<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 June 30, 1995
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: 9,139,482 common shares, $.01
par value, as of July 31, 1995.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
INTRODUCTION
CONSOLIDATED BALANCE SHEETS-
June 30,1995 and December 31, 1994
CONSOLIDATED STATEMENTS OF INCOME (LOSS)-
Three and Six Months Ended June 30, 1995 and 1994
CONSOLIDATED STATEMENTS OF CASH FLOWS-
Six Months Ended June 30, 1995 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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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 six month periods ended June 30,
1995 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
JUNE 30, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
6/30/95 12/31/94
--------------- ---------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,001,000 $ 1,654,000
--------------- ---------------
Notes and accounts receivable, less allowances of
$1,135,000 and $1,521,000, respectively $ 54,847,000 $ 46,267,000
--------------- ---------------
Inventories:
Raw materials $ 14,134,000 $ 11,556,000
Work in process 27,336,000 16,437,000
Finished goods 19,085,000 20,462,000
--------------- ---------------
$ 60,555,000 $ 48,455,000
--------------- ---------------
Prepaid expenses $ 604,000 $ 456,000
--------------- ---------------
Total current assets $ 117,007,000 $ 96,832,000
--------------- ---------------
Plant and Equipment, at cost:
Land $ 2,298,000 $ 2,311,000
Buildings and improvements 40,798,000 34,252,000
Machinery and equipment 43,424,000 40,126,000
--------------- ---------------
$ 86,520,000 $ 76,689,000
Less- Accumulated depreciation and amortization 48,675,000 46,128,000
--------------- ---------------
$ 37,845,000 $30,561,000
--------------- ---------------
Other Assets:
Notes receivable, due after one year $ 7,426,000 $ 7,658,000
Deferred charges (goodwill), net of amortization 13,592,000 14,626,000
Other 701,000 878,000
--------------- ---------------
$ 21,719,000 $ 23,162,000
--------------- ---------------
$ 176,571,000 $ 150,555,000
--------------- ---------------
--------------- ---------------
</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
JUNE 30, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
6/30/95 12/31/94
--------------- ---------------
<S> <C> <C>
Current Liabilities:
Revolving credit agreement $ 2,000,000 $ 10,300,000
Current portion of long-term debt 628,000 689,000
Accounts payable 49,586,000 20,475,000
Accrued expenses 30,941,000 31,837,000
--------------- ---------------
Total current liabilities $ 83,155,000 $ 63,301,000
--------------- ---------------
Long-term debt, less current portion shown above $ 339,000 $ 630,000
--------------- ---------------
Other long-term liabilities $ 2,128,000 $ 2,622,000
--------------- ---------------
Redeemable preferred stock: $10.81 Series C Cumulative
Preferred Stock; stated value $100 per share, authorized
150,000 shares; issued and outstanding 115,000 shares at
June 30, 1995 and December 31, 1994, respectively $ 11,500,000 $ 11,500,000
--------------- ---------------
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 none and 146,800
shares at June 30, 1995 and December 31, 1994,
respectively $ - $ 7,340,000
Undesignated - authorized 1,500,000 shares; none issued - -
Common Stock, par value $.01 per share; authorized
25,000,000 shares; issued and outstanding 9,139,482 and
9,104,482 shares at June 30, 1995 and December 31, 1994,
respectively 91,000 91,000
Additional paid-in capital 93,224,000 92,146,000
Retained earning (deficit) (13,866,000) (27,075,000)
--------------- ---------------
$ 79,449,000 $ 72,502,000
--------------- ---------------
$ 176,571,000 $ 150,555,000
--------------- ---------------
--------------- ---------------
</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 JUNE 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1995 1994
------------- ------------
<S> <C> <C>
Net sales from continuing operations $64,328,000 $57,255,000
Cost of products sold 47,503,000 41,467,000
----------- -----------
Gross profit $16,825,000 15,788,000
----------- -----------
Other costs and expenses:
Selling and administrative expenses $ 8,864,000 7,652,000
Interest expense 223,000 469,000
Other (income) expense, net (167,000) 409,000
----------- -----------
$ 8,920,000 $ 8,530,000
----------- -----------
Income before taxes from continuing operations $ 7,905,000 $ 7,258,000
Provision for income taxes 228,000 266,000
----------- -----------
Income from continuing operations $ 7,677,000 $ 6,992,000
Discontinued operations - (loss) on disposition of
discontinued operations and other costs, net of tax - (1,001,000)
----------- -----------
Net income $ 7,677,000 $ 5,991,000
----------- -----------
----------- -----------
Net income applicable to common stock $ 7,255,000 $ 5,524,000
----------- -----------
----------- -----------
Earnings (loss) per common share:
Primary-
Continuing operations $ .77 $ .72
Discontinued operations - (.11)
----------- -----------
Income per common share $ .77 $ .61
----------- -----------
----------- -----------
Fully Diluted -
Continuing operations $ .77 $ .72
Discontinued operations - (.11)
----------- -----------
Income per common share $ .77 $ .61
----------- -----------
----------- -----------
Weighted average shares outstanding:
Primary 9,416,000 9,104,000
----------- -----------
----------- -----------
Fully Diluted 9,420,000 9,104,000
----------- -----------
----------- -----------
Dividends per common share $ .025 $ -
----------- -----------
----------- -----------
</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 SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Net sales from continuing operations $131,916,000 $116,469,000
Cost of products sold 99,245,000 85,454,000
------------ ------------
Gross profit $ 32,671,000 $ 31,015,000
------------ ------------
Other costs and expenses:
Selling and administrative expenses $ 17,870,000 $ 15,928,000
Interest expense 674,000 1,523,000
Other (income) expense, net (691,000) 793,000
------------ ------------
$ 17,853,000 $ 18,244,000
------------ ------------
Income before taxes from continuing operations $ 14,818,000 $ 12,771,000
Provision for income taxes 491,000 482,000
------------ ------------
Income from continuing operations $ 14,327,000 $ 12,289,000
Discontinued operations - (loss) on disposition of
discontinued operations and other costs, net of tax - (2,950,000)
------------ ------------
Net income $ 14,327,000 $ 9,339,000
------------ ------------
------------ ------------
Net income applicable to common stock $ 13,438,000 $ 8,388,000
------------ ------------
------------ ------------
Earnings (loss) per common share:
Primary-
Continuing operations $ 1.43 $ 1.24
Discontinued operations - (.32)
------------ ------------
Income per common share $ 1.43 $ .92
------------ ------------
------------ ------------
Fully Diluted -
Continuing operations $ 1.43 $ 1.24
Discontinued operations - (.32)
------------ ------------
Income per common share $ 1.43 $ .92
------------ ------------
------------ ------------
Weighted average shares outstanding:
Primary 9,370,000 9,099,000
------------ ------------
------------ ------------
Fully Diluted 9,413,000 9,099,000
------------ ------------
------------ ------------
Dividends per common share $ .025 $ -
------------ ------------
------------ ------------
</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 SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------
1995 1994
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 14,327,000 $ 9,339,000
Adjustments to reconcile net income to net cash provided
from (used for) operating activities:
Provision for loss on disposition of discontinued
operation - (135,000)
Depreciation and amortization 2,585,000 2,731,000
Amortization of deferred charges 1,034,000 1,034,000
Changes in noncash assets and liabilities, net of
effects of assets/businesses sold and noncash
transactions:
(Increase) in accounts receivable (9,114,000) (16,603,000)
(Increase) decrease in inventories (12,100,000) 7,457,000
(Increase) decrease in prepaid expenses (148,000) 611,000
Increase (decrease) in accounts
payable and accrued expenses 27,811,000 (6,886,000)
Other, net (922,000) (30,000)
------------ -----------
Net cash provided from (used for) operating activities $23,473,000 $(2,482,000)
------------ -----------
Cash Flows from Investing Activities:
Additions to plant and equipment $(9,956,000) $(2,389,000)
Proceeds from sales of plant and equipment 1,436,000 763,000
------------ -----------
Net cash (used for) investing activities $(8,520,000) $(1,626,000)
------------ -----------
Cash Flows from Financing Activities:
Borrowings under the revolving credit agreement $59,200,000 $31,700,000
Borrowings under the revolver loan agreements - 29,243,000
Payments under the revolver loan agreements - (48,508,000)
Payments under the revolving credit agreement (67,500,000) (14,500,000)
Payments of long-term debt (353,000) (33,192,000)
Payments of preferred stock redemptions (6,366,000) (1,550,000)
Payments of stock dividends (1,118,000) (951,000)
Stock option transactions 531,000 251,000
------------ -----------
Net cash (used for) financing activities $(15,606,000) $(37,507,000)
------------ -----------
Net (decrease) in cash and cash equivalents $ (653,000) $(41,615,000)
Cash and cash equivalents at beginning of year 1,654,000 44,416,000
------------ -----------
Cash and cash equivalents at end of period $ 1,001,000 $ 2,801,000
------------ -----------
------------ -----------
</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>
6/30/95 12/31/94
------------ -----------
<S> <C> <C>
Salaries and wages $ 5,976,000 $ 4,678,000
Warranty 6,594,000 5,817,000
Self insurance accruals 5,577,000 6,522,000
Restructuring and other facility close
down costs 2,609,000 3,373,000
Pensions, including retiree health 4,832,000 4,985,000
Taxes, other than income taxes 357,000 1,288,000
Environmental matters 2,536,000 3,045,000
Other 2,460,000 2,129,000
----------- -----------
$30,941,000 $31,837,000
----------- -----------
----------- -----------
</TABLE>
(2) DISPOSITION/SALES OF ASSETS
Income from continuing operations in the first half of 1995 includes
gains of approximately $1,300,000 ($110,000 in the second quarter of
1995) from the sales of non-operating assets.
In the first quarter of 1994, the Company recorded a provision of
$1,000,000 for the estimated loss on the disposition of its Cooper
division which was sold in the second quarter of 1994. The
provision has been included in the Consolidated Statements of Income
(Loss) in the first quarter of 1994 as "Discontinued operations -
(loss) on disposition of discontinued operations and other costs,
net of tax."
(3) RESTRUCTURING COSTS
During the first half and second quarter of 1995 and 1994,
expenditures of approximately $764,000 ($336,000 in the second
quarter) and $5,509,000 ($3,300,000 in the second quarter),
respectively, were charged against the provision for restructuring
costs established prior to 1994.
(4) FINANCIAL ARRANGEMENTS
During 1995, the Company entered into an amendment of the Revolving
Credit Agreement. Under the terms of the amendment, interest rates
have been reduced. In addition, the amendment provides for an
increase in permitted capital expenditures for 1995 and allows the
Company to accelerate preferred stock redemptions, pay dividends on
Common Stock, repurchase Common Stock and permits limited
acquisitions.
<PAGE>
(5) PENSION PLAN
During 1995, the Company instituted a noncontributory defined
contribution retirement plan called the Target Benefit Plan. All
employees covered by the Employees' Stock Plan are covered under the
Target Benefit Plan. Under the terms of the Target Benefit Plan,
the Company will make an actuarially determined annual contribution
based upon each eligible employee's years of service and earnings,
as defined. Employee investment alternatives include a money market
fund, two mutual funds and a fixed income fund. Employees become
vested in the Company contribution after five years of service.
During the first half of 1995 the Company provided $692,000
($361,000 in the second quarter) to fund this plan.
(6) DIVIDEND PAYMENT ON COMMON STOCK
During the second quarter of 1995, the Company declared and paid its
first dividend on its common stock since 1982. The dividend payable
on June 30, 1995 to shareholders of record on May 26, 1995 was $.025
per share. Subsequent to the end of the second quarter the Company
declared a quarterly dividend of $.025 per share on its common
stock payable on September 29, 1995 to shareholders of record on
August 25, 1995.
(7) REDEMPTION OF SERIES B PREFERRED STOCK
During the second quarter of 1995, the Company redeemed the 129,800
remaining shares of Series B Preferred stock. The stock, which had
a stated value of $50 per share, was redeemed for $5,516,500.
(8) CONTINGENT LIABILITIES
The Company is involved in a number of legal proceedings as a
defending party, including product liability and environmental
matters for which additional liability is reasonably possible.
However, after consideration of relevant data (consultation with
legal counsel and 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 its ongoing results of operations.
During the first half of 1995, the Company entered into an agreement
with the purchaser of the Cooper business. As part of this
agreement, the Company agreed to be a co-applicant on a letter of
credit in the amount of $4,252,000. The letter of credit secures
the performance of the purchaser's obligation to deliver five rigs
and certain related spare parts against a specific foreign order.
In exchange for this arrangement, the Company has received all
amounts due under the purchase agreement as well as a fee for
expenses incurred in connection with this arrangement. In addition,
the Company received additional collateral securing the Company's
obligation under the letter of credit.
<PAGE>
At June 30, 1995, the Company was contingently liable for
approximately $10,717,000, primarily relating to outstanding letters
of credit, including the letter of credit referred to above, the
balance of which was $3,429,000.
(9) INCOME TAXES
The provision for income taxes in the first half of 1995 and 1994 is
$491,000 and $375,000, respectively. The allocation of the
provision for income taxes in the Consolidated Statements of Income
(Loss) in the first half of 1995 and 1994 includes the following:
<TABLE>
<CAPTION>
1995 1994
-------- ---------
<S> <C> <C>
Continuing operations $491,000 $ 482,000
Discontinued operations - (107,000)
-------- ---------
Total provision $491,000 $ 375,000
-------- ---------
-------- ---------
</TABLE>
The provision for income taxes in the first half of 1995 and 1994
differs from amounts computed by applying the statutory rate to
pre-tax income as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Income tax at statutory rates $ 5,186,000 $ 3,400,000
Utilization of net operating loss
carry forwards (4,919,000) (3,369,000)
Permanent book over tax, net of tax over
book, differences on acquired assets 455,000 455,000
Other (231,000) (111,000)
----------- -----------
Total provision $ 491,000 $ 375,000
----------- -----------
----------- -----------
</TABLE>
(10) SUBSEQUENT EVENT
On July 17, 1995, the Company concluded the settlement of litigation
pending against the shareholders of the former Verson Allsteel Press
Company arising from alleged misrepresentations and breaches of
warranties in the 1986 sale of the assets of Verson Allsteel Press
Company to Allied Products Corporation. As a result of the
settlement, the Company will receive 21,682 shares of Allied
Products Corporation Common Stock valued at approximately $430,000
and $500,000 in cash. The settlement requires the Company to pay
certain expenses of the agent for the Verson Allsteel Press
shareholders, estimated to be approximately $60,000. Also as a
result of the settlement, all other litigation pending against the
Company by the Verson Allsteel Press shareholders has been
terminated without cost to the Company.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
- -----------------
FIRST HALF OF 1995 COMPARED TO FIRST HALF OF 1994
- -------------------------------------------------
Net sales from continuing operations in the first half of 1995 were
$131,916,000 compared to net sales from continuing operations of $116,469,000
reported in the first half of 1994. Income from continuing operations and
net income in the first half of 1995 was $14,327,000 compared to income from
continuing operations of $12,289,000 and net income of $9,339,000 reported in
the first half of the prior year.
Net sales at the Bush Hog division increased by over 4% in the first half of
1995 compared to the first half of 1994. The majority of the increase was
related to new products introduced in the current year, primarily zero turn
mowers. Rotary cutter sales have also increased in the current year,
principally from increased sale prices implemented since the first half of
1994. These increases were partially offset by decreased disc mower sales in
the current year. In general, the farm economy has weakened slightly in 1995
compared to 1994. Cattle prices are down in 1995 as are projected crop
yields. However, commodity prices have increased in 1995. Overall, farm
income in 1995 should be slightly less than 1994. Adjustments in production
levels have been made at the Bush Hog division to reflect these revised
expectations. Gross profits and gross profit margins have decreased in the
first half of 1995 compared to the first half of the prior year. The
decreases were primarily related to the effects of decreased labor efficiency
and the mix of products sold. New product sales in the current year were
generally not manufactured by the Bush Hog division but were purchased from
outside source under an OEM (original equipment manufacturing) agreement,
resulting in a lower gross profit margin.
At the Verson division, net sales increased by over 26% in the first half of
1995 compared to the first half of 1994. The majority of the increase was
related to the press product line. Parts sales have also increased in the
first half of 1995. Press orders continue to be received at a very high
level in
<PAGE>
comparision to the first half of 1994. Orders received in the first
half of 1995 total in excess of $86,000,000 with production on some of these
orders going out into mid-1997. Although gross profit margins have decreased
in 1995, gross profits have increased, principally the result of the
increased sales volume noted above. The margin decrease was partially
related to the mix of presses manufactured. Current year production and
sales included a larger percentage of smaller presses which carry a lower
gross profit margin. In addition, the margin decrease was also associated
with increased labor costs (overtime) necessary to meet delivery schedules of
manufactured presses and increased sub-contracting costs related to press
components.
Net sales at the Coz division have increased by 14% in the first half of 1995
compared to the first half of 1994. The majority of the sales increase was
related to brokered products and compounded materials. Approximately half of
the increase in net sales was associated with increased volume while the
remainder of the increase was due to an increase in selling prices. The
price of basic raw materials has increased significantly during 1994 and in
the early part of the current year. Recently, raw material prices have
stabilized and, in some cases, decreased. Selling prices have been adjusted
to partially reflect these cost increases. Gross profits have increased
slightly in the first half of 1995, principally due to increased sales volume
while margins have decreased slightly as material cost increases have been
more difficult to pass on to customers.
Selling and administrative expenses were $17,870,000 (13.5% of net sales from
continuing operations) in the first half of 1995 compared to $15,928,000
(13.7% of net sales from continuing operations) in the first half of the
prior year. As a percent of sales dollars, selling expenses have decreased.
The majority of the increase in sales volume was related to the Verson
division, which primarily are non-commissioned sales products. Increases in
administrative expenses reflect provisions for the new Target Benefit
(effective January 1, 1995) and Executive Retirement (approved in the fourth
quarter of 1994) pension plans. Additional separation expenses were also
provided for in the first half of 1995 as a result of the resignation of a
Corporate officer. Normal cost increases (salaries, rent, utilities, etc.)
also impacted both selling and administrative costs in 1995.
The decrease in interest expense ($674,000 in the first half of 1995 compared
to $1,523,000 in the first half of the prior year) was directly related to
reduced borrowing levels and lower effective interest rates in the current
year. In March 1994, the Company terminated certain financing agreements and
replaced them with a Revolving Credit Agreement which provided for a decreased
effective interest rate. Borrowing levels have been reduced due to the
improved internal cash flow of the Company from its continuing operations.
<PAGE>
Other income in the first half of 1995 was $691,000 compared to other expense
of $793,000 reported in the first half of 1994. Gains on sales of fixed
assets (primarily related to the disposition of idle facilities) were
approximately $1,000,000 greater in the first half of 1995. Loan costs have
decreased in the current year. These increases in other income were offset
in part by decreased interest income, due to decreased invested cash balances
in the current year's first half.
Discontinued operations in the first half of 1994 included the operating
results of the Cooper division (which was sold in the third quarter of 1994)
and ongoing costs (insurance, utilities, taxes, clean up) of facilities
related to operations which were shut down prior to 1994.
SECOND QUARTER OF 1995 COMPARED TO SECOND QUARTER OF 1994
- ---------------------------------------------------------
Net sales from continuing operations in the second quarter of 1995 were
$64,328,000 compared to net sales from continuing operations of $57,255,000
reported in the second quarter of 1994. Income from continuing operations
and net income were $7,677,000 in the second quarter of 1995 compared to
income from continuing operations of $6,992,000 and net income of $5,991,000
reported in the second quarter of the prior year.
Net sales at the Bush Hog division increased 5% in the second quarter of 1995
compared to the second quarter of 1994. New product sales, primarily zero
turn mowers, represented the most significant increase in sales during the
second quarter of 1995. Rotary cutter sales also improved in the current
year's second quarter. These increases were partially offset by the effect
of lower disc mower and loader sales in the second quarter of 1995. While
gross profits remained approximately the same in the second quarter of 1995
compared to the second quarter of 1994, gross profit margins decreased
slightly. As noted above, new product sales in the current year, including
the second quarter, carried a lower profit margin as these products were not
manufactured by the Bush Hog division but purchased from an outside source
under an OEM (original equipment manufacturing) agreement. Labor efficiency
also decreased in the second quarter of 1995 at the Bush Hog division.
At the Verson division, net sales increased by approximately 25% in the
second quarter of 1995 compared to the second quarter of 1994. Press
production, manufacturing and orders received continued to increase in the
current year's quarter compared to that of the prior year's second quarter.
Gross profit margins have remained constant in the second quarter of 1995
compared to the same quarter of the prior year. Cost increases associated
with increased labor costs (overtime) necessary to meet delivery schedules of
manufactured presses were offset by the favorable effects of
<PAGE>
product sales/production mix also in the current quarter. Gross profits have
increased in the current year's second quarter due primarily to the increased
volume noted above.
Net sales at the Coz division have increased almost 12% in the second quarter
of 1995 compared to the second quarter of the prior year. The most
significant increases in sales in the current year's second quarter were
related to brokered products and compounded materials. The impact of
increased sales volume approximated the effect of increased selling prices in
the second quarter of 1995 compared to the second quarter of 1994. Gross
profits in the second quarter of the current year approximated those of the
same quarter of the prior year. Gross profit margins decreased in the current
year's second quarter due to the effects of mix of sales (brokered products
carry a lower gross profit margin than other products) and cost increases
primarily in the manufacturing area. Employment levels have been increased
and additional space has been leased to handle the increased sales noted
above.
Selling and administrative expenses in the second quarter of 1995 were
$8,864,000 (13.8% of the net sales from continuing operations) compared to
$7,652,000 (13.4% of net sales from continuing operations) reported in the
second quarter of 1994. A portion of the increase was related to the effects
of two new pension plans created in the latter part of 1994. Additional
expenses were incurred in relation to sales concessions granted during the
second quarter of 1995 at the Verson division. The remainder of the
increases was principally related to normal cost increases in the areas of
salaries, fringe benefits (including insurance) and supplies.
The decrease in interest expense ($223,000 in the second quarter of 1995
compared to $469,000 in the second quarter of 1994) was directly related to
reduced borrowing levels and lower effective interest rates in the current
year's second quarter. As noted above, a new Revolving Credit Agreement was
entered into in 1994. Favorable operating cash flow continued to keep
borrowing levels lower in the current year.
Other income in the second quarter of 1995 was $167,000 compared to other
expense of $409,000 in the second quarter of the prior year. The most
significant change related to income (approximately $450,000) generated in
the second quarter of 1995 from the settlement of certain legal issues
related to discontinued operations. Other expense in the second quarter of
1994 included a provision for deferred compensation offset in part by the
effect of greater interest income in the 1994 second quarter compared to the
current year's second quarter. Gains on the sales of excess/idle facilities
were also greater in the second quarter of 1994.
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
Working capital at June 30, 1995 was $33,852,000 (current ration of 1.41 to
1.0) versus working capital of $33,531,000 (current ration of 1.53 to 1.0) at
December 31, 1994. Net receivables have increased by about $8,600,000 since
the end of 1994. The majority of the increase was related to the Bush Hog
division. Cash collections associated with the sale of agricultural
equipment to dealers are dependent upon the retail sale of the products by
the dealer. Sales to dealers are typically strong in the first quarter of
the year or just prior to the use season by the farmer. Net agricultural
related receivables have decreased by over $7,000,000 during the second
quarter of 1995. Extended payment terms are offered to dealers in the form
of floor plan financing which is customary in the agricultural equipment
industry. On a consolidated basis, inventory levels have increased by over
$12,000,000 since the end of 1994. Over 95% of the increase was related to
the Verson division. Business at this division continues to improve as
evidenced by jobs in production at the end of the first half of 1995. In
addition, purchasing activities continue for the "A" size press order which
will go into production during the third quarter of 1995. Inventory levels
at the Bush Hog and Coz division have not changed significantly since the end
of 1994. The increase in payables (over $29,000,000 since the end of 1994)
was also principally related to the Verson division due to the above noted
production/purchasing increases. Internal cash flow from operations has
allowed the Company to reduce the balance outstanding under the Revolving
Credit Agreement by $8,300,000 during the first half of 1995.
Major fixed asset additions included building additions at the Verson
division (to expand the press assembly area) and a new paint system at the
Bush Hog division. Other fixed asset additions at all divisions were for
equipment to improve productivity and quality in the products manufactured.
Funds to finance these additions include current operating cash flow and
borrowings (subsequently repaid) under the Revolving Credit Agreement.
As noted above, internal cash flow has been very strong in the first half of
1995 and the Company anticipates that the trend will continue for the
remainder of the current year. Besides cash usages in the first half of 1995
described above, the Company also redeemed all outstanding shares of its
Series B Preferred Stock in the second quarter at a discount of approximately
$974,000. In addition, the Company declared and paid a $0.025 per share
dividend on its common stock, the first such dividend on the common stock
since 1982. Subsequent to the end of the second quarter of 1995, the Company
declared an additional $0.025 per share dividend on its common stock, payable
at the end of the third quarter. The Company has also announced its intent
to redeem the outstanding shares of its Series
<PAGE>
C Preferred Stock prior to the end of 1995.
As of June 30, 1995, the Company had cash balances of approximately
$1,000,000 and additional funds of approximately $28,000,000 available under
its Revolving Credit Agreement. The Company believes that its expected
operating cash flow and funds available under its Revolving Credit Agreement
are adequate to finance its operations and capital expenditures in the near
future. During the first half of 1995, the Company has been in compliance
with all provisions of loan agreements in effect.
<PAGE>
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
On May 17, 1995 the Registrant held its annual meeting of
shareholders. Copies of the related proxy statement have been previously
filed with the Securities and Exchange Commission. The following item was
voted on by the Company's shareholders:
THE ELECTION OF FOUR DIRECTORS. Proxies for the meeting were solicited
pursuant to Regulation 14A. There were no solicitations in opposition to the
management's nominees as listed in the proxy statement. The nominees
received the following number of votes of Common and Preferred Shares:
CLASS A DIRECTORS - TERM EXPIRES IN 1997 - MR. MITCHELL I. QUAIN
----------------------------------------------------------------
For Mr. Quain - 8,556,198; withheld from Mr. M. Quain - 11,232.
Mr. R. A. Drexler and J. W. Puth terms of office as Class A Directors
continued after the meeting.
CLASS B DIRECTORS - TERM EXPIRES IN 1998 - MR. LLOYD A. DREXLER, MR. JOHN
E. JONES AND MR. STANLEY J. GOLDRING
-------------------------------------------------------------------------
For Mr. L. Drexler - 8,552,480; withheld from Mr. L. Drexler - 14,950.
For Mr. J. Jones - 8,553,739; withheld from Mr. J. Jones 13,691 and
for Mr. S. Goldring - 8,557,029; withheld from Mr. Goldring - 10,401.
CLASS C DIRECTORS - TERM EXPIRES IN 1996 - MR. S. S. SHERMAN,
MR. KENNETH B. LIGHT AND MR. WILLIAM FISCHER
-------------------------------------------------------------
Mr. S. S. Sherman, Mr. Kenneth Light and Mr. W. Fischer terms of office
as Class C Directors continued after the meeting.
Approximately 430,000 shares held by brokers and nominees were not voted
in the election of the directors.
<PAGE>
Item 6. EXHIBIT AND REPORTS ON FORM 8-K
-------------------------------
(a) Exhibits - See Exhibit Index included herein.
(b) Reports on Form 8-K - there were no reports on Form 8-K for the three
months ended June 30, 1995.
<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)
August 11, 1995 Kenneth B. Light
- --------------- ----------------------------------------------
Kenneth B. Light,
Executive Vice President, Chief Financial &
Administrative Officer; Director
August 11, 1995 Robert J. Fleck
- --------------- -----------------------------------------------
Robert J. Fleck,
Vice President - Accounting & Chief Accounting
Officer
<PAGE>
ALLIED PRODUCTS CORPORATION
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- ----------------------------------
11 Computation of Earnings per Share
27 Financial Data Schedule
<PAGE>
EXHIBIT 11
PAGE 1
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF PRIMARY EARNINGS PER SHARE
(ALL DOLLARS ROUNDED TO THE NEAREST $1,000, EXCEPT PER SHARES AMOUNTS)
<TABLE>
<CAPTION>
Income from Loss on
Continuing Discontinued Net
Shares Operations Operations Income
------ ----------- ------------ ------
<S> <C> <C> <C> <C>
FOR THE THREE MONTHS ENDED
JUNE 30, 1995
Income (loss) $7,677,000 $ - $7,667,000
Dividend requirements on Series B preferred
stock (111,000) - (111,000)
Dividend requirements on Series C preferred
stock (311,000) - (311,000)
Weighted average of outstanding shares of
common stock 9,121,982 - - -
Effect of assumed exercise of outstanding
stock options 293,778 - - -
--------- ---------- ----------- ----------
9,415,760 $7,255,000 $ - $7,255,000
--------- ---------- ----------- ----------
--------- ---------- ----------- ----------
Earnings per common share $ .77 $ - $ .77
---------- ----------- ----------
---------- ----------- ----------
FOR THE THREE MONTHS ENDED
JUNE 30, 1994
Income(loss) $6,992,000 $(1,001,000) $5,991,000
Dividend requirements on Series B preferred
stock (137,000) - (137,000)
Dividend requirements on Series C preferred
stock (330,000) - (330,000)
Weighted average of outstanding shares of
common stock 9,103,727 - - -
--------- ---------- ----------- ----------
9,103,727 $6,525,000 $(1,001,000) $5,524,000
--------- ---------- ----------- ----------
--------- ---------- ----------- ----------
Earnings (loss) per common share $ .72 $ (.11) $ .61
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
<PAGE>
EXHIBIT 11
PAGE 2
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF PRIMARY EARNINGS PER SHARE
(ALL DOLLARS ROUNDED TO THE NEAREST $1,000, EXCEPT PER SHARES AMOUNTS)
<TABLE>
<CAPTION>
Income from Loss on
Continuing Discontinued Net
Operations Operations Income
----------- ------------ ------
<S> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED
JUNE 30, 1995
Income (loss) $14,327,000 $ - $14,327,000
Dividend requirements on Series B preferred
stock (267,000) - (267,000)
Dividend requirements on Series C preferred
stock (622,000) - (622,000)
Weighted average of outstanding shares of
common stock 9,114,482 - - -
Effect of assumed exercise of outstanding
stock options 255,029 - - -
--------- ----------- ----------- -----------
9,369,511 $13,438,000 $ - $13,438,000
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
Earnings per common share $ 1.43 $ - $ 1.43
----------- ----------- -----------
----------- ----------- -----------
FOR THE SIX MONTHS ENDED
JUNE 30, 1994
Income (loss) $12,289,000 $(2,950,000) $ 9,339,000
Dividend requirements on Series B preferred
stock (273,000) - (273,000)
Dividend requirements on Series C preferred
stock (678,000) - (678,000)
Weighted average of outstanding shares of
common stock 9,099,491 - - -
--------- ----------- ----------- -----------
9,099,491 11,338,000 $(2,950,000) $ 8,388,000
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
Earnings (loss) per common share $ 1.24 $ (.32) $ .92
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<PAGE>
EXHIBIT 11
PAGE 3
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
(ALL DOLLARS ROUNDED TO THE NEAREST $1,000, EXCEPT PER SHARES AMOUNTS)
<TABLE>
<CAPTION>
Income from Loss on
Continuing Discontinued Net
Shares Operations Operations Income
------ ----------- ------------ ------
<S> <C> <C> <C> <C>
FOR THE THREE MONTHS ENDED
JUNE 30, 1995
Income (loss) $7,677,000 $ - $7,667,000
Dividend requirements on Series B preferred
stock (111,000) - (111,000)
Dividend requirements on Series C preferred
stock (311,000) - (311,000)
Weighted average of outstanding shares of
common stock 9,121,982 - - -
Effect of assumed exercise of outstanding
stock options 298,204 - - -
--------- ---------- ----------- ----------
9,420,186 $7,255,000 $ - $7,255,000
--------- ---------- ----------- ----------
--------- ---------- ----------- ----------
Earnings per common share $ .77 $ - $ .77
--------- ---------- ----------- ----------
--------- ---------- ----------- ----------
FOR THE THREE MONTHS ENDED
JUNE 30, 1994
Income(loss) $6,992,000 $(1,001,000) $5,991,000
Dividend requirements on Series B preferred
stock (137,000) - (137,000)
Dividend requirements on Series C preferred
stock (330,000) - (330,000)
Weighted average of outstanding shares of
common stock 9,103,727 - - -
--------- ----------- ----------- ----------
9,103,727 $6,525,000 $(1,001,000) $5,524,000
--------- ----------- ----------- ----------
--------- ----------- ----------- ----------
Earnings (loss) per common share $ .72 $ (.11) $ .61
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
<PAGE>
EXHIBIT 11
PAGE 4
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
(ALL DOLLARS ROUNDED TO THE NEAREST $1,000, EXCEPT PER SHARES AMOUNTS)
<TABLE>
<CAPTION>
Income from Loss on
Continuing Discontinued Net
Operations Operations Income
----------- ------------ ------
<S> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED
JUNE 30, 1995
Income (loss) $14,327,000 $ - $14,327,000
Dividend requirements on Series B preferred
stock (267,000) - (267,000)
Dividend requirements on Series C preferred
stock (622,000) - (622,000)
Weighted average of outstanding shares of
common stock 9,114,482 - - -
Effect of assumed exercise of outstanding
stock options 298,204 - - -
--------- ----------- ----------- -----------
9,412,686 $13,438,000 $ - $13,438,000
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
Earnings per common share $ 1.43 $ - $ 1.43
----------- ----------- -----------
----------- ----------- -----------
FOR THE SIX MONTHS ENDED
JUNE 30, 1994
Income (loss) $12,289,000 $(2,950,000) $ 9,339,000
Dividend requirements on Series B preferred
stock (273,000) - (273,000)
Dividend requirements on Series C preferred
stock (678,000) - (678,000)
Weighted average of outstanding shares of
common stock 9,099,491 - - -
--------- ----------- ----------- -----------
9,099,491 $11,338,000 $(2,950,000) $ 8,388,000
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
Earnings (loss) per common share $ 1.24 $ (.32) $ .92
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS STATEMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT JUNE 30, 1995 AND THE CONSOLIDATED STATEMENT OF
INCOME (LOSS) AND THE CONSOLIDATED STATEMENT OF CASH FLOW FOR THE SIX MONTHS
ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,001
<SECURITIES> 0
<RECEIVABLES> 55,892
<ALLOWANCES> 1,135
<INVENTORY> 60,555
<CURRENT-ASSETS> 117,007
<PP&E> 86,520
<DEPRECIATION> 48,675
<TOTAL-ASSETS> 176,571
<CURRENT-LIABILITIES> 83,155
<BONDS> 339
<COMMON> 91
11,500
0
<OTHER-SE> 79,358
<TOTAL-LIABILITY-AND-EQUITY> 176,571
<SALES> 131,916
<TOTAL-REVENUES> 131,916
<CGS> 99,245
<TOTAL-COSTS> 99,245
<OTHER-EXPENSES> 17,853
<LOSS-PROVISION> 516
<INTEREST-EXPENSE> 674
<INCOME-PRETAX> 14,818
<INCOME-TAX> 491
<INCOME-CONTINUING> 14,327
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,327
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.43
</TABLE>
