<PAGE>
UNITED STATES
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 March 31, 1996 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 May 2, 1996)
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CMI CORPORATION
Index
Page
----
PART I. Financial Information
Condensed Consolidated Balance Sheets -
March 31, 1996, December 31, 1995 and
March 31, 1995 3
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6-8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-10
PART II. Other Information
Item 1. Legal Proceedings 11
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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PART I - FINANCIAL INFORMATION
CMI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31 December 31 March 31
1996 1995 1995
(Unaudited) * (Unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
Current assets:
Cash & cash equivalents $ 1,589 2,062 1,407
Cash equivalents - restricted 150 150 825
Receivables, net 15,382 11,731 20,232
Inventories
Finished equipment 30,883 31,717 23,375
Work-in-process 8,229 7,629 7,527
Raw materials & parts 24,411 23,753 22,092
------- ------- ------
Total inventories 63,523 63,099 52,994
Other 444 389 81
Deferred tax asset 7,510 9,000 9,200
------- ------- ------
Total current assets 88,598 86,431 84,739
Property, plant & equipment 46,303 45,904 44,932
Less accumulated depreciation 35,104 34,671 33,629
------- ------- ------
Net property, plant & equipment 11,199 11,233 11,303
Long-term receivables 662 1,135 920
Deferred tax assets 9,800 9,800 800
Other assets 584 620 692
------- ------- ------
$110,843 109,219 98,454
======= ======= ======
Current liabilities:
Current portion of long-term debt $ 2,433 2,340 4,457
Accounts payable 12,633 11,417 11,077
Accrued liabilities 7,579 8,435 6,794
------- ------- ------
Total current liabilities 22,645 22,192 22,328
Long-term debt 22,288 23,091 25,854
Redeemable preferred stock 4,537 4,537 5,911
Common shares & other capital:
Voting Class A common stock & common stock 2,038 2,038 2,036
Other capital 59,335 57,361 42,325
------- ------- ------
Total common shares & other capital 61,373 59,399 44,361
------- ------- ------
$110,843 109,219 98,454
======= ======= ======
</TABLE>
* Condensed from audited financial statements.
See notes to condensed consolidated financial statements.
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CMI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1996 1995
------- ------
<S> <C> <C>
Net revenues $36,493 32,671
------ ------
Costs and expenses:
Cost of revenues 25,202 22,799
Marketing and administrative 5,677 5,289
Engineering and product development 1,630 1,440
Interest expense 799 746
Interest income (154) (62)
Other expense (income), net 14 (4)
------ ------
33,168 30,208
------ ------
Earnings before income taxes 3,325 2,463
Income tax expense (Note 6) 1,230 91
------ ------
Net earnings $ 2,095 2,372
====== ======
Net earnings per common share and
common share equivalents (Note 3) $ .10 .11
------ ------
Average outstanding common shares and
common share equivalents 20,772 20,919
====== ======
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
CMI CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $2,095 2,372
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 532 425
Amortization 10 18
Loss(gain) on sale of assets 14 (4)
Change in assets and liabilities:
Increase in accounts receivable (3,651) (3,006)
Increase in inventory (424) (5,430)
Decrease (increase) in other current assets (55) 118
Increase in accounts payable 1,216 2,945
Decrease in accrued liabilities (856) (864)
Decrease in deferred tax asset 1,490 -
Decrease (increase) in long-term receivables 473 (269)
Decrease (increase) in other non-current assets 26 (7)
----- -----
Net cash provided by (used in) operating activities 870 (3,702)
----- -----
INVESTING ACTIVITIES
Proceeds from sale of assets 6 28
Capital expenditures (518) (599)
----- -----
Net cash used in investing activities (512) (571)
----- -----
FINANCING ACTIVITIES
Payments on long-term debt (639) (158)
Net borrowings on revolving credit note 232 4,432
Net borrowings (payments) on fleet financing agreement (303) 124
Dividends on preferred stock (121) (157)
Stock options exercised - 16
----- -----
Net cash provided by (used in) financing activities (831) 4,257
----- -----
Decrease in cash and cash equivalents (473) (16)
Cash and cash equivalents at beginning of year 2,062 1,423
----- -----
Cash and cash equivalents at end of period $1,589 1,407
===== =====
</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 Exchange Commission for the preceding fiscal year.
The financial information as of March 31, 1996 and 1995 and for the
interim periods ended March 31, 1996 and 1995 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 three months ended March 31, 1996 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 of redeemable preferred stock for the period, by the
weighted average outstanding common shares and common share equivalents
for the period. Common share equivalents are not considered in the
computation of per share amounts if their effect is anti-dilutive.
(4) Certain reclassifications have been made to the prior interim period to
conform to the 1996 presentation.
(5) There have been no material changes in related party transactions since
the annual report filed for the preceding fiscal year.
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(6) Under the provisions of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (Statement 109), the benefit of tax
deductions and credits not utilized by the company in the past is
reflected as an asset only 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 and has
determined that it is more likely than not that the $17,310,000 of
deferred tax assets will be realized. The remaining valuation allowance
of approximately $700,000 is maintained against deferred tax assets
which the company has not determined to be more likely than not
realizable at this time. The company will continue to review the
valuation allowance on a quarterly basis and make adjustments as
appropriate.
At March 31, 1996, the tax effect of the net operating loss
carryforwards and temporary differences created a deferred tax asset as
follows (in thousands):
<TABLE>
<CAPTION>
Current Non-current
------- -----------
<S> <C> <C>
Net operating loss & other carryfowards $3,436 12,006
Other net deductible temporary differences 4,074 1,538
----- ------
Deferred tax assets 7,510 10,468
Less valuation allowance - 668
----- ------
Net deferred tax asset $7,510 9,800
===== ======
</TABLE>
(7) Commitments and Contingencies
-----------------------------
The company and its subsidiaries are parties to various leases relating
to plants, warehouses, office facilities, transportation vehicles, and
certain other equipment. Real estate taxes, insurance, and maintenance
expenses are normally obligations of the company. It is expected that
in the normal course of business, the majority of the leases will be
renewed or replaced by other leases. Leases do not provide for dividend
restrictions, debt, or future leasing arrangements. All leasing
arrangements contain normal leasing terms without unusual purchase
options or escalation clauses.
At March 31, 1996, the company was contingently liable as guarantor for
certain accounts receivable sold with recourse of approximately
$3,615,000 through December 2002.
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(8) Litigation
----------
On November 22, 1995, certain attorneys, previously engaged by the
company in connection with prior patent litigation, filed suit against
the company in the Circuit Court of Cook County, Illinois, seeking to
recover approximately $1.4 million of legal fees and costs alleged to be
owing by the company, together with prejudgment and postjudgment
interest and other costs. The company has filed counterclaims against
the law firm for negligence and legal malpractice. The company seeks an
unspecified amount of monetary damages, disgorgement of all legal fees
collected, punitive damages, prejudgment interest and other costs, and
is seeking removal of the case to the United States District Court for
the Northern District of Illinois, Eastern Division.
There are numerous other claims and pending legal proceedings that
generally involve product liability and employment issues. These cases
are, in the opinion of management, ordinary routine matters incidental
to the normal business conducted by the company. In the opinion of the
company's management after consultation with outside legal counsel, the
ultimate disposition of such proceedings, including the case above, will
not have a materially adverse effect on the company's consolidated
financial position or future results of operations.
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<PAGE>
CMI CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Net revenues for the three months ended March 31, 1996 increased 12 percent to
$36,493,000 from $32,671,000 for the comparable three months ended in 1995.
Earnings before income taxes increased 35 percent to $3,325,000 from $2,463,000
last year. Net earnings after income taxes for the three months ended March 31,
1996 were $2,095,000, or 10 cents per share compared to $2,372,000, or 11 cents
per share for the comparable three months in 1995. The company's effective tax
rate for 1996 was 37 percent compared to 4 percent in 1995. The first quarter of
1995 benefited from tax loss carryforwards of approximately 4 cents per share.
Net revenue growth of $3,822,000 for the first quarter of 1996 compared to the
first quarter of 1995 was due to both strong domestic and international demand.
Net revenues in the domestic and international markets for the first quarter of
1996 compared to the first quarter of 1995, increased 8 percent and 70 percent,
respectively. Shipments of road reclaimers, pavement profiling equipment and hot
mix asphalt production plants were the leading sources of revenue as the
company's pavement restoration equipment continued to enjoy widespread market
preference.
Gross margin, as a percent of net revenues, increased to 31 percent in 1996
compared to 30 percent in 1995 for the three months ended March 31. The
increase in the gross margin is primarily the result of decreased material
costs, productivity improvements, and a change in the mix of products sold in
first quarter of 1996 as opposed to 1995.
Marketing and administrative expenses increased $388,000 in the first quarter of
1996 compared to the first quarter of 1995. This increase is due to the
company's continued aggressive market strategy which included customer
demonstrations for new and existing products, continued participation in
industry trade shows, and an increased sales force for both domestic and foreign
locations. During the first quarter of 1996, the company participated in
CONEXPO-Con/Agg, a major industry equipment show held every three years in Las
Vegas, Nevada. The company had the largest booth at the show exhibiting 31
machines in a 31,000 square-foot display. Marketing and administrative expenses
as a percentage of net revenues for the three months ended March 31 remained
consistent at 16 percent in 1996 and 1995.
Engineering and product development expenses increased $190,000 in the first
quarter of 1996 compared to the first quarter of 1995. Engineering and product
development expenses as a percent of net revenues for the three months ended
March 31 remained consistent at 4 percent for 1996 and 1995. The company
continues to be committed to product development. During the CONEXPO-Con/Agg
trade show, the company introduced many new products, including a new line of
metric hot mix asphalt production plants, three new pavement profiling machines,
and several lines of concrete slipform paving machines.
Interest expense increased to $799,000 in 1996 from $746,000 in 1995 for the
three months ended March 31, due to increased debt levels during the period.
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<PAGE>
Liquidity and Capital Resources
- -------------------------------
The company's working capital at March 31, 1996 was $65,953,000 compared to
$62,411,000 at March 31, 1995, an increase of $3,542,000. The increase in
working capital is primarily due to an increase in inventories of $10,529,000, a
decrease in receivables of $4,850,000 and a decrease in current deferred tax
assets of $1,690,000. The current ratio at March 31, 1996 was 3.91-to-1
compared to 3.80-to-1 at the same time last year.
Cash provided by operating activities for the three months ended March 31, 1996
was $870,000 compared to cash used of $3,702,000 for the three months ended
March 31, 1995. During the first quarter of 1996, the company was able to
maintain a consistent inventory level and improve their cash collections which
provided for a continued strong liquidity position. Cash provided by financing
activities during the first quarter of 1995 was utilized, in part, to fund
increases in inventory during that period. The increased funding during the
first quarter of 1995 was made available through the credit loan agreement with
its primary lender.
Capital expenditures are budgeted at $3 million for 1996 and will be financed
using internally generated funds and leasing programs. These capital
expenditures will be used to continue improving the Company's manufacturing and
product support efficiencies. Capital expenditures for the three months ending
March 31, 1996 were $518,000 compared to $599,000 for the three months ending
March 31, 1995.
The company's revolving credit loan agreement with its primary lender has been
in place since 1991. Terms of the credit loan agreement provide for a maximum
credit line of $30,000,000. The amount outstanding at March 31, 1996 was
$14,758,000 with $804,000 reflected as current portion of long-term debt and the
remainder reflected as long-term debt. The due date of this credit loan
agreement is December 1997. Other long-term debts have maturity dates ranging
from August 1997 to September 2010 and are expected to be paid or refinanced
when due.
Income Taxes
- ------------
Under the provisions of Statement 109, the benefits of future tax deductions and
credits not utilized by the company in the past are reflected as an asset to the
extent the company assesses that future operations will "more likely than not"
be sufficient to realize such benefits. For the period ending March 31, 1996,
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
$17,310,000 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 $48 million in future years.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
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 Statement re Computation of 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 March 31, 1996.
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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: May 2, 1996 /s/Jim D. Holland
----------------- ----------------------------------------
Jim D. Holland
Senior Vice President,
Chief Financial Officer & Treasurer
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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
March 31
------------------
1996 1995
---- ----
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
Net earnings per condensed statements of operations $ 2,095 2,372
Deduct dividends on preferred stock 121 157
Deduct accretion of preferred stock discount - 3
------ ------
Net earnings applicable to common stock $ 1,974 2,212
====== ======
Weighted average outstanding common shares 20,382 20,353
Add dilutive effect of outstanding stock options
(as determined using the treasury stock method) 390 560
------ ------
Weighted average outstanding common shares and
common share equivalents, as adjusted 20,772 20,913
====== ======
Primary earnings per share .10 .11
====== ======
FULLY DILUTED EARNINGS PER SHARE
Net earnings applicable to common stock as shown in
primary computation above $ 1,974 2,212
------ ------
Weighted average outstanding common shares 20,382 20,353
Add fully dilutive effect of outstanding stock
options (as determined using the treasury
stock method) 390 566
------ ------
Weighted average outstanding common shares and,
common share equivalents, as adjusted 20,772 20,919
====== ======
Fully diluted earnings per share $ .10 .11
====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,739
<SECURITIES> 0
<RECEIVABLES> 15,382
<ALLOWANCES> 0
<INVENTORY> 63,523
<CURRENT-ASSETS> 88,598
<PP&E> 46,303
<DEPRECIATION> 35,104
<TOTAL-ASSETS> 110,843
<CURRENT-LIABILITIES> 22,645
<BONDS> 22,288
4,537
0
<COMMON> 2,038
<OTHER-SE> 59,335
<TOTAL-LIABILITY-AND-EQUITY> 110,843
<SALES> 36,493
<TOTAL-REVENUES> 36,493
<CGS> 25,202
<TOTAL-COSTS> 32,509
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 799
<INCOME-PRETAX> 3,325
<INCOME-TAX> 1,230
<INCOME-CONTINUING> 2,095
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,095
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
