<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, 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 October 31, 1995.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTRODUCTION
CONDENSED CONSOLIDATED BALANCE SHEETS-
September 30, 1995 and December 31, 1994
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)-
Three and Nine Months Ended September 30, 1995 and 1994
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-
Nine Months Ended September 30, 1995 and 1994
NOTES TO CONDENSED 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 condensed consolidated financial statements included herein (as of
September 30, 1995 and for the three and nine months ended September 30, 1995
and 1994) 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 condensed consolidated financial information
required therein. The information as of December 31, 1994 is derived from the
audited year end balance sheet for that year. 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, 1995 and 1994 are not necessarily indicative of the results to be
expected for the full year.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
------------------ -----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,517,000 $ 1,654,000
------------ ------------
Notes and accounts receivable, less allowances of
$1,126,000 and $1,521,000, respectively $ 57,340,000 $ 46,267,000
------------ ------------
Inventories:
Raw materials $ 13,093,000 $ 11,556,000
Work in process 21,483,000 16,437,000
Finished goods 17,939,000 20,462,000
------------ ------------
$ 52,515,000 $ 48,455,000
------------ ------------
Prepaid expenses $ 599,000 $ 456,000
------------ ------------
Total current assets $111,971,000 $ 96,832,000
------------ ------------
Plant and Equipment, at cost:
Land $ 2,215,000 $ 2,311,000
Buildings and improvements 38,573,000 34,252,000
Machinery and equipment 44,760,000 40,126,000
------------ ------------
$ 85,548,000 $ 76,689,000
Less- Accumulated depreciation and amortization 47,229,000 46,128,000
------------ ------------
$ 38,319,000 $ 30,561,000
------------ ------------
Other Assets:
Notes receivable, due after one year $ 7,437,000 $ 7,658,000
Deferred charges (goodwill), net of amortization 13,075,000 14,626,000
Other 584,000 878,000
------------ ------------
$ 21,096,000 $ 23,162,000
------------ ------------
$171,386,000 $150,555,000
------------ ------------
------------ ------------
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
</TABLE>
1
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
------------------ -----------------
<S> <C> <C>
Current Liabilities:
Revolving credit agreement $ 6,300,000 $ 10,300,000
Current portion of long-term debt 601,000 689,000
Accounts payable 33,510,000 20,475,000
Accrued expenses 32,090,000 31,837,000
------------ ------------
Total current liabilities $ 72,501,000 $ 63,301,000
------------ ------------
Long-term debt, less current portion shown above $ 98,000 $ 630,000
------------ ------------
Other long-term liabilities $ 2,119,000 $ 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 September 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 September 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 September 30, 1995 and
December 31, 1994, respectively 91,000 91,000
Additional paid-in capital 93,154,000 92,146,000
Retained earning (deficit) (8,077,000) (27,075,000)
------------ ------------
$ 85,168,000 $ 72,502,000
------------ ------------
$171,386,000 $150,555,000
------------ ------------
------------ ------------
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
2
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
<TABLE>
<CAPTION>
For the three months ended September 30,
----------------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Net sales from continuing operations $68,899,000 $54,406,000
Cost of products sold 54,436,000 40,734,000
----------- -----------
Gross profit $14,463,000 $13,672,000
----------- -----------
Other costs and expenses:
Selling and administrative expenses $ 7,909,000 $ 7,230,000
Interest expense 143,000 191,000
Other (income) expense, net (164,000) 387,000
----------- -----------
$ 7,888,000 $ 7,808,000
----------- -----------
Income before taxes from continuing operations $ 6,575,000 $ 5,864,000
Provision for income taxes 248,000 226,000
----------- -----------
Income from continuing operations $ 6,327,000 $ 5,638,000
Discontinued operations - (loss) on disposition
of discontinued operations and other costs, net
of tax - (1,301,000)
----------- -----------
Net income $ 6,327,000 $ 4,337,000
----------- -----------
----------- -----------
Net income applicable to common stock $ 6,016,000 $ 3,859,000
----------- -----------
----------- -----------
Earnings (loss) per common share:
Primary-
Continuing operations $ .63 $ .56
Discontinued operations - (.14)
----------- -----------
Income per common share $ .63 $ .42
----------- -----------
----------- -----------
Fully Diluted -
Continuing operations $ .63 $ .56
Discontinued operations - (.14)
----------- -----------
Income per common share $ .63 $ .42
----------- -----------
----------- -----------
Weighted average shares outstanding:
Primary 9,468,000 9,104,000
----------- -----------
----------- -----------
Fully Diluted 9,468,000 9,104,000
----------- -----------
----------- -----------
Dividends per common share $ .025 $ -
----------- -----------
----------- -----------
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
3
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
<TABLE>
<CAPTION>
For the nine months ended September 30,
---------------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Net sales from continuing operations $200,815,000 $170,875,000
Cost of products sold 153,681,000 126,188,000
------------ ------------
Gross profit $ 47,134,000 $ 44,687,000
------------ ------------
Other costs and expenses:
Selling and administrative expenses $ 25,779,000 $ 23,158,000
Interest expense 817,000 1,714,000
Other (income) expense, net (855,000) 1,180,000
------------ ------------
$ 25,741,000 $ 26,052,000
------------ ------------
Income before taxes from continuing operations $ 21,393,000 $ 18,635,000
Provision for income taxes 739,000 708,000
------------ ------------
Income from continuing operations $ 20,654,000 $ 17,927,000
Discontinued operations - (loss) on disposition
of discontinued operations and other costs, net
of tax - (4,251,000)
------------ ------------
Net income $ 20,654,000 $ 13,676,000
------------ ------------
------------ ------------
Net income applicable to common stock $ 19,454,000 $ 12,247,000
------------ ------------
------------ ------------
Earnings (loss) per common share:
Primary-
Continuing operations $ 2.07 $ 1.81
Discontinued operations - (.46)
------------ ------------
Income per common share $ 2.07 $ 1.35
------------ ------------
------------ ------------
Fully Diluted -
Continuing operations $ 2.06 $ 1.81
Discontinued operations - (.46)
------------ ------------
Income per common share $ 2.06 $ 1.35
------------ ------------
------------ ------------
Weighted average shares outstanding:
Primary 9,396,000 9,101,000
------------ ------------
------------ ------------
Fully Diluted 9,450,000 9,101,000
------------ ------------
------------ ------------
Dividends per common share $ .05 $ -
------------ ------------
------------ ------------
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
4
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the nine months ended September 30,
---------------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 20,654,000 $ 13,676,000
Adjustments to reconcile net income to net cash
provided from operating activities:
Provision for loss on disposition of discontinued
operation - (75,000)
Depreciation and amortization 3,792,000 4,040,000
Amortization of deferred charges 1,551,000 1,551,000
Changes in noncash assets and liabilities, net of
effects of assets/businesses sold and noncash
transactions:
(Increase) in accounts receivable (11,612,000) (1,160,000)
(Increase) decrease in inventories (4,060,000) 2,936,000
(Increase) decrease in prepaid expenses (143,000) 597,000
Increase (decrease) in accounts payable and accrued
expenses 13,117,000 (4,677,000)
Other, net (1,002,000) 344,000
------------ ------------
Net cash provided from operating activities $ 22,297,000 $ 17,232,000
------------ ------------
Cash Flows from Investing Activities:
Additions to plant and equipment $(12,822,000) $ (3,271,000)
Proceeds from sales of plant and equipment 2,054,000 1,990,000
------------ ------------
Net cash used for investing activities $(10,768,000) $ (1,281,000)
------------ ------------
Cash Flows from Financing Activities:
Borrowings under the revolving credit agreement 79,100,000 38,700,000
Borrowings under the revolver loan agreements - 29,243,000
Payments under the revolver loan agreements - (48,508,000)
Payments under the revolving credit agreement (83,100,000) (38,700,000)
Payments of long-term debt (620,000) (33,587,000)
Payments of preferred stock redemptions (6,366,000) (1,550,000)
Payments of dividends (1,344,000) (1,429,000)
Stock option transactions 664,000 277,000
------------ ------------
Net cash used for financing activities $(11,666,000) $(55,554,000)
------------ ------------
Net (decrease) in cash and cash equivalents $ (137,000) $(39,603,000)
Cash and cash equivalents at beginning of year 1,654,000 44,416,000
------------ ------------
Cash and cash equivalents at end of period $ 1,517,000 $ 4,813,000
------------ ------------
------------ ------------
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
5
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) ACCRUED EXPENSES
The Company's accrued expenses consist of the following:
<TABLE>
<CAPTION>
9/30/95 12/31/94
----------- -----------
<S> <C> <C>
Salaries and wages $ 5,824,000 $ 4,678,000
Warranty 7,982,000 5,817,000
Self insurance accruals 5,924,000 6,522,000
Restructuring and other facility close
down costs 1,807,000 3,373,000
Pensions and retiree health 4,940,000 4,985,000
Taxes, other than income taxes 544,000 1,288,000
Environmental matters 2,535,000 3,045,000
Other 2,534,000 2,129,000
----------- -----------
$32,090,000 $31,837,000
----------- -----------
----------- -----------
</TABLE>
(2) DISPOSITION/SALES OF 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 Condensed 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 nine months of 1995 and 1994, expenditures of
approximately $1,566,000 ($801,000 in the third quarter) and $2,400,000
($200,000 in the third quarter), respectively, were charged against the
provision for restructuring costs established 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.
(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'
6
<PAGE>
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
nine month period of 1995 the Company provided $945,000 ($224,000 in the
third quarter) to fund this plan.
(6) DIVIDEND PAYMENT ON COMMON STOCK
During the second and third quarter of 1995, the Company declared and
paid its first dividends on its Common Stock since 1982. The dividend paid
on June 30, 1995 and September 30, 1995 to shareholders of record on May
26, 1995 and August 25, 1995 was $.025 per share per quarter. Subsequent
to the end of the third quarter of 1995, the Company declared a quarterly
dividend of $.025 per share on its Common Stock payable on December 29,
1995 to shareholders of record on November 24, 1995.
(7) REDEMPTION OF SERIES B PREFERRED STOCK
During the nine months 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) LEGAL SETTLEMENT
During the third quarter of 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 purchase of the assets of Verson Allsteel Press
Company by the Company. As a result of the settlement, the Company received
21,682 shares of its Common Stock, valued at approximately $430,000, and
$500,000 in cash. The settlement required 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.
(9) 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
7
<PAGE>
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 nine months ended September 30, 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 secured the
performance of the purchaser's obligation to deliver five rigs and certain
related spare parts against a specific foreign order. As of September
30, 1995, the purchaser has met its obligations under the letter of
credit, which expired September 10, 1995.
At September 30, 1995, the Company was contingently liable for
approximately $6,752,000, primarily relating to outstanding letters of
credit.
(10) INCOME TAXES
The provision for income taxes for the nine months ended September
30, 1995 and 1994 is $739,000 and $554,000, respectively. The allocation
of the provision for income taxes in the Condensed Consolidated Statements
of Income (Loss) in the nine month periods of 1995 and 1994 includes the
following:
<TABLE>
<CAPTION>
1995 1994
-------- ----------
<S> <C> <C>
Continuing operations $739,000 $ 708,000
Discontinued operations - (154,000)
-------- ---------
Total current provision $739,000 $ 554,000
-------- ---------
-------- ---------
</TABLE>
The provision for income taxes for the nine months ended September
30, 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 $ 7,488,000 $ 4,981,000
Utilization of net operating loss carryforwards (7,154,000) (4,982,000)
Permanent book over tax, net of tax over book,
differences on acquired assets 682,000 682,000
Other (277,000) (127,000)
----------- -----------
Total current provision $ 739,000 $ 554,000
----------- -----------
----------- -----------
</TABLE>
8
<PAGE>
(11) SUMMARY OF OTHER (INCOME) EXPENSE
Other (income) expense for the three months and nine months periods
ended September 30, 1995 and 1994 consists of the following:
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
-------------------------- -------------------------
9/30/95 9/30/94 9/30/95 9/30/94
----------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income $ (69,000) $(224,000) $ (347,000) $ (916,000)
Goodwill amortization 516,000 516,000 1,551,000 1,551,000
Loan cost expenses 87,000 103,000 261,000 495,000
Net gain (loss) on sales of operating and
non-operating assets 202,000 74,000 (1,123,000) (240,000)
Litigation settlements (1,090,000) - (1,123,000) -
Other miscellaneous 190,000 (82,000) (74,000) 290,000
----------- --------- ----------- ----------
$ (164,000) $ 387,000 $ (855,000) $1,180,000
----------- --------- ----------- ----------
----------- --------- ----------- ----------
</TABLE>
(12) SUBSEQUENT EVENT
On October 2, 1995, the Company redeemed 115,000 shares of its Series
C Cumulative Preferred Stock. The stock, which had a stated value of $100
per share, was redeemed for a cash payment of $11,630,000. The stock was
held by Chrysler Financial Corporation and Ford Motor Credit Company.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
FIRST NINE MONTHS OF 1995 COMPARED TO FIRST NINE MONTHS OF 1994
Net sales from continuing operations for the nine month period ended
September 30, 1995 were $200,815,000, an increase of over 17% from net sales
from continuing operations of $170,875,000 reported in the nine month period
ended September 30, 1994. Income from continuing operations and net income in
the first nine months of 1995 was $20,654,000 compared to income from
continuing operations of $17,927,000 and net income of $13,676,000 reported in
the first nine months of 1994.
Net sales at the Bush Hog division decreased by 3% in the first nine
months of 1995 compared to the same nine month period of the prior year. The
majority of the decrease was associated with the disc mower and peanut combine
product lines. Rotary cutter sales have also decreased, to a lesser extent, in
the first nine months of 1995. In general, economic conditions in the U. S.
Farm sector continue to weaken in 1995 after record incomes from 1989 through
1994. Net farm income for 1995 is projected to decrease by more than 10%
compared to 1994. Debate on the 1995 farm bill continues in Congress. Farm
subsidy payments are expected to decrease over the next several years. Major
grain and cotton prices have increased significantly since 1994. Sales at the
Bush Hog division have been impacted by the above conditions as well as the
effects of spring flooding in the Midwest and drought and insect infestation in
certain areas of the south affecting corn, cotton and peanut crops. These
decreases were partially offset by the effects of sales of new products
introduced in the current year. Gross profits and gross profit margins have
decreased in the 1995 nine month period at Bush Hog. The decreases were
primarily related to the effects of decreased labor efficiencies 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 sources
under OEM (original equipment manufacturing) agreements, resulting in lower
gross profit margins. Lower sales volume as noted above also resulted in lower
gross profits.
At the Verson division, net sales increased by over 54% in the first nine
months of 1995 compared to the first nine months of 1994. Production has begun
in 1995 on an order in excess of
10
<PAGE>
$80,000,000 for three "A" size transfer presses. Revenues and profits are
recognized on a percentage of completion basis for press orders at the Verson
division. Production on other press orders as well as parts sales have also
increased in 1995. Although gross profit margins have decreased in 1995, gross
profits have increased, principally the result of the increased production
(sales) volume noted above. The margin decrease was associated with increased
labor costs (overtime) necessary to meet delivery schedules of manufactured
presses and increased subcontracting costs related to press components which
cannot be produced internally due to capacity limitations. Gross profits in the
1994 nine month period include the effects of the reversal of a $1,100,000
inventory reserve established in a prior year.
Net sales at the Coz division have increased by over 13% in the first nine
months of 1995 compared to the same nine month period of 1994. The majority of
the sales increase was related to brokered products and compounded materials
product lines. The vast majority of the increase in sales was associated with
increased sales prices in the current year. Volume increases were not
significant. During 1994 and the early part of 1995, the price of basic raw
materials increased significantly. Sales prices were adjusted to reflect these
cost increases. In recent months, raw material prices have stabilized or have
decreased. Gross profits have increased slightly in the 1995 nine month period,
principally due to the effects of increased sales noted above. Gross profit
margins have decreased slightly in 1995 due to the mix of products sold and the
difficulty encountered in passing on material cost increases to customers.
Manufacturing and shipping costs have increased due to a slight increase in
employment levels and normal cost increases in labor, rent and supplies, all of
which have resulted in lower current year margins.
Selling and administrative expenses were $25,779,000 (12.8% of net sales
from continuing operations) in the first nine months of 1995 compared to
$23,158,000 (13.6% of net sales from continuing operations) in the first nine
months of 1994. As a percent of sales dollars, selling expenses have decreased
in 1995. The majority of the increase in sales volume was related to the Verson
division, which are primarily 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 1995 nine month period as a result of the resignation of a
Corporate officer. Normal cost increases (salaries, rent, utilities, insurance,
etc.) also impacted both selling and administrative costs in 1995.
The decrease in interest expense ($817,000 in the first nine months of 1995
compared to
11
<PAGE>
$1,714,000 in the first nine months of the prior year) was directly related to
reduced borrowing levels in the current year. In March 1994, the Company
terminated certain financing agreements and replaced them with a Revolving
Credit Agreement. Borrowing levels have been reduced due to the improved
internal cash flow of the Company from its continuing operations. The Revolving
Credit Agreement also provides for a decreased effective interest rate.
Other income was $855,000 for the nine month period ended September 30,
1995 compared to other expense of $1,180,000 for the same nine month period of
the prior year. Reference is made to Note 11 of Notes to Condensed Consolidated
Financial Statements for an analysis of other (income) expense for the nine
month periods ended September 30, 1995 and 1994.
Discontinued operations in the first nine months 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.
THIRD QUARTER OF 1995 COMPARED TO THIRD QUARTER OF 1994
Net sales from continuing operations in the third quarter of 1995 were
$68,899,000, an increase of over 26% from net sales from continuing operations
of $54,406,000 reported in the third quarter of 1994. Income from continuing
operations and net income were $6,327,000 in the third quarter of 1995 compared
to income from continuing operations of $5,638,000 and net income of $4,337,000
reported in the third quarter of the prior year.
Net sales at the Bush Hog division decreased 19% in the third quarter of
1995 compared to the third quarter of 1994. Approximately half of the decrease
was related to the peanut combine product line. Certain peanut growing areas of
the United States were affected by extreme drought conditions. Insect
infestation also affected the peanut crop in 1995 resulting in decreased crop
yields. Farmers were reluctant to invest in related farm machinery due to
anticipated decreased income from their crops. Rotary cutter sales have also
decreased in the third quarter of 1995 compared to the third quarter of 1994.
Continued weak cattle prices continue to slow down sales of the larger cutters.
New product sales were not significant in the current year's third quarter. At
the Bush Hog division, gross profits and gross profit margins have decreased in
the third quarter of 1995 compared to the third quarter of 1994. Approximately
half of the decrease in gross profits was related to lower sales volume as
noted above. Margin decreases were associated with decreased facility
utilization and the effects of manufacturing inefficiencies in the third
quarter of 1995.
12
<PAGE>
At the Verson division, net sales in the third quarter of 1995 have more
than doubled net sales levels of the third quarter of the prior year.
Production has begun on an order for three "A" size transfer presses in the
third quarter of 1995. Significant press orders received in the last half of
1994 and the early part of 1995 had a positive effect on sales in the third
quarter of the current year. Gross profits at the Verson division have
increased in the third quarter of 1995 due to the increase in sales volume as
noted above. Margins have decreased in the third quarter of the current year
due to the significant amount of production overtime necessary to meet press
delivery schedules. Certain press production is being subcontracted to outside
vendors in the current year's third quarter also resulting in decreased
margins. Gross profits and gross profit margins in the third quarter of 1994
include the effect of the reversal of a $1,100,000 inventory reserve
established in a prior year.
Net sales at the Coz division increased by over 12% in the third quarter
of 1995 compared to the third quarter of 1994. The majority of this increase
was related to the effects of increased sales prices within the brokered and
compounded materials product lines as previously discussed. Gross profits
increased in the third quarter of the current year due primarily to the effect
of increased sales. Margins decreased slightly due to the effect of the mix of
products sold.
Selling and administrative expenses in the third quarter of 1995 were
$7,909,000 (11.5% of net sales from continuing operations ) compared to
$7,230,000 (13.3% of net sales from continuing operations) reported in the
third quarter of 1994. A portion of the increase was related to the effect of
two new pension plans created in the latter part of 1994 as previously
discussed. Administrative expenses also include the effect of an ongoing cost
reduction study at the Bush Hog division. The remainder of the increases was
principally related to normal cost increases in the areas of salaries and
fringe benefits (including insurance).
The decrease in interest expense ($143,000 in the third quarter of 1995
compared to $191,000 in the third quarter of 1994) was directly related to
reduced borrowing levels in the current year's third quarter.
Other income was $164,000 in the third quarter of 1995 compared to other
expense of $387,000 in the third quarter of the prior year. Reference is made
to Note 11 of Notes to Condensed Consolidated Financial Statements for an
analysis of other (income) expense for the above noted periods.
13
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
Working capital at September 30, 1995 was $39,470,000 (current ratio of
1.54 to 1.0) versus working capital of $33,531,000 (current ratio of 1.53 to
1.0) at December 31, 1994. Net receivables have increased by approximately
$11,000,000 since the end of 1994. The majority of this increase was associated
with the Verson division where levels of press shipments have increased during
the third quarter of 1995. Receivable levels at the Bush Hog division have
increased slightly since the end of 1994 but have decreased significantly in
recent months due to normal seasonal collections and lower recent sales as
previously discussed. On a consolidated basis, inventory levels have increased
by over $4,000,000 since the end of 1994. The entire increase was related to
the Verson division where production has begun in the third quarter of 1995 on
the order for three "A" size transfer presses. Inventory levels have decreased
at the Coz and Bush Hog divisions since the end of 1994. The increase in
payables (over $13,000,000 since the end of 1994) was entirely associated with
the Verson division due to increased production levels as previously discussed.
Internal cash flow from operations has allowed the Company to reduce the
balance outstanding under the Revolving Credit Agreement by $4,000,000 during
the first nine months 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
finances these additions include current operating cash flow and borrowings
(subsequently repaid) under the Revolving Credit Agreement. During the first
nine months of 1995, the Company sold for cash several idle facilities
resulting in gains in excess of $1,000,000.
As noted above, internal cash flow has been very strong in the first nine
months of 1995 and the Company anticipates that the trend will continue for the
remainder of the current year. In addition to the cash usages described above
in the first nine months of 1995, the Company redeemed all outstanding shares
of its Series B Preferred Stock in the second quarter at a discount of
approximately $975,000. In addition, the Company declared and paid dividends of
$0.025 per share in each of the second and third quarters of 1995, the first
such dividends on Common Stock since 1982. Subsequent to the end of the third
quarter of 1995, the Company declared an additional $0.025 per share dividend
on its Common Stock, payable at the end of 1995. Also subsequent to the end of
the third quarter, the Company redeemed all outstanding shares of its Series C
Preferred Stock at a slight premium through the use of internally generated
funds.
14
<PAGE>
As of September 30, 1995, the Company had cash balances of approximately
$1,500,000 and additional funds of approximately $23,700,000 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 nine months of 1995, the Company has been in
compliance with all provisions of loan agreements in effect.
15
<PAGE>
PART II - OTHER INFORMATION
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 September 30, 1995.
16
<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 10, 1995 Kenneth B. Light
- ----------------- ----------------------------------------
Kenneth B. Light,
Executive Vice President, Chief
Financial & Administrative Officer;
Director
November 10, 1995 Robert J. Fleck
- ----------------- ----------------------------------------
Robert J. Fleck,
Vice President - Accounting & Chief
Accounting Officer
17
<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 SEPTEMBER 30, 1995
Income (loss) $6,327,000 $ - $6,327,000
Dividend requirements on Series B preferred stock - - -
Dividend requirements on Series C preferred stock (311,000) - (311,000)
Weighted average of outstanding shares of common
stock 9,139,482 - - -
Effect of assumed exercise of outstanding stock
options 328,793 - - -
--------- ---------- ----------- ----------
9,468,275 $6,016,000 $ - $6,016,000
--------- ---------- ----------- ----------
--------- ---------- ----------- ----------
Earnings per common share $ .63 $ - $ .63
---------- ----------- ----------
---------- ----------- ----------
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1994
Income (loss) $5,638,000 $(1,301,000) $4,337,000
Dividend requirements on Series B preferred stock (148,000) - (148,000)
Dividend requirements on Series C preferred stock (330,000) - (330,000)
Weighted average of outstanding shares of common
stock 9,104,482 - - -
--------- ---------- ----------- ----------
9,104,482 $5,160,000 $(1,301,000) $3,859,000
--------- ---------- ----------- ----------
--------- ---------- ----------- ----------
Earnings (loss) per common share $ .56 $ (.14) $ .42
---------- ----------- ----------
---------- ----------- ----------
</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
SHARES OPERATIONS OPERATIONS INCOME
------ ----------- ------------ ------
<S> <C> <C> <C> <C>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
Income (loss) $20,654,000 $ - $20,654,000
Dividend requirements on Series B preferred stock (267,000) - (267,000)
Dividend requirements on Series C preferred stock (933,000) - (933,000)
Weighted average of outstanding shares of common
stock 9,121,982 - - -
Effect of assumed exercise of outstanding stock
options 274,304 - - -
--------- ----------- ----------- -----------
9,396,286 $19,454,000 $ - $19,454,000
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
Earnings per common share $ 2.07 $ - $ 2.07
----------- ----------- -----------
----------- ----------- -----------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
Income (loss) $17,927,000 $(4,251,000) $13,676,000
Dividend requirements on Series B preferred stock (421,000) - (421,000)
Dividend requirements on Series C preferred stock (1,008,000) - (1,008,000)
Weighted average of outstanding shares of common
stock 9,100,908 - - -
--------- ----------- ----------- -----------
9,100,908 $16,498,000 $(4,251,000) $12,247,000
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
Earnings (loss) per common share $ 1.81 $ (.46) $ 1.35
----------- ----------- -----------
----------- ----------- -----------
</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 SEPTEMBER 30, 1995
Income (loss) $6,327,000 $ - $6,327,000
Dividend requirements on Series B preferred stock - - -
Dividend requirements on Series C preferred stock (311,000) - (311,000)
Weighted average of outstanding shares of common
stock 9,139,482 - - -
Effect of assumed exercise of outstanding stock
options 328,793 - - -
--------- ---------- ----------- ----------
9,468,275 $6,016,000 $ - $6,016,000
--------- ---------- ----------- ----------
--------- ---------- ----------- ----------
Earnings per common share $ .63 $ - $ .63
---------- ----------- ----------
---------- ----------- ----------
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1994
Income (loss) $5,638,000 $(1,301,000) $4,337,000
Dividend requirements on Series B preferred stock (148,000) - (148,000)
Dividend requirements on Series C preferred stock (330,000) - (330,000)
Weighted average of outstanding shares of common
stock 9,104,482 - - -
--------- ---------- ----------- ----------
9,104,482 $5,160,000 $(1,301,000) $3,859,000
--------- ---------- ----------- ----------
--------- ---------- ----------- ----------
Earnings (loss) per common share $ .56 $ (.14) $ .42
---------- ----------- ----------
---------- ----------- ----------
</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
SHARES OPERATIONS OPERATIONS INCOME
------ ----------- ------------ ------
<S> <C> <C> <C> <C>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
Income (loss) $20,654,000 $ - $20,654,000
Dividend requirements on Series B preferred stock (267,000) - (267,000)
Dividend requirements on Series C preferred stock (933,000) - (933,000)
Weighted average of outstanding shares of common
stock 9,121,982 - - -
Effect of assumed exercise of outstanding stock
options 327,801 - - -
--------- ----------- ----------- -----------
9,449,783 $19,454,000 $ - $19,454,000
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
Earnings per common share $ 2.06 $ - $ 2.06
----------- ----------- -----------
----------- ----------- -----------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
Income (loss) $17,927,000 $(4,251,000) $13,676,000
Dividend requirements on Series B preferred stock (421,000) - (421,000)
Dividend requirements on Series C preferred stock (1,008,000) - (1,008,000)
Weighted average of outstanding shares of common
stock 9,100,908 - - -
--------- ----------- ----------- -----------
9,100,908 $16,498,000 $(4,251,000) $12,247,000
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
Earnings (loss) per common share $ 1.81 $ (.46) $ 1.35
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This statement contains summary financial information extracted from the
consolidated balance sheet at September 30, 1995 and the consolidated
statement of income (loss) and the consolidated statement of cash flow for
the nine months ended September 30, 1995 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-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,517
<SECURITIES> 0
<RECEIVABLES> 58,466
<ALLOWANCES> 1,126
<INVENTORY> 52,515
<CURRENT-ASSETS> 111,971
<PP&E> 85,548
<DEPRECIATION> 47,229
<TOTAL-ASSETS> 171,386
<CURRENT-LIABILITIES> 72,501
<BONDS> 98
<COMMON> 91
11,500
0
<OTHER-SE> 85,077
<TOTAL-LIABILITY-AND-EQUITY> 171,386
<SALES> 200,815
<TOTAL-REVENUES> 200,815
<CGS> 153,681
<TOTAL-COSTS> 153,681
<OTHER-EXPENSES> 25,741
<LOSS-PROVISION> 521
<INTEREST-EXPENSE> 817
<INCOME-PRETAX> 21,393
<INCOME-TAX> 739
<INCOME-CONTINUING> 20,654
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,654
<EPS-PRIMARY> 2.07
<EPS-DILUTED> 2.06
</TABLE>
