equity in Earnings
(Loss) of Subsidiaries and Minority Interest (6,998) (80) (928) - (8,006)
Benefit (Provision) for Income Taxes (96) - (9) - (105)
Equity in Earnings (Loss) of Subsidiaries (75) - (7,169) 7,244 -
Minority Interest - - - 5 5
-------- ------- ------- ------- --------
Net Income (Loss) $ (7,169) $ (80) $(8,106) $ 7,249 $ (8,106)
======== ======= ======= ======= ========
FOR THE THREE MONTHS ENDED JANUARY 31, 2001
---------------------------------------------
Consolidated
MMH MMH
Holdings, Inc. Eliminations Holdings, Inc.
-------------- ------------ --------------
Revenues
Net Sales $ - $ - $ 52,212
Cost of Sales - - 39,917
Selling, General
and Administrative expenses - - 14,233
Reorganization Items - - 2,979
------- ------- --------
Operating Income (Loss) - - (4,917)
Gain on sale of business - - -
Loss on disposal of fixed assets (128)
Interest Income (Expense) - Net
Affiliates - - -
Third party - - (2,961)
------- ------- --------
Income (Loss) Before Income Taxes, Equity in Earnings
(Loss) of Subsidiaries and Minority Interest - - (8,006)
Benefit (Provision) for Income Taxes - - (105)
Equity in Earnings (Loss) of Subsidiaries (8,106) 8,106 -
Minority Interest - - 5
------- ------- --------
Net Income (Loss) $(8,106) $ 8,106 $ (8,106)
======= ======= ========
25
MMH HOLDINGS, INC.
(Debtors-in-Possession as of May 17, 2000)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(UNAUDITED)
(Dollars in Thousands)
FOR THE THREE MONTHS ENDED JANUARY 31, 2000
-------------------------------------------------------------------------------
Non- Consolidated
Guarantor Guarantor Morris Material Morris Material
Subsidiaries Subsidiaries Handling, Inc. Eliminations Handling, Inc.
------------ ------------ -------------- ------------ ---------------
Revenues
Net Sales $ 63,854 $ 3,057 $ - $ (192) $ 66,719
Cost of Sales 48,840 2,224 - (192) 50,872
Selling, General and
Administrative expenses 15,158 905 797 - 16,860
-------- ------- ------- ------- --------
Operating Income (Loss) (144) (72) (797) - (1,013)
Gain on Sale of Business - - 6,380 - 6,380
Interest (Expense) Income - net
Affiliates (1,635) (90) 1,725 - -
Third party (62) 74) (7,614) - (7,750)
-------- ------- ------- ------- --------
Loss Before Income Taxes, Equity in Earnings
(Loss) of Subsidiaries and Minority (1,841) (236) (306) - (2,383)
Provision for Income Taxes (305) (83) (1,400) - (1,788)
Equity in Earnings (Loss) of Subsidiaries (303) - (2,449) 2,752 -
Minority Interest - - - 16 16
-------- ------- ------- ------- --------
Net Income (Loss) $ (2,449) $ (319) $(4,155) $ 2,768 $ (4,155)
======== ======= ======= ======= ========
FOR THE THREE MONTHS ENDED JANUARY 31, 2000
---------------------------------------------
Consolidated
MMH MMH
Holdings, Inc. Eliminations Holdings, Inc.
-------------- ------------ --------------
Revenues
Net Sales $ - $ - $ 66,719
Cost of Sales - - 50,872
Selling, General and
Administrative expenses - - 16,860
------- ------- --------
Operating Income (Loss) - - (1,013)
Gain on Sale of Business - - 6,380
Interest (Expense) Income - net
Affiliates - - -
Third party - - (7,750)
------- ------- --------
Loss Before Income Taxes, Equity in Earnings
(Loss) of Subsidiaries and Minority - - (2,383)
Provision for Income Taxes - - (1,788)
Equity in Earnings (Loss) of Subsidiaries (4,155) 4,155 -
Minority Interest - 16
------- ------- --------
Net Income (Loss) $(4,155) $ 4,155 $ (4,155)
======= ======= ========
26
MMH HOLDINGS, INC.
(Debtors-in-Possession as of May 17, 2000)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 2001
(UNAUDITED)
(Dollars in Thousands)
Non- Consolidated
Guarantor Guarantor Morris Material Morris Material
Subsidiaries Subsidiaries Handling, Inc. Eliminations Handling, Inc.
------------ ------------ -------------- ------------ ---------------
Operating Activities
Net loss $(7,169) $ (80) $(8,106) $ 7,249 $(8,106)
Add (deduct) - items not affecting cash provided by
operating activities:
Depreciation and amortization 1,653 63 - - 1,716
Amortization of debt financing costs - - 604 - 604
Equity in loss of subsidiaries 75 - 7,169 (7,244) -
Loss on disposal of fixed assets 128 - - - 128
Other - - - (5) (5)
Changes in working capital:
Accounts receivable 4,746 (211) - - 4,535
Inventories (992) 49 - - (943)
Other current assets 336 (129) - - 207
Trade accounts payable and bank overdrafts (4,625) (568) - - (5,193)
Accrued interest 70 - (11) - 59
Other current liabilities 1,497 792 369 - 2,658
------- ----- ------- ------- -------
Net cash provided by (used for) operating
activities (4,281) (84) 25 - (4,340)
------- ----- ------- ------- -------
Investment and Other Transactions
Fixed asset additions - net (570) - - - (570)
Capitalized software (82) - - - (82)
Other - net 49 - (49) - -
------- ----- ------- ------- -------
Net cash used for investment and other transactions (603) - (49) - (652)
------- ----- ------- ------- -------
Financing Activities
Net (repayment of)/proceeds from DIP Facility
borrowings - - 4,325 - 4,325
Distribution from parent 5,367 159 (5,526) - -
Repayments of long-term debt (56) (8) - - (64)
------- ----- ------- ------- -------
Net cash provided by (used for) financing
activities 5,311 151 (1,201) - 4,261
------- ----- ------- ------- -------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents (9) 27 - - 18
------- ----- ------- ------- -------
Increase (Decrease) in Cash and Cash Equivalents 418 94 (1,225) - (713)
Cash and Cash Equivalents
Beginning of Period 1,141 241 1,225 - 2,607
------- ----- ------- ------- -------
End of Period $ 1,559 $ 335 $ - $ - $ 1,894
======= ===== ======= ======= =======
Consolidated
MMH MMH
Holdings, Inc. Eliminations Holdings, Inc.
-------------- ------------ --------------
Operating Activities
Net loss $(8,106) $ 8,106 $(8,106)
Add (deduct) - items not affecting cash provided by
operating activities:
Depreciation and amortization - - 1,716
Amortization of debt financing costs - - 604
Equity in loss of subsidiaries 8,106 (8,106) -
Loss on disposal of fixed assets - - 128
Other - - (5)
Changes in working capital:
Accounts receivable - - 4,535
Inventories - - (943)
Other current assets - - 207
Trade accounts payable and bank overdrafts - - (5,193)
Accrued interest - - 59
Other current liabilities - - 2,658
------- ------- -------
Net cash provided by (used for) operating
activities - - (4,340)
------- ------- -------
Investment and Other Transactions
Fixed asset additions - net - - (570)
Capitalized software - - (82)
Other - net - - -
------- ------- -------
Net cash used for investment and other transactions - - (652)
------- ------- -------
Financing Activities
Net (repayment of)/proceeds from DIP Facility
borrowings - - 4,325
Distribution from parent - - -
Repayments of long-term debt - - (64)
------- ------- -------
Net cash provided by (used for) financing
activities - - 4,261
------- ------- -------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents - - 18
------- ------- -------
Increase (Decrease) in Cash and Cash Equivalents - - (713)
Cash and Cash Equivalents
Beginning of Period - - 2,607
------- ------- -------
End of Period $ - $ - $ 1,894
======= ======= =======
27
MMH HOLDINGS, INC.
(Debtors-in-Possession as of May 17, 2000)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 2000
(UNAUDITED)
(Dollars in Thousands)
NON- MORRIS CONSOLIDATED
GUARANTOR GUARANTOR MATERIAL MORRIS MATERIAL
SUBSIDIARIES SUBSIDIARIES HANDLING, INC. ELIMINATIONS HANDLING, INC.
------------ ------------ -------------- ------------ ---------------
Operating Activities
Net loss $(2,449) $ (319) $(4,155) $ 2,768 $(4,155)
Add (deduct) - items not affecting cash used
for operating activities:
Depreciation and amortization 2,361 74 10 - 2,445
Amortization of debt financing costs - - 585 - 585
Equity in loss of subsidiaries 303 - 2,449 (2,752) -
Gain on sale of business - - (6,380) - (6,380)
Other - - - (16) (16)
Changes in working capital:
Accounts receivable 380 425 - - 805
Inventories (1,219) (10) - - (1,229)
Other current assets (551) (23) - - (574)
Trade accounts payable and bank overdrafts (7,083) 496 - - (6,587)
Accrued interest - - 5,524 - 5,524
Other current liabilities 3,778 (148) 1,962 - 5,592
------- ------- ------- ------- -------
Net cash provided by (used for) operating activities (4,480) 495 (5) - (3,990)
------- ------- ------- ------- -------
Investment and Other Transactions
Fixed asset additions - net (318) (16) - - (334)
Capitalized software (624) - - - (624)
Net proceeds on divestiture of business 9,115 - - - 9,115
Other - net 82 (9) 6 - 79
------- ------- ------- ------- -------
Net cash (used for) provided by investment and other
transactions 8,255 (25) 6 - 8,236
------- ------- ------- ------- -------
Financing Activities
Changes in short-term debt and notes payable 1,936 (16) - - 1,920
(Repayments of)/Proceeds for Revolving Credit Facility
borrowings - - (6,200) - (6,200)
Repayments of Term Loans - - (3,100) - (3,100)
Proceeds from Acquisition Facility Line borrowings - - (336) - (336)
Distribution to parent (8,456) 188 8,268 - -
Repayments of long-term debt (87) - - - (87)
Payment of fees for amendment of New Credit Facility - - (133) - (133)
------- ------- ------- ------- -------
Net cash provided by (used for) financing activities (6,607) 172 (1,501) - (7,936)
------- ------- ------- ------- -------
Effect of Exchange Rate Changes on Cash and Cash 3 (5) - - (2)
------- ------- ------- ------- -------
Increase (Decrease) in Cash and Cash Equivalents (2,829) 637 (1,500) - (3,692)
Cash and Cash Equivalents
Beginning of Period 2,325 104 1,500 - 3,929
------- ------- ------- ------- -------
End of Period $ (504) $ 741 $ - $ - $ 237
======= ======= ======= ======= =======
CONSOLIDATED
MMH MMH
HOLDINGS, INC. ELIMINATIONS HOLDINGS, INC.
--------------- -------------- ---------------
Operating Activities
Net loss $(4,155) $ 4,155 $(4,155)
Add (deduct) - items not affecting cash used
for operating activities:
Depreciation and amortization - - 2,445
Amortization of debt financing costs - - 585
Equity in loss of subsidiaries 4,155 (4,155) -
Gain on sale of business - - (6,380)
Other - - (16)
Changes in working capital:
Accounts receivable - - 805
Inventories - - (1,229)
Other current assets - - (574)
Trade accounts payable and bank overdrafts - - (6,587)
Accrued interest - - 5,524
Other current liabilities - - 5,592
------- ------- -------
Net cash provided by (used for) operating activities - - (3,990)
------- ------- -------
Investment and Other Transactions
Fixed asset additions - net - - (334)
Capitalized software - - (624)
Net proceeds on divestiture of business - - 9,115
Other - net - - 79
------- ------- -------
Net cash (used for) provided by investment and other
transactions - - 8,236
------- ------- -------
Financing Activities
Changes in short-term debt and notes payable - - 1,920
(Repayments of)/Proceeds for Revolving Credit Facility
borrowings - - (6,200)
Repayments of Term Loans - - (3,100)
Proceeds from Acquisition Facility Line borrowings - - (336)
Distribution to parent - - -
Repayments of long-term debt - - (87)
Payment of fees for amendment of New Credit Facility - - (133)
------- ------- -------
Net cash provided by (used for) financing activities - - (7,936)
------- ------- -------
Effect of Exchange Rate Changes on Cash and Cash - - (2)
------- ------- -------
Increase (Decrease) in Cash and Cash Equivalents - - (3,692)
Cash and Cash Equivalents
Beginning of Period - - 3,929
------- ------- -------
End of Period $ - $ - $ 237
======= ======= =======
28
Note 13 - Condensed Combined/Consolidating Financial Statements
- ---------------------------------------------------------------
The following condensed combined/consolidating financial statements are
presented in accordance with SOP 90-7:
MMH HOLDINGS, INC.
(DEBTOR-IN-POSSESSION AS OF MAY 17, 2000)
CONDENSED COMBINED/CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTH ENDED JANUARY 31, 2001
(UNAUDITED)
Combined Combined
Entities in Entities not in
Reorganization Reorganization
Proceedings Proceedings Eliminations Consolidated
-------------- --------------- ------------ ------------
Revenues
Equipment and Part Sales $ 25,637 $ 16,994 $(1,931) $ 40,700
Service Sales 6,183 5,329 - 11,512
-------- -------- ------- --------
Net sales 31,820 22,323 (1,931) 52,212
Cost of Sales 25,146 16,702 (1,931) 39,917
Selling, General and Administrative Expenses 8,911 5,322 - 14,233
Reorganization Items 2,740 239 - 2,979
-------- -------- ------- --------
Operating Income (Loss) (4,977) 60 - (4,917)
Loss on disposal of fixed assets (128) - - (128)
Interest Expense - net (500) (2,461) - (2,961)
-------- -------- ------- --------
Loss before Income Taxes and Minority Interest (5,605) (2,401) - (8,006)
Benefit (Provision) for Income Taxes 73 (178) - (105)
Minority Interest - - 5 5
Equity in Income (Loss) of Subsidiaries (2,579) - 2,579 -
-------- -------- ------- --------
Net loss (8,111) (2,579) 2,584 (8,106)
======== ======== ======= ========
29
MMH HOLDINGS, INC.
(DEBTOR-IN-POSSESSION AS OF MAY 17, 2000)
CONDENSED COMBINED/CONSOLIDATING BALANCE SHEET
AS OF JANUARY 31, 2001
(UNAUDITED)
Combined Combined
Entities in Entities not in
Reorganization Reorganization
Proceedings Proceedings Eliminations Consolidated
-------------- --------------- ------------ ------------
ASSETS
Current Assets
Cash and cash equivalents $ 103 $ 1,791 $ - $ 1,894
Accounts receivable - net 33,821 19,657 - 53,478
Inventories 21,257 11,613 - 32,870
Other current assets 2,828 1,169 (443) 3,554
--------- --------- --------- ---------
58,009 34,230 (443) 91,796
--------- --------- --------- ---------
Intercompany accounts receivable, net 102,827 - (102,827) -
--------- --------- --------- ---------
Property, Plant and Equipment - net 18,005 15,896 - 33,901
--------- --------- --------- ---------
Other Assets
Goodwill 16,523 5,506 - 22,029
Debt financing costs 13,703 - - 13,703
Investment in subsidiaries 83,306 - (83,306) -
Other 4,805 3,781 - 8,586
--------- --------- --------- ---------
118,337 9,287 (83,306) 44,318
--------- --------- --------- ---------
$ 297,178 $ 59,413 $(186,576) $ 170,015
========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities Not Subject to Compromise
Current Liabilities
Current portion of long-term obligations $ - $ 131 $ - $ 131
Junior DIP Facility 38,000 - - 38,000
DIP Facility 4,325 - - 4,325
Bank overdrafts - 546 - 546
Trade accounts payable 6,254 6,415 - 12,669
Advance payments and progress billings 5,063 3,254 - 8,317
Accrued warranties 1,115 1,257 - 2,372
Accrued interest 741 - - 741
Income taxes payable 1,357 674 - 2,031
Other current liabilities 8,757 8,496 - 17,253
--------- --------- --------- ---------
65,612 20,773 - 86,385
--------- --------- --------- ---------
Intercompany accounts payable, net - 103,270 (103,270) -
Other Long-Term Debt - 581 - 581
Other Long Term Liabilities - 235 - 235
--------- --------- --------- ---------
65,612 124,859 (103,270) 87,201
Liabilities Subject to Compromise 285,848 - - 285,848
Minority Interest - - 77 77
Manditorily Redeemable Preferred Stock 125,574 - - 125,574
Shareholders' Equity (179,856) (65,446) (83,383) (328,685)
--------- --------- --------- ---------
$ 297,178 $ 59,413 $(186,576) $ 170,015
========= ========= ========= =========
30
MMH HOLDINGS, INC.
(DEBTOR-IN-POSSESSION AS OF MAY 17, 2000)
CONDENSED COMBINED/CONSOLIDATING STATEMENTS OF CASH FLOW
AS OF JANUARY 31, 2001
(UNAUDITED)
Combined Combined
Entities in Entities not in
Reorganization Reorganization
Proceedings Proceedings Eliminations Consolidated
-------------- --------------- ------------ ------------
Operating Activities
Net Loss $(5,532) $(2,579) $ 5 $(8,106)
Add (deduct) - items not affecting cash provided by
(used for) operating activities:
Depreciation and amortization 1,184 532 - 1,716
Amortization of debt financing costs 604 - - 604
Deferred income taxes - net - - - -
Loss on disposal of fixed assets 128 - - 128
Other - - (5) (5)
Changes in working capital:
Accounts receivable 3,642 893 - 4,535
Inventories (979) 36 - (943)
Trade accounts payable and bank overdrafts (2,562) (2,631) - (5,193)
Advance payments and progress billings 396 360 - 756
Accrued interest 59 - - 59
Other, net including intercompany balances (1,938) 4,047 - 2,109
------- ------- ------ -------
Net cash provided by (used for) operating activities,
including reorganization items (4,998) 658 - (4,340)
------- ------- ------ -------
Investment and Other Transactions
Fixed asset additions - net (454) (116) - (570)
Capitalized software (82) - - (82)
Other - net - - - -
------- ------- ------ -------
Net cash provided by (used for) investment and other
transactions (536) (116) - (652)
------- ------- ------ -------
Financing Activities
Net (repayments of)/proceeds from DIP Facility borrowings 4,325 - - 4,325
Proceeds from/(repayments of) Acquisition Facility Line
borrowings - - - -
Repayments of long-term debt (30) (34) - (64)
------- ------- ------ -------
Net cash provided by (used for) financing activities 4,295 (34) - 4,261
------- ------- ------ -------
Effect of Exchange Rate Changes on
Cash and Cash Equivalents - 18 - 18
------- ------- ------ -------
Increase (decrease) in Cash and Cash Equivalents (1,239) 526 - (713)
Cash and Cash Equivalents
Beginning of Period 1,342 1,265 - 2,607
------- ------- ------ -------
End of Period $ 103 $ 1,791 $ - $ 1,894
======= ======= ====== =======
31
Note 14 - Subsequent Events
On February 28, 2001, the Bankruptcy Court approved procedures for the
divestiture of substantially all assets of the Company's non-North American
operations. On March 6, 2001, substantially all assets of the Company's United
Kingdom Group were sold, including the Company's operations in Singapore and
Thailand, with the exception of certain U.K. real estate holdings, and
investments in the Company's operations in Australia and South Africa. In
connection with these transactions, the Company's U.K. operating subsidiaries
were placed in administrative receivership as a result of their inability to
satisfy claims made by creditors pursuant to guarantees made by such
subsidiaries under the Prepetition Credit Facility. Accordingly, these U.K.
subsidiaries will not have sufficient assets to settle all recorded third party
liabilities.
A net loss of approximately $12.0 million is expected to be recognized by the
Company in connection with the completed transactions and the derecognition of
recorded liabilities of the U.K. subsidiaries that will not be settled pursuant
to the receivership proceedings as discussed above. This net loss is
substantially attributed to the recognition of cumulative translation
adjustments and a settlement loss recognized under SFAS 88 related to the
Company's United Kingdom employee benefit plan.
On March 30, 2001, the Company completed the sale of certain U.K. real estate
holdings. A net gain of approximately $1.2 million is expected to be recognized
by the Company in connection with this completed transaction.
The Company did not meet certain of the financial covenants under the DIP
Facility at December 31, 2000. The Company obtained a waiver of such financial
covenants through March 30, 2001. The waiver permits the Company to continue to
borrow under the DIP Facility to meet its working capital requirements. The
Company entered into an amendment which cured past financial covenant violations
and reset financial covenants beginning April 30, 2001.
32
MMH HOLDINGS, INC.
MORRIS MATERIAL HANDLING, INC.
(Debtors - in - Possession as of May 17, 2000)
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements and the related notes thereto included previously in this document.
The Company's fiscal year ends October 31. Consequently, any reference to any
particular fiscal year means the fiscal year ended October 31 of such year. As
used herein, unless the context otherwise requires, the term "Company" refers to
Holdings, MMH and its subsidiaries.
GENERAL
On May 17, 2000, MMH Holdings, Inc. ("Holdings"), Morris Material Handling, Inc.
and their domestic operating subsidiaries (collectively, the "Debtors") filed
voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy
Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"). The Debtors' Chapter 11 cases
have been consolidated for the purpose of joint administration under case number
00-2027(SLR). The Debtors are currently operating their businesses as
debtors-in-possession pursuant to the Bankruptcy Code. No trustee has been
appointed. An official committee of unsecured creditors (the "Creditors'
Committee") was appointed by the office of the United States Trustee on May 30,
2000. Pursuant to the Bankruptcy Code, actions to collect certain prepetition
indebtedness of the Debtors and other obligations against the Debtors may not be
enforced. These claims are reflected in the balance sheet as "liabilities
subject to compromise". In addition, under the Bankruptcy Code, the Debtors may
assume or reject executory contracts and unexpired leases. Additional claims may
arise from such rejection, and from the determination by the court (or agreed by
the parties in interest) to allow claims for contingencies and other disputed
amounts. However, the Debtors have not yet completed their review of all their
prepetition executory contracts and leases for assumption or rejection. See also
Note 4, Liabilities Subject to Compromise, and Note 8, Indebtedness, of the
financial statements.
The Debtors received approval from the Bankruptcy Court to pay or otherwise
honor certain of their prepetition obligations, including the authority to pay
employee wages and maintain their employee benefit programs.
The Debtors filed a plan of reorganization (the "Plan") and related disclosure
statement (the "Disclosure Statement") with the U.S. Bankruptcy Court on January
16, 2001. The Debtors are continuing to negotiate with their creditor
constituencies regarding the Plan and anticipate making material amendments to
the Plan. The Debtors are still attempting to obtain a commitment by a lender to
provide the Debtors with financing to satisfy the Debtors' cash obligations
under the Plan and to provide the Debtors with working capital and letters of
credit and anticipate modifications to the Plan to reflect such financing.
Subject to certain exceptions set forth in the Bankruptcy Code, acceptance of a
plan of reorganization requires approval of the Bankruptcy Court and the
affirmative vote (i.e., more than 50% of the number and at least 66-2/3% of the
dollar amount, both based on claims actually voted) of each class of creditors
whose claims are impaired by the plan. Alternatively, absent the requisite
approvals, a debtor may seek Bankruptcy Court approval of its reorganization
plan under "cramdown" provisions of the Bankruptcy Code, assuming certain tests
are met.
The Bankruptcy Court set September 20, 2000 as the last date creditors could
file proof of claims against the Debtors. There may be differences between the
amounts recorded in the Debtors' schedules and financial statements and the
amounts claimed by their respective creditors. Litigation may be required to
resolve such disputes.
The Debtors will continue to incur significant costs associated with the
reorganization. The amount of these expenses, which are being expensed as
incurred, is expected to significantly affect results while the Debtors operate
under Chapter 11. See Note 3, Reorganization Items of the financial statements.
Currently, it is not possible to predict the length of time the Debtors will
operate under the protection of Chapter 11, the outcome of the Chapter 11
proceedings in general, or the effect of the proceedings on the business of the
Company or on the interests of the various creditors and security holders. The
Company believes that the filing provides the Debtors with the opportunity to
restructure its indebtedness. The Company plans to continue with implementation
of its cost savings initiatives to bring costs in line with market requirements.
Disruption of operations relating to the Chapter 11 reorganization has not had a
material adverse effect on the Debtors' relationships with their creditors,
suppliers or employees, however,
33
sales and bookings for modernizations, engineered and standard cranes, hoists
and components have been negatively impacted.
The accompanying consolidated interim financial statements of the Company have
been prepared on a going concern basis, which contemplates continuity of
operations, realization of assets and liquidation of liabilities in the ordinary
course of business and do not reflect any adjustments that might result if the
Debtors are unable to continue as a going concern. As a result of the Debtors'
Chapter 11 filings, however, such matters are subject to significant
uncertainty. The Debtors filed a plan of reorganization with the U.S. Bankruptcy
Court on January 16, 2001. Continuing on a going concern basis is dependent
upon, among other things, the Bankruptcy Court's acceptance of such plan of
reorganization, the success of future business operations, and the generation of
sufficient cash from operations and financing sources to meet the Debtors'
obligations. The accompanying consolidated interim financial statements do not
reflect: (i) the realizable value of assets on a liquidation basis or their
availability to satisfy liabilities, (ii) aggregate prepetition liability
amounts that may be allowed for claims or contingencies, or their status or
priority, (iii) the effect of any changes to the Debtors' capital structure or
in the Debtors' business operations as the result of an approved plan of
reorganization; or (iv) adjustments to the carrying value of assets or liability
amounts that may be necessary as the result of actions by the Bankruptcy Court.
The Company's consolidated interim financial statements have been presented in
conformity with the AlCPA's Statement of Position 90-7, "Financial Reporting By
Entities In Reorganization Under the Bankruptcy Code" ("SOP 90-7"). SOP 90-7
requires a segregation of liabilities subject to compromise by the Bankruptcy
Court as of the bankruptcy filing date and identification of all transactions
and events that are directly associated with the reorganization of the Debtors.
The Company is an international provider of "through-the-air" material handling
products and services used in most manufacturing industries. The Company's
original equipment operations design and manufacture a comprehensive line of
industrial cranes, hoists and component products. Through its aftermarket
operations, the Company provides a variety of related products and services,
including replacement parts, repair and maintenance services and product
modernizations. In recent years, the Company has shifted its orientation from an
original equipment-focused United States manufacturer to an international full
service provider with a significant emphasis on the higher margin aftermarket
business. The Company's revenues are derived principally from the sale of
industrial overhead cranes, component products and aftermarket products and
services.
HII Bankruptcy Petition. On June 7, 1999, (the "HII Petition Date") HII and
certain of its United States affiliates (including HarnCo) filed voluntary
petitions for relief under Chapter 11 of the Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware. Certain provisions of the
Bankruptcy Code allow a debtor to avoid, delay and/or reduce its contractual and
other obligations to third parties. There can be no assurance that HII and its
affiliates will not attempt to utilize such provisions to cease performance
under their agreements and arrangements with the Company. The inability of the
Company to receive the benefits of one or more of these agreements or the
termination of ongoing arrangements between the Company and affiliates of HII
(including those relating to the provision of services and materials by HII and
its affiliates to the Company) could materially adversely affect the Company's
operations and financial performance. In the event that any of the liabilities
retained by HII and its affiliates in connection with the Recapitalization
remain unsatisfied as of the HII Petition Date, the Company's right to
indemnification for any such amounts it has paid on behalf of HII and its
affiliates may also be avoided, delayed or reduced. Each of HII and certain of
its affiliates on the one hand, and the Company and certain of its affiliates,
on the other hand, have receivables and payables to the other that may be
affected by the HII Bankruptcy. The Debtors and Harnischfeger continue to
negotiate towards a consensual resolution of the issues arising from and related
to the Recapitalization and have reached a settlement in principle, subject to
definitive documentation and Bankruptcy Court approval.
ACQUISITIONS AND DIVESTITURES
Acquisitions- During the three month periods ended January 31, 2001 and 2000,
the Company did not make any acquisitions. During the three months ended January
31, 2000, a payment of $100,000 was made toward a fiscal 1998 purchase which was
partially financed by the seller.
34
Divestitures-On December 16, 1999, the Company completed the sale of the
Company's brake manufacturing operation (the "Brake Business") located in
Mississauga, Ontario, Canada, for a net sale price of $6.8 million after
deduction of certain transaction-related items, including taxes. During the
first quarter of fiscal year 2000, the Brake Business contributed $0.5 million
in sales and no operating income to the Company's results.
In accordance with the Prepetition Credit Facility, as amended by the Amendment,
the Company was permitted to apply half of the net proceeds of the sale of the
Brake Business (which amounted to $3.4 million) to general corporate purposes,
which the Company would otherwise have been required to use to prepay
indebtedness under the Prepetition Credit Facility. After consummation of the
sale, the Company repaid $3.1 million of the outstanding term loans ($2.4
million of which was applied to the final scheduled principal payment obligation
with respect to the term loans) and repaid $0.3 million on the Acquisition
Facility. A pre-tax gain of $6.4 million was recognized on this transaction.
RESULTS OF OPERATIONS
The following table sets forth certain financial data for the periods indicated.
SUPPLEMENTAL DATA
(DOLLARS IN MILLIONS)
Three months ended Three months ended
January 31, 2001 January 31, 2000
------------------------------ ------------------------------
Percent of Percent of
$ net sales $ net sales
------------- ------------- ------------- -------------
Net sales $ 52.2 100.0% $ 66.7 100.0%
Cost of sales 39.9 76.4% 50.9 76.3%
Selling, general and
Administrative expenses 14.2 27.2% 16.8 25.1%
Reorganization items 3.0 5.7% - -
Operating income (loss) (4.9) -9.3% (1.0) -1.4%
Gain on sale of business - - 6.4 9.5%
Loss on disposal of fixed assets (0.1) -0.2% - -
Interest expense (3.0) -5.7% (7.8) -11.6%
Tax provision (0.1) -0.2% (1.8) -2.7%
Net loss (8.1) -15.4% (4.2) -6.2%
THREE MONTHS ENDED JANUARY 31, 2001 AS COMPARED TO THREE MONTHS ENDED JANUARY
31, 2000
Net sales for the three months ended January 31, 2001 ("First Quarter 2001")
decreased $14.5 million or 21.7% to $52.2 million from $66.7 million for the
three months ended January 31, 2000 ("First Quarter 2000"). The decrease in net
sales was primarily caused by the following: (i) a decrease of $6.7 million in
engineered cranes in the United States due to a slowdown in new orders; (ii) a
decrease in standard cranes of $1.4 million in the United States; (iii) a
decrease of $4.0 million worldwide in hoists and components; and (iv) a decrease
of $2.7 milliion in service sales in the United States. In general, sales in the
U.S. reflect the lower level of orders in recent months due to customers'
apprehension regarding the financial stability of the Company as well as a
downturn in the overall economy. These decreases were partially offset by: (i)
an increase of $1.2 million in standard cranes in the United Kingdom caused by
better backlog entering First Quarter 2001 than there was at the beginning of
First Quarter 2000; and (ii) an increase in modernizations of $0.8 million.
Cost of sales decreased $11.0 million or 21.6% to $39.9 million in First Quarter
2001 from $50.9 million in First Quarter 2000. Cost of sales increased as a
percentage of net sales from 76.3% in First Quarter 2000 to 76.4% in First
Quarter 2001 due to lower selling prices as a result of competitive pressure in
tight markets for all of the Company's products and services.
Selling, general and administrative expenses decreased $2.6 million or 15.5% to
$14.2 million in First Quarter 2001 from $16.8 million in First Quarter 2000.
The primary causes were: (i) decreased goodwill amortization due to the
write-off of international goodwill in the third quarter of fiscal 2000; and
(ii) savings realized due to fiscal 2000 restructuring of the Company's
workforce.
35
Professional fees related to the restructuring of the Company's operations and
capital structure for the three months ended January 31, 2001 are included as a
separate line item in the Condensed Statements of Operations and Comprehensive
Loss entitled "Reorganization Items". It also includes fees paid relative to the
DIP Facility financing and accrued retention plan costs.
Approximately $3.0 million in interest expense, including $0.6 million in
amortization of related financing costs, was recorded in First Quarter 2001
compared to $7.8 million, including $0.6 million in amortization of related
financing costs, in First Quarter 2000. The Company paid $2.3 million and $1.5
million of interest and commitment fees during the First Quarter 2001 and First
Quarter 2000, respectively.
The Company's backlog of orders at January 31, 2001 was approximately $62.0
million compared to $88.0 million at January 31, 2000. Bookings in First Quarter
2001 were $54.3 million compared to $77.3 million in First Quarter 2000. The
overall backlog is lower primarily due to lower level of orders as a result of
the Company's current financial condition. It is also impacted by the normal
variability in booking patterns for highly engineered cranes. Bookings for
modernizations, standard cranes, hoists and components have been negatively
impacted by the Company's filing voluntary petitions for reorganization under
Chapter 11 of the U.S. Bankruptcy Code.
LIQUIDITY AND CAPITAL RESOURCES
The majority of the Company's sales of products and services are recorded as
products are shipped or services are rendered. Revenue on certain long-term
contracts is recorded using the percentage-of-completion method. Net cash flow
from operations is affected by the volume of, and timing of the payments under,
percentage-of-completion long-term contracts, and more recently, also by the
Company's financial condition, as vendors have shortened payment terms and, in
some cases, required advance payments.
Net cash flow used for operating activities for the first quarter of fiscal
years 2001 and 2000, respectively, was $4.3 million and $4.0 million,
respectively.
Net cash used for investment and other transactions for First Quarter 2001 was
$0.7 compared to net cash provided by investment and other transactions of $8.2
million for the same period in 2000. During the first quarter of 2000, $9.1
million of cash, net of transaction costs, was provided by the sale of the
Canadian brake business. This was partially offset by $0.1 million of cash used
for deferred payments on previous acquisitions. Capital expenditures decreased
to $0.7 million during the three months ended January 31, 2001 from $1.0 million
during the three months ended January 31, 2000. These expenditures included
computers and manufacturing equipment.
Net cash provided by financing activities during First Quarter 2001 was $4.3
million compared to net cash used for financing activities of $7.9 million in
the first quarter of 2000. Net proceeds from DIP Facility borrowings were $4.3
million during the first three months of fiscal 2001. Net repayments during the
three months ended January 31, 2000 included $6.2 million under the Revolving
Credit Facility in the United States and United Kingdom and $3.4 million of
principal on the Term Loan A, Term Loan B, and Acquisition Facility, mainly from
the net proceeds from the sale of the Canadian brake business.
On June 15, 2000, the Bankruptcy Court approved a $35 million
Debtor-in-Possession Facility ("DIP Facility") (which was subsequently reduced
by agreement of the parties to $25 million) and authorized the Debtors to use
their collections in the operations of their business. Pursuant to such
facility, cash collected by the Company is used to repay the Term Loans, the
Revolving Credit Facility Borrowings and the Acquisition Facility Line
Borrowings on a pro-rata basis and these amounts are re-loaned to the Company
under a Junior DIP Facility up to $38 million. The DIP and Junior DIP Facilities
contain a number of covenants that, among other things, limit the Debtors'
ability to create or assume liens, consolidate or merge with other entities,
create, incur, or assume additional indebtedness, dispose of certain assets and
make capital expenditures. The DIP and Junior DIP Facilities also require the
Debtors to comply with certain financial ratios and borrowing condition tests
based on monthly measurements of the latest twelve months results of operations.
The first measurement date was December 31, 2000. The Company did not meet
certain of the financial covenants under the DIP Facility at December 31, 2000.
The Company obtained a waiver of such financial covenants through March 30,
2001. The waiver permits the Company to continue to borrow under the DIP
Facility to meet its working capital requirements. On March 30, 2001, the
Company entered into an amendment to the DIP Facility which cured past financial
covenant violations and reset financial covenants beginning April 30, 2001. The
Junior DIP Facility is junior to the DIP Facility. At January 31, 2001, $38.0
36
million in borrowings are outstanding under the Junior DIP Facility and $4.3
million in borrowings are outstanding under the DIP Facility. Both are
classified as current obligations in the January 31, 2001 balance sheet.
The DIP and Junior DIP Facilities benefit from superpriority administrative
claim status and senior and junior liens as provided for under the Bankruptcy
Code. Under the Bankruptcy Code, a superpriority claim is senior to unsecured
prepetition claims and all other administrative expenses incurred in the Chapter
11 case. Borrowings under the DIP Facility are priced at the Alternate Base Rate
of the Post-Petition Agent under the DIP Facility plus 1.5% or, at the Debtors'
option, LIBOR plus 3 1/2%. Borrowings under the Junior DIP Facility are priced
at the Alternate Base Rate of the Post-Petition Agent under the DIP Facility
plus 2.0% or, at the Debtors' option, LIBOR plus 3 1/2%. The DIP and Junior DIP
Facilities mature on the earlier of the initial maturity date of December 1,
2000, which was automatically extended to June 1, 2001, or upon confirmation of
a plan of reorganization.
The principal sources of liquidity for the Company's operating requirements have
been cash flows from operations and borrowings under the DIP Facility and Junior
DIP Facility. While the Company expects that such sources will provide
sufficient working capital to operate its businesses, there can be no assurances
that such sources will prove to be sufficient.
The matters described under this caption "Liquidity and Capital Resources", to
the extent that they relate to future events or expectations, may be
significantly affected by the Chapter 11 proceedings. Those proceedings will
involve, or result in, various restrictions on the Debtors' activities,
limitations on financing, the need to obtain Bankruptcy Court approval for
various matters and uncertainty as to relationships with vendors, suppliers,
customers and others with whom the Debtors may conduct or seek to conduct
business.
Under the Bankruptcy Code, postpetition liabilities and prepetition liabilities
(i.e., liabilities subject to compromise) of the Debtors must be satisfied
before shareholders of the Debtors can receive any distribution. The ultimate
recovery to the Debtors' shareholders, if any, will not be determined until the
end of the case when the fair value of the Debtors' assets is compared to the
liabilities and claims against the Debtors. The Debtors and their professional
advisors are in the process of analyzing strategic alternatives and developing a
plan of reorganization for the Debtors. Based on the Debtors' analysis of
scheduled and filed claims and the valuation of the Debtors, a determination
will be made as to the payment of claims and the distribution of value, if any,
to the Debtors' shareholders.
The Company believes that the filing provides the Debtors with the opportunity
to restructure its indebtedness. The Company plans to continue to implement its
cost savings initiatives to bring costs in line with market requirements.
Although management believes that disruption of operations relating to the
Chapter 11 reorganization has not had a material adverse effect on the Debtors'
relationships with their creditors, suppliers or employees, sales and bookings
for modernizations, engineered and standard cranes, hoists and components have
been negatively impacted.
The Company is currently seeking, and is engaged in discussions regarding, its
strategic alternatives. The Company has engaged in discussions with its bank
lenders and representatives of the Creditors Committee concerning the possible
restructuring of the Company's capital structure pursuant to a plan of
reorganization, including a possible sale of the Company to a third party in
connection therewith. The Debtors filed the Plan and related Disclosure
Statement with the U.S. Bankruptcy Court on January 16, 2001. The Debtors are
continuing to negotiate with their creditor constituencies regarding the Plan
and anticipate making material amendments to the Plan. There can be no assurance
that the Company will be able to successfully pursue strategic alternatives or
that the results of its discussions with its creditors will be successful.
CAUTIONARY FACTORS
This report contains or may contain forward looking statements by or on behalf
of Holdings and the Company. Such statements are based upon management's current
expectations and are subject to risks and uncertainties that could cause the
Company's actual results to differ materially from those contemplated in the
statements. Readers are cautioned not to place undue reliance on these forward
looking statements. In addition to the assumptions and other factors referred to
specifically in connection with such statements, factors that could cause the
Company's actual results to differ materially from those contemplated include,
among others, the following:
o Liquidity Status and Chapter 11 Filing -On May 17, 2000, Holdings,
MMH and their domestic operating subsidiaries filed voluntary
petitions for reorganization under Chapter 11 of the U.S.
Bankruptcy Code. See Note 1, Reorganization under Chapter 11. On
May 18, 2000, the Bankruptcy Court entered an order approving
$10.0 million in interim debtor-in-possession financing to the
Debtors and authorizing the Debtors
37
to utilize their collections in the operation of their business.
This $10 million amount represented the initial portion under a
commitment by the lenders to provide $35 million in financing
(including a letter of credit facility) in connection with the
Debtors' Chapter 11 cases. The full $35 million facility (which
was reduced by agreement of the parties to $25 million) was
approved by the Bankruptcy Court on June 15, 2000. This facility
matures on the earlier of the initial maturity date of December 1,
2000, which date was automatically extended to June 1, 2001, or
upon confirmation of a plan of reorganization.
The Company believes that the filing provides the Debtors with the
opportunity to restructure its indebtedness. The Company plans to
continue to implement its cost savings initiatives to bring costs
in line with market requirements. Although management believes
that disruption of operations relating to the Chapter 11
reorganization has not had a material adverse effect on the
Debtors' relationships with their creditors, suppliers or
employees, sales and bookings for modernizations, engineered and
standard cranes, hoists and components have been negatively
impacted.
As of January 31, 2001, the Company had $313.5 million of
indebtedness outstanding, including $98.0 million under the
Prepetition Credit Facility, the DIP Facility and the Junior DIP
Facility (including accrued interest) and $212.1 million evidenced
by the Senior Notes (including accrued interest).
The Company is currently seeking, and is engaged in discussions
regarding, its strategic alternatives. The Company has engaged in
discussions with its bank lenders and representatives of the
Creditors Committee concerning the possible restructuring of the
Company's capital structure pursuant to a plan of reorganization,
including a possible sale of the Company to a third party in
connection therewith. The Debtors filed the Plan and related
Disclosure Statement with the U.S. Bankruptcy Court on January 16,
2001. The Debtors are continuing to negotiate with their creditor
constituencies regarding the Plan and anticipate making material
amendments to the Plan. The Debtors are still attempting to obtain
a commitment by a lender to provide the Debtors with financing to
satisfy the Debtors' cash obligations under the Plan and to
provide the Debtors with working capital and letters of credit and
anticipate modifications to the Plan to reflect such financing.
There can be no assurance that the Company will be able to
successfully pursue strategic alternatives or that the results of
its discussions with its creditors will be successful.
o Potential Material Adverse Effect of HII Bankruptcy - On June 7,
1999, HII and certain of its United States affiliates (including
HarnCo) filed voluntary petitions for relief under Chapter 11 of
the Bankruptcy Code in the United States Bankruptcy Court for the
District of Delaware. Certain provisions of the Bankruptcy Code
allow a debtor to avoid, delay and/or reduce its contractual and
other obligations to third parties. There can be no assurance that
HII and its affiliates will not attempt to utilize such provisions
to cease performance under their agreements and arrangements with
the Company. The inability of the Company to receive the benefits
of one or more of these agreements or the termination of ongoing
arrangements between the Company and affiliates of HII (including
those relating to the provision of services and materials by HII
and its affiliates to the Company) could materially adversely
affect the Company's operations and financial performance. In the
event that any of the liabilities retained by HII and its
affiliates in connection with the Recapitalization remain
unsatisfied as of the HII Petition Date, the Company's right to
indemnification for any such amounts it has paid on behalf of HII
and its affiliates may also be avoided, delayed or reduced. Each
of HII and certain of its affiliates on one hand, and the Company
and certain affiliates on the other hand, have receivables and
payables to the other which may be affected by the HII Bankruptcy.
The Debtors and Harnischfeger continue to negotiate towards a
consensual resolution of the issues arising from and related to
the Recapitalization and have reached a settlement in principle,
subject to definitive documentation and Bankruptcy Court approval.
o Risks Associated with Large Crane Projects - The Company's
principal business includes designing, manufacturing, marketing
and servicing large cranes for the capital goods industries. Long
periods of time are often necessary to plan, design and build
these machines. With respect to these machines, there are risks of
customer acceptance and start-up or performance problems. Large
amounts of capital are required to be devoted by some of the
Company's customers to purchase these machines and to finance the
steel mills, paper mills and other facilities that use these
machines. The Company's success in obtaining and managing sales
opportunities can affect the Company's financial performance. In
addition, some projects are located in undeveloped or developing
economies where business conditions are less predictable. Finally,
the market for large cranes is down substantially and the outlook
is not expected to improve for the foreseeable future.
38
o Risks Associated with International Operations - The Company has
operations and assets located in Canada, Mexico, Chile, the United
Kingdom, South Africa, Thailand, Australia and Singapore and is
establishing joint ventures in Malaysia and Saudi Arabia. The
Company also sells its products through distributors and agents in
over 50 countries, some of which are merely ad hoc arrangements
and may be terminated at any time. The Company's international
operations (including Canada, Mexico, Chile, South Africa,
Singapore, Thailand, Australia and the United Kingdom) accounted
for 41.1% and 36.8% of the Company's aggregate net sales for the
three months ended January 31, 2001 and 2000, respectively.
Although historically, exchange rate fluctuations and other
international factors have not had a material impact on the
Company's business, financial condition or results of operations,
international operations expose the Company to a number of risks,
including currency exchange rate fluctuations, trade barriers,
exchange controls, risk of governmental expropriation, political
and legal risks and restrictions, foreign ownership restrictions
and risks of increases in taxes. The inability of the Company, or
limitations on its ability, to conduct its foreign operations or
distribute its products internationally could adversely affect the
Company's operations and financial performance. See Note 14,
Subsequent Events.
o Competition - The markets in which the Company operates are highly
competitive. Both domestically and internationally, the Company
faces competition from a number of different manufacturers in each
of its product lines, some of which have greater financial and
other resources than the Company. The principal competitive
factors affecting the Company include performance, functionality,
price, brand recognition, customer service and support, financial
strength and stability, and product availability. The current
depressed level of new equipment orders has increased the
intensity of competition and has reduced selling prices and
margins on new equipment bookings. There can be no assurance that
the Company will be able to compete successfully with its existing
competitors or with new competitors. Failure to compete
successfully could have a material adverse effect on the Company's
financial condition, liquidity and results of operations. In
addition, the Company's ability to compete successfully will
likely be adversely affected by the Company's liquidity crisis.
o Market Risks - The Company's business is affected by the state of
the United States and global economy in general, and by the
varying economic cycles of the industries in which its products
are used. There can be no assurance that any future condition of
the United States economy or the economies of the other countries
in which the Company does business will not have an adverse effect
on the Company's business, operations or financial performance.
FUTURE ACCOUNTING CHANGES
In October 2000, the Emerging Issues Task Force ("EITF") reached a consensus in
Issue No. 00-10, "Accounting for Shipping and Handling Fees and Costs." EITF
Issue No. 00-10 requires companies to classify all amounts billed to a customer
in a sale transaction related to shipping and handling as revenue. Initial
application of EITF Issue No. 00-10 is required for financial statements for the
fiscal years beginning after December 15, 1999. Reclassification of comparative
financial statements for prior periods is required. The Company plans to apply
EITF Issue No. 00-10 in fiscal year 2001. It is not expected to have a
significant effect on the Company's financial statements.
In December 1999, The Securities and Exchange Commission ("SEC") released Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 summarizes certain of the SEC staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. The SEC staff expressed its view that revenue generally is realized
or realizable and earned when all of the following criteria are met: persuasive
evidence of an arrangement exists; delivery has occurred or services have been
rendered; the seller's price to the buyer is fixed or determinable; and
collectibility is reasonably assured. Implementation of SAB 101 is required for
fiscal years beginning after December 15, 1999. The Company plans to implement
SAB 101 in fiscal year 2001. It is not expected to have a significant effect on
the Company's financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is potentially exposed to market risk asssociated with changes in
foreign exchange and interest rates. From time to time the Company will enter
into derivative financial instruments to hedge these exposures. An instrument
will be treated as a hedge if it is effective in offsetting the impact of
volatility in the Company's underlying interest rate and foreign exchange rate
exposures. The Company does not enter into derivatives for speculative purposes.
There have been no
39
material changes in the Company's market risk exposures as compared to those
discussed in the Company's 2000 Annual Report on Form 10-K.
40
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Chapter 11 Bankruptcy Filing
As a result of the bankruptcy filings, litigation relating to prepetition claims
against the Debtors is stayed. See also Note 1, Reorganization under Chapter 11,
of the financial statements for information regarding our bankruptcy
proceedings.
General
On October 28, 1996, a strong windstorm caused significant damage to the Belview
container-handling terminal at the Port of Waterford in Ireland. One
container-handling crane sold by the Company's United Kingdom subsidiary was
destroyed and another was seriously damaged. The two cranes were sold to the
Waterford Harbour Commissioners in 1992 and commissioned for use in 1993. On
October 19, 1998, the Waterford Harbour Commissioners wrote to the Company and
provided a notice of arbitration, asserting breach of contract, negligence and
breach of duty against the Company's United Kingdom subsidiary in connection
with the destroyed and damaged cranes. The Waterford Harbour Commissioners
claimed direct damages of IR(pound)8.5 million ($10.0 million based on exchange
rates at January 31, 2001) and consequential damages of IR(pound)4.9 million
($5.7 million based on exchange rates at January 31, 2001. The port operator,
Bell Lines, Limited, filed a similar claim against the Company's United Kingdom
subsidiary in October 1999, asserting unspecified damages. Management intends to
vigorously defend both matters. The Company's insurance carriers have agreed to
provide defense coverage for the accident and limited indemnification if the
Company is unsuccessful in defending the claims. The Company and its United
Kingdom subsidiary have initiated litigation in the Milwaukee County Circuit
Court against Ace American Insurance Company, AON Risk Services, Inc. of
Illinois, and National Union Fire Insurance Company of Pittsburgh, Pennsylvania,
seeking additional insurance coverage for indemnification obligations. While the
Company believes that it will obtain a favorable resolution (either by
successfully defending the claim or by obtaining insurance coverage thereon), no
assurances can be made as to the final outcome of the claims. If the Company's
United Kingdom subsidiary is found liable for the claims and is unable to obtain
insurance coverage therefore, there could be a material adverse effect on the
Company's operations and financial performance. Based upon the current status of
this matter, no related liability has been accrued at January 31, 2001.
In connection with the sale of substantially all assets of the Company's United
Kingdom Group in March 2001, (see also Note 14, Subsequent Events, of the
financial statements) the Company's U.K. operating subsidiaries were placed in
administrative receivership as a result of their inability to satisfy claims
made by creditors pursuant to guarantees made by such subsidiaries under the
Prepetition Credit Facility. It is not yet certain as to the impact this will
have on the litigation discussed above; however, these subsidiaries will not
have sufficient assets to settle all third party liabilities.
The Company is a party to various other litigation matters, including product
liability and other claims, which are normal in the course of its operations.
Also, as a normal part of its operations, the Company undertakes certain
contractual obligations and warranties in connection with the sale of products
or services. Although the outcome of these matters cannot be predicted with
certainty, management believes that the resolution of such matters will not have
a material adverse effect on the consolidated results of operations, financial
position or cash flows of the Company.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
In advance of the Chapter 11 bankruptcy filings described in Item 2 -
Management's Discussion and Analysis of Financial Condition and Results
of Operations of Part I, the Debtors were unable to pay the interest on
the Senior Notes.
41
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
The Registrants filed no reports on Form 8-K during the quarter
ended January 31, 2001.
42
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
MMH HOLDINGS, INC.
Date: April 12, 2001 /s/ David D. Smith
-------------------
David D. Smith
Vice President - Finance
(Principal Financial Officer)
MORRIS MATERIAL HANDLING, INC.
Date: April 12, 2001 /s/ David D. Smith
-------------------
David D. Smith
Vice President - Finance
(Principal Financial Officer)
43
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------ -------------------
27.1 Financial Data Schedule
27.2 Financial Data Schedule
44