<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 1-5530
ALLIED PRODUCTS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 38-0292230
------------------------------ ---------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
10 SOUTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 454-1020
Not Applicable
----------------------------------------------
(former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of 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 requirement 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: 9,104,482 common shares, $.01
par value, as of October 31, 1994.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTRODUCTION
CONSOLIDATED BALANCE SHEETS-
December 31, 1993 and September 30, 1994
CONSOLIDATED STATEMENTS OF INCOME (LOSS)-
Three and Nine Months Ended September 30, 1993 and 1994
CONSOLIDATED STATEMENTS OF CASH FLOWS-
Nine Months Ended September 30, 1993 and 1994
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
ITEM 1. NOT APPLICABLE
ITEM 2. NOT APPLICABLE
ITEM 3. NOT APPLICABLE
ITEM 4. NOT APPLICABLE
ITEM 5. NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EXHIBIT INDEX
<PAGE>
PART I - FINANCIAL INFORMATION
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
INTRODUCTION
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission and reflect all adjustments of a recurring
nature which are, in the opinion of management, necessary to present fairly
the consolidated financial information required therein. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the information presented
not misleading. It is suggested that these financial statements be read in
conjunction with the financial statements and the notes thereto included in
the Company's latest annual report on Form 10-K.
The results of operations for the three and nine month periods ended September
30, 1993 and 1994 are not necessarily indicative of the results to be expected
for the full year.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND SEPTEMBER 30, 1994
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
12/31/93 9/30/94
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 44,416,000 $ 4,813,000
------------ ------------
Notes and accounts receivable,
less allowances of $1,996,000
and $1,681,000, respectively $ 44,415,000 $ 47,595,000
------------ ------------
Inventories:
Raw materials $ 9,407,000 $ 12,623,000
Work in process 18,161,000 13,397,000
Finished goods 17,156,000 13,903,000
------------ ------------
$ 44,724,000 $ 39,923,000
------------ ------------
Prepaid expenses $ 1,915,000 $ 1,318,000
------------ ------------
Total current assets $135,470,000 $ 93,649,000
------------ ------------
PLANT AND EQUIPMENT, AT COST:
Land $ 2,454,000 $ 2,310,000
Buildings and improvements 34,573,000 33,034,000
Machinery and equipment 37,946,000 39,283,000
------------ ------------
$ 74,973,000 $ 74,627,000
Less-Accumulated depreciation
and amortization 43,923,000 46,621,000
------------ ------------
$ 31,050,000 $ 28,006,000
------------ ------------
OTHER ASSETS:
Notes receivable, due after
one year $ 8,465,000 $ 7,792,000
Deferred charges (goodwill),
net of amortization 16,693,000 15,142,000
Other 362,000 880,000
------------ ------------
$ 25,520,000 $ 23,814,000
------------ ------------
$192,040,000 $145,469,000
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND SEPTEMBER 30, 1994
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
12/31/93 9/30/94
-------------- --------------
<S> <C> <C>
CURRENT LIABILITIES:
Revolver loan $ 4,382,000 $ -
Current portion of long-term debt 39,343,000 892,000
Accounts payable 13,957,000 19,772,000
Accrued expenses 46,124,000 36,123,000
-------------- --------------
Total current liabilities $ 103,806,000 $ 56,787,000
-------------- --------------
LONG-TERM DEBT, LESS CURRENT PORTION SHOWN ABOVE $ 10,622,000 $ 607,000
-------------- --------------
OTHER LONG-TERM LIABILITIES $ 2,701,000 $ 2,687,000
-------------- --------------
REDEEMABLE PREFERRED STOCK: $10.81 SERIES C
CUMULATIVE PREFERRED STOCK; STATED VALUE $100
PER SHARE; AUTHORIZED 150,000 SHARES; ISSUED
AND OUTSTANDING 129,000 AND 122,000 SHARES AT
DECEMBER 31, 1993 AND SEPTEMBER 30, 1994,
RESPECTIVELY $ 12,900,000 $ 12,200,000
-------------- --------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' INVESTMENT:
Preferred Stock-
Series B Variable Rate Cumulative Preferred
Stock, stated value $50 per share; authorized
350,000 shares; issued and outstanding
180,800 and 163,800 shares at December 31,
1993 and September 30, 1994, respectively $ 9,040,000 $ 8,190,000
Undesignated-authorized 1,500,000 shares;
none issued - -
Common stock, par value $.01 per share;
authorized 25,000,000 shares; issued 9,089,748
and 9,104,482 shares at December 31, 1993 and
September 30, 1994, respectively 91,000 91,000
Additional paid-in capital 92,395,000 92,175,000
Retained earnings (deficit) (39,515,000) (27,268,000)
-------------- --------------
$ 62,011,000 $ 73,188,000
-------------- --------------
$ 192,040,000 $ 145,469,000
============== ==============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
For the three months ended September 30, 1993 and 1994
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months ended
-------------------------------
9/30/93 9/30/94
------------- -------------
<S> <C> <C>
Net sales from continuing operations $ 52,786,000 $ 54,406,000
Cost of products sold 40,051,000 40,734,000
------------- -------------
Gross profit $ 12,735,000 $ 13,672,000
------------- -------------
Other costs and expenses-
Selling and administrative expenses $ 7,955,000 $ 7,230,000
Interest expense 1,553,000 191,000
Other (income) expense, net 1,254,000 387,000
------------- -------------
$ 10,762,000 $ 7,808,000
------------- -------------
Income before taxes from continuing
operations $ 1,973,000 $ 5,864,000
Provision for income taxes 66,000 226,000
------------- -------------
Income from continuing operations $ 1,907,000 $ 5,638,000
------------- -------------
Discontinued operations (net of tax):
Income (loss) from operations $ 18,000 $ (1,241,000)
(Loss) on disposition of discontinued
operations - (60,000)
------------- -------------
Income (loss) from discontinued
operations $ 18,000 $ (1,301,000)
------------- -------------
Net income $ 1,925,000 $ 4,337,000
============= =============
Net income applicable to common
stock $ 1,409,000 $ 3,859,000
============= =============
Earnings (loss) per common share:
Continuing operations $ .16 $ .56
Discontinued operations - ( .14)
------------- -------------
Income per common share $ .16 $ .42
============= =============
Average number of common shares
outstanding 9,071,000 9,104,000
============= =============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
For the nine months ended September 30, 1993 and 1994
(UNAUDITED)
<TABLE>
<CAPTION>
For the nine months ended
---------------------------------
9/30/93 9/30/94
-------------- --------------
<S> <C> <C>
Net sales from continuing operations $ 171,765,000 $ 170,875,000
Cost of products sold 128,540,000 126,188,000
-------------- --------------
Gross profit $ 43,225,000 $ 44,687,000
-------------- --------------
Other costs and expenses-
Selling and administrative expenses $ 24,475,000 $ 23,158,000
Interest expense 4,866,000 1,714,000
Other (income) expense, net 3,049,000 1,180,000
-------------- --------------
$ 32,390,000 $ 26,052,000
-------------- --------------
Income before taxes from continuing
operations $ 10,835,000 $ 18,635,000
Provision for income taxes 378,000 708,000
-------------- --------------
Income from continuing operations $ 10,457,000 $ 17,927,000
-------------- --------------
Discontinued operations (net of tax):
Income (loss) from operations $ 4,235,000 $ (4,326,000)
Gain on disposition of discontinued
operations - 75,000
-------------- --------------
Income (loss) from discontinued
operations $ 4,235,000 $ (4,251,000)
-------------- --------------
Net income $ 14,692,000 $ 13,676,000
============== ==============
Net income applicable to common
stock $ 13,113,000 $ 12,247,000
============== ==============
Earnings (loss) per common share:
Continuing operations $ .99 $ 1.81
Discontinued operations .47 ( .46)
-------------- --------------
Income per common share $ 1.46 $ 1.35
============== ==============
Average number of common shares
outstanding 8,972,000 9,101,000
============== ==============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1993 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1993 1994
--------------- ---------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 14,692,000 $ 13,676,000
Adjustments to reconcile net income
to net cash provided from
operating activities:
Income on disposition of discontined
operations - (75,000)
Effect of provision for restructuring costs 700,000 -
Depreciation and amortization 6,096,000 4,040,000
Amortization of deferred charges and
(credits), net (162,000) 1,551,000
Changes in noncash assets and liabilities,
net of effects of assets/businesses sold
and noncash transactions:
(Increase) decrease in accounts receivable 27,943,000 (1,160,000)
Decrease in inventories 24,405,000 2,936,000
Decrease in prepaid expenses 302,000 597,000
(Decrease) in accounts payable and accrued
expenses (2,557,000) (4,677,000)
Other, net 864,000 344,000
--------------- ---------------
Net cash provided from operating activities $ 72,283,000 $ 17,232,000
--------------- ---------------
Cash Flows from Investing Activities:
Additions to plant and equipment $ (6,142,000) $ (3,271,000)
Proceeds from the sale of assets/businesses 9,609,000 -
Proceeds from sales of plant and equipment 7,189,000 1,990,000
--------------- ---------------
Net cash provided from (used for) investing
activities $ 10,656,000 $ (1,281,000)
--------------- ---------------
Cash Flows from Financing Activities:
Borrowing under the revolving credit agreement $ - $ 38,700,000
Proceeds from issuances of long-term debt 33,348,000 -
Borrowings under the revolver loan agreements 114,218,000 29,243,000
Payments under the revolving credit agreement - (38,700,000)
Payments under the revolver loan agreements (98,025,000) (48,508,000)
Payments of short and long-term debt (96,202,000) (33,587,000)
Payments of preferred stock redemptions and
dividends (1,780,000) (2,979,000)
Stock option transactions 681,000 277,000
--------------- ---------------
Net cash (used for) financing activities $ (47,760,000) $ (55,554,000)
--------------- ---------------
Net increase (decrease) in cash and cash
equivalents $ 35,179,000 $ (39,603,000)
Cash and cash equivalents at beginning
of year 5,446,000 44,416,000
--------------- ---------------
Cash and cash equivalents $ 40,625,000 $ 4,813,000
=============== ===============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------
1993 1994
--------------- ---------------
<S> <C> <C>
Supplemental Information:
(A) Noncash investing and financing activities:
1. Series B Preferred stock dividends
paid through the issuance of
common stock $ 398,000 $ -
=============== ===============
2. Series B Preferred stock redemp-
tions ($2,350,000) and dividends
($657,000) paid through the
issuance of subordinated debt,
net of $866,000 cash paid $ 2,141,000 $ -
=============== ===============
3. Series C Preferred stock dividends
paid through the issuance of
common stock $ 405,000 $ -
=============== ===============
4. Series C Preferred stock redemp-
tions ($1,400,000) and dividends
($1,527,000) paid through the
issuance of subordinated debt,
net of $1,040,000 cash paid $ 1,887,000 $ -
=============== ===============
5. Interest expense paid though the
issuance of subordinated debt $ 161,000 $ -
=============== ===============
6. Debt assumed by purchasers of
businesses sold $ 533,000 $ -
=============== ===============
7. Proceeds (Short-Term Note Receivable)
received from the sales of a
discontinued operation $ 100,000 $ 2,351,000
=============== ===============
(B) Interest paid during the period $ 9,716,000 $ 2,554,000
=============== ===============
(C) Income/franchise taxes paid during the
period, net of refunds $ 482,000 $ 344,000
=============== ===============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ACCRUED EXPENSES
The Company's accrued expenses consist of the following:
<TABLE>
<CAPTION>
12/31/93 9/30/94
----------- -----------
<S> <C> <C>
Salaries and wages $ 7,051,000 $ 5,028,000
Warranty 9,658,000 7,256,000
Insurance 9,096,000 7,864,000
Restructuring and other
facility close down costs 6,141,000 4,800,000
Pensions, including retirees
health 3,712,000 4,042,000
Taxes, other than income taxes 1,742,000 962,000
Environmental matters 4,354,000 2,630,000
Other 4,370,000 3,541,000
----------- -----------
$46,124,000 $36,123,000
=========== ===========
</TABLE>
During the third quarter of 1994, certain accruals were reclassified
among the above categories to more accurately reflect the nature of the
accruals.
(2) EARNINGS PER COMMON SHARES
Earnings per common share is based on the average number of common
shares outstanding (9,071,000 and 8,972,000 for the three and nine month
periods ended September 30, 1993, respectively) after reducing net income for
preferred dividend requirements ($516,000 and $1,579,000 during the three and
nine month periods ended September 30, 1993, respectively). Earnings per
common share is based on the average number of common shares outstanding
(9,104,000 and 9,101,000 for the three and nine month periods ended September
30, 1994, respectively) after reducing net income for preferred dividend
requirements ($478,000 and $1,429,000 during the three and nine month periods
ended September 30, 1994, respectively).
(3) DISPOSITION/SALES OF ASSETS
During 1993, the Company sold its Smith Energy Services and White-New
Idea divisions. The Company also closed down and liquidated the R/B Die &
Prototype, International Agro, Kewanee Farm Equipment and Charles City Foundry
and Machining divisions during 1993. During 1994, the Company sold the
business and certain assets of the Cooper division for cash and a secured
short-term note. The Company has included the results of these operations
<PAGE>
and, in 1993, an allocation of financing costs, administrative and interest
expenses and related restructuring costs provisions, net of income taxes,
under the caption "Discontinued operations - Income (loss) from operations."
(4) RESTRUCTURING COSTS
During the first nine months of 1993 and 1994, expenditures of
approximately $7,200,000 ($1,800,000 in the third quarter) and $2,400,000
($200,000 in the third quarter), respectively, were charged against the
provision for restructuring costs established in 1991, 1992 and the first
quarter of 1993.
(5) DEFERRED COMPENSATION
Income from continuing operations in the first nine months of 1993
includes a charge of $1,230,000 (none in the third quarter) for deferred
compensation related to the retirement of certain executive officers of the
Company who have subsequently retired.
(6) FINANCIAL ARRANGEMENTS
During the first quarter of 1994, the Company terminated separate debt
financing agreements at the former Bush Hog, Verson, and Coz subsidiaries
through the completion of a new Revolving Credit Agreement. This new three
year $50,000,000 Revolving Credit Agreement with two banks, dated March 17,
1994, provides for up to $35,000,000 in working capital related loans and up
to $15,000,000 in standby letters of credit required for the Company's self-
insurance programs and for other commercial purposes. Interest is at prime
rate or at other rates as provided within the agreement. This facility is
collateralized principally by the Company's receivables and inventories;
however, all collateral is subject to release if the Company attains certain
financial results for the first nine months of 1994 or for any four
consecutive fiscal quarters starting January 1, 1994. The Company has
attained the required financial results for the first nine months of 1994 and
has requested the release of the collateral under this agreement. Under the
Revolving Credit Agreement, the Company must meet certain periodic financial
tests, including minimum net worth, minimum operating income, ratio of funded
debt to operating income, and ratio of operating income to interest expense.
As a result of this financing, Bush Hog Corporation, Verson Corporation and
Coz Corporation subsidiaries were dissolved and their assets were conveyed to
the parent company, Allied Products Corporation.
(7) CONTINGENT LIABILITIES
The Company is involved in a number of legal proceedings as a defending
party, including product liability claims for which additional liability is
reasonably possible. It is the Company's policy to reserve on a non-
discounted basis for all known product liability claims, with necessary
<PAGE>
reserves determined in consultation with independent insurance companies and
legal counsel. Payment of these claims may take place over the next several
years. However, after consideration of relevant data (review of insurance
coverage, accruals, etc.), management believes that the eventual outcome of
these matters will not have a material adverse effect on the Company's
financial position or results of operations.
At September 30, 1994, the Company was contingently liable for
approximately $2,716,000 primarily relating to outstanding letters of credit.
(8) INCOME TAXES
The provision for income taxes for the nine months ended September 30,
1993 and 1994 is $519,000 and $554,000, respectively. The allocation of the
provision for income taxes in the Consolidated Statements of Income (Loss) for
the nine months ended September 30, 1993 and 1994 is as follows:
<TABLE>
<CAPTION>
1993 1994
----------- -----------
<S> <C> <C>
Continuing operations $ 378,000 $ 708,000
Discontinued operations - Income (loss)
from operations 141,000 (157,000)
Discontinued operations - Gain on disposition
of discontinued operations - 3,000
----------- -----------
Total provision $ 519,000 $ 554,000
=========== ===========
</TABLE>
The provision for income taxes for the nine months ended September 30,
1993 and 1994 differs from amounts computed by applying the statutory rate to
pre-tax income as follows:
<TABLE>
<CAPTION>
1993 1994
----------- -----------
<S> <C> <C>
Income tax at statutory rates $ 5,172,000 $ 4,981,000
Utilization of net operating loss
carryforwards (4,668,000) (4,982,000)
Permanent book over tax, net of tax over
book, differences on acquired assets 22,000 682,000
Others (7,000) (127,000)
----------- -----------
Total provision $ 519,000 $ 554,000
=========== ===========
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OPERATING RESULTS
During 1993, the Company sold the Smith Energy Services and White-New Idea
Farm Equipment divisions for cash. The Company also closed down and liquidated
the R/B Die & Prototype, International Agro, Kewanee Farm Equipment and Charles
City Foundry and Machining operations during 1993. During the second quarter of
1994, the Company sold the business and certain assets of the Cooper division.
The Company has included the results of these operations and, in 1993, an
allocation of financing costs, administrative and interest expenses and related
restructuring cost provisions under the caption "Discontinued operations (net of
tax) - Income (loss) from operations" in the accompanying Consolidated
Statements of Income (Loss). Previously issued financial statements for 1993
have been restated to reflect the effect of these discontinued operations.
FIRST NINE MONTHS OF 1994 COMPARED TO FIRST NINE MONTHS OF 1993
Net sales from continuing operations for the first nine months of 1994 were
$170,875,000 representing a slight decrease in net sales from continuing
operations of $171,765,000 reported in the first nine months of 1993. Income
from continuing operations in the first nine months of 1994 was $17,927,000
compared to income from continuing operations of $10,457,000 in the first nine
months of the prior year. Net income for the 1994 nine month period was
$13,676,000 compared to net income of $14,692,000 reported in the first nine
months of 1993.
At the Bush Hog division, net sales increased by over 15% in the first nine
months of 1994 compared to the first nine months of 1993. While net sales have
increased within all product lines, the most significant increases were within
the loader and disc mower product lines. In general, the agricultural equipment
industry has experienced improvement over the prior year due to a number of
factors, including improved farm income, higher crop prices in 1993, increased
planted acreage and farmers' improved financial position. More particularly,
major product line sales increases were the direct result of increased market
share and increased market demand for those products. Peanut combine sales have
also improved. Excessive rain in the major peanut growing regions in the
southeastern portion of the United States during the mid-summer months did not
damage the crop as severely as originally expected. Current rains in this
portion of the country are however, having an adverse effect on the harvest.
Lower cattle prices have resulted in weakened demand for rotary cutters from the
<PAGE>
important cattle growers market segment in 1994. Gross profits and gross profit
margins have improved at the Bush Hog division in the first nine months of 1994
compared to the first nine months of 1993. Approximately two-thirds of this
increase was related to the effects of increased sales volume as noted above.
The effect of price increases and a favorable mix of products sold also
contributed to the increase in gross profits during 1994. These increases were
partially offset by the effects of increased cash discounts (primarily related
to increased sales volume) and slightly decreased manufacturing efficiencies
resulting from extreme facility utilization during the first nine months of
1994.
At the Verson division, net sales in the first nine months of 1994
decreased by 20% in comparison to the first nine months of the prior year.
During the first nine months of 1993, production continued on a large press
order for Chrysler. Most of the production on that order was completed prior
to the end of 1993. New production in the first nine months of 1994 to replace
the work completed did not materialize in sufficient amounts. A significant
quantity of new orders for presses has been received during the second and third
quarters of 1994 which should result in increased productivity and improved
profitability in 1995 and 1996. Partially offsetting the effect of decreased
press manufacturing sales was increased press rebuild revenue in the first nine
months of 1994. Parts sales have also increased in the current year. While
gross profits decreased at the Verson division (due to decreased sales volume as
discussed above), gross profit margins increased. The increase was the result
of several factors, including improved margins on parts sales (price increase in
the early part of 1994), improved mix of products sold (as discussed above) and
lower warranty costs due to decreased sales volume and mix of customer.
Net sales at the Coz division increased by approximately 3% in the first
nine months of 1994 compared to the first nine months of 1993. Processed goods
represent the largest product line increase due to expansion of the customer
base and increased selling prices. This increase was partially offset by lower
unprocessed goods sales. Due to selling price increases, customers are looking
to other sources of materials. Gross profits and gross profit margins have
decreased slightly at the Coz division in the first nine months of 1994 compared
to the same nine month period of the prior year. The favorable effects of
increased sales discussed above were more than offset by increased material
prices and overhead costs, particularly shipping supplies, insurance and outside
freight costs.
Selling and administrative expenses decreased to $23,158,000 (13.6% of net
sales from continuing operations) in the first nine months of 1994 compared to
expenses of $24,475,000 (14.2% of net sales from continuing operations) for the
same nine month period of the prior year. Decreases were generally associated
with cost reduction programs within the operating divisions of the Company,
lower insurance costs throughout the Company and decreased corporate
administrative expenses due to staff and other cost reduction measures
implemented throughout 1993 and 1994. These decreases were partially offset by
increased commissions
<PAGE>
(agricultural equipment sales increased in the first nine months of 1994 and are
generally commissioned sales) and other normal increases experienced in
operations throughout the Company.
The decrease in interest expense ($1,714,000 in the first nine months of
1994 compared to $4,866,000 after an allocation to discontinued operations in
the first nine months of 1993) was directly related to a significantly reduced
borrowing level and the effects of lower average interest rates associated with
outstanding debt in the current year.
Other expense in the first nine months of 1994 was $1,180,000 compared to
other expense of $3,049,000 in the first nine months of the prior year. In the
first nine months of 1993, the Company provided $1,230,000 for deferred
compensation related to the retirement of certain executive officers of the
Company who have subsequently retired. Decreases in interest income (due to
lower cash balances invested in short-term financial instruments in 1994) and
gains on sales of fixed assets were offset by the effects of decreased idle
facility charges and loan cost expenses in 1994.
In the first nine months of 1994, loss from discontinued operations was
primarily represented by the operating losses incurred at the Cooper division,
which was sold in the second quarter of 1994. Other losses from discontinued
operations in the first nine months of 1994 include ongoing costs (insurance,
utilities, taxes, clean up) of facilities related to operations which were shut
down during 1993. Operating income of discontinued operations in the first nine
months of 1993 included the profitable results of the White-New Idea division
which was sold at the end of that year. The prime manufacturing and selling
period for this division was the first half of the year due to the nature of the
products sold. Discontinued operations in the first nine months of 1993 also
included the results of the Charles City division. In the early part of 1993,
the Company announced the closing of this operation. Upon notification of the
closure, customers ordered more than normal quantities of products from this
machining and foundry division to bridge their manufacturing needs until another
source of product could be identified, resulting in above normal operating
results at the division. The operating results of other discontinued operations
discussed above, reduced by an allocation of financing costs, administrative and
interest expenses and related restructuring cost provision, were also included.
THIRD QUARTER OF 1994 COMPARED TO THIRD QUARTER OF 1993
Net sales from continuing operations in the third quarter of 1994 were
$54,406,000, compared to net sales from continuing operations of $52,786,000 in
the third quarter of 1993. Income from continuing operations in the third
quarter of 1994 was $5,638,000 compared to income from continuing operations of
$1,907,000 in the third quarter of the prior year. Net income in the third
quarter of 1994 was $4,337,000 compared to net income of $1,925,000 in the third
<PAGE>
quarter of 1993.
At the Bush Hog division, net sales within all product lines have increased
in the third quarter of 1994 compared to the third quarter of the prior year
resulting in an overall increase in net sales of approximately 24%. The most
significant increases were within the loader and peanut combine product lines.
Loader sales have increased due to a general expansion of demand for this
product and an increase in market share by Bush Hog. The increase in peanut
combine sales was a direct result of increased production and sales in the
current year's third quarter compared to intentionally reduced production in the
prior year's third quarter as a result of excessive dealer inventory carryover
from 1992. Gross profits and gross profit margins have improved at the Bush Hog
division in the third quarter of 1994 when compared to the third quarter of
1993. Approximately 75% of the increase in gross profits was related to
increased sales volume. The remaining portion of the increase in gross profits
was associated with a more favorable mix of products sold and continuing effects
of cost reduction measures.
At the Verson division, sales have decreased by 21% in the third quarter
of 1994 compared to the third quarter of 1993. The entire decrease was related
to lower press sales as discussed above. Non-press sales have increased in the
third quarter of 1994 due to the effects of revenue generated from press
installations. While gross profits have decreased in the third quarter of 1994
(due primarily to lower sales volume), margins have increased. The principal
reasons for this increase include the favorable mix of products/services sold in
the third quarter of 1994 and the positive effects of job close-outs also in the
current quarter.
At the Coz division, sales decreased by approximately 1% in the third
quarter of 1994 compared to the third quarter of 1993. The overall decrease was
related to the industry being flat in the northeastern part of the country.
Some resistance to sales price increases were noted from certain customers.
Gross profits and gross profit margins decreased at the Coz division in the
third quarter of 1994 compared to the third quarter of 1993. The reasons for
these decreases include increased material costs (offset in part by increased
sales prices), increased shipping container costs (alternative packaging
containers are now being used) and increased outside freight costs. The mix
of products sold also resulted in lower gross profits and gross profit margins
in the third quarter of 1994.
Selling and administrative expenses decreased to $7,230,000 (13.3% of net
sales from continuing operations) in the third quarter of 1994 compared to
$7,955,000 (15.1% of net sales from continuing operations) in the third quarter
of the previous year. In general, corporate administrative expenses have
decreased due to lower bank charges related to borrowings and lower professional
fees. The Company also restructured its Management Information System (MIS)
function during 1993, resulting in savings during the current quarter. These
<PAGE>
decreases were partially offset by increased commissions at the Bush Hog
division (directly related to increased sales) and other normal cost increases
(salaries, fringe benefits, supplies) in both administrative and selling
expenses throughout all operations in the third quarter of 1994.
Interest expense in the third quarter of 1994 was $191,000 compared to
interest expense of $1,553,000 (after an allocation to discontinued operations)
in the third quarter of 1993. The decrease was directly related to lower
borrowing levels in the current year's quarter. Proceeds received from the sale
of the White-New Idea division at the end of 1993 were used to reduce
outstanding debt. In addition, the Company entered into a new three year
Revolving Credit Agreement during the first quarter of 1994 which included more
favorable interest rates than prior borrowings. Borrowings under this agreement
were not significant and no amounts were outstanding under this agreement as of
the end of the third quarter of 1994.
Other expense in the third quarter of 1994 was $387,000 compared to other
expense of $1,254,000 in the third quarter of the prior year. Decreases in
interest income (due to lower cash balances invested in short-term financial
instruments) and lower gains on sales of fixed assets were more than offset by
decreased idle facility costs in the third quarter of 1994.
Operating losses associated with discontinued operations for the third
quarter of 1994 included operating losses of the Cooper division and ongoing
costs related to operations shut down during 1993. Operating income of
discontinued operations in the third quarter of 1993 include the results of
White-New Idea (which was sold at the end of 1993) and the Charles City
machining and foundry division which was closed in the third quarter of 1993.
The operating results of other discontinued operations (R/B Die & Prototype,
International Agro, Smith Energy Services, Kewanee Farm Equipment and Cooper)
and an allocation of financing costs, administrative and interest expenses were
also included in 1993.
FINANCIAL CONDITION AND LIQUIDITY
Working capital at September 30, 1994 was $36,862,000 (current ratio of
1.65 to 1.0) versus working capital of $31,664,000 (current ratio of 1.31 to
1.0) at December 31, 1993. Net receivables have increased by approximately
$3,200,000 since the end of 1993. Increases at the Bush Hog division where
primarily related to the increased sales volume at this division during 1994.
Cash collections associated with the sales of agricultural equipment to dealers
are dependent upon the retail sale of the products by the dealer. Extended
payment terms are offered to dealers in the form of floor plan financing which
is customary in the agricultural equipment industry. Receivable levels have
also increased significantly at the Coz division. September 1994 sales were at
a record monthly level, resulting in this increase. At the Verson division,
receivables decreased since the end of 1993. Inventory levels have decreased by
<PAGE>
approximately $4,800,000 since the end of 1993. The majority of the decrease was
related to the Verson division where production levels have decreased due to a
temporary lag in press orders. Significant orders have been received in the
third quarter and the early part of the fourth quarter which will result in a
significant increase in production in 1995 and 1996. The sale of the Cooper
division in the second quarter of 1994 also resulted in decreased inventory
levels. Approximately half of the fixed asset additions are associated with the
Bush Hog division and relate to new machinery to improve production efficiencies
and product quality. Tooling for new products and replacement tooling are also
included in this division's fixed asset additions. Internally generated funds
were used to finance these additions.
At the end of 1993, the Company sold for cash substantially all of the
assets and liabilities of the White-New Idea Farm Equipment division. Proceeds
from the disposition were used to pay all amounts due under a restrictive credit
agreement which had, for the past four years, seriously hampered the Company's
ability to take actions that the Company believed were advisable and in the
interests of shareholders. The sale of the Cooper division, as previously
described, marks the successful completion of the Company's operations
divestiture program.
During the first quarter of 1994, the Company terminated separate debt
financing agreements at the Bush Hog, Verson and Coz divisions through the
completion of a new Revolving Credit Agreement. Reference is made to Note 6 of
Notes to Consolidated Financial Statements regarding a further description of
this financial arrangement. All borrowings under this agreement have been
repaid prior to the end of the third quarter of 1994 through the internal
generation of funds from operations and the sale of idle facilities. Total
borrowings outstanding at September 30, 1994 for the Company are less than
$1,500,000.
<PAGE>
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
27 - Financial Data Schedule
(b) Reports on Form 8-K - There were no reports on Form 8-K for
the three months ended September 30, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLIED PRODUCTS CORPORATION
-----------------------------------
(REGISTRANT)
November 11, 1994 Kenneth B. Light
- - --------------------- ----------------------------------------------
Kenneth B. Light,
Executive Vice President, Chief Administrative
Officer and Secretary; Director
November 11, 1994 Robert J. Fleck
- - --------------------- ----------------------------------------------
Robert J. Fleck,
Vice President - Accounting and
Chief Accounting Officer
<PAGE>
EXHIBIT INDEX
NUMBER DESCRIPTION
- - ------ -----------
27 FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS STATEMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1994 AND THE CONSOLIDATED STATEMENT
OF INCOME (LOSS) AND THE CONSOLIDATED STATEMENT OF CASH FLOW FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 4,813
<SECURITIES> 0
<RECEIVABLES> 49,276
<ALLOWANCES> 1,681
<INVENTORY> 39,923
<CURRENT-ASSETS> 93,649
<PP&E> 74,627
<DEPRECIATION> 46,621
<TOTAL-ASSETS> 145,469
<CURRENT-LIABILITIES> 56,787
<BONDS> 607
<COMMON> 91
20,390
0
<OTHER-SE> 64,907
<TOTAL-LIABILITY-AND-EQUITY> 145,469
<SALES> 170,875
<TOTAL-REVENUES> 170,875
<CGS> 126,188
<TOTAL-COSTS> 126,188
<OTHER-EXPENSES> 26,052
<LOSS-PROVISION> 320
<INTEREST-EXPENSE> 1,741
<INCOME-PRETAX> 18,635
<INCOME-TAX> 708
<INCOME-CONTINUING> 17,927
<DISCONTINUED> (4,251)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,676
<EPS-PRIMARY> 1.35
<EPS-DILUTED> 1.35
</TABLE>
