<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, 1996
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: 8,945,115 COMMON SHARES, $.01
PAR VALUE, AS OF OCTOBER 31, 1996.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTRODUCTION
CONDENSED CONSOLIDATED BALANCE SHEETS-
September 30, 1996 and December 31, 1995
CONDENSED CONSOLIDATED STATEMENTS OF INCOME -
Three and Nine Months Ended Sepatember 30, 1996 and 1995
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-
Nine Months Ended September 30, 1996 and 1995
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, 1996 and for the three and nine months ended September 30, 1996
and 1995) 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, 1995 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, 1996 and 1995 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, 1996 December 31, 1995
------------------ ---------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 314,000 $ 744,000
------------- -------------
Notes and accounts receivable, less allowances of
$819,000 and $948,000, respectively $ 53,510,000 $ 44,293,000
------------- -------------
Inventories:
Raw materials $ 9,367,000 $ 12,037,000
Work in process 26,394,000 20,438,000
Finished goods 17,580,000 19,931,000
------------- -------------
$ 53,341,000 $ 52,406,000
------------- -------------
Deferred tax asset $ 16,374,000 $ 22,538,000
------------- -------------
Prepaid expenses $ 316,000 $ 323,000
------------- -------------
Total current assets $ 123,855,000 $ 120,304,000
------------- -------------
Plant and Equipment, at cost:
Land $ 2,172,000 $ 2,172,000
Buildings and improvements 36,538,000 36,269,000
Machinery and equipment 48,748,000 47,078,000
------------- -------------
$ 87,458,000 $ 85,519,000
Less- Accumulated depreciation and amortization 50,088,000 47,083,000
------------- -------------
$ 37,370,000 $ 38,436,000
------------- -------------
Other Assets:
Notes receivable, due after one year, less allowance of
$7,165,000 and $7,699,000, respectively $ 7,000 $ 40,000
Deferred tax asset 4,823,000 4,823,000
Deferred charges (goodwill), net of amortization 1,712,000 1,845,000
Other 1,097,000 1,295,000
------------- -------------
$ 7,639,000 $ 8,003,000
------------- -------------
$ 168,864,000 $ 166,743,000
------------- -------------
------------- -------------
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
September 30, 1996 December 31,1995
------------------ ----------------
<S> <C> <C>
Current Liabilities:
Revolving credit agreement $ 8,000,000 $ 11,200,000
Current portion of long-term debt 201,000 621,000
Accounts payable 16,744,000 21,152,000
Accrued expenses 34,663,000 32,384,000
------------- -------------
Total current liabilities $ 59,608,000 $ 65,357,000
------------- -------------
Long-term debt, less current portion shown above $ 174,000 $ 315,000
------------- -------------
Other long-term liabilities $ 2,728,000 $ 2,806,000
------------- -------------
Commitments and Contingencies
Shareholders' Investment:
Common Stock, par value $.01 per share; authorized
25,000,000 shares; issued 9,364,844 and 9,138,344
shares at September 30, 1996 and December 31, 1995,
respectively $ 94,000 $ 91,000
Treasury Stock, at cost (347,097 shares at
September 30, 1996) (8,400,000) -
Additional paid-in capital 95,531,000 93,143,000
Retained earnings 19,129,000 5,031,000
------------- -------------
$ 106,354,000 $ 98,265,000
------------- -------------
$ 168,864,000 $ 166,743,000
------------- -------------
------------- -------------
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended September 30,
--------------------------------
1996 1995
------------ ------------
Net sales $ 72,273,000 $ 68,899,000
Cost of products sold 56,151,000 54,436,000
------------ ------------
Gross profit $ 16,122,000 $ 14,463,000
------------ ------------
Other costs and expenses:
Selling and administrative expenses $ 8,293,000 $ 7,909,000
Interest expense 374,000 143,000
Other (income) expense, net (291,000) (164,000)
------------ ------------
$ 8,376,000 $ 7,888,000
------------ ------------
Income before taxes $ 7,746,000 $ 6,575,000
Provision for income taxes 2,940,000 248,000
------------ ------------
Net income $ 4,806,000 $ 6,327,000
------------ ------------
------------ ------------
Net income applicable to common stock $ 4,806,000 $ 6,016,000
------------ ------------
------------ ------------
Earnings per common share:
Primary $ .53 $ .63
------------ ------------
------------ ------------
Fully Diluted $ .53 $ .63
------------ ------------
------------ ------------
Weighted average shares outstanding:
Primary 9,046,000 9,468,000
------------ ------------
------------ ------------
Fully Diluted 9,046,000 9,468,000
------------ ------------
------------ ------------
Dividends per common share $ .05 $ .025
------------ ------------
------------ ------------
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended September 30,
-------------------------------
1996 1995
------------- -------------
Net sales $ 216,714,000 $ 200,815,000
Cost of products sold 165,890,000 153,681,000
------------- -------------
Gross profit $ 50,824,000 $ 47,134,000
------------- -------------
Other costs and expenses:
Selling and administrative expenses $ 25,967,000 $ 25,779,000
Interest expense 1,294,000 817,000
Other (income) expense, net (458,000) (855,000)
------------- -------------
$ 26,803,000 $ 25,741,000
------------- -------------
Income before taxes $ 24,021,000 $ 21,393,000
Provision for income taxes 8,555,000 739,000
------------- -------------
Net income $ 15,466,000 $ 20,654,000
------------- -------------
------------- -------------
Net income applicable to common stock $ 15,466,000 $ 19,454,000
------------- -------------
------------- -------------
Earnings per common share:
Primary $ 1.70 $ 2.07
------------- -------------
------------- -------------
Fully Diluted $ 1.70 $ 2.06
------------- -------------
------------- -------------
Weighted average shares outstanding:
Primary 9,092,000 9,396,000
------------- -------------
------------- -------------
Fully Diluted 9,092,000 9,450,000
------------- -------------
------------- -------------
Dividends per common share $ .15 $ .05
------------- -------------
------------- -------------
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the nine months ended September 30,
---------------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 15,466,000 $ 20,654,000
Adjustments to reconcile net income to net cash provided from
operating activities:
Gains on sales of operating and non-operating assets (117,000) (1,085,000)
Depreciation and amortization 3,866,000 3,792,000
Amortization of deferred charges 133,000 1,551,000
Deferred income taxes 7,609,000 -
Changes in noncash assets and liabilities, net of noncash
transactions:
Increase in accounts receivable (9,412,000) (11,612,000)
Increase in inventories (935,000) (4,060,000)
(Increase) decrease in prepaid expenses 7,000 (143,000)
Decrease in notes receivable, due after one year 33,000 221,000
Increase (decrease) in accounts payable and accrued expenses (2,948,000) 13,117,000
Other, net 315,000 (138,000)
-------------- --------------
Net cash provided from operating activities $ 14,017,000 $ 22,297,000
-------------- --------------
Cash Flows from Investing Activities:
Additions to plant and equipment $ (2,806,000) $ (12,822,000)
Proceeds from sales of plant and equipment 123,000 2,054,000
-------------- --------------
Net cash used for investing activities $ (2,683,000) $ (10,768,000)
-------------- --------------
Cash Flows from Financing Activities:
Borrowings under revolving credit agreements $ 81,150,000 $ 79,100,000
Payments under revolving credit agreements (84,350,000) (83,100,000)
Payments of short and long-term debt (560,000) (620,000)
Payments of preferred stock redemptions - (6,367,000)
Issuance of common stock 1,501,000 -
Purchase of treasury stock (9,638,000) -
Dividends paid (911,000) (1,343,000)
Stock option transactions 1,044,000 664,000
-------------- --------------
Net cash used for financing activities $ (11,764,000) $ (11,666,000)
-------------- --------------
Net decrease in cash and cash equivalents $ (430,000) $ (137,000)
Cash and cash equivalents at beginning of year 744,000 1,654,000
-------------- --------------
Cash and cash equivalents at end of period $ 314,000 $ 1,517,000
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
<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:
9/30/96 12/31/95
------------ ------------
Salaries and wages $ 7,011,000 $ 5,542,000
Warranty 12,210,000 9,077,000
Self insurance accruals 2,620,000 4,411,000
Restructuring and other facility close
down costs 789,000 1,494,000
Pensions, including retiree health 6,334,000 5,901,000
Taxes, other than income taxes 445,000 738,000
Environmental matters 2,612,000 3,019,000
Other 2,642,000 2,202,000
------------ ------------
$34,663,000 $32,384,000
------------ ------------
------------ ------------
(2) RESTRUCTURING COSTS
During the first nine months of 1996 and 1995, expenditures of
approximately $705,000 ($261,000 in the third quarter) and $1,566,000
($801,000 in the third quarter), respectively, were charged against the
provision for restructuring cost established prior to 1994.
(3) FINANCIAL ARRANGEMENTS
During the third quarter of 1996, the Company entered into an Amended
and Restated Credit Agreement with the Bank of America and LaSalle National
Bank. The new agreement (which replaces the Revolving Credit Agreement)
provides for up to $100,000,000 of borrowing at either a floating prime
or fixed LIBOR (with the rate dependant on the ratio of Funded Debt to
Operating Cash Flow) rate. The agreement provides for certain specific
covenants (minimum net worth, debt coverage and fixed charge coverage ratio
and maximum funded debt/operating cash flow ratio) and expires on
September 30, 1999.
(4) DIVIDEND PAYMENTS ON COMMON STOCK
During the first quarter of 1996, the Company increased the
quarterly dividend from $.025 per share to $.05 per share effective with
the first quarter dividend paid on March 30, 1996. Second and third
quarter dividends of $.05 per share have been declared and paid
<PAGE>
prior to the end of each respective quarter. Subsequent to the end of the
third quarter of 1996, the Company declared a fourth quarter dividend of
$.05 per share payable on December 31, 1996 to stockholders of record on
December 6, 1996.
(5) TREASURY STOCK
During the first nine months of 1996, the Company issued 211,500 new
common shares to certain officers of the Company for the exercise of stock
options. The Company repurchased these shares from the officers for
treasury stock purposes. The Company's Board of Directors authorized the
purchase of up to an additional 500,000 shares of the Company's common
stock from time to time on the open market, subject to prevailing market
conditions. Of this amount, approximately 190,000 shares have been
purchased in the first nine months of 1996 (59,000 shares in the third
quarter). Subsequent to the end of the third quarter of 1996, an
additional 123,300 shares have been purchased for treasury stock purposes.
Some treasury shares purchased have been reissued upon the exercises of
stock options.
(6) 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.
At September 30, 1996, the Company was contingently liable for
approximately $2,866,000 primarily relating to outstanding letters of
credit.
(7) INCOME TAXES
The provision for income taxes for the nine months ended September 30,
1995 was reduced to the Alternative Minimum Tax rate through the
utilization of net operating loss carryforwards. See Note 4 of Notes to
Consolidated Financial Statements in the Company's 1995 Annual Report on
Form 10-K for a further discussion related to income taxes.
<PAGE>
(8) SUMMARY OF OTHER (INCOME) EXPENSE
Other (income) expense for the three and nine month periods ended
September 30, 1996 and 1995 consists of the following:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
-------------------------- -------------------------
9/30/96 9/30/95 9/30/96 9/30/95
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest income $ (19,000) $ (69,000) $ (95,000) $ (224,000)
Goodwill amortization 45,000 516,000 133,000 1,551,000
Loan cost expenses 65,000 87,000 218,000 261,000
Net (gain) loss on sales
of operating and non-
operating assets (68,000) 202,000 (117,000) (1,085,000)
Litigation settlements - (1,090,000) (96,000) (1,123,000)
Payment received on long-
term note receivable
reserved for as
uncollectible (376,000) - (534,000) -
Other miscellaneous 62,000 190,000 33,000 (235,000)
--------- --------- --------- ----------
$(291,000) $(164,000) $(458,000) $ (855,000)
--------- --------- --------- ----------
--------- --------- --------- ----------
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS AND RESULTS OF OPERATIONS
OPERATING RESULTS
FIRST NINE MONTHS OF 1996 COMPARED TO FIRST NINE MONTHS OF 1995
Net sales for the nine months ended September 30, 1996 were $216,714,000
compared to net sales of $200,815,000 for the same nine month period of 1995.
Income before taxes for the first nine months of 1996 was $24,021,000 compared
to income before taxes of $21,393,000 reported in the first nine months of the
prior year. Net income was $15,466,000 ($1.70 per common share) for the first
nine months of 1996 compared to net income of $20,654,000 ($2.07 per common
share) for the same nine month period of 1995. Beginning in 1996, the Company
is recording a tax provision based upon the Federal statutory rate in effect.
Had the Company been providing taxes in 1995 on a similar basis, income before
taxes would have been $22,810,000 (due to the elimination of goodwill associated
with certain acquisitions which had net operating loss carryforwards) and net
income would have been $14,402,000 ($1.41 per common share) for the first nine
months of 1995.
At the Bush Hog division, net sales decreased by 2% in the first nine
months of 1996 compared to the first nine months of the prior year. On an
overall basis, no single product line was responsible for any significant
increase or decrease in sales comparing 1996 to 1995. Decreases were primarily
related to disc mowers, loaders, peanut combines and parts while increases were
associated with the cutter product line and the effect of new products (such as
the zero turn mower) introduced in the last half of 1995. These new products
are related to the turf and landscaping market for utilization by commercial
turf (sod) growers and for golf course maintenance. Major product line sales
(with the exception of new products) have been affected by continued weak cattle
prices and drought conditions in Texas, Oklahoma and Kansas. Recent rains have
eased the drought situation somewhat late in the third quarter. The Southeast
portion of the country, which reported dry conditions in the first half of 1996,
became extremely wet during the latter portion of the third quarter. Gross
profits and gross profit margins have improved in the first nine months of 1996
compared to the same nine month period of the prior year. The majority of this
change was associated with improved direct labor efficiencies and management of
overhead costs. A program was initiated in the last half of 1995 and completed
at the end of the second quarter of the current year to help recognize areas and
means of improvement in the manufacturing process. Management believes that
further implementation of these changes should result in additional savings in
the future.
At the Verson division, net sales in the first nine months of 1996 have
increased by over 20%
<PAGE>
compared to the first nine months of 1995. The entire increase was related to
press production. Revenue and profits are recognized on a percentage of
completion basis for press production at this division. During the last half of
1995, production began on an order for three "A" size transfer presses.
Significant production continued on this order in the 1996 nine month period.
Production and shipment of the first press was completed in the first half of
1996. Production was completed on the second press during the third quarter of
1996 with shipment scheduled for the last quarter of this year. Production
continues on the third press of this order. During 1995, the press assembly
area was expanded to accommodate the continuing increase in orders and
production. Production in the first nine months of 1995 (primarily in the first
half) was related to smaller presses with lower sales value. Gross profits
increased in the first nine months of 1996 compared to the same nine month
period of the prior year. This increase was principally associated with
increased sales (production) volume as noted above. Gross profit margins
decreased in the 1996 nine month period primarily due to increased employment
levels (direct and indirect) in 1996 compared to the prior year in order to
meet production and delivery schedules. Absorption of engineering costs has
decreased in the current year. Absorption in 1995 was related primarily to the
order for the three "A" presses discussed above. Part of this order has been
shipped with the remainder in production. Engineering activities will increase
in the future as the division has received an order to design and build two
large transfer presses for Ford.
At the Coz division, net sales in the first nine months of 1996 increased
slightly from levels reported in the first nine months of 1995. Sales by
product line at this division indicated no significant changes between the two
nine month periods. Gross profits and gross profit margins decreased in the
current year's nine month period. The decrease reflects the effects of
increased material costs which are not being passed on to customers in order to
remain competitive with other manufacturers. The division has also been selling
older inventory stock, which is no longer in demand, at prices that generate
less than normal margins. The majority of this inventory has now been sold.
Selling and administrative expenses were $25,967,000 (12.0% of net sales)
for the first nine months of 1996 compared to $25,779,000 (12.8% of net sales)
for the same nine month period of the prior year. Increases in selling expenses
were associated with the Verson division (increased employment levels to secure
additional orders) and the Bush Hog division (costs associated with the
introduction of new products at turf and lawn shows and increased commissions
related to the mix of products sold). On a consolidated basis, administrative
expenses decreased for the current year's nine month period. During 1995,
separation expenses were provided for as a result of the resignation of a
Corporate officer. This was partially offset by the cost of outside consultants
in 1996 at the Bush Hog division.
<PAGE>
Interest expense for the first nine months of 1996 was $1,294,000 compared
to $817,000 reported for the first nine months of the prior year. Average
borrowing levels increased as production continues at the Verson division on an
order for three large presses previously discussed. The Company has also
purchased over $9,600,000 of treasury stock since the end of 1995, some of which
has been reissued upon the exercise of stock options.
Reference is made to Note 8 of Notes to Condensed Consolidated Financial
Statements for an analysis of Other (income) expense in the first nine months of
1996 and 1995.
During the fourth quarter of 1995, the Company reevaluated its net
operating loss carryforwards and other tax assets in relation to its earnings
history over the past few years and the projected future earnings over the next
few years. As a result of this review, the Company recorded a deferred tax
asset which represented a reversal of the valuation allowance previously
recorded against its deferred tax asset. As noted above, the Company is
recording in 1996 (and in subsequent years) a tax provision based upon the
Federal statutory rate in effect.
THIRD QUARTER OF 1996 COMPARED TO THIRD QUARTER OF 1995
Net sales for the third quarter of 1996 were $72,273,000 compared to net
sales of $68,899,000 reported in the third quarter of 1995. Income before taxes
in the third quarter of 1996 was $7,746,000 compared to income before taxes of
$6,575,000 in the third quarter of the prior year. Net income was $4,806,000
($.53 per common share) in the third quarter of 1996 compared to net income of
$6,327,000 ($.63 per common share) reported in the third quarter of 1995. As
noted above, the Company is recording a tax provision in 1996 based upon the
Federal statutory rate in effect. Had the Company been providing taxes in the
third quarter of 1995 on a similar basis, income before taxes would have been
$7,047,000 and net income would have been $4,449,000 ($.44 per common share).
Net sales at the Bush Hog division increased 6% in the third quarter of
1996 compared to the third quarter of the prior year. The vast majority of the
increase was related to improved rotary cutter sales. As previously noted,
drought conditions in Texas, Oklahoma and Kansas eased somewhat during the
latter portion of the current year's third quarter. Sales were still being
affected by weak cattle prices, a situation which is anticipated to bottom out
in the near future. Sales of all other products at the Bush Hog division during
the third quarter of 1996 resulted in no significant variances from the third
quarter of the prior year. Gross profits and gross profit margins improved in
the third quarter of the current year compared to the same quarter of 1995. The
improvements were associated with increased manufacturing efficiencies resulting
from the implementation of cost
<PAGE>
reduction measures recommended by outside consultants. The favorable effects of
increased sales volume noted above also contributed to improved gross profits in
the third quarter of 1996.
At the Verson division, net sales increased by approximately 4% in the
third quarter of 1996 compared to the third quarter of 1995. The majority of
the increase was related to increased press production (sales). Both third
quarters contained a significant amount of production for the three "A" press
order from Chrysler. Parts sales also improved in the third quarter of the
current year. Gross profits and gross profit margins increased slightly in the
third quarter of the current year. The increases related primarily to the mix
of products sold.
At the Coz division, net sales increased by over 5% in the third quarter of
1996 compared to the third quarter of 1995. The majority of product lines
indicated sales volume increases. Gross profit in the third quarter of the
current year approximated that reported in the third quarter of the prior year.
Increases associated with the improved sales volume noted above were offset by
lower gross profit margins, the result of the sale of older inventory stock, no
longer in demand, at prices that generated a less than normal margin.
Selling and administrative expenses totaled $8,293,000 (11.5% of net sales)
in the third quarter of 1996 compared to $7,909,000 (11.5% of net sales) in the
third quarter of 1995. Increases in selling expenses were related primarily to
the Bush Hog division and associated with increased commissions, the direct
result of the improved sales volume noted above. Sales salaries and commissions
also increased at the Verson division in the third quarter of 1996. Decreases
in administrative expenses were generally associated with the Bush Hog division.
Outside consultants utilized in the third quarter of 1995 completed their cost
reduction study prior to the third quarter of the current year. Insurance
expense also decreased in the current year's third quarter.
Interest expense for the third quarter of 1996 increased to $374,000
compared to $143,000 reported in the third quarter of 1995. Cash requirements
at the Verson division continued to increase in the third quarter of 1996 due to
accumulated production costs associated with the order for three "A" size
presses. Treasury stock purchases also continued in the third quarter of the
current year.
Reference is made to Note 8 of Notes to Condensed Consolidated Financial
Statements for an analysis of Other (income) expense for the third quarter of
1996 and 1995.
The discussion above related to the provision for income taxes for the
first nine months of 1996 is relevant for the third quarter of 1996.
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
Working capital at September 30, 1996 was $64,247,000 (current ratio of
2.08 to 1.0) compared to working capital of $54,947,000 (current ratio of 1.84
to 1.0) at December 31, 1995. Net receivables have increased by over $9,200,000
since the end of 1995. The majority of the increase was related to the Verson
division where production was completed on the second of three "A" size transfer
presses. Other smaller presses were also shipped prior to the end of the third
quarter. Bush Hog net receivables have also increased since the end of 1995,
although this increase has decreased during the third quarter. Cash collections
at this division are dependent upon the retail sale of the product by the
dealer. Drought conditions in Texas, Oklahoma and Kansas are having a
detrimental effect on retail sales in this area of the country. Recent rains
have somewhat relieved this situation and retail sales are beginning to pick up.
Sales to dealers are typically strong in the first quarter of the year or just
prior to the use season by the farmer. 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 less than $1,000,000 since the end of 1995. Increases at the
Verson division (due to increases in accumulated costs of presses in progress)
were offset by normal seasonal decreases at the Bush Hog division and the
effects of improved inventory management at the Coz division. The decrease in
the current deferred tax asset ($6,164,000) represents the estimated portion of
the tax provision in the first nine months of 1996 that will be offset by the
utilization of tax loss carryforwards available to the Company. The Company
projects that future Federal income tax payments will be based upon the
Alternative Minimum Tax rate as substantial tax loss carryforwards still exist
for tax reporting purposes. There have been no significant fixed asset
additions or retirements in the first nine months of 1996. Additions are
primarily related to improved manufacturing equipment.
Net borrowings under the Revolving Credit Agreement and the new Amended and
Restated Credit Agreement (which replaces the Revolving Credit Agreement) have
decreased by $3,200,000 since the end of 1995. Borrowings under these
agreements have been used for working capital needs (primarily receivables and
inventories) and toward the purchase of treasury stock. Sources of funds used
to pay down borrowings under these agreements include operating profits and, in
recent months, inventory reductions at the Bush Hog division.
During the first nine months of 1996, the Company issued 211,500 new common
shares to certain officers of the Company upon the exercise of stock options.
The Company repurchased these shares from the officers for treasury stock
purposes. The Company's Board of Directors authorized
<PAGE>
the purchase of up to an additional 500,000 shares of the Company's common stock
from time to time on the open market, subject to prevailing market conditions.
Of this amount, approximately 190,000 shares have been purchased in the first
nine months of 1996. Subsequent to the end of the third quarter of 1996, an
additional 123,300 shares have been purchased for treasury stock purposes. Some
treasury shares purchased have been reissued upon the exercise of stock options.
During the first quarter of 1996, the Company increased the quarterly
dividend from $.025 per share to $.05 per share effective with the first
quarter dividend of this year paid at the end of that quarter. Second and
third quarter dividends of $.05 per share have been declared and paid prior
to the end of each respective quarter. Subsequent to the end of the third
quarter of 1996, the Company declared a fourth quarter dividend of $.05 per
share payable on December 31, 1996.
During the third quarter of 1996, the Company entered into an Amended and
Restated Credit Agreement with the same lenders as under the Revolving Credit
Agreement. Reference is made to Note 3 of Notes to Condensed Consolidated
Financial Statements for a description of the major terms of this new agreement
which replaces the Revolving Credit Agreement.
As of September 30, 1996, the Company had cash balances of $314,000 and
additional funds of $85,559,000 available under its Amended and Restated Credit
Agreement of which $60,559,000 is available for general corporate and operating
purposes (including costs incurred by the Verson division in connection with new
press orders from the major U. S. automotive manufacturers) and an additional
$25,000,000 which is available for new Verson business as noted above. The
Company believes that its expected operating cash flow and funds available under
the Amended and Restated Credit Agreement are adequate to finance its operations
and capital expenditures in the near future. During the first nine months of
1996, the Company has been in compliance with all provisions of loan agreements
in effect.
<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, 1996.
<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 12,1996 Kenneth B. Light
- ---------------- -----------------------------------------------
Kenneth B. Light,
Executive Vice President, Chief Financial &
Administrative Officer; Director
November 12,1996 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)
NET
SHARES INCOME
------ ------
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1995
Net income $ 6,327,000
Dividend requirements on Series B preferred stock -
Dividend requirements on Series C preferred stock (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
----------- -------------
----------- -------------
Earnings per common share $ .63
-------------
-------------
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995
Net income $ 20,654,000
Dividend requirements on Series B preferred stock (267,000)
Dividend requirements on Series C preferred stock (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
----------- -------------
----------- -------------
Earnings per common share $ 2.07
-------------
-------------
<PAGE>
EXHIBIT 11
PAGE 2
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)
NET
SHARES INCOME
------ ------
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1995
Net income $ 6,327,000
Dividend requirements on Series B preferred stock -
Dividend requirements on Series C preferred stock (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
------------ -------------
------------ -------------
Earnings per common share $ .63
-------------
-------------
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995
Net income $ 20,654,000
Dividend requirements on Series B preferred stock (267,000)
Dividend requirements on Series C preferred stock (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
------------ -------------
------------ -------------
Earnings per common share $ 2.06
-------------
-------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS STATEMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1996 AND THE CONSOLIDATED STATEMENT
OF INCOME AND THE CONSOLIDATED STATEMENT OF CASH FLOW FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 314
<SECURITIES> 0
<RECEIVABLES> 54,329
<ALLOWANCES> 819
<INVENTORY> 53,341
<CURRENT-ASSETS> 123,855
<PP&E> 87,458
<DEPRECIATION> 50,088
<TOTAL-ASSETS> 168,864
<CURRENT-LIABILITIES> 59,608
<BONDS> 174
0
0
<COMMON> 94
<OTHER-SE> 106,260
<TOTAL-LIABILITY-AND-EQUITY> 168,864
<SALES> 216,714
<TOTAL-REVENUES> 216,714
<CGS> 165,890
<TOTAL-COSTS> 165,890
<OTHER-EXPENSES> 26,803
<LOSS-PROVISION> 195
<INTEREST-EXPENSE> 1,294
<INCOME-PRETAX> 24,021
<INCOME-TAX> 8,555
<INCOME-CONTINUING> 15,466
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,466
<EPS-PRIMARY> 1.70
<EPS-DILUTED> 1.70
</TABLE>
