<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, 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 20,468,004
- ------------------------------------------ ----------------------------------
(Title of each class) (Outstanding at November 11, 1996)
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<PAGE>
CMI CORPORATION
Index
Page
----
PART I. Financial Information
Condensed Consolidated Balance Sheets -
September 30, 1996, December 31, 1995 and
September 30, 1995 3
Condensed Consolidated Statements of Operations -
Three Months and Nine Months Ended
September 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1996 and 1995 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 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of 10
Security Holders
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
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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
1996 1995 1995
------------ ----------- ------------
(Unaudited) * (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 9,467 2,062 1,566
Cash equivalents - restricted 150 150 825
Receivables, net of valuation
allowance 16,503 11,731 22,558
Inventories
Finished equipment 29,756 31,717 26,200
Work-in-process 7,845 7,629 7,041
Raw materials and parts 21,985 23,753 24,070
------- ------- -------
Total inventories 59,586 63,099 57,311
Other current assets 302 389 464
Deferred tax asset 5,238 9,000 8,419
------- ------- -------
Total current assets 91,246 86,431 91,143
Property, plant and equipment 46,715 45,904 45,988
Less accumulated depreciation 34,738 34,671 34,441
------- ------- -------
Net property, plant and equipment 11,977 11,233 11,547
Long-term receivables 1,167 1,135 235
Deferred tax assets 9,800 9,800 9,800
Other assets 764 620 659
------- ------- -------
$114,954 109,219 113,384
======= ======= =======
Current liabilities:
Current portion of long-term debt $ 368 2,340 3,236
Accounts payable 8,526 11,417 10,065
Accrued liabilities 6,506 8,435 7,111
------- ------- -------
Total current liabilities 15,400 22,192 20,412
Long-term debt 34,096 23,091 28,081
Redeemable preferred stock - 4,537 4,905
Common shares and other capital:
Voting Class A common stock and
Voting common stock 2,047 2,038 2,038
Other capital 63,411 57,361 57,948
------- ------- -------
Total common shares and other
capital 65,458 59,399 59,986
------- ------- -------
$114,954 109,219 113,384
======= ======= =======
</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
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $36,636 30,923 111,887 107,198
------ ------ ------- -------
Costs and expenses:
Cost of revenues 25,620 22,043 78,643 75,281
Marketing and administrative 5,367 5,436 17,201 15,543
Engineering and product development 1,466 1,395 4,527 4,427
Interest expense 730 845 2,122 2,306
Interest income (181) (253) (432) (435)
Other (income) expense, net 39 (2) 50 (116)
------ ------ ------- ------
33,041 29,464 102,111 97,006
------ ------ ------- ------
Earnings before income taxes 3,595 1,459 9,776 10,192
Income tax expense (benefit) (Note 6) 1,262 581 3,564 (7,862)
------ ------ ------- ------
Net earnings $ 2,333 878 6,212 18,054
====== ====== ======= ======
Net earnings per common share and
common share equivalent (Note 3) $ .11 .04 .29 .85
====== ====== ======= ======
Average outstanding common shares and
common share equivalents 20,672 20,925 20,757 20,923
====== ====== ======= ======
</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
-----------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 6,212 18,054
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 1,633 1,346
Amortization 64 47
Deferred tax expense (benefit) 3,762 (8,219)
Loss (gain) on sale of assets 65 (116)
Change in assets and liabilities:
Increase in accounts receivable (4,772) (5,332)
Decrease (increase) in inventory 3,513 (9,747)
Decrease (increase) in other current assets 87 (265)
Increase (decrease) in accounts payable (2,891) 1,933
Decrease in accrued liabilities (1,929) (547)
Decrease (increase) in long-term receivables (32) 416
Increase in other, non-current assets (209) (4)
------ ------
Net cash provided by (used in)operating activities 5,503 (2,434)
------ ------
INVESTING ACTIVITIES
Proceeds from sale of assets 24 194
Capital expenditures (2,466) (1,817)
------ ------
Net cash used in investing activities (2,442) (1,623)
------ ------
FINANCING ACTIVITIES
Payments on long-term debt (294) (2,506)
Borrowings on long-term debt 26,950 -
Net borrowings (payments) on revolving credit note (14,526) 6,115
Net borrowings (payments) on fleet financing agreement (3,097) 1,795
Dividends on preferred stock (272) (551)
Redemption of preferred stock (4,537) (750)
Stock options exercised 120 97
------ ------
Net cash provided by financing activities 4,344 4,200
------ ------
Increase in cash and cash equivalents 7,405 143
Cash and cash equivalents at beginning of year 2,062 1,423
------ ------
Cash and cash equivalents at end of period $ 9,467 1,566
====== ======
</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, 1996 and 1995 and
for the interim periods ended September 30, 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 financial
position and the operating results for the interim periods.
(2) The results of operations for the nine months ended September 30, 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 50 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 periods to
conform to the 1996 presentations.
(5) There have been no material changes in related party transactions since
the annual report filed for the preceding fiscal year.
(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 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 $15,038,000 of deferred tax assets will be utilized. 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. The ultimate realization of the deferred
tax asset will require aggregate taxable income of approximately $38
million to $42 million in future years.
-6 of 11-
<PAGE>
At September 30, 1996, the temporary differences that give rise to
significant portions of the deferred tax assets are as follows (in
thousands):
<TABLE>
<CAPTION>
Current Non-Current
------- -----------
<S> <C> <C>
Tax operating loss & other carryforwards $2,406 12,006
Other temporary differences 2,832 (1,538)
----- ------
Deferred tax assets 5,238 10,468
Less valuation allowance - 668
----- ------
Net deferred tax asset $5,238 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 September 30, 1996, the Company was contingently liable as guarantor
for certain accounts receivable sold with recourse of approximately
$3,822,000 through May 2006.
(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. The
case was removed to the United States District Court for the Northern
District of Illinois, Eastern Division on December 20, 1995.
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.
-7 of 11-
<PAGE>
CMI CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
The Company reported revenues of $36,636,000 for the three months ended
September 30, 1996, an increase of 18.5% over revenues of $30,923,000 for
the three months ended September 30, 1995. Net earnings were $2,333,000,
or 11 cents per share, for the three months ended September 30, 1996
compared with $878,000, or 4 cents per share, for the three months ended
September 30, 1995. Revenues and earnings for the three months ended
September 30, 1996 are up from the same period in 1995 primarily as a
result of the Company delivering equipment ordered earlier this year.
For the nine months ended September 30, 1996, revenues were $111,887,000
compared to $107,198,000 for the nine months ended September 30, 1995. Net
earnings were $6,212,000, or 29 cents per share, for the nine months ended
September 30, 1996 compared to $18,054,000, or 85 cents per share, for the
nine months ended September 30, 1995. The nine months ended September 30,
1995 benefited from previously unrecognized tax benefits of 42 cents per
share and a lower effective tax rate of 15 cents per share.
Gross margin, as a percentage of revenues, increased to 30.1% for the three
months ended September 30, 1996 from 28.7% for the three months ended
September 30, 1995. For the three months ended September 30, 1996, the
Company's improved gross margin, as a percentage of revenues, was primarily
the result of a decrease in material and labor costs over the same period
in 1995. Gross margin, as a percentage of revenues, were 29.7% and 29.8%
for the nine months ended September 30, 1996 and 1995, respectively. Gross
margins were impacted by pricing competitiveness which the Company believes
is key to maintaining market share.
Late in the quarter, the Company received good news from Washington
regarding approval of annual funds for the Highway Program -- over $20
billion, the largest amount ever approved. Additionally, the Corps of
Engineers funding increased approximately 34% over prior year. The Company
indirectly benefits from highway funding as it provides business
opportunities to contractors who purchase the automated roadbuilding
equipment manufactured by the Company.
Marketing and administrative expenses decreased $69,000 for the three
months ended September 30, 1996, compared to the three months ended
September 30, 1995, and increased $1,658,000 for the nine months ended
September 30, 1996, compared to the nine months ended September 30, 1995.
As a percentage of revenues, marketing and administrative expenses
decreased to 14.6% for the three months ended September 30, 1996, from
17.6% for the three months ended September 30, 1995. For the nine months
ended September 30, 1996, marketing and administrative expenses, as a
percentage of revenues, increased to 15.4% from 14.5% for the nine months
ended September 30, 1995. The overall increase is due to the Company's
continued aggressive marketing strategy which included customer demon-
strations for new and existing products, continued participation in
industry trade shows, and an increased domestic and international sales
force.
-8 of 11-
<PAGE>
Engineering and product development expenses increased $71,000 for the
three months ended September 30, 1996, compared to the three months ended
September 30, 1995, and increased $100,000 for the nine months ended
September 30, 1996, compared to the nine months ended September 30, 1995.
As a percentage of revenues, engineering and product development expenses
were 4.0% and 4.5% for the three months ended September 30, 1996 and 1995,
respectively. As a percentage of revenues, engineering and product
development expenses were 4.0% and 4.1%, for the nine months ended
September 30, 1996 and 1995, respectively. The Company continues to be
committed to product development and product enhancement.
Interest expense decreased to $730,000 from $845,000 for the three months
ended September 30, 1996 and 1995, respectively, and decreased to
$2,122,000 from $2,306,000 for the nine months ended September 30, 1996 and
1995, respectively. This decrease is primarily the result of a decrease in
the Company's average outstanding accounts receivable over the same period
in 1995. The improved cash collections resulted in lower outstanding debt
balances for the nine months ended September 30, 1996. Also, see
discussion regarding new financing in the Liquidity and Capital Resources
section.
Liquidity and Capital Resources
- -------------------------------
During the quarter, the Company completed a $30,000,000 private placement
of unsecured senior notes and established a $25,000,000 unsecured revolving
line of credit with the Bank of Oklahoma, N.A. of Oklahoma City. A portion
of the proceeds from the unsecured senior notes were used to retire higher-
interest debt and to redeem the Company's preferred stock. It is the
intention of management to utilize the remainder of the financing for
general corporate purposes, including acquisitions.
The Company's liquidity improved significantly in 1996 with the completion
of the new financing agreements in September 1996. At September 30, 1996,
working capital was $75,846,000, compared to $70,731,000 at September 30,
1995. The current ratio at September 30, 1996 was 5.93-to-1 compared to
4.47-to-1 at September 30, 1995. The Company's quick asset ratio improved
to 1.69 at September 30, 1996 from 1.18 at September 30, 1995.
Capital expenditures totaled $2,466,000 for the nine months ended September
30, 1996, an increase of $649,000 compared to the nine months ended
September 30, 1995. Capital expenditures are budgeted at $3.5 million for
1996. Capital expenditures are used to continue improving the Company's
manufacturing and product support efficiencies.
Total debt increased $3,147,000 to $34,464,000 at September 30, 1996 from
$31,317,000 at September 30, 1995. This increase is the result of the
$30,000,000 private placement completed during September 1996. The
increase in debt was offset by an increase in cash of $7,901,000 at
September 30, 1996 compared to September 30, 1995. The debt-to-total-
capital percentage was 34.5% at September 30, 1996 compared to 32.6% at
September 30, 1995.
The $30,000,000 unsecured senior notes mature from September 2000 to
September 2006 and are reflected as long-term debt at September 30, 1996.
Other term debt has a maturity date of September 2010.
-9 of 11-
<PAGE>
The Company's Board of Directors has authorized payment of a regular
guarterly cash dividend of one cent per share. The first payment will be
on December 3, 1996 to holders of record at the close of business on
November 15, 1996. The policy of regular quarterly dividend payments
reflects management's confidence in the outlook for the business.
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 that the Company assesses that future
operations will "more likely than not" be sufficient to realize such
benefits. For the period ending September 30, 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
$15,038,000 of deferred tax assets will be realized. Realization of the
deferred tax assets will require aggregate taxable income of approximately
$38 million to $42 million in future years.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
As previously disclosed, on November 22, 1995, certain attorneys,
previously engaged by the Company in connection with prior patent
litigation filed suit against the Company, seeking to recover approximately
$1.4 million of legal fees and costs alleged to be owing by the Company,
together with prejudgment and post judgment interest and other costs. The
Company's counterclaims for negligence and legal malpractice, where the
Company sought an unspecified amount of monetary damages, disgorgement of
all legal fees collected, punitive damages and prejudgment interest and
other costs, was dismissed on September 24, 1996.
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, 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: November 11, 1996 /s/Jim D. Holland
------------------ --------------------------------------
Jim D. Holland
Senior Vice President, Treasurer and
Chief Financial Officer
-11 of 11-
<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
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Net income per statements of operations $ 2,333 878 6,212 18,054
Deduct dividends on preferred stock $ 151 133 272 315
Deduct accretion of preferred stock
discount $ - 2 - 7
------ ------ ------ ------
Net Income Available to Common Stock $ 2,182 743 5,940 $17,732
====== ====== ====== ======
Weighted average common shares
outstanding 20,468 20,376 20,413 20,362
Add dilutive effect of outstanding
stock options (as determined using
the treasury stock method) 204 549 344 561
------ ------ ------ ------
Weighted average common shares
outstanding, as adjusted 20,672 20,925 20,757 20,923
====== ====== ====== ======
Primary earnings per share $ .11 .04 .29 .85
====== ====== ====== ======
FULLY DILUTED EARNINGS PER SHARE
Net income applicable to common stock
as shown in primary computation above $ 2,182 743 5,940 17,732
------ ------ ------ ------
Weighted average common shares
outstanding 20,468 20,376 20,413 20,362
Add fully dilutive effect of
outstanding stock options (as
determined using the treasury stock
method) 204 549 344 561
------ ------ ------ ------
Weighted average common shares
outstanding, as adjusted 20,672 20,925 20,757 20,923
====== ====== ====== ======
Fully diluted earnings per share $ .11 .04 .29 .85
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 9,617
<SECURITIES> 0
<RECEIVABLES> 16,503
<ALLOWANCES> 0
<INVENTORY> 59,586
<CURRENT-ASSETS> 91,246
<PP&E> 46,715
<DEPRECIATION> 34,738
<TOTAL-ASSETS> 114,954
<CURRENT-LIABILITIES> 15,400
<BONDS> 34,096
0
0
<COMMON> 2,047
<OTHER-SE> 63,411
<TOTAL-LIABILITY-AND-EQUITY> 114,954
<SALES> 111,887
<TOTAL-REVENUES> 111,887
<CGS> 78,643
<TOTAL-COSTS> 100,371
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,122
<INCOME-PRETAX> 9,776
<INCOME-TAX> 3,546
<INCOME-CONTINUING> 6,212
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,212
<EPS-PRIMARY> $.29
<EPS-DILUTED> $.29
</TABLE>
