<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For quarter ended September 30, 1995 Commission file number 1-5951
CMI CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Oklahoma 73-0519810
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
I-40 & Morgan Road, P.O. Box 1985
Oklahoma City, Oklahoma 73101
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (405) 787-6020
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Voting Class A Common Stock Par Value $.10
and Voting Common Stock Par Value $.10 20,382,004
- ------------------------------------------ --------------------------------
(Title of each class) (Outstanding at November 7,1995)
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<PAGE>
CMI CORPORATION
Index
Page
----
PART I. Financial Information
Condensed Consolidated Balance Sheets -
September 30, 1995, December 31, 1994 and
September 30, 1994 3
Condensed Consolidated Statements of Operations -
Three Months and Nine Months Ended
September 30, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1995 and 1994 5
Notes to Condensed Consolidated Financial
Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. Other Information
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of 11
Security Holders
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
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<PAGE>
PART I - FINANCIAL INFORMATION
CMI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
September 30 December 31 September 30
1995 1994 1994
------------- ----------- ------------
(Unaudited) * (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,566 1,423 1,424
Cash equivalents - restricted 825 903 903
Receivables, net 22,558 17,226 15,159
Inventories
Finished equipment 26,200 20,278 14,765
Work-in-process 7,041 7,942 7,621
Raw materials and parts 24,070 19,344 19,869
------ ------ ------
Total inventories 57,311 47,564 42,255
Deferred tax asset 8,419 9,200 3,600
Other current assets 464 121 54
------ ------ ------
Total current assets 91,143 76,437 63,395
Property, plant and equipment 45,988 44,361 43,969
Less accumulated depreciation 34,441 33,208 32,869
------ ------ ------
Net property, plant and equipment 11,547 11,153 11,100
Other assets 659 703 747
Long-term receivables 235 651 1,827
Deferred tax assets 9,800 800 6,400
------- ------ ------
$113,384 89,744 83,469
======= ====== ======
Current liabilities:
Current portion of long-term debt $ 3,236 4,222 4,560
Accounts payable 10,065 8,132 8,888
Accrued liabilities 7,111 7,658 7,978
------ ------ ------
Total current liabilities 20,412 20,012 21,426
Long-term debt 28,081 21,691 14,308
Redeemable preferred stock 4,905 5,908 5,900
Common shares and other capital:
Voting Class A common stock and
common stock 2,038 2,035 2,035
Other capital 57,948 40,098 39,800
------ ------ ------
Total common shares and other
capital 59,986 42,133 41,835
------- ------ ------
$113,384 89,744 83,469
======= ====== ======
</TABLE>
* Condensed from audited financial statements.
See notes to condensed consolidated financial statements.
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<PAGE>
CMI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $30,923 27,291 107,198 103,319
------ ------ ------- -------
Costs and expenses:
Cost of revenues 22,043 18,526 75,281 70,173
Marketing and administrative 5,436 5,159 15,543 14,575
Engineering and product development 1,395 1,356 4,427 4,373
Interest expense 845 622 2,306 2,026
Interest income (253) (221) (435) (412)
Other (income) expense, net (2) 18 (116) (248)
------ ------ ------ ------
29,464 25,460 97,006 90,487
------ ------ ------ ------
Earnings before income taxes 1,459 1,831 10,192 12,832
Income tax expense (benefit) (Note 4) 581 73 (7,862) (9,481)
------ ------ ------ ------
Net earnings $ 878 1,758 18,054 22,313
====== ====== ====== ======
Net earnings per common share
(Note 3) $ .04 .08 .85 1.05
====== ====== ====== ======
Average outstanding shares 20,925 20,949 20,923 20,983
====== ====== ====== ======
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
CMI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
-----------------
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $18,054 22,313
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 1,346 1,084
Amortization 47 154
Gain on sale of assets (116) (248)
Change in assets and liabilities:
Increase in accounts receivable (5,332) (5,694)
Decrease (increase) in inventory (9,747) 753
Increase in other current assets (265) (10)
Increase (decrease) in accounts payable 1,933 (675)
Increase (decrease) in accrued liabilities (547) 1,500
Increase in deferred tax asset (8,219) (10,000)
Decrease (increase) in long-term receivables 416 (1,818)
Decrease (increase) in other, non-current assets (4) 85
----- -----
Net cash provided by (used in) operating activities (2,434) 7,444
INVESTING ACTIVITIES
Proceeds from sale of assets 194 316
Capital expenditures (1,817) (1,453)
----- -----
Net cash used in investing activities (1,623) (1,137)
----- -----
FINANCING ACTIVITIES
Net payments on long-term debt (2,506) (748)
Net borrowings (payments) on revolving credit note 6,115 (5,917)
Net borrowings on fleet financing agreement 1,795 1,793
Payment of dividends on preferred stock (551) (157)
Payments for redemption of preferred stock (750) -
Stock options exercised 97 -
----- -----
Net cash provided by (used in) financing activities 4,200 (5,029)
----- -----
Increase in cash and cash equivalents 143 1,278
Cash and cash equivalents at beginning of year 1,423 146
----- -----
Cash and cash equivalents at end of period $ 1,566 $ 1,424
====== ======
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1)The interim condensed consolidated financial information has been
prepared in conformity with generally accepted accounting principles
applied, in all material respects, on a basis consistent with the
consolidated financial statements included in the annual report filed
with the Securities and Exchange Commission for the preceding fiscal
year. The financial information as of September 30, 1995 and for the
interim periods ended September 30, 1995 and 1994 included herein is
unaudited; however, such information reflects all adjustments,
consisting of only normal recurring adjustments, which are, in the
opinion of management, necessary to a fair presentation of the results
for the interim periods.
(2)The results of operations for the nine months ended September 30, 1995
are not necessarily indicative of the results to be expected for the
full year. The Company is in a very seasonal business, whereas
normally at least 60 percent of the Company's revenues occur in the
first six months of each calendar year.
(3)Earnings per share amounts are computed by dividing the net earnings
less redeemable preferred stock dividends and accretion of the
difference between the ultimate redemption value and the initial
carrying value for the period, by the weighted average number of common
shares and common share equivalents outstanding during the period.
Common share equivalents are not considered in the computation of per
share amounts if their effect is anti-dilutive.
(4)The provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (Statement 109), requires the benefit of
tax deductions and credits not utilized by the Company in the past to
be reflected as an asset to the extent the Company assesses that future
operations will "more likely than not" be sufficient to realize such
benefits.
The Company has assessed its past earnings history and trends, sales
backlog, budgeted sales, and expiration dates of carryforwards of
future tax benefits and has determined that it is "more likely than
not" that the $18,219,000 of deferred tax assets will be utilized. The
ultimate realization of the deferred tax asset will require aggregate
taxable income of approximately $45 million to $50 million in future
years.
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<PAGE>
At September 30, 1995, the tax effects that give rise to significant
portions of the deferred tax assets are as follows (in thousands):
Current Non-Current
------- -----------
Tax operating loss & other carryforwards $4,039 4,828
Waste to energy facility - 7,700
Other temporary differences 4,380 (1,728)
----- -----
Deferred tax assets 8,419 10,800
Less valuation allowance - 1,000
----- -----
Net deferred tax asset $ 8,419 9,800
====== =====
Income tax expense varies from the federal statutory income tax rate of
35% principally due to the reduction in the valuation allowance held
against the Company's deferred tax assets.
(5)Certain reclassifications have been made to the prior interim period to
conform to the 1995 presentations.
(6)There have been no material changes in related party transactions since
the annual report filed for the preceding fiscal year.
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<PAGE>
CMI CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
The Company reported revenues of $30,923,000 for the quarter ended
September 30, 1995, an increase of 13% over revenues of $27,291,000 for the
same period in 1994. Net earnings were $878,000 compared with net earnings
of $1,758,000 in the prior year. However, earnings before income taxes for
the third quarter of 1995 were $1,459,000 compared with $1,831,000 for the
third quarter of 1994. Quarterly earnings prior to the third quarter of
1995 benefited from tax loss carryforwards. As a result income taxes for
the quarter ending September 30, 1995 increased to $581,000 from $73,000
for the same period in 1994. Earnings per share for the third quarter were
$.04 compared with $.08 per share in 1994. Had the 1994 quarter been taxed
consistent with 1995, earnings per share would have been $.04.
For the nine months ended September 30, 1995, revenues were $107,198,000
compared to $103,319,000 in 1994. Net earnings for the first nine months
of 1995 were $18,054,000, or $.85 per share, which included $8,800,000, or
$.42 per share, for previously unrecognized tax benefits related to
Statement 109. In the first nine months of 1994, net earnings of
$22,313,000 or $1.05 per share, included $10,000,000, or $.47 per share,
for previously unrecognized tax benefits related to Statement 109. As
discussed previously, net earnings prior to the third quarter of 1995
benefited from tax loss carryforwards.
While revenues increased slightly during the third quarter and nine months
ended September 30, 1995, gross margins were reduced primarily due to
pricing competitiveness which the Company believed was key to increasing
market share. Gross margin, as percentage of revenues, decreased to 29%
for the three months ended September 30, 1995 from 32% for the same period
in 1994, and decreased to 30% from 32% for the nine month period ended
September 30, 1995 and 1994, respectively.
Although the general outlook for the road building business is still
positive and the domestic core business has exceeded that of 1994, the
industry was adversely affected by several factors this year. With the
1996 federal highway transportation bill and the National Highway System
(NHS) legislation still awaiting final approval, states are delaying
project letting schedules and contractors are postponing equipment
purchases pending a clearer view of the prospects for future work.
Currently, states are forced to operate without approximately $5.4 billion
in funds for transportation projects that cannot be released until the NHS
bill is enacted. Also, international orders have been slower than last
year largely due to a near stoppage of the road building program in Mexico
caused by the collapse of the peso late last year.
This slow down in the market resulted in increased pricing pressures. As a
result, the Company gave higher sales discounts in the third quarter of
1995 than in 1994. Additional inefficiencies associated with the
relocation of the Load King bottom dump trailer product line from the
Company's South
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<PAGE>
Dakota manufacturing facility to Oklahoma City negatively affected gross
margins in 1995. The decision to relocate the trailer line to Oklahoma
City was due to the South Dakota facility's need to concentrate on the
custom low-bed segment of the business. The relocation took longer than
originally anticipated resulting in lower gross margins than projected.
During the first nine months of 1995, the Company has continued to
experience increases in its labor and material costs over 1994. The
Company continues to evaluate and adjust its product prices, where
possible, to recover the increase in manufacturing costs.
Marketing and administrative expenses increased $277,000 for the three-
month period ended September 30, 1995, compared to the same period in 1994,
and increased $968,000 for the nine-month period ended September 30, 1995,
compared to the same period in 1994. As a percentage of revenues,
marketing and administrative expenses were 18% for the three months ended
September 30, 1995, and 19% for the same period in 1994. For the nine
months ended September 30, marketing and administrative expenses, as a
percentage of revenues, were 14% in 1995 and 1994. The increase for the
three-month period is due to the Company's continued aggressive marketing
strategy which included customer demonstrations for new and existing
products, continued participation in industry trade shows, and an increased
domestic and international sales force. Currently, the Company's marketing
and advertising efforts are being spent in preparation for the Con-Expo
trade show to be held in Las Vegas, Nevada in March 1996.
Engineering and product development expenses increased $39,000 for the
three- month period ended September 30, 1995, compared to the same period
in 1994, and increased $54,000 for the nine-month period ended September
30, 1995, compared to the same period in 1994. As a percentage of
revenues, engineering and product development expenses were 5% for the
three months ended September 30, 1995 and 1994, and 4% in 1995 and 1994.
The Company continues to be committed to product development and product
enhancement.
Interest expense increased to $845,000 from $622,000 for the three months
ended September 30, 1995 and 1994, and to $2,306,000 from $2,026,000 for
the nine months ended September 30, 1995 and 1994. This increase is due to
increased prime rates and an increase in working capital.
Liquidity and Capital Resources
- -------------------------------
The Company's liquidity remained strong in 1995. At September 30, 1995
working capital was $70,731,000, compared to $41,969,000 at September 30,
1994, an increase of 69%. Accounts receivables increased $7,399,000 over
the prior year and is primarily due to an increase in revenues in the month
of September. Additionally, inventories increased $15,056,000 over the
prior year in anticipation of increasing sales levels as evidenced by the
Company's sales backlog. The current ratio at September 30, 1995 was 4.47-
to-1 compared to 2.96-to-1 at the same time last year.
Capital expenditures total $1,817,000 for the nine-month period of 1995, an
increase of $364,000 from the prior year. Capital expenditures are
budgeted at $3 million for 1995. Capital expenditures are used to continue
improving the Company's manufacturing and product support efficiencies.
-9 of 12-
<PAGE>
The Company's revolving credit loan agreement has been in place since 1991
and matures in December 1997. The current line of credit is $30,000,000.
The amount outstanding at September 30, 1995 was $18,597,000 with $804,000
reflected as current portion of long-term debt with the remainder reflected
as long-term debt. Other term debt has maturity dates ranging from July
2006 to September 2010 and is expected to be paid or refinanced when due.
Total debt increased $12,449,000 to $31,317,000 at September 30, 1995 from
$18,868,000 at September 30, 1994. The revolving credit loan agreement
which was re-negotiated during the fourth quarter of 1994 increased the
Company's ability to finance inventory for future sale. The ratio of debt-
to-capital was 33% at September 30, 1995 compared to 28% at September 30,
1994.
As previously reported, on March 31, 1995, the Company and Yargo, Inc.
entered into a Stock Purchase Agreement (the "Agreement"), whereby the
Company agreed to purchase the 4,500 outstanding shares of the Company's
Series B Preferred Stock in a series of installments, with all shares to be
purchased by December 31, 1996. On June 30, 1995, in accordance with the
terms of the Agreement, the Company purchased 750 shares of the Series B
Preferred Stock for an aggregate purchase price of $1,010,313 including
accrued dividends. In addition, on July 15, 1995, the Company made a
dividend payment of $131,250 on the Series B Preferred Stock.
Income Taxes
- ------------
Under the provisions of Statement 109, the benefits of future tax
deductions and credits not utilized by the Company in the past is reflected
as an asset to the extent that the Company assesses that future operations
will "more likely than not" be sufficient to realize such benefits. For
the period ending September 30, 1995, the Company has assessed its past
earnings history and trends, sales backlog, budgeted sales, and expiration
dates of future tax deductions and credits. As a result, the Company has
determined it is "more likely than not" that the $18,219,000 of future tax
deductions and credits will be utilized. The ultimate realization of
future tax deductions and credits will require aggregate taxable income of
approximately $45 million to $50 million in future years.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
- ------------------------------
Midwest Soil Remediation, Inc. ("Midwest Soil"), a customer of the Company,
is one of several defendants in an action filed on August 1, 1995 by
Recycling Sciences International, Inc. ("RSI"). RSI has alleged that
Midwest Soil and the other defendants infringed upon certain patents held
by RSI by carrying out soil remediation processes on soils contaminated
with various types of hazardous materials. RSI is seeking unspecified
monetary damages and asking that such damages be trebled under applicable
federal law, together with pre-judgment interest, costs and attorneys'
fees. In addition, RSI seeks an injunction prohibiting further infringement
of its patents.
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<PAGE>
Because a portion of the soil remediation activities that are the subject
of this suit were conducted by Midwest Soil utilizing a soil remediation
plant sold by the Company to Midwest Soil, the Company has agreed to defend
Midwest Soil, but only with respect to those claims asserted by RSI
relating to the soil remediation plant manufactured by the Company. The
Company believes that its soil remediation plant does not infringe upon any
of the patents held by RSI and intends to vigorously defend any claims to
the contrary.
Item 2. Changes in Securities.
- ----------------------------------
None.
Item 3. Defaults Upon Senior Securities.
- --------------------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders.
- ----------------------------------------------------------------
None.
Item 5. Other Information.
- ------------------------------
None.
Item 6. Exhibits and Reports on Form 8-K.
- ---------------------------------------------
(a) Exhibits required by Item 601 of Regulation S-K are as follows:
Exhibit No.
-----------
11 Statements re Computation Per Share Earnings
27 Financial Data Schedule
(b) The Company did not file any report on a Form 8-K during the fiscal
quarter ended September 30, 1995.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: November 14, 1995 /s/Jim D. Holland
------------------- --------------------------------------
Jim D. Holland
Senior Vice President, Treasurer and
Chief Financial Officer
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<PAGE>
EXHIBIT (11)
CMI CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Net income per statement of operations $ 878 1,758 $18,054 22,313
Deduct dividends on preferred stock $ 133 158 $ 315 158
Deduct accretion of preferred stock
discount $ 2 8 $ 7 23
------ ----- ------ ------
Net Income Available to Common Stock $ 743 1,592 $17,732 $22,132
====== ===== ====== ======
Weighted average common shares
outstanding 20,376 20,352 20,362 20,352
Add dilutive effect of outstanding
stock options (as determined using
the treasury stock method) 549 584 561 631
------ ------ ------ ------
Weighted average common shares
outstanding, as adjusted 20,925 20,936 20,923 20,983
====== ====== ====== ======
Primary earnings per share $ .04 .08 $ .85 1.05
====== ====== ====== ======
FULLY DILUTED EARNINGS PER SHARE
Net income applicable to common stock
as shown in primary computation above $ 743 1,592 $17,732 22,132
====== ====== ====== ======
Weighted average common shares
outstanding 20,376 20,352 20,362 20,352
Add fully dilutive effect of
outstanding stock options (as
determined using the treasury stock
method) 549 597 561 631
------ ------ ------ ------
Weighted average common shares
outstanding, as adjusted 20,925 20,949 20,923 20,983
====== ====== ====== ======
Fully diluted earnings per share $ .04 .08 $ .85 1.05
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JUN-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,391
<SECURITIES> 0
<RECEIVABLES> 22,558
<ALLOWANCES> 0
<INVENTORY> 57,311
<CURRENT-ASSETS> 91,143
<PP&E> 45,988
<DEPRECIATION> 34,441
<TOTAL-ASSETS> 113,384
<CURRENT-LIABILITIES> 20,412
<BONDS> 28,081
<COMMON> 2,038
4,905
0
<OTHER-SE> 57,948
<TOTAL-LIABILITY-AND-EQUITY> 113,384
<SALES> 107,198
<TOTAL-REVENUES> 107,198
<CGS> 75,281
<TOTAL-COSTS> 95,251
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,306
<INCOME-PRETAX> 10,192
<INCOME-TAX> (7,862)
<INCOME-CONTINUING> 18,054
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,054
<EPS-PRIMARY> $.85
<EPS-DILUTED> $.85
</TABLE>
