<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, 1997 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 21,078,004
- ------------------------------------------ -----------------------------
(Title of each class) (Outstanding at May 9, 1997)
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<PAGE>
CMI CORPORATION
Index
Page
----
PART I. Financial Information
Condensed Consolidated Balance Sheets -
March 31, 1997, December 31, 1996 and
March 31, 1996 3
Condensed Consolidated Statements of Earnings -
Three Months Ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6-7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
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
Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 11
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<PAGE>
PART I - FINANCIAL INFORMATION
CMI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31 December 31 March 31
1997 1996 1996
(Unaudited) * (Unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
Current assets:
Cash & cash equivalents $ 10,123 7,160 1,589
Cash equivalents - restricted - - 150
Receivables, net 23,472 17,857 15,382
Inventories
Finished equipment 26,766 31,972 30,883
Work-in-process 10,505 6,890 8,229
Raw materials & parts 22,211 19,835 24,411
-------- ------- -------
Total inventories 59,482 58,697 63,523
Other current assets 271 187 444
Deferred tax asset 5,879 6,700 7,510
-------- ------- -------
Total current assets 99,227 90,601 88,598
Property, plant & equipment 48,009 47,595 46,303
Less accumulated depreciation 35,336 35,248 35,104
-------- ------- -------
Net property, plant & equipment 12,673 12,347 11,199
Long-term receivables 352 352 662
Other assets 1,032 1,054 584
Deferred tax assets 9,100 9,100 9,800
-------- ------- -------
$122,384 113,454 110,843
======== ======= =======
Current liabilities:
Current maturities of long-term debt $ 204 256 2,433
Accounts payable 11,660 6,409 12,633
Accrued liabilities 8,503 8,183 7,579
-------- ------- -------
Total current liabilities 20,367 14,848 22,645
Long-term debt 34,051 34,103 22,288
Redeemable preferred stock - - 4,537
Common stock & other capital:
Class A common stock & common stock 2,107 2,047 2,038
Other capital 65,859 62,456 59,335
-------- ------- -------
Total common stock & other capital 67,966 64,503 61,373
-------- ------- -------
$122,384 113,454 110,843
======== ======= =======
</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 EARNINGS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------------------
1997 1996
---------- --------
<S> <C> <C>
Net revenues $41,713 36,493
------- ------
Costs and expenses:
Cost of goods sold 31,314 25,202
Marketing and administrative 6,152 5,677
Engineering and product development 1,434 1,630
------- ------
38,900 32,509
------- ------
Operating earnings 2,813 3,984
------- ------
Other expense (income):
Interest expense 713 799
Interest income (163) (154)
Other, net 3 14
------- ------
Earnings before income taxes 2,260 3,325
Income tax expense (Note 6) 836 1,230
------- ------
Net earnings $ 1,424 2,095
======= ======
Net earnings per common share and
common share equivalent (Note 3) $ .07 .10
======= ======
Average outstanding common shares and
common share equivalents 21,152 20,772
======= ======
</TABLE>
See notes to condensed consolidated financial statements.
-4 of 11-
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-----------------
1997 1996
-------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 1,424 2,095
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 614 532
Amortization 12 10
Loss on sale of assets 4 14
Change in assets and liabilities:
Receivables (5,615) (3,651)
Inventories (785) (424)
Current assets (84) (55)
Accounts payable 5,251 1,216
Accrued liabilities 320 (856)
Deferred tax asset 821 1,490
Long-term receivables - 473
Other non-current assets 10 26
------- ------
Net cash provided by operating activities 1,972 870
------- ------
INVESTING ACTIVITIES
Proceeds from sale of assets 101 6
Capital expenditures (1,045) (518)
------- ------
Net cash used in investing activities (944) (512)
------- ------
FINANCING ACTIVITIES
Payments on long-term debt (104) (639)
Net borrowings on revolving credit note - 232
Net borrowings (payments) on fleet financing agreement - (303)
Payment of preferred stock dividends - (121)
Proceeds from stock warrants exercised 2,250 -
Payment of common stock dividends (211) -
------- ------
Net cash provided by (used in) financing activities 1,935 (831)
------- ------
Increase (decrease) in cash and cash equivalents 2,963 (473)
Cash and cash equivalents at beginning of period 7,160 2,062
------- ------
Cash and cash equivalents at end of period $10,123 1,589
======= ======
</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, 1997 and 1996 and for the
interim periods ended March 31, 1997 and 1996 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, 1997 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 1997 presentation.
(5) There have been no material changes in related party transactions since
the annual report filed for the preceding fiscal year. As disclosed in
the annual report, in January 1997, certain Board of Directors exercised
stock purchase warrants for 600,000 shares of the Company's Voting Class
A Common Stock at an exercise price of $3.75 per share.
(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 $14,979,000 of deferred
tax assets will be realized. The remaining valuation allowance of
approximately $600,000 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 March 31, 1997, 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 $2,320 10,998
Other net deductible temporary differences 3,559 (1,267)
------ ------
Deferred tax assets 5,879 9,731
Less valuation allowance - 631
------ ------
Net deferred tax asset $5,879 9,100
====== ======
</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, 1997, the Company was contingently liable as guarantor for
certain accounts receivable sold with recourse of approximately
$4,455,000 through September 2006.
(8) Litigation
----------
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 in the Circuit Court of Cook
County, Illinois. On December 20, 1995, the case was removed to the
United States District Court for the Northern District of Illinois,
Eastern Division. The attorneys are seeking to recover approximately
$1.4 million of legal fees and costs alleged to be owing by the Company,
together with prejudgement and postjudgment interest and other costs.
The Company filed counterclaims for negligence and legal malpractice
where the Company sought an unspecified amount of monetary damages,
disgorgement of all legal fees collected, punitive damages, prejudgment
interest and other costs. On September 24, 1996 the Company's
counterclaims for negligence and legal malpractice were dismissed.
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
- ---------------------
Net revenues for the three months ended March 31, 1997 rose to $41,713,000, an
increase of 14.3 percent, from $36,493,000 for the comparable three months ended
in 1996. Net earnings for the three months ended March 31, 1997 were
$1,424,000, or seven cents per share, compared to $2,095,000, or ten cents per
share, for the comparable three months ended in 1996.
Net earnings declined as the cost of goods sold increased 24.3 percent in the
quarter, which resulted primarily from the Company's focused manufacturing
concept for improving quality while making manufacturing more efficient.
Although this program is expected to reduce costs of both labor and material
over time, putting the program in place and working with new manufacturing
processes increased the Company's labor costs during the quarter.
Gross margin for the three months ended March 31, 1997 was 24.9 percent, a
decrease from 30.9 percent for the comparible three months ended in 1996. In
addition to increased cost of goods sold related to higher labor content for the
quality enhancements, product modifications and development for special orders,
also impacted the first quarter gross margins.
Marketing and administrative expenses for the three months ended March 31, 1997
were $6,152,000, an increase of $475,000 from the comparable three months ended
in 1996. The Company's market strategy continues to include customer
demonstrations for new and existing products, participation in industry trade
shows, and an increasing sales force for domestic and international locations.
Marketing and administrative expenses as a percentage of net revenues for the
three months ended March 31, 1997 were 14.7 percent compared to 15.6 percent for
the comparable three months ended in 1996.
Engineering and product development expenses for the three months ended March
31, 1997 were $1,434,000, a decrease of $196,000 from the comparable three
months ended in 1996. Engineering and product development expenses as a percent
of net revenues for the three months ended March 31, 1997 were 3.4 percent
compared to 4.5 percent for the comparable three months ended in 1996. The
Company continues to be committed to product development and enhancement.
Interest expense for the three months ended March 31, 1997, decreased to
$713,000 from $799,000 for the comparable three months ended in 1996. The
Company experienced more favorable interest rates for the comparable periods,
the result of the new financing completed in September 1996.
The Company's effective tax rate was approximately 37 percent for both three
month periods ending March 31, 1997 and 1996. The Company's quarterly tax rates
are estimates of its expected annual effective federal and state income tax
rates. The combined effective income tax rate for 1996 was approximately 37
percent and the Company expects a comparable annual effective rate in 1997.
-8 of 11-
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The Company's liquidity remained strong during the first quarter of 1997.
Working capital at March 31, 1997 was $78,860,000 compared to $65,953,000 at
March 31, 1996, an increase of $12,907,000. The increase in working capital is
primarily due to an increase in cash of $8,534,000, and an increase in
receivables of $8,090,000; offset by, a decrease in inventories of $4,041,000
and a decrease in current maturities of long-term debt of $2,229,000. The
current ratio at March 31, 1997 was 4.87-to-1 compared to 3.91-to-1 at the same
time last year.
Cash provided by operating activities for the three months ended March 31, 1997
was $1,972,000 compared to $870,000 for the comparable three months ended in
1996. Financing activities for the three months ended March 31, 1997 provided an
additional $1,935,000, which included $2,250,000 proceeds from stock warrants
being exercised.
Capital expenditures are budgeted at $5 million for 1997 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, 1997 were $1,045,000 compared to $518,000 for the comparable three
months ended in 1996.
The Company's $30,000,000 unsecured senior notes mature from September 2000 to
September 2006. The Company's $25,000,000 unsecured revolving line of credit
matures three years from the date of initial borrowing. As of March 31, 1997,
the Company had not utilized the unsecured revolving line of credit. Other long-
term debts have maturity dates ranging from August 1997 to September 2010 and
are expected to be paid or refinanced when due.
During the first quarter of 1997 the Company paid a quarterly cash dividend of
one cent per share on March 3, 1997, to holders of record at the close of
business on February 21, 1997. During the second quarter of 1997 the Company's
Board of Directors authorized payment of a quarterly cash dividend of one cent
per share payable on June 2, 1997, to holders of record at the close of business
on May 16, 1997. It is the Board of Directors present intention to continue
paying quarterly cash dividends.
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, 1997,
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
$14,979,000 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 $38 million to $42 million in future years.
-9 of 11-
<PAGE>
Forward Looking Statements
- --------------------------
Statements of the Company or management's intentions, beliefs, anticipations,
expectations and similar expressions concerning future events contained in this
report constitute "forward looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. As with any future event, there can
be no assurance that the events described in forward looking statements made in
this report will occur or that the results of future events will not vary
materially from those described in the forward looking statements made in this
report. Important factors that could cause the Company's actual performance and
operating results to differ materially from the forward looking statements
include, but are not limited to, highway funding, adverse weather conditions,
general economic conditions and political changes both domestically and
overseas.
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.
On May 2, 1997, the annual meeting of shareholders of the Company was held at
the Company's corporate offices in Oklahoma City, Oklahoma. The items of
business considered at the annual meeting were as follows:
1. The election of Joe Finn-Egan, Jeff Lipkin, and Larry Nichols to serve as
directors of the Company for a term of three years.
At the annual meeting, 19,719,796 votes were cast by the shareholders FOR the
election of Joe Finn-Egan and 155,682 votes were WITHHELD; 19,719,195 votes were
cast by the shareholders FOR the election of Jeff Lipkin and 156,283 votes were
WITHHELD; 19,697,410 votes were cast by the shareholders FOR the election of
Larry Nichols and 178,068 votes were WITHHELD.
ITEM 5. OTHER INFORMATION.
None.
-10 of 11-
<PAGE>
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, 1997.
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 9, 1997 /s/ Jim D. Holland
---------------- -------------------------------------
Jim D. Holland
Senior Vice President,
Chief Financial Officer & Treasurer
-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
March 31
------------------
1997 1996
--------- -------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
Net earnings per condensed statements of earnings $ 1,424 2,095
Deduct dividends on preferred stock - 121
------- ------
Net earnings applicable to common stock $ 1,424 1,974
======= ======
Weighted average outstanding common shares 21,005 20,382
Add dilutive effect of outstanding stock options
(as determined using the treasury stock method) 147 390
------- ------
Weighted average outstanding common shares and
common share equivalents, as adjusted 21,152 20,772
======= ======
Primary earnings per share .07 .10
======= ======
FULLY DILUTED EARNINGS PER SHARE
Net earnings applicable to common stock as shown in
primary computation above $ 1,424 1,974
------- ------
Weighted average outstanding common shares 21,005 20,382
Add fully dilutive effect of outstanding stock
options (as determined using the treasury
stock method) 147 390
------- ------
Weighted average outstanding common shares and,
common share equivalents, as adjusted 21,152 20,772
======= ======
Fully diluted earnings per share $ .07 .10
======= ======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 10,123
<SECURITIES> 0
<RECEIVABLES> 23,472
<ALLOWANCES> 0
<INVENTORY> 59,482
<CURRENT-ASSETS> 99,227
<PP&E> 48,009
<DEPRECIATION> 35,336
<TOTAL-ASSETS> 122,384
<CURRENT-LIABILITIES> 20,367
<BONDS> 34,051
0
0
<COMMON> 2,107
<OTHER-SE> 65,859
<TOTAL-LIABILITY-AND-EQUITY> 122,384
<SALES> 41,713
<TOTAL-REVENUES> 41,713
<CGS> 31,314
<TOTAL-COSTS> 38,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 713
<INCOME-PRETAX> 2,260
<INCOME-TAX> 836
<INCOME-CONTINUING> 1,424
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,424
<EPS-PRIMARY> $0.07
<EPS-DILUTED> $0.07
</TABLE>
