EXHIBIT 99.2
CHALLENGER PRODUCT LINE
(A PRODUCT LINE OF CATERPILLAR INC.)
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001 AND 2000
AND FOR THE YEARS ENDED
DECEMBER 31, 2001, 2000 AND 1999
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Caterpillar Inc.
In our opinion, the accompanying statements of financial position and the
related statements of operations and of cash flows present fairly, in all
material respects, the financial position of the Challenger Product Line (a
product line of Caterpillar Inc.) at December 31, 2001 and 2000, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 2001, 2000 and 1999 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
Challenger Product Line is a product line of Caterpillar Inc. and, as disclosed
in the financial statements, has extensive transactions and relationships with
Caterpillar Inc. and its subsidiaries. Because of these relationships, it is
possible that the terms of these transactions are not the same as those that
would result from transactions among wholly unrelated parties.
The accompanying financial statements have been prepared assuming that the
Challenger Product Line will continue as a going concern. As discussed in Note
12 to the financial statements, the Challenger Product Line has suffered
recurring losses and negative cash flows from operations and has total
liabilities in excess of total assets of $344,998 at December 31, 2001. These
factors, among others, raise substantial doubt about the Challenger Product
Line's ability to continue as a going concern. Management's plan in regard to
these matters is described in Note 13. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
As discussed in Note 13, AGCO Corporation purchased the design, assembly and
marketing of the new MT Series of Caterpillar's Challenger high-tech agriculture
tractor on March 5, 2002.
Peoria, Illinois
March 15, 2002
CHALLENGER PRODUCT LINE
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
(Dollars in Thousands)
2001 2000 1999
---------- ---------- ----------
SALES:
Net sales of machinery (Note 2) $ 55,484 $ 96,585 $ 105,909
OPERATING COSTS (Note 7):
Cost of goods sold 107,432 137,434 126,025
Selling, general and administrative 13,680 8,953 12,642
Research and development 26,921 29,911 30,203
---------- ---------- ----------
OPERATING LOSS (92,549) (79,713) (62,961)
Interest expense (net) (20,091) (21,365) (13,989)
Other expense (1,237) (906) (2,270)
---------- ---------- ----------
LOSS BEFORE TAXES (113,877) (101,984) (79,220)
Income tax benefit (Note 8) 45,640 40,941 31,787
---------- ---------- ----------
LOSS $ (68,237) $ (61,043) $ (47,433)
========== ========== ==========
See accompanying Notes to the Financial Statements.
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CHALLENGER PRODUCT LINE
STATEMENT OF FINANCIAL POSITION
AT DECEMBER 31,
- -------------------------------------------------------------------------------
(Dollars in Thousands)
2001 2000
---------- ----------
ASSETS
Current assets:
Receivables - trade $ 8,021 $ 8,070
Inventories (Note 3) 17,677 17,707
Deferred tax asset (Note 8) 9,529 10,604
---------- ----------
Total current assets 35,227 36,381
Property, plant and equipment (Note 4) 53,964 40,343
---------- ----------
TOTAL ASSETS $ 89,191 $ 76,724
========== ==========
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses (Note 6) $ 29,260 $ 34,179
Net intercompany payable 209,713 123,248
---------- ----------
Total current liabilities 238,973 157,427
Long-term intercompany debt 190,718 191,416
Liability for postemployment benefits (Note 10D) 4,326 4,294
Deferred income taxes (Note 8) 172 348
---------- ----------
TOTAL LIABILITIES 434,189 353,485
COMMITMENTS AND CONTINGENCIES (NOTE 11)
NET PARENT INVESTMENT
Beginning balance (276,761) (215,718)
Loss employed in business (68,237) (61,043)
---------- ----------
TOTAL NET PARENT INVESTMENT (344,998) (276,761)
---------- ----------
TOTAL LIABILITIES AND NET PARENT INVESTMENT $ 89,191 $ 76,724
========== ==========
See accompanying Notes to the Financial Statements.
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CHALLENGER PRODUCT LINE
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
- -------------------------------------------------------------------------------
(Dollars in Thousands)
2001 2000 1999
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (68,237) $ (61,043) $ (47,433)
ADJUSTMENTS FOR NON-CASH ITEMS:
Depreciation and amortization 5,794 2,306 2,605
Liability for postemployment benefits 32 (598) 201
Deferred income taxes, net 899 (318) 2,909
CHANGES IN ASSETS AND LIABILITIES:
Receivables - trade 49 1,103 7,944
Inventories 30 4,099 9,223
Accounts payable and accrued expenses (4,919) 5,109 (20,486)
---------- ---------- ----------
NET CASH USED FOR OPERATING ACTIVITIES (66,352) (49,342) (45,037)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (21,637) (15,426) (6,862)
Disposals of equipment 2,222 1,118 218
---------- ---------- ----------
NET CASH USED FOR INVESTING ACTIVITIES (19,415) (14,308) (6,644)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net intercompany payable 86,465 64,506 (3,844)
Proceeds from intercompany long-term debt 70,197 68,998 190,748
Payments on intercompany long-term debt (70,895) (69,854) (135,223)
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 85,767 63,650 51,681
---------- ---------- ----------
Net change in cash -- -- --
Cash at beginning of year -- -- --
---------- ---------- ----------
Cash at end of year $ -- $ -- $ --
========== ========== ==========
See accompanying Notes to the Financial Statements.
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CHALLENGER PRODUCT LINE
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- -------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
As discussed in Note 12, the accompanying financial statements have been
prepared on a going concern basis.
Challenger Product Line, herein referred to as the Company, is a wholly-owned
product line of Caterpillar Inc. (Caterpillar). This product line includes the
activities related to the design, assembly and marketing of the Caterpillar
Challenger high-tech agricultural tractors. Assembly activities of the Company
are conducted in one plant in the United States.
These financial statements represent the carve-out from Caterpillar of the
assets, liabilities and results of operations of the Company. These financial
statements reflect historical cost basis, in accordance with accounting
principles generally accepted in the United States of America.
For purposes of presenting carve-out financial statements of the Company,
allocations were required to determine the assets, liabilities and operations of
the Company on a stand-alone basis. The financial statements include allocations
and estimates of direct and indirect costs such as selling and marketing,
warranty, post sale discounts, legal and accounting services, employee and
related charges for salaried and management personnel, insurance premiums,
taxes, information technology support, treasury functions and other corporate
and infrastructure costs. Management believes such allocations are reasonable
representations of the utilization of services or the benefit received by the
Company. However, these allocations and estimates are not necessarily indicative
of the costs and expenses that would have resulted if the Company had been
operated as a separate entity. Additionally, as explained in Note 10, salaried
and management employees and postretirement benefit obligations are not
reflected in the financial statements subsequent to October 2000 because
Caterpillar maintains these obligations on behalf of many of its subsidiaries,
including the Company.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
SALES AND REVENUE RECOGNITION
Machine sales are unconditional sales that are recorded when title transfers as
product is shipped and invoiced to customers or independently owned and operated
dealers. The Company extends merchandising programs that provide discounts to
dealers as products are sold to end users. Estimates of such discounts are
recorded as a reduction in sales as sales are recognized. Caterpillar reimburses
the Company for trade receivables due from independently owned and operated
dealers based on thirty day terms and assumes the risk of collection for these
trade receivables.
WARRANTY RESERVE
Warranty reserve is determined by applying historical claim rate experience to
the current field population and dealer inventory of agricultural products.
Historical claim rates are developed using a rolling annual average of per unit
warranty payments. These rates are then applied to the field population and
dealer inventory to determine the reserve. Warranty expense is recorded as part
of net sales and the related accrual is recorded in line item, "Accounts payable
and accrued expenses," on the Statement of Financial Position.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is principally
determined using the first-in, first-out method. Inventory costs include
material, labor and factory overhead. Finished goods inventories are reflected
at their estimated net realizable values. A lower of cost or market reserve of
$267 and $1,498 was recorded at December 31, 2001 and 2000, respectively.
-5-
CHALLENGER PRODUCT LINE
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- -------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are valued at historical costs. Depreciation of
plant and equipment is computed principally using accelerated methods.
Expenditures for maintenance and repair are expensed as incurred and major
renewals/betterments are capitalized. Long-lived assets were reviewed for
impairment and no adjustment was considered necessary as of December 31, 2001
and 2000.
ESTIMATES IN FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affected reported amounts. Examples of the most significant estimates include:
reserves for warranty, postemployment benefits, and post sale discounts. Actual
costs could differ from these estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of the Company's financial instruments, including accounts
receivable, accounts payable and accrued expenses approximate their fair values
due to their short maturities. Net intercompany payable approximates fair value
as the accrued interest is based on a market rate. The estimated fair values may
not represent actual values of the financial instruments that could be realized
as of the balance sheet date or that will be realized in the future.
SEGMENTS
The Company considers its business activities as a single segment.
CASH AND CASH EQUIVALENTS
The Company maintains no independent cash or cash equivalents. Caterpillar meets
all cash requirements. Cash receipts/disbursements for the Company are
received/funded by Caterpillar.
RELATED PARTY ALLOCATIONS
Certain expenses of Caterpillar have been allocated to the Company and, in the
opinion of management, are reasonable. The accompanying Statement of Operations
contains certain allocations that were based on personnel assigned to the
Company because they were an inherent part of the Company's operations. This
allocation method is based on fully burdened actual costs and is consistent with
the methodology used by Caterpillar to allocate the cost of similar services
provided to its other subsidiaries.
INCOME TAXES
The Company's taxable income is included in consolidated tax returns filed by
Caterpillar. Accordingly, net operating losses (NOLs) for the Challenger Product
Line have reduced Caterpillar's tax liabilities. Therefore, the tax provision
has been prepared recognizing the benefit of these NOLs through a reduction of
the intercompany payable. See Note 8 for further details of this arrangement.
NOTE 3 -- INVENTORIES
December 31,
--------------------------------
2001 2000
--------- ---------
Raw materials and work-in-process $ 8,806 $ 7,188
Finished goods 9,138 12,017
Less: reserve for lower of cost or market (267) (1,498)
--------- ---------
Total $ 17,677 $ 17,707
========= =========
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CHALLENGER PRODUCT LINE
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- --------------------------------------------------------------------------------
NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT
December 31, Average
------------------------------- depreciable
2001 2000 lives
--------- --------- -----------
Land - at original cost $ 375 $ 375 N/A
Buildings and land improvements 25,365 15,574 20-40
Machinery, equipment and other 31,020 19,658 3-10
Construction-in-process 15,088 17,683
--------- ---------
71,848 53,290
Less - Accumulated depreciation (17,884) (12,947)
--------- ---------
Property, plant and equipment, net $ 53,964 $ 40,343
========= =========
NOTE 5 -- OPERATING LEASES
The Company leases certain computer and communication equipment, transportation
equipment and other property through operating leases. Total rental expense for
operating leases was $368, $352 and $435 for 2001, 2000 and 1999, respectively.
At December 31, 2001, scheduled minimum rental payments for operating leases
were as follows:
2002 2003 2004 2005 2006 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
$379 $160 $48 $40 $40 $ -- $667
NOTE 6 -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses are comprised of the following:
December 31,
-------------------------------
2001 2000
-------- --------
Accounts payable (trade) $ 4,205 $ 8,148
Accrued warranty 12,918 12,916
Accrued post sale discounts 9,639 11,188
Accrued wages, salaries and employee benefits 1,443 1,668
Other accrued liabilities 1,055 259
-------- --------
Total $ 29,260 $ 34,179
======== ========
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CHALLENGER PRODUCT LINE
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- --------------------------------------------------------------------------------
NOTE 7 -- RELATED PARTY TRANSACTIONS
A. INTERCOMPANY CHARGES AND ALLOCATIONS
As discussed in Notes 1 and 2, certain expenses of Caterpillar have
been allocated to the Company. Allocations based on:
- Research and development costs -- actual costs incurred on
specific authorized programs
- Sales and marketing costs -- general marketing overheads as a
percent of sales plus actual costs incurred for program
specific costs
- General and administrative costs -- including information
system services, human resources and finance support -- actual
costs incurred allocated based on estimated level of effort
- Personnel cost for salaried and management -- fully-burden
rates based on salaried and management headcount
- Logistic services - actual time for services provided to
the Company.
The following costs were allocated to the Company for the years ended
December 31,
2001 2000 1999
-------- -------- --------
Research and development $ 14,824 $ 16,371 $ 19,672
Sales and marketing 1,548 848 597
General and administrative 661 704 737
Personnel cost for salaried and
Management 894 818 785
Logistic services 513 443 532
-------- -------- --------
Total $ 18,440 $ 19,184 $ 22,323
======== ======== ========
REFLECTED IN FINANCIAL STATEMENTS AS:
Cost of goods sold $ 1,407 $ 1,261 $ 1,478
Selling, general and administrative 2,209 1,552 1,173
Research and development 14,824 16,371 19,672
B. NET INTERCOMPANY PAYABLE
The Company has a net intercompany payable to Caterpillar. Interest is
payable on the outstanding balance at the applicable federal interest
rate. Interest is due and payable to Caterpillar on the 25th day of the
month following the end of each quarter. These payments are made in the
form of net intercompany payable settlements. The average interest
rates were 4.15%, 6.14%, and 5.03% as of December 31, 2001, 2000 and
1999, respectively.
C. OTHER TRANSACTIONS
Caterpillar participates in joint ventures with Caterpillar Claas
America LLC for the United States production of the Lexion combines and
Caterpillar Claas Europe LLC for the European distribution of the
Caterpillar Challenger tractors. The Company sells equipment to the
joint ventures that are considered related parties. Sales to the joint
ventures for the years ended December 31, 2001, 2000 and 1999 were
$16,667, $32,434 and $21,478, respectively. Prices for units sold to
the joint ventures were determined as if the transactions were
considered to be at arms length. As of December 31, 2001 and 2000, the
Company had receivables from the joint ventures of $4,802 and $2,506,
respectively.
-8-
CHALLENGER PRODUCT LINE
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- --------------------------------------------------------------------------------
NOTE 8 -- INCOME TAXES
The components of the benefit for income taxes were as follows for the years
ended December 31:
2001 2000 1999
--------- --------- ---------
Current tax benefit:
Federal $ (38,183) $ (33,345) $ (28,470)
State (8,356) (7,278) (6,226)
--------- --------- ---------
(46,539) (40,623) (34,696)
--------- --------- ---------
Deferred tax provision (benefit):
Federal 736 (260) 2,381
State 163 (58) 528
--------- --------- ---------
899 (318) 2,909
--------- --------- ---------
Total benefit for income taxes $ (45,640) $ (40,941) $ (31,787)
========= ========= =========
Reconciliation of the U.S. federal statutory rate to effective rate:
2001 2000 1999
--------- --------- ---------
U.S. statutory rate $ (39,857) $ (35,695) $ (27,727)
(Decrease) increase in taxes resulting from:
State income tax benefits (5,325) (4,768) (3,704)
Research credits (488) (514) (382)
Other 30 36 26
--------- --------- ---------
Benefit for income taxes $ (45,640) $ (40,941) $ (31,787)
========= ========= =========
2001 2000
--------- ---------
Deferred tax assets and liabilities:
Deferred tax assets:
Postemployment benefits other than pensions $ 1,717 $ 1,704
Warranty reserves 5,126 5,125
Post sale discounts 3,825 4,439
Inventory valuation method 516 975
Vacation 61 64
--------- ---------
11,245 12,307
Deferred tax liabilities:
Capital assets (1,888) (2,051)
--------- ---------
Deferred taxes -- net $ 9,357 $ 10,256
========= =========
If the Company's tax provision had been prepared on a separate return method,
net deferred tax assets would have increased by $162,820 and $116,282 for NOL
carryforwards as of December 31, 2001 and 2000, respectively, and the total net
deferred tax balance would have been fully offset with a valuation allowance due
to the uncertain prospects relating to future taxable income. In addition, the
income tax benefit reflected in the Statement of Operations for each of the
three years in the period ended December 31, 2001, 2000 and 1999 would have been
zero.
-9-
CHALLENGER PRODUCT LINE
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- --------------------------------------------------------------------------------
NOTE 9 -- LONG-TERM INTERCOMPANY DEBT
As of December 31, 2001 and 2000, the Company has $190,718 and $191,416 of
promissory notes due to Caterpillar at a floating interest rate indexed to
LIBOR. The outstanding notes mature on July 1, 2004, payable to Caterpillar.
Interest is payable at the rate of US 6 month LIBOR plus 1.25% per annum.
Interest is due and payable semi-annually in July and January. These payments
are made in the form of net intercompany payable settlements. The average
interest rates were 6.47%, 7.24%, and 6.83% as of December 31, 2001, 2000 and
1999, respectively.
NOTE 10 -- EMPLOYEE BENEFITS
During the period of January 1999 through September 2000, all salaried and
management employees of the Company with hire dates before November 1997 were
included on the Company's payroll and all related benefits were included in the
Company's financial statements. All management personnel with hire dates
subsequent to October 1997 and transfers of management personnel to the Company
from Caterpillar were included on Caterpillar's central payroll and all related
employee benefits were included in Caterpillar's financial statements. The
financial statements include an allocation of salaries and benefits for all
management personnel with hire dates subsequent to October 1997 and transferees
for the period January 1999 through September 2000. On October 1, 2000, all
salaried and management personnel were transferred to Caterpillar and became
leased employees. The costs of the leased personnel are included in these
financial statements beginning in October 2000.
The Company offers a savings plan, medical benefits plan and postretirement
benefits plan to substantially all hourly employees and certain salaried and
management personnel (for the applicable periods as described above).
A. DEFINED BENEFIT PENSION PLAN
Substantially all salaried and management personnel working on behalf
of the Company are part of a noncontributory defined benefit pension
plan which is part of the benefits provided by Caterpillar to
substantially all employees. Benefits under these plans are based
primarily upon years of service and final earnings. The funding policy
provides that payments to the pension trusts shall be equal to the
minimum funding requirements of the Employee Retirement and Income
Security Act, plus such additional amounts as may be approved.
Caterpillar also has a retiree life and health insurance plan covering
most of the Company's salaried and management personnel upon their
retirement. Health benefits are primarily provided through
comprehensive hospital, surgical and major medical benefit provisions
subject to various cost-sharing features.
For the purposes of these financial statements, the Company is
considered to be participating in multiemployer benefit plans of
Caterpillar for salaried and management personnel.
B. SAVINGS PLAN
All hourly employees and certain salaried and management personnel (for
the applicable periods as described above) were eligible to participate
in the Company's Savings 401(k) Plan. Participating employees may
contribute from 0% to 15% of their earnings. The Company matches 100%
of the first 2% and 50% from 3-8% of earnings contributed by each
employee. Company contributions were $162, $243 and $303 in 2001, 2000
and 1999, respectively.
-10-
CHALLENGER PRODUCT LINE
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- --------------------------------------------------------------------------------
C. MEDICAL BENEFITS
Salaried and management employees of the Company are required to
contribute a portion of their salaries and wages for employee medical
premiums on a pretax or after tax basis at the employees' option. In
addition, salaried and management employees may contribute a portion of
their salaries and wages for other medical and dependent care benefits
on a pretax basis. The Company covers the premiums for the bargaining
unit employees. The Company costs incurred under this plan were $2,003,
$1,904 and $2,184 in 2001, 2000 and 1999, respectively.
D. POSTRETIREMENT BENEFITS
All hourly employees and certain salaried and management employees (for
the applicable periods as described above) are eligible to receive
postretirement healthcare benefits if they retire at age 62 until they
reach the age of 65. On October 1, 2000, when the Company began leasing
all salaried and management personnel from Caterpillar, the related
postretirement benefit obligation was transferred from the Company's
financial statements to Caterpillar. Annual net postretirement benefits
liability and expense are determined on an actuarial basis. These
benefits are paid as they become due. Benefits are determined primarily
based upon employees' length of service and include applicable employee
cost-sharing.
2001 2000 1999
--------- --------- ---------
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation, January 1 $ 3,780 $ 4,224 $ 4,711
Service cost 82 109 132
Interest cost 281 317 310
Actuarial loss/(gain) 301 -- (690)
Transfer of salaried and management personnel -- (595) --
Benefits paid (316) (275) (239)
--------- --------- ---------
Benefit obligation, December 31 4,128 3,780 4,224
--------- --------- ---------
CHANGE IN PLAN ASSETS:
Fair value of plan assets, January 1 -- -- --
Employer contributions 316 275 239
Benefits paid (316) (275) (239)
--------- --------- ---------
Fair value of plan assets, December 31 -- -- --
OVER (UNDER) FUNDED, DECEMBER 31 (4,128) (3,780) (4,224)
Unrecognized net actuarial gain (224) (536) (687)
Employer contributions 26 22 19
--------- --------- ---------
Net amount recognized in financial statements $ (4,326) $ (4,294)* $ (4,892)
========= ========= =========
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost $ 82 $ 109 $ 132
Interest cost 281 317 310
Amortization of net actuarial gain (11) (19)
--------- --------- ---------
Total cost included in results of operation$ 352 $ 407 $ 442
========= ========= =========
RATE ASSUMPTION:
Assumed discount rate 7.25% 7.75% 7.75%
* Transfer accrued cost for salaried and management personnel of
$727 is reflected in this balance.
-11-
CHALLENGER PRODUCT LINE
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Thousands)
- --------------------------------------------------------------------------------
For measurement purposes, a 10.6% annual rate of increase in the per capita cost
of covered healthcare benefits was assumed for 2002. This rate was assumed to
decrease gradually to 4.5% for 2009.
Assumed healthcare cost trend rates can have a significant effect on the amounts
reported for healthcare plans. A one-percentage point change in assumed
healthcare trend rates would have the following effects:
1-Percentage 1-Percentage
point point
increase decrease
------------ ------------
Effect on total service and interest cost $ 71 $ (58)
Effect on postretirement obligation 675 (580)
NOTE 11 -- COMMITMENTS AND CONTINGENCIES
The Company, in the ordinary course of business, is subject to investigations,
claims and lawsuits. In the Company's management's opinion, any such outstanding
matters affecting the Company for which the Company has knowledge are covered by
accruals or would have no material adverse effect on the Company's financial
position, results of operations or cash flows.
NOTE 12 -- LIQUIDITY
The Company has incurred substantial losses and negative cash flows from
operations in every fiscal period presented. For the years ended December 31,
2001, 2000 and 1999, the Company incurred a loss from operations of
approximately $68,237, $61,043 and $47,433, respectively, and negative cash
flows from operations of $66,352, $49,342 and $45,037 respectively. As of
December 31, 2001 and 2000, the Company had total liabilities in excess of total
assets of approximately $344,998 and $276,761, respectively. As discussed in
Note 13, the Company was sold subsequent to year-end.
NOTE 13 -- SUBSEQUENT EVENT
In December 2001, Caterpillar entered into an agreement with AGCO Corporation
Inc. to sell the design, assembly and marketing of the new MT Series of
Caterpillar Challenger high-tech agriculture tractors during the first quarter
of 2002. The assets associated with this sale were previously used to design,
assemble and market the previous series of Caterpillar Challenger high-tech
agriculture tractors and were the assets comprising Challenger Product Line.
These financial statements do not reflect any impact of this planned
transaction.
-12-