<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, 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:9,057,497 COMMON SHARES, $.01
PAR VALUE, AS OF JULY 31, 1996.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTRODUCTION
CONDENSED CONSOLIDATED BALANCE SHEETS-
June 30, 1996 and December 31, 1995
CONDENSED CONSOLIDATED STATEMENTS OF INCOME -
Three and Six Months Ended June 30, 1996 and 1995
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-
Six Months Ended June 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. 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 condensed consolidated financial statements included herein (as of
June 30, 1996 and for the three and six months ended June 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 six month periods ended June
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>
June 30, 1996 December 31, 1995
----------------- -----------------
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 8,699,000 $ 744,000
----------------- -----------------
Notes and accounts receivable, less allowances of
$914,000 and $948,000, respectively $ 50,379,000 $ 44,293,000
----------------- -----------------
Inventories:
Raw materials $ 9,592,000 $ 12,037,000
Work in process 35,943,000 20,438,000
Finished goods 19,495,000 19,931,000
----------------- -----------------
$ 65,030,000 $ 52,406,000
----------------- -----------------
Deferred tax asset $ 18,900,000 $ 22,538,000
----------------- -----------------
Prepaid expenses $ 409,000 $ 323,000
----------------- -----------------
Total current assets $ 143,417,000 $ 120,304,000
----------------- -----------------
Plant and Equipment, at cost:
Land $ 2,172,000 $ 2,172,000
Buildings and improvements 36,374,000 36,269,000
Machinery and equipment 48,093,000 47,078,000
----------------- -----------------
$ 86,639,000 $ 85,519,000
Less- Accumulated depreciation and amortization 49,150,000 47,083,000
----------------- -----------------
$ 37,489,000 $ 38,436,000
----------------- -----------------
Other Assets:
Notes receivable, due after one year, less allowance of
$7,541,000 and $7,699,000, respectively $ 11,000 $ 40,000
Deferred tax asset 4,823,000 4,823,000
Deferred charges (goodwill), net of amortization 1,757,000 1,845,000
Other 1,128,000 1,295,000
----------------- -----------------
$ 7,719,000 $ 8,003,000
----------------- -----------------
$ 188,625,000 $ 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>
June 30, 1996 December 31, 1995
----------------- -----------------
Current Liabilities:
<S> <C> <C>
Revolving credit agreement $ 28,300,000 $ 11,200,000
Current portion of long-term debt 405,000 621,000
Accounts payable 19,281,000 21,152,000
Accrued expenses 34,227,000 32,384,000
----------------- -----------------
Total current liabilities $ 82,213,000 $ 65,357,000
----------------- -----------------
Long-term debt, less current portion shown above $ 221,000 $ 315,000
----------------- -----------------
Other long-term liabilities $ 2,755,000 $ 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 June 30, 1996 and December 31, 1995,
respectively $ 94,000 $ 91,000
Treasury Stock, at cost (7,019,000) -
Additional paid-in capital 95,582,000 93,143,000
Retained earnings 14,779,000 5,031,000
----------------- -----------------
$ 103,436,000 $ 98,265,000
----------------- -----------------
$ 188,625,000 $ 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
<TABLE>
<CAPTION>
Three Months Ended June 30,
------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
Net sales $ 69,198,000 $ 64,328,000
Cost of products sold 51,392,000 47,503,000
---------------- ----------------
Gross profit $ 17,806,000 $ 16,825,000
---------------- ----------------
Other costs and expenses:
Selling and administrative expenses $ 8,641,000 $ 8,864,000
Interest expense 478,000 223,000
Other (income) expense, net (61,000) (167,000)
---------------- ----------------
$ 9,058,000 $ 8,920,000
---------------- ----------------
Income before taxes $ 8,748,000 $ 7,905,000
Provision for income taxes 3,206,000 228,000
---------------- ----------------
Net income $ 5,542,000 $ 7,677,000
---------------- ----------------
---------------- ----------------
Net income applicable to common stock $ 5,542,000 $ 7,255,000
---------------- ----------------
---------------- ----------------
Earnings per common share:
Primary $ .61 $ .77
---------------- ----------------
---------------- ----------------
Fully Diluted $ .61 $ .77
---------------- ----------------
---------------- ----------------
Weighted average shares outstanding:
Primary 9,096,000 9,416,000
---------------- ----------------
---------------- ----------------
Fully Diluted 9,096,000 9,420,000
---------------- ----------------
---------------- ----------------
Dividends per common share $ .05 $ .025
---------------- ----------------
---------------- ----------------
</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
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
Net sales $ 144,441,000 $ 131,916,000
Cost of products sold 109,739,000 99,245,000
---------------- ----------------
Gross profit $ 34,702,000 $ 32,671,000
---------------- ----------------
Other costs and expenses:
Selling and administrative expenses $ 17,674,000 $ 17,870,000
Interest expense 920,000 674,000
Other (income) expense, net (167,000) (691,000)
---------------- ----------------
$ 18,427,000 $ 17,853,000
---------------- ----------------
Income before taxes $ 16,275,000 $ 14,818,000
Provision for income taxes 5,615,000 491,000
---------------- ----------------
Net income $ 10,660,000 $ 14,327,000
---------------- ----------------
---------------- ----------------
Net income applicable to common stock $ 10,660,000 $ 13,438,000
---------------- ----------------
---------------- ----------------
Earnings per common share:
Primary $ 1.17 $ 1.43
---------------- ----------------
---------------- ----------------
Fully Diluted $ 1.17 $ 1.43
---------------- ----------------
---------------- ----------------
Weighted average shares outstanding:
Primary 9,115,000 9,370,000
---------------- ----------------
---------------- ----------------
Fully Diluted 9,115,000 9,413,000
---------------- ----------------
---------------- ----------------
Dividends per common share $ .10 $ .025
---------------- ----------------
---------------- ----------------
</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 CASH FLOWS
<TABLE>
<CAPTION>
For the six months ended June 30,
-----------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 10,660,000 $ 14,327,000
Adjustments to reconcile net income to net cash provided from
(used for) operating activities:
Gains on sales of operating and non-operating assets (38,000) (1,331,000)
Depreciation and amortization 2,750,000 2,585,000
Amortization of deferred charges 88,000 1,034,000
Deferred income taxes 5,053,000 -
Changes in noncash assets and liabilities, net of effects of
assets sold and noncash transactions:
Increase in accounts receivable (6,213,000) (9,114,000)
Increase in inventories (12,624,000) (12,100,000)
Increase in prepaid expenses (86,000) (148,000)
Decrease in notes receivable, due after one year 29,000 232,000
Increase (decrease) in accounts payable and accrued expenses (393,000) 27,811,000
Other, net 243,000 177,000
--------------- ---------------
Net cash provided from (used for) operating activities $ (531,000) $ 23,473,000
--------------- ---------------
Cash Flows from Investing Activities:
Additions to plant and equipment $ (1,809,000) $ (9,956,000)
Proceeds from sales of plant and equipment 44,000 1,436,000
--------------- ---------------
Net cash used for investing activities $ (1,765,000) $ (8,520,000)
--------------- ---------------
Cash Flows from Financing Activities:
Borrowings under revolving credit agreement $ 64,350,000 $ 59,200,000
Payments under revolving credit agreement (47,250,000) (67,500,000)
Payments of short and long-term debt (310,000) (353,000)
Payments of preferred stock redemptions - (6,366,000)
Issuance of common stock 1,501,000 -
Purchase of treasury stock (8,125,000) -
Dividends paid (912,000) (1,118,000)
Stock option transactions 997,000 531,000
--------------- ---------------
Net cash provided from (used for) financing activities $ 10,251,000 $ (15,606,000)
--------------- ---------------
Net increase (decrease) in cash and cash equivalents $ 7,955,000 $ (653,000)
Cash and cash equivalents at beginning of year 744,000 1,654,000
--------------- ---------------
Cash and cash equivalents at end of period $ 8,699,000 $ 1,001,000
--------------- ---------------
--------------- ---------------
</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:
6/30/96 12/31/95
----------- -----------
Salaries and wages $ 7,562,000 $ 5,542,000
Warranty 11,131,000 9,077,000
Self insurance accruals 3,185,000 4,411,000
Restructuring and other facility close
down costs 1,049,000 1,494,000
Pensions, including retiree health 5,786,000 5,901,000
Taxes, other than income taxes 508,000 738,000
Environmental matters 2,563,000 3,019,000
Other 2,443,000 2,202,000
----------- -----------
$34,227,000 $32,384,000
----------- -----------
----------- -----------
(2) RESTRUCTURING COSTS
During the first half and second quarter of 1996 and 1995,
expenditures of approximately $445,000 ($87,000 in the second quarter)
and $764,000 ($336,000 in the second quarter), respectively, were
charged against the provision for restructuring cost established prior
to 1994.
(3) FINANCIAL ARRANGEMENTS
During the first half of 1996, the Company entered into an
amendment of the Revolving Credit Agreement with the Bank of America
and LaSalle National Bank. Prior to this amendment, the $50,000,000
permitted under this agreement was available as $15,000,000 in Letters
of Credit and $35,000,000 in loans. This amendment does away with
this distinction. The Company can now have up to $50,000,000 of
borrowings outstanding, any part of which can be letters of credit
and/or loans.
(4) DIVIDENDS PAYMENT ON COMMON STOCK
During the first quarter of 1996, the Company announced an increase in
the quarterly dividend from $.025 per share to $.05 per share, effective
with the first quarter dividend paid
<PAGE>
on March 30, 1996. A second quarter dividend ($.05 per share) was
declared and paid prior to the end of the second quarter. Subsequent to
the end of the second quarter of 1996, the Company declared a third
quarter dividend ($.05 per share) payable September 30, 1996.
(5) TREASURY STOCK
During the first half 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 also authorized
the purchase by the Company of up to an additional 250,000 shares of the
Company's common stock from time to time on the open market, subject to
prevailing market conditions. Of this amount, approximately 131,000 shares
have been purchased in the first half of 1996 (60,000 shares in the second
quarter). Subsequent to the end of the second quarter of 1996, the
purchase of an additional 250,000 common shares was authorized by the Board
of Directors. Some treasury shares purchased have been reissued as a result
of exercises 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 June 30, 1996, the Company was contingently liable for
approximately $2,593,000 primarily relating to outstanding letters of
credit.
(7) INCOME TAXES
The provision for income taxes in the first half of 1996 and 1995 is
based upon the Federal statutory rate adjusted for items that are not
subject to taxes. The provision for income taxes in the first half of 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 six month periods ended June
30, 1996 and 1995 consists of the following:
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
-------------------------- ------------------------
6/30/96 6/30/95 6/30/96 6/30/95
--------- --------- --------- ----------
Interest income $ (13,000) $ (31,000) $ (76,000) $ (285,000)
Goodwill amortization 44,000 517,000 88,000 1,034,000
Loan cost expenses 75,000 87,000 153,000 174,000
Net (gain) loss on sales
of operating and non-
operating assets 1,000 (110,000) (38,000) (1,331,000)
Litigation settlements - (456,000) (96,000) 9,000
Other miscellaneous (168,000) (174,000) (198,000) (292,000)
--------- --------- --------- ----------
$ (61,000) $(167,000) $(167,000) $ (691,000)
--------- --------- --------- ----------
--------- --------- --------- ----------
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OPERATING RESULTS
FIRST HALF OF 1996 COMPARED TO FIRST HALF OF 1995
Net sales for the first half of 1996 were $144,441,000 compared to net
sales of $131,916,000 reported for the first half of 1995. Income before taxes
for the first half of 1996 was $16,275,000 compared to income before taxes of
$14,818,000 reported for the same six month period of the prior year. Net
income was $10,660,000 ($1.17 per common share) for the first half of 1996
compared to $14,327,000 ($1.43 per common share) reported for the first half of
1995. Beginning in the current year, 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
$15,763,000 (due to the elimination of goodwill associated with certain
acquisitions which had net operating loss carryforwards) and net income would
have been $9,953,000 ($.97 per common share) for the first half of that year.
At the Bush Hog division, net sales decreased by 6% for the first half of
1996 compared to the first half of 1995. The majority of the decrease was
related to the cutter and loader product lines. Sales of these products were
affected by continued weak cattle prices. Product sales were also affected by
drought conditions in Texas, Oklahoma and Kansas. During the second quarter,
portions of the Southeast have also experienced drier than normal conditions.
Crop plantings were delayed in the Midwest due to extremely wet conditions.
Parts sales also decreased in the first half of 1996 due to the effects of
weather conditions noted above and dealers in some areas delaying preseason
parts orders. These decreases were partially offset by the effects of sales of
new products (such as the zero turn mower) introduced in the last half of 1995.
New products are related to turf and landscaping for utilization by commercial
turf (sod) growers and for golf course maintenance. Gross profits in the first
half of 1996 approximated those reported in the first half of the prior year.
The effect of decreased sales was offset by the effect of improved gross profit
margins resulting from improved direct labor efficiencies and management of
overhead costs. A program was initiated in the last half of 1995 and completed
in June 1996 to help recognize areas and means of improvement in the
manufacturing process. Further implementation of these changes should result in
additional savings going forward.
<PAGE>
At the Verson division, net sales have increased by over 33% for the first
half of 1996 compared to the first half of the prior year. 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 first half of
1996. Shipment of the first press of this order took place during the second
quarter of 1996. During 1995, the press assembly area was expanded to
accommodate the continuing increase in orders. Production in the first half of
1995 was related to smaller presses with lower sales value. Gross profits
increased in the first half of 1996 compared to the first half of the prior year
due to greater sales (production) as noted above. Gross profit margins
decreased in the first half of 1996. Average monthly employment levels (direct
and indirect) have increased in the first half of 1996 compared to the prior
year. Overtime costs have increased as this division works to meet press
shipment delivery schedules. Warranty costs have also increased in 1996 over
1995 levels reflecting the mix of production during each of the six month
periods.
At the Coz division, net sales for the first half of 1996 approximated net
sales levels reported for the first half of the prior year. Sales by product
line at this division indicated no significant changes between the two six month
periods. Gross profits and gross profit margins have decreased in the first
half of 1996. The decreases reflect the effects of increased material costs
which are not being fully passed on to customers in order to remain competitive
with other manufacturers.
Selling and administrative expenses were $17,674,000 (12.2% of net sales)
for the first half of 1996 compared to $17,870,000 (13.5% of net sales) for the
first half of 1995. Increases in selling expenses were primarily related to the
Bush Hog division and were associated with the introduction of new products at
turf and lawn shows. On a consolidated basis, administrative expenses decreased
for the 1996 six month period. During the first half of 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.
Interest expense for the first half of 1996 was $920,000 compared to
$674,000 reported for the first half of the prior year. Average borrowing
levels have increased as production continues at the Verson division on an order
for three large presses previously discussed. The Company has also purchased
over $8,000,000 of treasury stock since the end of 1995, some of which has been
reissued upon the exercise of stock options.
<PAGE>
Reference is made to Note 8 of Notes to Condensed Consolidated Financial
Statements for an analysis of Other (income) expense in the first half 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 estimated 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.
SECOND QUARTER OF 1996 COMPARED TO THE SECOND QUARTER OF 1995
Net sales for the second quarter of 1996 were $69,198,000, an increase of
over 7% compared to net sales of $64,328,000 reported for the second quarter of
1995. Income before taxes for the second quarter of 1996 was $8,748,000
compared to income before taxes of $7,905,000 reported for the second quarter of
the prior year. Net income was $5,542,000 ($.61 per common share) compared to
net income of $7,677,000 ($.77 per common share) reported for the second 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 second quarter of 1995 on a similar basis, income before taxes would have
been $8,377,000 and net income would have been $5,289,000 ($.52 per common
share).
At the Bush Hog division, net sales have decreased by over 13% for the
second quarter of 1996 compared to the second quarter of 1995. The majority of
the decrease was related to the rotary cutter product line. Large cutter sales
to cattle ranchers have been affected by weak cattle prices. Cattle prices are
expected to remain weak for the remainder of this year and into the first half
of 1997. Other product line decreases relate to loaders, peanut combines and
parts. These decreases were partially offset by the effects of new product
sales previously discussed. Gross profits at the Bush Hog division decreased
for the second quarter of 1996 compared to the second quarter of the prior year.
The decrease was primarily associated with lower sales volume. Gross profit
margins have improved slightly during the second quarter of 1996 reflecting
improved manufacturing efficiencies resulting from the implementation of cost
reduction measures recommended by outside consultants.
At the Verson division, net sales for the second quarter of 1996 increased
over 36% from
<PAGE>
levels reported for the second quarter of 1995. The entire increase was related
to increased press production (sales) resulting from the order for three "A"
size presses from Chrysler. Production for this order began in the third
quarter of 1995. Parts sales remained constant for the second quarter of 1996.
Gross profits improved at the Verson division in the second quarter of 1996, the
direct result of increased sales volume discussed above. Gross profit margins
decreased during the 1996 second quarter due to increased manufacturing costs.
Employment levels were increased to handle the increased production. Increased
overtime costs were incurred in 1996 in order to meet the required delivery
schedule associated with the large press order. Provisions for warranty were
also increased in the second quarter of 1996 as sales volumes increased. Mix of
products sold changed in 1996 as parts sales (which carry a higher gross profit
margin) were less significant in relation to total sales for the quarter.
At the Coz division, net sales increased by over 6% for the second quarter
of 1996 compared to the same quarter of the prior year. The majority of the
increase was related to the processed goods product line. A portion of this
increase was associated with the division having a two week production shutdown
for vacation in the first two weeks of July 1996. Customers increased their
orders prior to the shutdown so as to not disrupt their own production
schedules. Gross profit and gross profit margins decreased slightly at the Coz
division during the second quarter of 1996. These decreases reflect the effects
of increased material costs which have not been completely passed on to
customers in order to stay competitive with other providers of thermoplastic
resins.
Selling and administrative expenses totaled $8,641,000 (12.5% of net sales)
for the second quarter of 1996 compared to $8,864,000 (13.8% of net sales)
reported for the second quarter of 1995. In terms of actual dollars expensed,
administrative expenses in the second quarter of the current year were equal to
administrative expenses in the second quarter of the prior year. Increases at
the Bush Hog division (primarily related to the cost of outside consultants)
were offset by the effects of slightly lower costs at the remaining operating
divisions and the Corporate office. Actual selling expenses decreased during
the second quarter of 1996 primarily reflecting the effects of lower sales at
the Bush Hog division.
Interest expense for the second quarter of 1996 increased to $478,000
compared to $223,000 reported for the second quarter of 1995. Cash requirements
at the Verson division have increased in the second quarter of 1996 due to
accumulated production costs associated with the order for three "A" size
presses. Treasury stock purchases also continued in the second quarter of the
current year.
<PAGE>
Reference is made to Note 8 of Notes to Condensed Consolidated Financial
Statements for an analysis of Other (income) expense for the second quarter of
1996 and 1995.
The discussion above related to the provision for income taxes for the
first half of 1996 is relevant for the second quarter of the current year.
FINANCIAL CONDITION AND LIQUIDITY
Working capital at June 30, 1996 was $61,204,000 (current ratio of 1.74 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 $6,000,000 since
the end of 1995. 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 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. 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. Net
receivables at the Coz division also increased in the first half of 1996,
primarily from the strong sales at the end of the second quarter as the
operations were shutdown for two weeks at the beginning of July. The
$12,600,000 increase in inventories in the first half of 1996 was entirely
associated with the Verson division where production continues on an order for
three "A" presses as discussed above. A portion of the increase in accumulated
costs of presses in progress has been offset by customer deposits and progress
payments related to contracts in process. Inventories at other operating
locations have decreased slightly since the end of 1995. The decrease in the
current deferred tax asset ($3,638,000) represents the estimated portion of the
tax provision in the first half 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 in the first
half of 1996.
Net borrowings under the Revolving Credit Agreement have increased by over
$17,000,000 since the end of 1995. These temporary borrowings were necessary as
working capital needs (primarily receivables and inventories) have increased
during the first half of 1996. Proceeds were also used for the purchase of
treasury stock noted below.
<PAGE>
During the first half 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 also authorized the purchase by the Company of
up to an additional 250,000 shares of the Company's common stock from time to
time on the open market, subject to prevailing market conditions. Of this
amount, approximately 131,000 shares have been repurchased in the first half of
1996. Subsequent to the end of the second quarter of 1996, the purchase of an
additional 250,000 common shares was authorized by the Board of Directors. Some
treasury shares purchased have been reissued upon the exercises of stock
options.
During the first quarter of 1996, the Company announced an increase in the
quarterly dividend from $.025 per share to $.05 per share, effective with the
first quarter dividend paid at the end of that quarter. A second quarter
dividend ($.05 per share) was declared and paid prior to the end of that
quarter. Subsequent to the end of the second quarter of 1996, the Company
declared a third quarter dividend ($.05 per share) payable September 30, 1996.
Reference is made to Note 3 of Notes to Condensed Consolidated Financial
Statements relating to an amendment to the Revolving Credit Agreement.
As of June 30, 1996, the Company had cash balances of $8,699,000 and
additional funds of $16,085,000 available under its Revolving Credit Agreement.
The Company believes that its expected operating cash flow and funds available
under this Revolving Credit Agreement are adequate to finance its operations and
capital expenditures in the near future. During the first half of 1996, 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 23, 1996 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:
ELECTION OF THREE DIRECTORS. Proxies for the meeting were solicited
pursuant to Regulation 14A. There was no solicitation in opposition to the
management's nominees as listed in the proxy statement. The nominees received
the following number of votes:
CLASS C DIRECTORS - TERMS EXPIRE IN 1999 - MR. S.S SHERMAN, MR. KENNETH B.
LIGHT AND MR. WILLIAM D. FISCHER
For Mr. Sherman - 7,965,648; withheld from Mr. Sherman - 59,931.
For Mr. Light - 7,935,958; withheld from Mr. Light - 82,721.
For Mr. Fischer - 7,960,320; withheld from Mr. Fischer - 65, 359
The terms of the following directors continued after the meeting:
CLASS A DIRECTORS - TERMS EXPIRE IN 1997
Mr. Mitchell I. Quain, Mr. R. A. Drexler and Mr. J. W. Puth
CLASS B DIRECTORS - TERMS EXPIRE IN 1998
Mr. Lloyd A. Drexler, Mr. John E. Jones and Mr. Stanley J. Goldring
Approximately 984, 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, 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)
August 12,1996 Kenneth B. Light
- -------------- ------------------------------------------
Kenneth B. Light,
Executive Vice President, Chief Financial &
Administrative Officer; Director
August 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)
<TABLE>
<CAPTION>
NET
SHARES INCOME
------ ------
FOR THE THREE MONTHS ENDED
JUNE 30, 1995
<S> <C> <C>
Net income $ 7,677,000
Dividend requirements on Series B preferred stock (111,000)
Dividend requirements on Series C preferred stock (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
------------- -------------
------------- -------------
Earnings per common share $ .77
-------------
-------------
FOR THE SIX MONTHS ENDED
JUNE 30, 1995
Net income $ 14,327,000
Dividend requirements on Series B preferred stock (267,000)
Dividend requirements on Series C preferred stock (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
------------- -------------
------------- -------------
Earnings per common share $ 1.43
-------------
-------------
</TABLE>
<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)
<TABLE>
<CAPTION>
NET
SHARES INCOME
------ ------
FOR THE THREE MONTHS ENDED
JUNE 30, 1995
<S> <C> <C>
Net income $ 7,677,000
Dividend requirements on Series B preferred stock (111,000)
Dividend requirements on Series C preferred stock (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
------------- -------------
------------- -------------
Earnings per common share $ .77
-------------
-------------
FOR THE SIX MONTHS ENDED
JUNE 30, 1995
Net income $ 14,327,000
Dividend requirements on Series B preferred stock (267,000)
Dividend requirements on Series C preferred stock (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
------------- -------------
------------- -------------
Earnings per common share $ 1.43
-------------
-------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS STATEMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996 AND THE CONSOLIDATED STATEMENT OF
INCOME AND THE CONSOLIDATED STATEMENT OF CASH FLOW FOR THE SIX MONTHS ENDED JUNE
30, 1996 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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 8,699
<SECURITIES> 0
<RECEIVABLES> 51,293
<ALLOWANCES> 914
<INVENTORY> 65,030
<CURRENT-ASSETS> 143,417
<PP&E> 86,639
<DEPRECIATION> 49,150
<TOTAL-ASSETS> 188,625
<CURRENT-LIABILITIES> 82,213
<BONDS> 221
0
0
<COMMON> 94
<OTHER-SE> 103,342
<TOTAL-LIABILITY-AND-EQUITY> 188,625
<SALES> 144,441
<TOTAL-REVENUES> 144,441
<CGS> 109,739
<TOTAL-COSTS> 109,739
<OTHER-EXPENSES> 18,427
<LOSS-PROVISION> 127
<INTEREST-EXPENSE> 920
<INCOME-PRETAX> 16,275
<INCOME-TAX> 5,615
<INCOME-CONTINUING> 10,660
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,660
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.17
</TABLE>
