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, 1997
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: 11,989,296 common shares, $.01
par value, as of October 31, 1997.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
INTRODUCTION
CONDENSED CONSOLIDATED BALANCE SHEETS-
September 30, 1997 and December 31, 1996
CONDENSED CONSOLIDATED STATEMENTS OF INCOME Three
and Nine Months Ended September 30, 1997 and
1996
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-
Nine Months Ended September 30, 1997 and 1996
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. LEGAL PROCEEDINGS
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
ITEM 1. FINANCIAL STATEMENTS
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
INTRODUCTION
The condensed consolidated financial statements included herein (as of
September 30, 1997 and for the nine months ended September 30, 1997 and 1996)
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission and reflect all
adjustments which are, in the opinion of management, necessary to present fairly
the condensed consolidated financial information required therein. All such
adjustments are of a normal, recurring nature. The information as of December
31, 1996 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, 1997 and 1996 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 30,1997 December 31,1996
----------------- ----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 503,000 $ 833,000
----------------- ----------------
Notes and accounts receivable, less allowances of
$685,000 and $629,000, respectively $ 62,380,000 $ 52,914,000
----------------- ----------------
Inventories:
Raw materials $ 8,674,000 $ 9,524,000
Work in process 44,986,000 28,269,000
Finished goods 15,209,000 18,997,000
----------------- ----------------
$ 68,869,000 $ 56,790,000
----------------- ----------------
Deferred tax asset $ 14,532,000 $ 14,532,000
----------------- ----------------
Prepaid expenses $ 175,000 $ 191,000
----------------- ----------------
Total current assets $ 146,459,000 $ 125,260,000
----------------- ----------------
Plant and Equipment, at cost:
Land $ 2,243,000 $ 2,155,000
Buildings and improvements 38,879,000 37,196,000
Machinery and equipment 56,103,000 50,083,000
----------------- ----------------
$ 97,225,000 $ 89,434,000
Less- Accumulated depreciation and amortization 52,777,000 51,048,000
----------------- ----------------
$ 44,448,000 $ 38,386,000
----------------- ----------------
Other Assets:
Notes receivable, due after one year,
less allowances of $805,000
and $7,165,000 , respectively $ - $ -
Deferred tax asset 5,282,000 5,282,000
Deferred charges (goodwill), net of amortization 1,535,000 1,668,000
Other 1,293,000 1,353,000
----------------- ----------------
$ 8,110,000 $ 8,303,000
----------------- ----------------
$ 199,017,000 $ 171,949,000
================= ================
</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, 1997 December 31,1996
------------------ ----------------
<S> <C> <C>
Current Liabilities:
Revolving credit agreement $ 43,100,000 $ 27,000,000
Current portion of long-term debt 193,000 193,000
Accounts payable 20,797,000 16,692,000
Accrued expenses 29,017,000 30,575,000
------------------ ----------------
Total current liabilities $ 93,107,000 $ 74,460,000
------------------ ----------------
Long-term debt, less current portion shown above $ 344,000 $ 489,000
------------------ ----------------
Other long-term liabilities $ 11,511,000 $ 3,547,000
------------------ ----------------
Commitments and Contingencies
Shareholders' Investment:
Preferred stock:
Undesignated-authorized 1,500,000 shares at
September 30,1997 and December 31, 1996: none issued $ - $ -
Common stock, par value $.01 per share; authorized
25,000,000 shares; issued 14,047,249 and
9,364.844 shares at September 30,1997 and
December 31, 1996, respectively 140,000 94,000
Additional paid-in capital 94,635,000 94,671,000
Retained earnings 37,324,000 22,227,000
------------------ ----------------
$ 132,099,000 $ 116,992,000
Less: Treasury stock, at cost 2,018,122 and
1,357,606 shares at September 30, 1997 and
December 31, 1996, respectively (38,044,000) (23,539,000)
------------------ -----------------
Total shareholders' equity $ 94,055,000 $ 93,453,000
----------------- ----------------
$ 199,017,000 $ 171,949,000
================== ================
</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,
--------------------------------
1997 1996
------ ------
Net sales $ 63,714,000 $ 72,273,000
Cost of products sold 47,515,000 56,151,000
------------- -------------
Gross profit $ 16,199,000 $ 16,122,000
------------- -------------
Other costs and expenses:
Selling and administrative expenses $ 9,217,000 $ 8,293,000
Interest expense 847,000 374,000
Other (income) expense, net (1,623,000) (291,000)
------------- -------------
$ 8,441,000 $ 8,376,000
------------- -------------
Income before taxes $ 7,758,000 $ 7,746,000
Provision for income taxes 2,745,000 2,940,000
------------- -------------
Net income $ 5,013,000 $ 4,806,000
============= =============
Earnings per common share:
Primary $ .40 $ .35
============= =============
Fully diluted $ .40 $ .35
============= =============
Weighted average shares outstanding:
Primary 12,501,000 13,570,000
============= =============
Fully diluted 12,515,000 13,570,000
============= =============
Dividends per common share $ .04 $ .03
============= =============
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,
----------------------------
1997 1996
------ ------
Net sales $ 213,497,000 $ 216,714,000
Cost of products sold 160,064,000 165,890,000
-------------- --------------
Gross profit $ 53,433,000 $ 50,824,000
-------------- --------------
Other costs and expenses:
Selling and administrative expenses $ 26,485,000 $ 25,967,000
Interest expense 2,499,000 1,294,000
Other (income) expense, net (1,082,000) (458,000)
-------------- --------------
$ 27,902,000 $ 26,803,000
-------------- --------------
Income before taxes $ 25,531,000 $ 24,021,000
Provision for income taxes 9,141,000 8,555,000
-------------- --------------
Net income $ 16,390,000 $ 15,466,000
============== ==============
Earnings per common share:
Primary $ 1.32 $ 1.13
============= ==============
Fully diluted $ 1.32 $ 1.13
============== ==============
Weighted average shares outstanding:
Primary 12,388,000 13,638,000
============== ==============
Fully diluted 12,435,000 13,638,000
============== ==============
Dividends per common share $ .11 $ .10
============== ==============
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,
---------------------------------------
1997 1996
------ ------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 16,390,000 $ 15,466,000
Adjustments to reconcile net income to net cash used
for operating activities:
Gains on sales of operating and non-operating assets (151,000) (117,000)
Depreciation and amortization 3,840,000 3,866,000
Amortization of deferred charges 133,000 133,000
Deferred income tax provision 8,065,000 7,609,000
Changes in noncash assets and liabilities,
net of noncash transactions:
(Increase) in accounts receivable (9,572,000) (9,412,000)
(Increase) in inventories (12,079,000) (935,000)
Decrease in prepaid expenses 16,000 7,000
Decrease in notes receivable, due after one year - 33,000
Increase (decrease) in accounts payable and
accrued expenses 2,418,000 (2,948,000)
Other, net 65,000 315,000
---------------- ---------------
Net cash provided from operating activities $ 9,125,000 $ 14,017,000
---------------- ---------------
Cash Flows from Investing Activities:
Additions to plant and equipment $ (10,165,000) $ (2,806,000)
Proceeds from sales of plant and equipment 414,000 123,000
---------------- ---------------
Net cash used for investing activities $ (9,751,000) $ (2,683,000)
---------------- ---------------
Cash Flows from Financing Activities:
Borrowings under revolving credit agreement $ 83,100,000 $ 81,150,000
Payments under revolving credit agreement (67,000,000) (84,350,000)
Payments of short and long-term debt (145,000) (560,000)
Common stock issued - 1,501,000
Purchase of treasury stock (15,995,000) (9,638,000)
Dividends paid (811,000) (911,000)
Stock option transactions 1,147,000 1,044,000
---------------- ---------------
Net cash provided from (used for) financing activities $ 296,000 $ (11,764,000)
---------------- ---------------
Net decrease in cash and cash equivalents $ (330,000) $ (430,000)
Cash and cash equivalents at beginning of year 833,000 744,000
----------------- ---------------
Cash and cash equivalents at end of period $ 503,000 $ 314,000
================= ===============
</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:
9/30/97 12/31/96
------- --------
Salaries and wages $ 6,786,000 $ 6,026,000
Warranty 7,446,000 9,559,000
Self insurance accruals 3,121,000 4,046,000
Pensions, including retiree health 6,577,000 6,417,000
Taxes, other than income taxes 464,000 811,000
Environmental matters 1,701,000 2,020,000
Other 2,922,000 1,696,000
----------- -----------
$29,017,000 $30,575,000
=========== ===========
(2) Stock Split
-----------
During the third quarter of 1997, the Company announced that
the Board of Directors had authorized a three-for-two stock split to be
effected by means of a dividend payable in shares of the Company's
common stock, at the rate of one share for each two shares owned. The
dividend was paid on September 5, 1997 to stockholders of record on
August 15, 1997. In addition, on September 30, 1997 the Company paid a
cash dividend of four cents ($.04) per share on its common stock to
stockholders of record on August 15, 1997, including the shares to be
issued as a result of the stock split. Earning per common share and
weighted average shares outstanding have been adjusted for the periods
presented to reflect the three-for-two stock split.
(3) Treasury Stock
--------------
The Company's Board of Directors in 1996 authorized the
purchase of up to 2,250,000 shares of the Company's common stock from
time to time on the open market, subject to prevailing market
conditions. Through the end of the nine months ended September 30,
1997, the Company has purchased approximately 1,960,000 shares (336,000
in the third quarter and 758,000 in the nine months ended September 30,
1997 ) of its common stock since the inception of the repurchase plan.
Some treasury shares purchased have been reissued in satisfaction of
stock options exercised. Treasury stock repurchased has been adjusted
for the periods presented to reflect the three-for-two stock split,
which occurred in the third quarter of 1997.
(4) 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
<PAGE>
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.
Reference is made to Note 9 of Notes to Consolidated Financial
Statements in the Company's 1996 Annual Report on Form 10-K as it
relates to a note receivable taken in connection with the sale of the
business and assets of the former Littell division. During the nine
months ended September 30, 1997, the Company received payments of
$2,195,000 ($1,695,000 in the third quarter of 1997) to be applied
to this note. All litigation related to this disposition has now been
settled and all amounts not expected to be collected have been written
off at September 30, 1997.
At September 30, 1997, the Company was contingently liable for
approximately $1,627,000 primarily relating to outstanding letters of
credit.
(5) Income Taxes
------------
The provision for income taxes in the nine months ended
September 30, 1997 and 1996 is based upon the Federal statutory rate
adjusted for items that are not subject to taxes. See Note 4 of Notes
to Consolidated Financial Statements in the Company's 1996 Annual
Report on Form 10-K for a further discussion related to income taxes.
(6) Summary of Other (Income) Expense
---------------------------------
Other (income) expense for the three and nine month periods
ended September 30, 1997 and 1996 consists of the following:
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
-------------------------- -------------------------
9/30/97 9/30/96 9/30/97 9/30/96
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest income $ (46,000) $ (19,000) $ ( 86,000) $ (95,000)
Goodwill amortization 44,000 45,000 133,000 133,000
Loan cost expenses - 65,000 - 218,000
Net (gain) loss on sales
of operating and non-
operating assets (8,000) (68,000) (151,000) (117,000)
Litigation settlements/insurance
provision 81,000 - 638,000 (96,000)
Payment received on long-term
notes receivable reserved for
as uncollectible (1,695,000) (376,000) (2,195,000) (534,000)
Other miscellaneous 1,000 62,000 579,000 33,000
----------- --------- ------------ ----------
$ (1,623,000) $(291,000) $ (1,082,000) $ (458,000)
============ ========== ============ ==========
</TABLE>
(7) Subsequent Event
----------------
On October 15, 1997, the Company announced it had completed
the sale of its Coz division to a wholly-owned subsidiary of PMC, Inc. of Sun
Valley, California. The all cash proceeds of this sale were used to reduce
borrowings under the Amended and Restated Credit Agreement.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
- - -----------------
On August 26, 1997 the Company entered into an agreement with a
subsidiary of PMC, Inc. of Sun Valley, California, pursuant to which the Company
would sell for cash the business assets of its Coz division located in
Northbridge, MA. The agreement was amended on September 9, 1997. The Coz
division provided a complete line of thermoplastic resins and related services
to the plastic molding and extrusion industry. On October 14, 1997, the sale of
the business was completed. The purchaser also assumed certain specified
liabilities, including accounts payable, of the Coz division. As part of the
Asset Purchase agreement, the Company agreed to enter into a non-competition
agreement for a term of five (5) years. The agreement, as amended, provides that
the purchase price is subject to adjustment for changes in the book value of the
business between August 23, 1997 and October 14, 1997.
First Nine Months of 1997 Compared to First Nine Months of 1996
- - ---------------------------------------------------------------
Net sales for the nine months ended September 30, 1997 were
$213,497,000 compared to net sales of $216,714,000 for the same nine month
period of 1996. Income before taxes for the first nine months of 1997 was
$25,531,000 compared to income before taxes of $24,021,000 reported in the first
nine months of the prior year. Net income for the first nine months of 1997 was
$16,390,000 ($1.32 per common share) based on 12,388,000 weighted average shares
outstanding compared to net income of $15,466,000 ($1.13 per common share) based
on 13,638,000 weighted average shares outstanding for the same nine month period
of 1996. Earnings per share and weighted average shares outstanding have been
adjusted to reflect the three-for-two stock split which occurred during the
third quarter of 1997. The decrease in weighted average shares outstanding was
the result of the Company's program to purchase its common stock.
At the Bush Hog division, net sales increased by over 7% in the first
nine months of 1997 compared to the first nine months of 1996. The majority of
the increase was related to the rotary cutter and loader product lines as well
as improved service parts sales. The increase in rotary cutter and loader sales
was primarily associated with a slight increase in cattle prices. Cattle
ranchers use the cutters and loaders for grazing pasture and feed lot
maintenance, respectively. Prior to 1997, cattle prices decreased due to the
liquidation of cattle herds. Cattle prices, which stabilized in the early part
of the current year, have now increased slightly, leading to increased equipment
purchases. The division also benefitted from the effect of new products,
including turf and landscape equipment. Overall, the agricultural equipment
industry has improved in the current year compared to 1996. The
<PAGE>
fall harvest is well underway and crop yields are good in most areas. Gross
profits and gross profit margins have improved at the Bush Hog division in the
first nine months of 1997 compared to the first nine months of 1996. The
improvement in the gross profit margin was related to improved manufacturing
efficiencies, increased facility utilization and the mix of products sold.
Increased sales volume also attributed to improved gross profits during the
first nine months of 1997.
At the Verson division, net sales decreased by over 5% in the first
nine months of 1997 compared to the same nine month period of the prior year.
Revenue and profits are recognized on a percentage of completion basis for press
production at this division. Production workers at the Verson division went on
strike on June 23, 1997. Production continued on a limited basis through the use
of supervisory employees. On July 22, 1997, the Company announced that it had
reached an agreement with the members of the United Auto Workers' local and the
production workers returned to work. The decrease in net sales reflects the mix
of jobs in production. Gross profits have decreased in the first nine months of
1997 compared to the same nine month period of 1996. Gross profit margins have
remained relatively constant. During the 1996 nine-month period, significant
production continued on an order for three "A" presses for Chrysler. Production
on this order was completed in early 1997. Current year production reflects a
smaller portion of production against this order and a larger portion of
production related to smaller presses with lower margins. Margin decreases were
offset by the effects of lower warranty provisions related to the mix of sales
(production) in the current year. Also impacting gross profits were increased
overtime costs necessary to meet delivery schedules and costs associated with a
program undertaken to identify improvements in the manufacturing process. These
cost increases were offset in part by the recovery of a claim associated with
prior periods.
At the Company's former Coz division, net sales decreased by over 15%
in the first nine months of 1997 compared to the first nine months of the prior
year. Net sales decreased throughout all product lines and generally reflect the
thermoplastic compounding industry in general. Sales were also impacted by the
August announcement of the sale of this division. Gross profits and gross profit
margins also decreased at the Coz division in the first nine months of 1997
compared to the same nine month period of the prior year. The majority of this
decrease in gross profits was related to the effects of lower sales volume noted
above. The decrease in gross profit margins was related to both decreased
facility utilization in 1997 and pressures on margins related to increased
competition.
Selling and administrative expenses increased to $26,485,000 (12.4% of
net sales) in the first nine months of 1997 from $25,967,000 (12.0% of net
sales) in the first nine months of 1996. In general, the increase in these
expenses related to normal cost increases (salaries, fringe benefits, travel,
etc.) associated with the operations of the Company. These increases were
partially offset by decreased commissions at the Bush Hog division where the
commission rates structure have been changed resulting in a decrease in the
current year. Administrative expenses also decreased at the
<PAGE>
Bush Hog division where costs were incurred during 1996 in connection with a
program to identify improvements in the manufacturing process. The program was
completed in 1996 and no such costs were incurred at this division in 1997.
Interest expense in the first nine months of 1997 was $2,499,000
compared to interest expense of $1,294,000 in the first nine months of the prior
year. Increased borrowing needs were associated with the Verson division where
the number of presses in process has increased and the division is awaiting
final payment on presses currently being installed. The Company also purchased
approximately $16,000,000 of treasury stock during the first nine months of 1997
as part of a program to purchase up to 2,250,000 shares of the Company's common
stock. See Note 2 of Notes to Condensed Consolidated Financial Statements.
Reference is made to Note 6 of Notes to Condensed Consolidated
Financial Statements for an analysis of Other (income) expense in the first nine
months of 1997 and 1996. It should be noted that "Litigation
settlements/insurance provisions" in 1997 included income of $1,550,000 from the
settlement of an environmental claim against a former owner of an idle facility,
income of $2,195,000 from the recovery of a note receivable previously written
off and additional expenses of approximately $2,100,000 related primarily to
product liability claims of certain former divisions of the Company.
Third Quarter of 1997 Compared to Third Quarter of 1996
- - -------------------------------------------------------
Net sales in the third quarter of 1997 were $63,714,000 compared to net
sales of $72,273,000 reported in the third quarter of 1996. Income before taxes
in the third quarter of 1997 was $7,758,000 compared to income before taxes of
$7,746,000 in the third quarter of the prior year. Net income in the third
quarter of 1997 was $5,013,000 ($.40 per common share based on 12,501,000
weighted average shares outstanding) compared to net income of $4,806,000 ($.35
per common share based on 13,570,000 weighted average shares outstanding) for
the same quarter of 1996. Earnings per share and weighted average shares
outstanding have been adjusted to reflect the three-for-two stock split which
occurred during the third quarter of 1997.
At the Bush Hog division, net sales increased by over 13% in the third
quarter of 1997 compared to the third quarter of 1996. While all major product
lines sales increased in the third quarter of 1997, the majority of the increase
was related to the rotary cutter products, reflecting the improvements
associated with the cattle industry previously discussed. The division also
benefitted from the effects of new products, including turf and landscape
equipment. Gross profits and gross profit margins improved at the Bush Hog
division in the third quarter of 1997 compared to the third quarter of 1996.
Approximately 60% of the improvement in gross profits was related to improved
margins resulting from greater facility utilization and increased manufacturing
efficiencies. The
<PAGE>
remainder of the improvement in gross profits was associated with increased
sales volume in the current year's third quarter.
At the Verson division, net sales decreased by 28% in the third quarter
of 1997 compared to the same quarter of the prior year. This decrease reflects
the mix of jobs in production. Gross profits decreased at the Verson division in
the third quarter of 1997. Lower sales (production) as discussed above resulted
in this decrease. Gross profit margins did improve in the current year's third
quarter. This increase was associated with the mix of production and the
recovery in the third quarter of 1997 of a claim associated with prior periods.
At the Coz division, net sales decreased by over 25% in the third
quarter of 1997 compared to the third quarter of 1996. As previously noted, the
Company announced the sale of this division during the current year's third
quarter. The industry in general has also been impacted by a slowdown. Gross
profits and gross profit margins decreased at the Coz division in the third
quarter of 1997. The majority of the decrease in gross profits reflect the lower
sales volume as noted above. Margins were affected by decreased facility
utilization and more competitive pricing.
Selling and administrative expenses increased to $9,217,000 (14.5% of
net sales) in the third quarter of 1997 from $8,293,000 (11.5% of net sales) in
the third quarter of 1996. Selling expense increases at the Bush Hog division
were associated with the expansion of the dealer network related to the turf and
landscape products. Commission expenses also increased due to the increase in
sales volume. Increased legal fees were incurred in the third quarter of 1997
due to the sale of the Coz division and expenses associated with the recovery of
a claim related to prior periods at the Verson division.
Interest expense in the third quarter of 1997 increased to $847,000
compared to interest expenses of $374,000 reported in the third quarter of 1996.
The majority of the increase was related to the Company's purchase of treasury
stock since the end of the third quarter of 1996. Increased working capital
needs at the Verson division (increased number of press in process and final
payments due on installed presses) have also resulted in increased borrowings in
the third quarter of 1997 under the Amended and Restated Credit Agreement.
Reference is made to Note 6 of Notes to Condensed Consolidated
Financial Statements for an analysis of Other (income) expense in the third
quarter of 1997 and 1996.
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
- - ---------------------------------
Working capital at September 30, 1997 was $53,352,000 (current ratio of
1.57 to 1.0) compared to working capital of $50,800,000 (current ratio of 1.68
to 1.0) at December 31, 1996. Net receivables have increased by $9,466,000 since
the end of 1996. Approximately half of the increase was related to the Bush Hog
division where cash collections associated with the sale of agricultural
equipment to dealers are dependent on the retail sale of the product by the
dealer. Sales to dealers are typically strong in the first quarter of the year
or just prior to the use season by the farmer. Extended payment terms are
offered to dealers in the form of floor plan financing which is customary in the
industry. The remainder of the increase in net receivables was related to the
Verson division. Press installations in 1997 have been delayed resulting in the
delayed collection of the final amounts due for these presses. As the
installation backlog decreases, receivables will also decrease. On a
consolidated basis, inventories increased by approximately $12,000,000. The
entire increase was related to the Verson division and was associated with
several factors including manufacturing/delivery delays attributable to a
four-week strike (as discussed above) and the mix of press jobs then in
production compared to the mix of presses in process at the end of 1996. Fixed
asset additions in the first nine months of 1997 ($10,165,000) include the
purchase of a 40,000 square foot facility for the Verson division which will be
used for expanded manufacturing capabilities and provides for the opportunity to
expand the Verson business into the manufacturing of other related equipment.
The increase in accounts payable relates to increased production at both the
Bush Hog and Verson operations during 1997.
Net borrowings under the Amended and Restated Credit Agreement
increased by $16,100,000 since the end of 1996. These borrowings, along with
internally generated cash, were used to finance working capital needs and fixed
asset additions described above and the purchase of 758,000 treasury shares
during the first nine months of 1997. Through the end of the third quarter of
1997, the Company has purchased approximately 1,960,000 shares of its common
stock since the inception of the plan in 1996 to repurchase up to 2,250,000
shares of its common stock.
As of September 30, 1997, the Company had cash balances of $503,000 and
additional funds of $54,453,000 available under its Amended and Restated Credit
Agreement of which $29,453,000 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
$25,000,000 which is available for new Verson business as noted above. The
Company believes that its expected operating cash flow and funds available under
the Amended and Restated Credit Agreement are adequate to finance its operating
and capital expenditures in the near future. During the first nine months of
1997, the Company has been in compliance with all provisions of loan agreements
in effect. Proceeds received subseequent to the end of the third quarter of 1997
related to the previously discussed sale of Coz division were used to reduce
borrowings under the Amended
<PAGE>
and Restated Credit Agreement.
During the third quarter of 1997, the Company's Board of Directors
authorized a three-for-two stock split for stockholders of record on August 15,
1997 and a four cent ($.04) per share quarterly dividend (which is a 20%
increase over the prior quarter dividend).
Reference is made to Note 4 of Notes to Condensed Consolidated
Financial Statements relating to the collection of amounts due under a note
receivable, the collection of which was fully reserved for in 1995.
Subsequent to the end of the third quarter of 1997, the Company
announced a dividend of $.04 per share on its Common Stock which will be paid on
December 30, 1997 to stockholders of record on December 12, 1997.
IMPACT FROM NOT YET EFFECTIVE RULES
- - -----------------------------------
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 128 - Earnings per
Share. This statement establishes standards for computing and presenting
earnings per share. It replaces the presentation of primary earnings per share
with a presentation of basic earnings per share. It also requires dual
presentation of basic and diluted earnings per share on the face of the income
statement for all entities with a complex capital structure and requires a
reconciliation of the numerator and denominator of the basic earnings per share
computation to the numerator and denominator of the diluted earnings per share
computation. The statement is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods. Earlier
application is not permitted. The Company anticipates that any earnings per
share adjustment from the application of this statement will not be material to
the current method of computing earnings per share.
Also in February 1997, the FASB issued SFAS No. 129-Disclosure of
Information about Capital Structure. This statement establishes disclosure
requirements relating to an entity's capital structure and is effective for
financial statements for periods ending after December 15, 1997. In June 1997,
the FASB issued SFAS No. 130-Reporting Comprehensive Income. This statement
establishes standards for the reporting and display of comprehensive income and
its components and is effective for fiscal years beginning after December 15,
1997. Reclassification of financial statements for earlier periods for
comparative purpose is also required. Also in June 1997, the FASB issued SFAS
131 Disclosures about Segments of an Enterprise and Related Information. This
statement establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards
<PAGE>
for related disclosures about products and services, geographic areas and major
customers. This statement is effective for financial statements for periods
beginning after December 15, 1997.
Comparative information for earlier years is also to be presented.
In relation to SFAS Nos. 129, 130, and 131, the Company is in the
process of evaluating the impact of these statements on its financial reporting.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Reference is made to Part I, Item 3-Legal Proceedings- and
Note 10 of Notes to Consolidated Financial Statements in the Company's
latest annual report on Form 10-K with respect to the Company's
involvement in legal proceedings as a defending party. There are no new
significant cases to report and there have been no significant changes
in the previously reported proceedings.
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, 1997.
<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 10,1997 Kenneth B. Light
- - ---------------- ----------------
Kenneth B. Light,
Executive Vice President, Chief Financial
& Administrative Officer; Director
November 10,1997 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 Earning per Share
27 Financial Data Schedule
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, 1997
Net income $ 5,013,000
Weighted average of outstanding shares of
common stock 12,091,000 -
Weighted average of effect of assumed
exercise of outstanding stock options 410,000 -
---------- -----------
12,501,000 $ 5,013,000
========== ===========
Earnings per common share $ .40
===========
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1996
Net income $ 4,806,000
Weighted average of outstanding shares of
common stock 13,570,000 -
Weight average of effect of assumed
exercise of outstanding stock options - -
---------- -----------
13,570,000 $ 4,806,000
========== ===========
Earnings per common share $ .35
===========
<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)
Net
Shares Income
---------- -------------
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997
Net income $ 16,390,000
Weighted average of outstanding
shares of common stock 12,165,000 -
Weighted average of effect of assumed
exercise of outstanding stock options 223,000 -
---------- ------------
12,388,000 $ 16,390,000
========== ============
Earnings per common share $ 1.32
============
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
Net income $ 15,466,000
Weighted average of outstanding shares of
common stock 13,638,000 -
Weighted average of effect of assumed
exercise of outstanding stock options - -
---------- ------------
13,638,000 $ 15,466,000
========== ============
Earnings per common share $ 1.13
============
<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)
Net
Shares Income
---------- ------------
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1997
Net income $ 5,013,000
Weighted average of outstanding shares of
common stock
12,091,000 -
Weighted average of effect of assumed
exercise of outstanding stock options 424,000 -
---------- ------------
12,515,000 $ 5,013,000
========== ============
Earnings per common share $ .40
============
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1996
Net income $ 4,806,000
Weighted average of outstanding shares of
common stock 13,570,000 -
Weighted average of effect of assumed
exercise of outstanding stock options - -
---------- ------------
13,570,000 $ 4,806,000
========== ============
Earnings per common share $ .35
============
<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)
Net
Shares Income
---------- -------------
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997
Net income $ 16,390,000
Weighted average of outstanding shares of
common stock
12,165,000 -
Weighted average of effect of assumed
exercise of outstanding stock options 270,000 -
---------- -------------
12,435,000 $ 16,390,000
========== =============
Earnings per common share $ 1.32
=============
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
Net income $ 15,466,000
Weighted average of outstanding shares of
common stock 13,638,000 -
Weighted average of effect of assumed
exercise of outstanding stock options - -
---------- -------------
13,638,000 $ 15,466,000
========== =============
Earnings per common share $ 1.13
=============
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS STATEMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30,1997 AND THE CONSOLIDATED STATEMENT
OF INCOME AND THE CONSOLIDATED STATEMENT OF CASH FLOW FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000003941
<NAME> ALLIED PRODUCTS CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-09-1997
<EXCHANGE-RATE> 1.000
<CASH> 503
<SECURITIES> 0
<RECEIVABLES> 63,065
<ALLOWANCES> 685
<INVENTORY> 68,869
<CURRENT-ASSETS> 146,459
<PP&E> 97,225
<DEPRECIATION> 52,777
<TOTAL-ASSETS> 199,017
<CURRENT-LIABILITIES> 93,107
<BONDS> 344
0
0
<COMMON> 140
<OTHER-SE> 93,915
<TOTAL-LIABILITY-AND-EQUITY> 199,017
<SALES> 213,497
<TOTAL-REVENUES> 213,497
<CGS> 160,064
<TOTAL-COSTS> 160,064
<OTHER-EXPENSES> 27,902
<LOSS-PROVISION> 106
<INTEREST-EXPENSE> 2,499
<INCOME-PRETAX> 25,531
<INCOME-TAX> 9,141
<INCOME-CONTINUING> 16,390
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,390
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.32
</TABLE>
