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, 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:8,085,272 common shares, $.01
par value, as of July 31, 1997.
<PAGE>
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
INTRODUCTION
CONDENSED CONSOLIDATED BALANCE SHEETS-
June 30, 1997 and December 31, 1996
CONDENSED CONSOLIDATED STATEMENTS OF INCOME-
Three and Six Months Ended June 30, 1997 and 1996
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-
Six Months Ended June 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. 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
------------------------------
ITEM 1. FINANCIAL STATEMENTS
ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
INTRODUCTION
The condensed consolidated financial statements included herein (as of
June 30, 1997 and for the six months ended June 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 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, 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 six month periods ended
June 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>
June 30,1997 December 31,1996
-------------- --------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,168,000 $ 833,000
-------------- --------------
Notes and accounts receivable, less allowances of
$680,000 and $629,000, respectively $ 74,989,000 $ 52,914,000
-------------- --------------
Inventories:
Raw materials $ 8,673,000 $ 9,524,000
Work in process 36,195,000 28,269,000
Finished goods 16,439,000 18,997,000
-------------- --------------
$ 61,307,000 $ 56,790,000
-------------- --------------
Deferred tax asset $ 14,532,000 $ 14,532,000
-------------- --------------
Prepaid expenses $ 176,000 $ 191,000
-------------- --------------
Total current assets $ 152,172,000 $ 125,260,000
-------------- --------------
Plant and Equipment, at cost:
Land $ 2,192,000 $ 2,155,000
Buildings and improvements 38,327,000 37,196,000
Machinery and equipment 54,179,000 50,083,000
------------- --------------
$ 94,698,000 $ 89,434,000
Less- Accumulated depreciation and amortization 51,865,000 51,048,000
------------- --------------
$ 42,833,000 $ 38,386,000
-------------- --------------
Other Assets:
Notes receivable, due after one year,
less allowance of $2,500,000 and
$7,165,000 at June 30, 1997 and
December 31, 1996,respectively $ - $ -
Deferred tax asset 5,282,000 5,282,000
Deferred charges (goodwill), net of amortization 1,579,000 1,668,000
Other 1,185,000 1,353,000
-------------- --------------
$ 8,046,000 $ 8,303,000
-------------- --------------
$ 203,051,000 $ 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>
June 30, 1997 December 31,1996
------------- ----------------
<S> <C> <C>
Current Liabilities:
Revolving credit agreement $ 53,800,000 $ 27,000,000
Current portion of long-term debt 193,000 193,000
Accounts payable 16,418,000 16,692,000
Accrued expenses 31,057,000 30,575,000
-------------- --------------
Total current liabilities $ 101,468,000 $ 74,460,000
-------------- --------------
Long-term debt, less current portion shown above $ 393,000 $ 489,000
-------------- --------------
Other long-term liabilities $ 9,064,000 $ 3,547,000
-------------- --------------
Commitments and Contingencies
Shareholders' Investment:
Preferred stock:
Undesignated-authorized 1,500,000 shares at
June 30,1997 and December 31, 1996: none issued $ - $ -
Common stock, par value $.01 per share; authorized
25,000,000 shares; issued 9,364,844 shares at
June 30,1997 and December 31, 1996, respectively 94,000 94,000
Additional paid-in capital 94,737,000 94,671,000
Retained earnings 32,796,000 22,227,000
-------------- --------------
$ 127,627,000 $ 116,992,000
Less: Treasury stock, at cost 1,286,572
and 905,071 shares at June 30, 1997 and
December 31, 1996, respectively $ (35,501,000) $ (23,539,000)
-------------- --------------
Total shareholders' equity 92,126,000 $ 93,453,000
-------------- --------------
$ 203,051,000 $ 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 June 30,
---------------------------
1997 1996
------------ ------------
Net sales $ 76,902,000 $ 69,198,000
Cost of products sold 57,323,000 51,392,000
------------ ------------
Gross profit $ 19,579,000 $ 17,806,000
------------ ------------
Other costs and expenses:
Selling and administrative expenses $ 8,775,000 $ 8,641,000
Interest expense 958,000 478,000
Other (income) expense, net 112,000 (61,000)
------------ ------------
$ 9,845,000 $ 9,058,000
------------ ------------
Income before taxes $ 9,734,000 $ 8,748,000
Provision for income taxes 3,528,000 3,206,000
------------ ------------
Net income $ 6,206,000 $ 5,542,000
============ ============
Earnings per common share:
Primary $ .75 $ .61
============ ============
Fully diluted $ .74 $ .61
============ ============
Weighted average of shares outstanding:
Primary 8,253,000 9,096,000
============ ============
Fully diluted 8,338,000 9,096,000
============ ============
Dividends per common share $ .05 $ .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 INCOME
Six Months Ended June 30,
-------------------------
1997 1996
------------- -------------
Net sales $ 149,783,000 $ 144,441,000
Cost of products sold 112,549,000 109,739,000
------------- -------------
Gross profit $ 37,234,000 $ 34,702,000
------------- -------------
Other costs and expenses:
Selling and administrative expenses 17,268,000 $ 17,674,000
Interest expense 1,652,000 920,000
Other (income) expense, net 541,000 (167,000)
------------- -------------
$ 19,461,000 $ 18,427,000
------------- -------------
Income before taxes $ 17,773,000 $ 16,275,000
Provision for income taxes 6,396,000 5,615,000
------------- -------------
Net income $ 11,377,000 $ 10,660,000
============= =============
Earnings per common share:
Primary $ 1.38 $ 1.17
============= =============
Fully diluted $ 1.38 $ 1.17
============= =============
Weighted average of shares outstanding:
Primary 8,221,000 9,115,000
============= =============
Fully diluted 8,263,000 9,115,000
============= =============
Dividends per common share $ .10 $ .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 six months ended June 30,
---------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 11,377,000 $ 10,660,000
Adjustments to reconcile net income to net cash
used for operating activities:
Gains on sales of operating and non-operating assets (143,000) (38,000)
Depreciation and amortization 2,525,000 2,750,000
Amortization of deferred charges 89,000 88,000
Deferred income tax provision 5,648,000 5,053,000
Changes in noncash assets and liabilities,
net of noncash transactions:
(Increase) in accounts receivable (22,151,000) (6,213,000)
(Increase) in inventories (4,517,000) (12,624,000)
(Increase) decrease in prepaid expenses 15,000 (86,000)
Decrease in notes receivable, due after one year - 29,000
Decrease in accounts payable and accrued expenses (27,000) (393,000)
Other, net 113,000 243,000
------------- -------------
Net cash used for operating activities $ (7,071,000) $ (531,000)
------------- -------------
Cash Flows from Investing Activities:
Additions to plant and equipment $ (7,233,000) $ (1,809,000)
Proceeds from sales of plant and equipment 404,000 44,000
-------------- -------------
Net cash used for investing activities $ (6,829,000) $ (1,765,000)
------------- -------------
Cash Flows from Financing Activities:
Borrowings under revolving loan and credit agreements $ 63,700,000 $ 64,350,000
Payments under revolving loan and credit agreements (36,900,000) (47,250,000)
Payments of short and long-term debt (96,000) (310,000)
Common stock issued - 1,501,000
Purchase of treasury stock (12,956,000) (8,125,000)
Dividends paid (407,000) (912,000)
Stock option transactions 894,000 997,000
------------- -------------
Net cash provided from financing activities $ 14,235,000 $ 10,251,000
------------- -------------
Net increase in cash and cash equivalents $ 335,000 $ 7,955,000
Cash and cash equivalents at beginning of year 833,000 744,000
-------------- -------------
Cash and cash equivalents at end of period $ 1,168,000 $ 8,699,000
============= =============
</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:
6/30/97 12/31/96
------------ ------------
Salaries and wages $ 6,966,000 $ 6,026,000
Warranty 7,539,000 9,559,000
Self insurance accruals 5,284,000 4,046,000
Pensions, including retiree health 6,164,000 6,417,000
Taxes, other than income taxes 516,000 811,000
Environmental matters 1,860,000 2,020,000
Other 2,728,000 1,696,000
------------ ------------
$ 31,057,000 $ 30,575,000
============ ============
(2) Treasury Stock
--------------
The Company's Board of Directors in 1996 authorized the
purchase of up to 1,500,000 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 first half of 1997, the Company has
purchased approximately 1,225,000 shares (none in the second quarter
and 422,000 in the first half of 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.
(3) 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.
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. Subsequent to the
end of the second quarter of 1997, the Company received a payment of
$1,500,000 (in addition to a receipt of $500,000 in the second 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 June 30, 1997.
<PAGE>
At June 30, 1997, the Company was contingently liable for
approximately $1,511,000 primarily relating to outstanding letters of
credit.
(4) Income Taxes
------------
The provision for income taxes in the first half of 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.
(5) Summary of Other (Income) Expense
---------------------------------
Other (income) expense for the three and six month periods
ended June 30, 1997 and 1996 consists of the following:
<TABLE>
<CAPTION>
For the three months ended For the six months ended
-------------------------- ------------------------
6/30/97 6/30/96 6/30/97 6/30/96
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income $ (23,000) $ (13,000) $ (40,000) $ (76,000)
Goodwill amortization 45,000 44,000 89,000 88,000
Loan cost expenses - 75,000 - 153,000
Net (gain) loss on sales
of operating and non-
operating assets (18,000) 1,000 (143,000) (38,000)
Litigation settlements/insurance .
provision 115,000 - 557,000 (96,000)
Payment received on long-term
notes receivable reserved for as
uncollectible (500,000) (500,000) (158,000)
Other miscellaneous 493,000 (168,000) 578,000 (40,000)
---------- ---------- --------- ---------
$ 112,000 $ (61,000) $ 541,000 $ (167,000)
========== ========== ======== =========
</TABLE>
(6) Subsequent Event
----------------
On July 24, 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 common stock, at the rate
of one share for each two shares owned. The dividend will be paid on
September 5, 1997 to stockholders of record on August 15, 1997. In
addition, a cash dividend of four cents ($.04) on its common stock will
be paid on September 30, 1997 to stockholders of record on August 15,
1997, including the shares to be issued as a result of the stock split.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
- - -----------------
First Half of 1997 Compared to First Half of 1996
- - -------------------------------------------------
Net sales in the first half of 1997 were $149,783,000 compared to net
sales of $144,441,000 reported in the first half of 1996. Income before taxes in
the first half of 1997 was $17,773,000 compared to income before taxes of
$16,275,000 in the first half of the prior year. Net income in the first half of
1997 was $11,377,000 ($1.38 per common share based on 8,221,000 weighted average
shares outstanding) compared to net income of $10,660,000 ($1.17 per common
share based on 9,115,000 weighted average shares outstanding) for the first half
of 1996. The decrease in the weighted average shares outstanding was the result
of the Company's program to purchase its common stock.
At the Bush Hog division, net sales in the first half of 1997 increased
by 5% over net sales in the first half of the prior year. The majority of the
sales increase was related to increased loader and service parts sales in 1997.
Cutter/mower sales in the first half of the current year approximated those
reported in the first half of 1996. Overall, the agricultural equipment industry
has improved in the current year compared to 1996. Cattle prices have stabilized
during the first half of 1997 and have improved in recent months. Beef cattle
producers are optimistic as feed costs have decreased and adequate moisture is
providing a good hay crop. Grain crop yields in 1997 are expected to exceed
yields of the prior year assuming favorable weather continues during the growing
season. Certain commodity prices have decreased significantly from 1996 levels
while others have remained relatively stable. Excessive rainfall in some areas
is expected to result in lower cotton yields. Gross profits and gross profit
margins have improved at the Bush Hog division in the first half of 1997
compared to the first half of the prior year. The improvement in the gross
profit margin was related to the mix of products sold, increased facility
utilization and improved manufacturing efficiencies during the first half of
1997. Increased sales volume also resulted in improved gross profits during
the first half of 1997.
At the Verson division, net sales increased by 7% in the first half of
1997 compared to the first half of 1996. The increase in net sales was reflected
in all product lines except parts, where sales remained constant with part sales
during the first half of 1996. Revenue and profits are recognized on a
percentage of completion basis for press production at this division. While
gross profits have increased in the first half of the current year (primarily
the result of increased sales volume), margins
<PAGE>
have decreased. This decrease was associated with the mix of jobs in production.
In the first half of 1996, significant production continued on an order for
three "A" presses for Chrysler. Production was completed on this order in the
first quarter of 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. The division also incurred increased
overtime costs necessary to meet delivery schedules and costs associated with a
program undertaken to identify areas and means of improvement in the
manufacturing process. These increased costs were partially offset by lower
warranty provisions related to the mix of sales during the first half of 1997.
Production workers at the Verson division went on strike on June 23,
1997, one week after the expiration of the prior union agreement. The strike had
no material impact on the operations of the Verson division or the Company for
the three and six month periods ended June 30, 1997. Production continued at the
Verson division through the use of supervisory employees, which enabled the
division to continue to meet customer obligations. On July 22, 1997, the Company
announced that it had reached an agreement with the members of the United Auto
Workers' local. It is too early to determine the full impact that the strike
will have on the third and fourth quarter operating results of the Verson
division.
At the Coz division, net sales decreased 13% in the first half of 1997
compared to the first half of the prior year. Net sales have decreased in most
product lines during 1997. The decrease in sales is reflected throughout the
industry. Customers of the Coz division have also experienced sales decreases of
10 - 15% in the first half of 1997. A smaller portion of the decrease in net
sales at the Coz division was related to the division's effort to extract itself
from lower margin products. Gross profits have decreased slightly in the first
half of the current year due to lower sales volume noted above. Gross profit
margins have remained constant in the first half of 1997. Savings resulting from
the reduction of lower margin sales were offset by lower margins resulting from
the effects of decreased facility utilization and increased competition and its
effect on selling prices.
Selling and administrative expenses decreased to $17,268,000 (11.5% of
net sales) in the first half of 1997 compared to expenses of $17,674,000 (12.2%
of net sales) reported in the first half of 1996. The majority of the decrease
in selling expenses was associated with the Bush Hog division where sales
commission rates have been decreased in 1997. Decreases in administrative
expenses were also primarily related to the Bush Hog division where costs were
incurred during the first half of 1996 in connection with a program to identify
areas and means of improvement in the manufacturing process. This program was
completed at the end of the first half of 1996. No such costs were incurred at
this division in the first half of the current year.
Interest expense in the first half of 1997 was $1,652,000 compared to
interest expense of $920,000 reported in the first half of the prior year.
Increased borrowing needs were associated with
<PAGE>
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 $13,000,000 of treasury stock during the
first half of 1997 as part of a program to purchase up to 1,500,000 shares of
the Company's common stock. See Note 2 of Notes to Condensed Consolidated
Financial Statements.
Reference is made to Note 5 of Notes to Condensed Consolidated
Financial Statements for an analysis of Other (income) expense in the first half
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
$500,000 from the recovery of a note receivable previously written off and
additional expenses of approximately $2,050,000 related primarily to product
liability claims of certain former divisions of the Company.
Second Quarter of 1997 Compared to Second Quarter of 1996
- - ---------------------------------------------------------
Net sales in the second quarter of 1997 were $76,902,000 compared to
net sales of $69,198,000 reported in the second quarter of 1996. Income before
taxes in the second quarter of the current year was $9,734,000 compared to
income before taxes of $8,748,000 in the second quarter of the prior year. Net
income in the second quarter of 1997 was $6,206,000 ($.75 per common share based
on 8,253,000 weighted average shares outstanding) compared to net income of
$5,542,000 ($.61 per common share based on 9,096,000 weighted average shares
outstanding) for the same quarter of the prior year.
At the Bush Hog division, net sales increased 17% in the second quarter
of 1997 compared to the second quarter of 1996. Increases in net sales were
reported primarily within the rotary cutter and loader product lines. Much of
this increase was the direct result of improvements in the cattle industry as
previously discussed. The effects of favorable weather conditions and moisture
levels in many parts of the country have also resulted in increased sales. Gross
profits and gross profit margins have improved in the second quarter of 1997
compared to the same quarter of the prior year. Approximately half of the
increase in gross profits was related to the increased sales volume noted above.
The remainder of the increase in gross profits and the improvement in gross
profit margins were related to the improved mix of products sold and the effects
of favorable manufacturing efficiencies obtained during the second quarter of
1997.
At the Verson division, net sales in the second quarter of 1997
increased 15% over levels reported in the second quarter of 1996. The majority
of the increase was related to press sales. Production (sales) in the second
quarter of 1997 was concentrated on smaller presses as production orders for
larger presses were completed prior to the current quarter. No significant
production has
<PAGE>
taken place on recent large press orders as design and engineering functions are
now being performed prior to production. Production in the second quarter of
1996 included work on the Chrysler order for three "A" presses which was
previously discussed. The gross profit margin in the second quarter of 1997 at
the Verson division decreased compared to the second quarter of 1996. This
decrease was primarily associated with the mix of production during each of the
quarters as noted above. In addition, a significant amount of production
overtime was incurred in the second quarter of 1997 which was necessary to meet
delivery schedules. Costs related to a program undertaken to identify areas and
means of improvement in the manufacturing process continued to be incurred in
the current year's second quarter. Lower warranty provisions were recorded in
the current year's second quarter as the mix of production has significantly
changed as noted above.
At the Coz division, net sales in the second quarter of 1997 decreased
21% compared to the second quarter of the prior year. Current second quarter
sales were affected by an industry wide slowdown in demand. As noted above, the
Coz division is extracting itself from certain lower margin products and selling
prices have been impacted by increased competition. Gross profits and gross
profit margins have decreased in the second quarter of 1997 compared to the
second quarter of 1996. This is the direct result of increased pricing
competition, decreased facility utilization and lower sales volume.
Selling and administrative expenses increased slightly in the second
quarter of 1997 ($8,775,000) compared to these same expenses in the second
quarter of 1996 ($8,641,000). As a percent of net sales, these expenses
decreased in the current year's second quarter (11.4%) compared to the same
quarter of the prior year (12.5%). Selling expense indicated little change on a
quarter to quarter comparison. Commission expenses at the Bush Hog division
remained constant in terms of actual amounts expensed even though sales
increased. As noted earlier, commission rates have been decreased in the current
year.
Interest expense in the second quarter of 1997 increased to $958,000
compared to interest expense of $478,000 reported in the second quarter of 1996.
Cash requirements at the Verson division increased in 1997, primarily in the
area of receivables. Balances remain outstanding on invoiced presses as
installation of these presses has been delayed due to the large number of
installations that need to be completed. Final payments on receivables related
to these presses are generally not due until installation is completed. Also
affecting the need for additional borrowings was the effect of treasury stock
purchases in the first quarter of 1997 as previously discussed.
Reference is made to Note 5 of Notes to Condensed Consolidated
Financial Statements for an analysis of Other (income) expense in the second
quarter of 1997 and 1996.
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
- - ---------------------------------
Working capital at June 30, 1997 was $50,704,000 (current ratio of 1.50
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 approximately
$22,000,000 since the end of 1996. Approximately 65% of this increase was
associated with the Verson division. As noted above, press installations have
been delayed in 1997 resulting in the delayed collection of the final amounts
due for these presses. As the installation backlog decreases, receivables will
also decrease. The remainder 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. On a consolidated basis, inventories increased by approximately
$4,500,000 since the end of 1996. The entire increase was related to the Verson
division and was associated with the mix of press jobs currently in production
compared to the mix of presses in process at the end of 1996. Down payments and
progress payments are recorded as a reduction in inventory on jobs in process.
Inventories at the Bush Hog and Coz divisions decreased since the end of 1996.
Fixed asset additions during the first half of 1997 included the purchase of a
40,000 square foot facility for the Verson division. The facility will be used
for expanded manufacturing capabilities. The facility also provides the
opportunity to expand the Verson business into the manufacturing of other
related equipment.
Net borrowings under the Amended and Restated Credit Agreement
increased by $26,800,000 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 422,000 treasury shares.
Through the end of the first half of 1997, the Company has purchased
approximately 1,225,000 shares of its common stock since the inception of the
repurchase plan in 1996.
As of June 30, 1997, the Company had cash balances of $1,168,000 and
additional funds of $43,753,000 available under its Amended and Restated Credit
Agreement of which $18,753,000 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 anticipates positive cash flow in the third quarter of 1997, principally
from the collection of Bush Hog and Verson receivables. 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 half of 1997, the Company has
been in compliance with all provisions of loan agreements in effect.
<PAGE>
Subsequent to the end of the second quarter of 1997, the Company
announced that the Board of Directors had authorized a three-for-two stock
split and a 20% increase in the quarterly dividend. Reference is made to
Note 6 of Notes to Condensed Consolidated Financial Statements for
additional information regarding this announcement.
Reference is made to Note 3 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.
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 in a full set of general purpose financial statements 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 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 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On May 28, 1997 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 items were voted on by the Company's shareholders:
The first item voted on was the 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 A Directors - Term expires in 2000 - Mr. R.A. Drexler,
------------------------------------------------------------
Mr. John W. Puth and Mr. Mitchell I. Quain
-------------------------------------------
For Mr. Drexler - 6,864,795; withheld from Mr. Drexler - 12,576.
For Mr. Puth - 6,869,272; withheld from Mr. Puth - 8,099.
For Mr. Quain - 6,869,280; withheld from Mr. Quain - 8,091
The terms of the following directors continued after the meeting:
Class B Directors - Terms expire in 1998
----------------------------------------
Mr.Lloyd A.Drexler, Mr.John E. Jones and Mr.Stanley J. Goldring
Class C Directors - Terms expire in 1999
-----------------------------------------
Mr. William D. Fischer, Mr. Kenneth B. Light and Mr. S.S Sherman
.
Approximately 677,000 shares held by brokers and nominees were not
voted in the election of directors.
The second item voted on was a proposed adoption of the 1997 Incentive
Stock Plan. The plan was adopted to replace the Company's 1990 Incentive Stock
Plan and 1993 Directors Incentive
<PAGE>
Stock Plan. The proposition received the following number of votes:
For - 4,487,937; Against - 1,747,681; Abstain - 79,843
Approximately 1,356,000 shares held by brokers and nominees were not
voted on the proposal to adopt the new plan.
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, 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)
August 12,1997 Kenneth B. Light
- - -------------- ----------------
Kenneth B. Light,
Executive Vice President, Chief Financial &
Administrative Officer; Director
August 12,1997 Robert J. Fleck
- - -------------- ---------------
Robert J. Fleck,
Vice President - Accounting & Chief Accounting
Officer
<PAGE>
ALLIED PRODUCTS CORPORATION
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- - ----------- -----------------------
10 1997 Incentive Stock Plan
11 Computation of Earning per Share
27 Financial Data Schedule
Allied Products Corporation
1997 Incentive Stock Plan
(Established March 31, 1997)
<PAGE>
TABLE OF CONTENTS
-----------------
Section 1..........Purpose...................................................1
Section 2..........Definitions...............................................1
Section 3..........Administration............................................3
Section 4..........Common Stock Subject to Plan..............................4
Section 5..........Eligibility ..............................................4
Section 6..........Options...................................................5
Section 7..........Stock Awards..............................................6
Section 8 .........Stock Appreciation Rights ................................7
Section 9 .........Performance Units ........................................7
Section 10.........Treatment of Incentives Upon Termination .................8
Section 11 ........Adjustment Provisions ....................................10
Section 12 ........Change in Control.........................................10
Section 13.........Term of Plan............................................. 10
Section 14 ........General Provisions........................................10
Section 15 ........Amendment or Discontinuance of the Plan...................12
<PAGE>
Allied Products Corporation
1997 Incentive Stock Plan
(Established March 31, 1997)
Section 1. Purpose.
The purpose of the Plan, as hereinafter set forth, is to enable the
Company to attract, retain and reward key employees and non-employee directors
by offering such individuals an opportunity to have a greater proprietary
interest in and a closer identity with the Company and its financial success.
Section 2. Definitions .
Board: The Board of Directors of the Company.
Change In Control: "Change in Control" shall be deemed to have
occurred if the conditions set forth in any one of the following paragraphs
shall have been satisfied:
(i) Any "person" as such term is defined in Section 3(a)(9)
and modified and used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, (other than the Company, any
trustee or other fiduciary holding securities under an
employee benefit plan of the Company (or of any subsidiary of
the Company), or any corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock
of the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of
1934), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the
Company's then outstanding securities, unless such beneficial
ownership is acquired in connection with the transaction
described in clause (iii)(2) of this definition;
(ii) During any period of two consecutive years (not including
any period prior to the adoption of this Plan), individuals
who at the beginning of such period constitute the Board, and
any new director (other than a director designated by a person
who has entered into an agreement with the Company to effect a
transaction
<PAGE>
described in clause (i), (iii) or (iv) of this definition)
whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose
election or nomination for election was previously so approved
cease for any reason to constitute at least a majority
thereof;
(iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other
than (1) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity), more than 75% of the combined voting
power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation or (2) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no "person" (as defined in clause (i) of
this definition but without the exceptions given therein)
acquires 50% or more of the combined voting power of the
Company's then outstanding securities; or
(iv) The stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all
of the Company's assets.
Code: The Internal Revenue Code of 1986, as amended.
Committee: The Compensation Committee of the Board or such other
committee as shall be appointed by the Board to administer the Plan pursuant to
Section 3.
Common Stock: The common stock, $0.01 par value, of the Company or such
other class of shares or other securities as may be applicable pursuant to the
provisions of Section 11.
Company: Allied Products Corporation, a Delaware corporation, its
subsidiary or subsidiaries, and any successor thereto.
<PAGE>
Covered Employee: A Participant who is or is expected to be a "covered
employee" within the meaning of Code Section 162(m) and the related regulations
for the year in which an Incentive is taxable to such employee and for
whom the Committee intends that such Incentive qualify for the
performance-based compensationexemption under Code Section 162(m).
Disabled or Disability: Permanent and total disability as determined in
accordance with the Company's then existing policies. A Participant shall not be
considered Disabled unless the Committee determines that the Disability arose
prior to such Participant's termination of employment or, in the case of a
non-employee director Participant, prior to the termination of service as a
director.
Fair Market Value: The average of the highest and lowest price at which
Common Stock was traded on the relevant date, as reported in the "NYSE-Composite
Transactions" section of the Midwest Edition of the Wall Street Journal, or, if
no sales of Common Stock were reported for that date, on the most recent
preceding date on which Common Stock was traded.
Incentive Stock Option: An Option that is intended to qualify as an
"incentive stock option" under Code Section 422.
Incentives: Options (including Incentive Stock Options), Stock Awards,
Performance Units and Stock Appreciation Rights.
Nonqualified Stock Option: An Option that is not an Incentive Stock
Option.
Option: An option to purchase shares of Common Stock granted to a
Participant pursuant to Section 6.
Participant: An employee of the Company (including any employee who is
a member of the Board) or any non-employee member of the Board whose
participation in the Plan is determined by the Board to be in the best interest
of the Company.
Performance Unit: A unit representing a cash sum or one or more
shares of Common Stock that is granted to a Participant pursuant to Section 9.
Plan: The Allied Products Corporation 1997 Stock Incentive Plan, as
amended from time to time.
<PAGE>
Restricted Shares: Shares of Common Stock issued subject to
restrictions pursuant to Section 7(b).
Retirement: Termination of employment upon "retirement" or, in the case
of a non-employee director Participant, "retirement" from the Board, in each
case as determined by the Committee in accordance with the Company's then
existing policies.
Stock Appreciation Right: An award granted to a Participant pursuant
to Section 8.
Stock Award: An award of Common Stock granted to a Participant
pursuant to Section 7.
Section 3. Administration.
(a) Committee. The Plan shall be administered by the Committee. To the
----------
extent required to comply with Rule 16b-3 under the Securities Exchange Act of
1934, each member of the Committee shall qualify as a "non-employee director,"
as defined therein. To the extent required to comply with the performance-based
compensation exemption under Code Section 162(m) and the related regulations,
each member of the Committee shall qualify as an "outside director," as defined
therein.
(b) Authority of the Committee. The Committee shall have the authority
--------------------------
to approve individuals for participation; to approve in advance the grant of any
Incentive; to construe and interpret the Plan; to establish, amend or waive
rules and regulations for its administration; and to accelerate the
exercisability of any Incentive or the termination of any restriction under any
Incentive. Incentives may be subject to such provisions as the Committee shall
deem advisable, and may be amended by the Committee from time to time; provided
that no such amendment may adversely affect the rights of the holder of an
Incentive without such holder's consent, and no amendment, as it applies to any
Covered Employee, shall be made that would cause an Incentive granted to such
Covered Employee to fail to satisfy the performance-based compensation exemption
under Code Section 162(m) and the related regulations (to the extent such
Incentive is intended to satisfy this exemption when granted).
(c) Powers of the Committee. The Committee may employ such legal
------------------------
counsel, consultants and agents as it may deem desirable for the administration
of the Plan and may rely upon any opinion received from any such counsel or
consultant and any computation received from any
<PAGE>
such consultant or agent.
(d) Indemnification. No member of the Committee or the Board shall be
---------------
liable for any action or determination made in good faith with respect to the
Plan or any Incentive awarded under it. To the maximum extent permitted by
applicable law, each Committee or Board member shall be indemnified and held
harmless by the Company against any cost or expense (including legal fees) or
liability (including any sum paid in settlement of a claim with the approval of
the Company) arising out of any act or omission to act in connection with the
Plan unless arising out of such member's own fraud or bad faith. Such
indemnification shall be in addition to any rights of indemnification the
members may have as members of the Board or under the by-laws of the Company.
Section 4. Common Stock Subject to Plan .
The aggregate shares of Common Stock that may be issued under
the Plan shall not exceed 500,000 as adjusted in accordance with the provisions
of Section 11. In the event of a lapse, expiration, termination, forfeiture or
cancellation of any Incentive granted under the Plan without the issuance of
shares or the payment of cash, the Common Stock subject to or reserved for such
Incentive may be used again for new Incentives hereunder; provided that in no
event may the number of shares of Common Stock issued hereunder exceed the total
number of shares reserved for issuance. Any shares of Common Stock withheld or
surrendered to pay withholding taxes pursuant to Section 14(e) or withheld or
surrendered in full or partial payment of the exercise price of an Option
pursuant to Section 6(d) or the purchase price of any other Incentive shall be
added to the aggregate shares of Common Stock available for issuance.
Section 5. Eligibility .
Incentives may be granted under the Plan to any employee of the
Company, including employees who are officers and/or members of the Board and to
any non-employee director of the Company whose participation the Committee
determines is in the best interest of the Company (collectively,
"Participants"). The Committee shall have absolute discretion to determine,
within the limits of the express provisions of the Plan, those Participants to
whom and the time or times at which Incentives shall be granted. The Committee
shall also determine, within the limits of the express provisions of the Plan,
the number of shares to be subject to each Incentive, the duration and specific
terms of each Incentive, including the exercise price under each Option, the
time or times within which (during the term of the Option) all or portions of
each Option may become vested and exercisable, and whether an Option shall be an
Incentive Stock Option, a Nonqualified Stock Option
<PAGE>
or a combination thereof. In making such determination, the Committee may take
into account the nature of the services rendered by the Participant, his or her
present and potential contributions to the Company's success and such other
factors as the Committee in its discretion shall deem relevant
Section 6. Options .
Options granted under this Plan may be Incentive Stock Options or
Nonqualified Stock Options. However, no Incentive Stock Option shall be granted
to any individual who is not an employee of the Company. Each Option granted
under the Plan shall be evidenced by an agreement, in a form approved by the
Committee, which shall be subject to the following express terms and conditions
and to such other terms and conditions as the Committee may deem appropriate:
(a) Option Period. Each Option agreement shall specify the period for
-------------
which the Option thereunder is granted (which, in the case of Incentive Stock
Options, shall not exceed ten years from the date of grant) and shall provide
that the Option shall expire at the end of such period.
(b) Exercise Price. The per share exercise price of each Option shall
--------------
be determined by the Committee at the time the Option is granted, and, in the
case of Incentive Stock Options and in the case of Options granted to Covered
Employees, shall not be less than the Fair Market Value of Common Stock on the
date the Option is granted.
(c) Vesting of Options. No part of any Option may be exercised until
------------------
the grantee shall have satisfied the vesting conditions (e.g., such as remaining
in the employ of the Company for a certain period of time), if any, as the
Committee may specify in the applicable Option agreement. Subject to the
provisions of Section 6(e), any Option may be exercised, to the extent
exercisable by its terms, at such time or times as may be determined by the
Committee.
(d) Payment. The exercise price of an Option shall be paid in full at
-------
the time of exercise (i) in cash, (ii) through the surrender of
previously-acquired shares of Common Stock having a Fair Market Value equal to
the exercise price of the Option, (iii) through the withholding by the Company
(upon such exercise) of Common Stock having a Fair Market Value equal to the
exercise price or (iv) by a combination of (i), (ii), and (iii).
(e) Other Rules Applicable to Incentive Stock Options.
--------------------------------------------------
<PAGE>
(i) Grant Period. Consistent with Section 13, an Incentive
------------
Stock Option must be granted within ten years of the date this Plan is
adopted or the date the Plan is approvedby the stockholders of the
Company, whichever is earlier.
(ii) Ten Percent Owner. If a Participant on the date that
------------------
an Incentive Stock Option is granted owns, directly or indirectly,
within the meaning of Section 424(d) of the Code, stock representing
more than 10% of the voting power of all classes of stock of the
Company, then the exercise price per share shall in no instance be less
than 110% of the Fair Market Value per share of Common Stock at the
time the Incentive Stock Option is granted, and no Incentive Stock
Option shall be exercisable by such Participant after the expiration of
five years from the date it is granted.
(iii) Employee Status. To retain favorable Incentive Stock
---------------
Option tax treatment, the Option holder must at all times from the date
the Option is granted through a date that is no more than three months
prior to the date it is exercised (or no more than one year prior to
the date it is exercised if the Option holder terminates employment due
to death or Disability) remain an employee of the Company. For this
purpose, authorized leaves of absence shall not be deemed to sever the
employment relationship.
(iv) Limitations on Dispositions. To retain favorable
-----------------------------
Incentive Stock Option tax treatment, Common Stock received upon the
exercise of an Incentive Stock Option may not be disposed of prior to
the later of two years from the date the Incentive Stock Option is
granted or one year from the date the shares of Common Stock are
transferred to the Participant upon exercise of the Incentive Stock
Option.
(v) Value of Shares. The aggregate Fair Market Value
----------------
(determined at the date of grant) of the Incentive Stock Options
exercisable for the first time by a Participant during any calendar
year shall not exceed $100,000 or any other limit imposed by the Code.
(f) Covered Employee Limitation. Options for more than 100,000
shares of Common Stock may not be granted in any calendar year to any
Covered Employee.
<PAGE>
Section 7. Stock Awards .
(a) Grant of Stock Awards. Stock Awards may be made to Participants
---------------------
on terms and conditions fixed by the Committee. Stock Awards may be in the form
of unrestricted shares of Common Stock or in the form of Restricted Shares
authorized pursuant to Section 7(b). The recipient of Common Stock pursuant to a
Stock Award shall be a stockholder of the Company with respect thereto, fully
entitled to receive dividends, vote and exercise all other rights of a
stockholder except to the extent otherwise provided in the Stock Award.
(b) Restricted Shares. Restricted Shares may not be sold by the
-----------------
holder, or subject to execution, attachment or similar process, until the lapse
of the applicable restriction period or satisfaction of other conditions
specified by the Committee.
(c) Stock Awards to Covered Employees. For purposes of satisfying
----------------------------------
the performance-based compensation exemption under Code Section 162(m), the
Committee may condition the grant of any Stock Award to any Covered Employee or
the vesting or lapse of restrictions of any Restricted Shares granted to any
Covered Employee upon the attainment of one or more pre-established performance
goals. In so doing, the Committee shall set the specific performance goals on or
about the beginning of the relevant performance period and, after the relevant
performance period has ended, it shall determine the extent to which the
relevant performance goals have been satisfied and the resulting Stock Awards.
The objective performance criteria upon which performance goals may be based
shall consist of the following: total stockholder return, return on equity,
return on capital, return on assets, return on investment, net income, operating
income, earnings per share, market share, stock price, sales, costs, net income,
cash flow, retained earnings, results of customer satisfaction surveys,
aggregate product price and other product price measures, safety record, service
reliability, and operating and maintenance cost management. Such performance
goals also may be based upon the attainment of specified levels of performance
of the Company under one or more of the measures described above relative to the
performance of other corporations. Stock Awards for more than 100,000 shares of
Common Stock may not be granted in any calendar year to any Covered Employee.
<PAGE>
Section 8. Stock Appreciation Rights .
(a) Grant of Stock Appreciation Rights. Stock Appreciation Rights
----------------------------------
may be granted in connection with an Option (at the time of the grant or at
any time thereafter) or may be granted independently. Stock Appreciation Rights
for more than 100,000 shares of Common Stock may not be granted in any
calendar year to any Covered Employee.
(b) Value of Stock Appreciation Rights. The holder of a Stock
-------------------------------------
Appreciation Right granted in connection with an Option, upon surrender of the
Option, will receive cash or shares of Common Stock equal in value to the excess
of the Fair Market Value on the exercise date over the Option's exercise price,
multiplied by the number of shares covered by such Option. The holder of a Stock
Appreciation Right granted independent of an Option, upon exercise, will receive
cash or shares of Common Stock equal in value to the excess of the Fair Market
Value on the exercise date over the Fair Market Value on the grant date,
multiplied by the number of shares covered by the Stock Appreciation Right.
Section 9. Performance Units.
(a) Value of Performance Units. Prior to the commencement of the
---------------------------
performance period, the Committee shall establish in writing an initial target
value or number of shares of Common Stock for the Performance Units to be
granted to a Participant, the duration of the performance period, and the
specific performance goals to be attained, including performance levels at which
various percentages of Performance Units will be earned and, for Covered
Employees, the minimum level of attainment to be met to earn any portion of the
Performance Units. If the Committee intends the Performance Units granted to any
Covered Employee to satisfy the performance-based compensation exemption under
Code Section 162(m) ("Qualifying Performance Units"), the performance goals
shall be based on one or more of the following objective criteria: total
stockholder return, return on equity, return on capital, return on assets,
return on investment, net income, operating income, earnings per share, market
share, stock price, sales, costs, net income, cash flow, retained earnings,
results of customer satisfaction surveys, aggregate product price and other
product price measures, safety record, service reliability, and operating and
maintenance cost management.
(b) Payment of Performance Units. After the end of a performance
------------------------------
period, the Committee shall certify in writing the extent to which performance
goals have been met and shall compute the payout to be received by each
Participant. With respect to Qualifying Performance Units, for any calendar
year, the maximum amount payable in cash to any Covered Employee shall be
$400,000 and the aggregate shares of Common Stock that may be issued to any
Covered Employee is 100,000. The Committee may not adjust upward the amount
payable to any Covered Employee with respect to Qualifying Performance Units.
<PAGE>
Section 10. Treatment of Incentives Upon Termination .
(a) Termination due to Disability or Death. Upon termination of the
--------------------------------------
employment of an employee Participant or upon the termination of the Board
membership of a non-employee Participant by reason of Disability, death or
Retirement, the following provisions shall apply:
(i) Options and Stock Appreciation Rights shall be
exercisable by the Participant (or, in the case of death, by his or her
estate) during the three-year period commencing on the date of
termination (except that Incentive Stock Options shall be exercisable
for only three months), but not later than the expiration of the term
of the Options or Stock Appreciation Rights. If a Participant dies
during such three-month period, such Participant's estate may exercise
the Incentive Stock Options during the one-year period commencing on
the date of death, but not later than the expiration of the term of the
Options.
(ii) Upon termination due to death, any restrictions on
Stock Awards shall lapse immediately. Upon termination due to
Disability or Retirement after age 65, any restrictions on Stock Awards
may be removed by the Committee in its discretion at any time during
the three years following termination.
(iii) Unvested Performance Units shall be payable prorated
based upon the number of full months of service during the applicable
performance period, adjusted based on the achievement of performance
goals during the performance period. Payment shall be made at the time
payments would have been made had the Participant not died, terminated
or retired.
(iv) The Committee, in its discretion, may accelerate the
vesting of any Option, Stock Appreciation Right, Performance Unit or
Stock Award upon the Participant's
Disability, death or Retirement.
(b) Voluntary Termination or Involuntary Termination Other than For
---------------------------------------------------------------
Cause. Upon the voluntary termination of the employment of an employee
- - -----
Participant or upon the voluntary termination of the Board membership of a
non-employee Participant or upon the involuntary termination of the employment
of an employee Participant or the involuntary termination of the Board
membership of a non-employee Participant for any reason other than for
substantial cause (defined
<PAGE>
below), Disability, death or Retirement, the following provisions shall apply:
(i) Options and Stock Appreciation Rights (to the extent
vested prior to such termination or to the extent vesting is
accelerated by the Committee) may be exercised by the Participant
during the three-month period commencing on the date of termination,
but not later than the expiration of the term of the Options or Stock
Appreciation Rights. If a Participant dies during such three-month
period, such Participant's estate may exercise the Options or Stock
Appreciation Rights (to the extent such Options or Stock Appreciation
Rights were vested and exercisable prior to death) during the one-year
period commencing on the date of death, but not later than the
expiration of the term of the Options or Stock Appreciation Rights.
(ii) Unvested Stock Awards shall be forfeited unless the
terms of the Stock Award provide otherwise or unless the Committee, in
its discretion, waives this forfeiture provision.
(iii) Unvested Performance Units shall be forfeited unless
the terms of the Performance Unit provide otherwise or unless the
Committee, in its discretion, waives the forfeiture provision.
(iv) The Committee, in its discretion, may accelerate the
vesting of any Option, Stock Appreciation Right or Stock Award upon the
Participant's involuntary termination.
(c) Termination for Cause. Upon the involuntary termination of an
---------------------
employee or Board member for "substantial cause," the Participant's right to
exercise his or her Options or Stock Appreciation Rights shall terminate and any
unvested Performance Units and Stock Awards shall be forfeited at the time
notice of involuntary termination is given by the Company to such Participant.
For purposes of this provision, substantial cause shall include:
(i) The commission of an action against or in derogation of
the interests of the Company which, if proven in a court of law, would
constitute a violation of a criminal code or similar law;
(ii) A material breach of any material duty or obligation
imposed upon the Participant by the Company or by law;
(iii) Divulging the Company's confidential information; or
<PAGE>
(iv) The performance of any similar action that the
Committee, in its sole discretion, may deem to be sufficiently
injurious to the interests of the Company so as to constitute
substantial cause for termination.
Section 11. Adjustment Provisions .
In the event of a stock split, stock dividend,
recapitalization, reclassification or combination of shares, merger, sale of
assets or similar event, the Committee shall adjust equitably (a) the number and
class of shares or other securities that are reserved for issuance under the
Plan, (b) the number and class of shares or other securities that are subject to
outstanding Incentives, and (c) the appropriate Fair Market Value and other
price determinations applicable to Incentives. The Committee shall make all
determinations under this Section 11, and all such determinations shall be
conclusive and binding.
Section 12. Change in Control.
In the event of a Change in Control, all Incentives shall vest
in each Participant, and the maximum value of all Performance Units shall be
immediately payable in cash, prorated for the number of days in the applicable
performance period that have elapsed as of the date of the Change in Control.
Section 13. Term of Plan .
The Plan shall be deemed adopted and shall become effective on
the date it is approved by the stockholders of the Company and shall continue
until terminated by the Board or until no Common Stock remains available for
issuance under Section 4, whichever occurs first.
Section 14. General Provisions .
(a) Employment. Nothing in the Plan or in any related instrument
----------
shall confer upon any employee Participant or upon any other employee any right
to continue in the employ of the Company or shall affect the right of the
Company to terminate the employment of any employee Participant or any other
employee with or without cause.
<PAGE>
(b) Legality of Issuance of Shares. No Common Stock shall be issued
------------------------------
pursuant to any Incentive unless and until all legal requirements applicable to
such issuance have been satisfied.
(c) Ownership of Common Stock Allocated to Plan. No Participant
-------------------------
(individually or as a member of a group), and no beneficiary or other person
claiming under or through such Participant, shall have any right, title or
interest in or to any Common Stock allocated or reserved for purposes of the
Plan or subject to any Incentive, except as to shares of Common Stock, if any,
as shall have been issued to such Participant or beneficiary.
(d) Governing Law. The Plan, and all agreements hereunder, shall be
-------------
construed in accordance with and governed by the laws of the State of Illinois.
(e) Withholding of Taxes. The Company may withhold, or allow a
---------------------
Participant to remit to the Company, any Federal, state or local taxes
applicable to any grant, exercise, vesting, distribution or other event giving
rise to income tax liability with respect to an Incentive. In order to satisfy
all or any portion of such income tax liability, an Incentive holder may elect
to surrender Common Stock previously acquired by the holder or to have the
Company withhold Common Stock that would otherwise have been issued to the
holder pursuant to the exercise of an Option or in connection with any other
Incentive, the number of shares of such withheld or surrendered Common Stock to
be sufficient to satisfy all or a portion of the income tax liability that
arises upon the exercise, vesting, distribution or other event giving rise to
income tax liability with respect to an Incentive.
(f) Non-transferability. Except as provided in this Section 14(f),
-------------------
no Incentive may be assigned or subjected to any encumbrance, pledge or charge
of any nature. Participant's may transfer all or a portion of an Incentive to be
granted to a Participant on terms to (i) the spouse, children, stepchildren or
grandchildren of the Participant ("Immediate Family Members"), (ii) a trust or
trusts for the exclusive benefit of such Immediate Family Members, or (iii) a
partnership or corporation in which such Immediate Family Members are the only
partners or shareholders, provided that (x) the agreement pursuant to which such
Incentives are granted must be approved by the Committee, and must expressly
provide for, or be amended to provide for, transferability in a manner
consistent with this Section, and (y) subsequent transfers of such Incentives
shall be prohibited except those permitted by will or the laws of descent and
distribution. The Committee may, at its sole discretion, permit transfers to
other persons or entities. Following transfer, such Incentives shall continue to
be subject to the same terms and conditions as were applicable immediately prior
to transfer. The treatment of Incentives upon termination set forth in Section
10 hereof shall continue to be applied with respect to the original Participant,
following which the Incentives shall be exercisable by the
<PAGE>
transferee only to the extent, and for the periods specified in Section 10. The
committee may establish such rules and procedures as it deems necessary with
respect to such transfer, including without limitation, the requirement that a
Participant provide such documentation or information concerning any such
transfer or transferee as the Committee may reasonably request. Such transfer
rights shall in no event apply to any Incentive Stock Option.
(g) No Implied Rights. Neither the establishment of the Plan nor any
-----------------
amendment thereof shall be construed as giving any Participant or any other
person any legal or equitable right unless such right shall be specifically
provided for in the Plan or conferred by specific action of the Committee in
accordance with the terms and provisions of the Plan.
(h) Successors. All obligations of the Company under the Plan, with
----------
respect to Incentives granted hereunder, shall be binding on any successor to
the Company, whether the existence of such successor is the result of a direct
or indirect purchase, merger, consolidation or otherwise, of all or
substantially all of the business and/or assets of the Company.
Section 15. Amendment or Discontinuance of the Plan .
(a) Amendment or Discontinuance. The Board, acting by a majority of
---------------------------
its members, without further action on the part of the stockholders, may from
time to time alter, amend or suspend the Plan or any Incentive granted hereunder
or may at any time terminate the Plan; provided, however, that the Board may not
(i) materially increase the number of shares of Common Stock subject to the Plan
(except as provided in Section 11 hereof), (ii) amend any other provision of the
Plan, the amendment of which would require stockholder approval by the standards
of New York Stock Exchange or any other stock exchange upon which the Common
Stock is then listed, or (iii) amend any other provision of the Plan, the
amendment of which would require stockholder approval in order to continue to
satisfy the performance-based compensation exemption under Code Section 162(m)
and the related regulations with respect to any Incentive awarded to any Covered
Employee.
(b) Effect of Amendment or Discontinuance on Outstanding Options. No
------------------------------------------------------------
amendment or discontinuance of the Plan by the Board or the stockholders of the
Company shall materially and adversely affect any outstanding Incentive
theretofore granted without the consent of the holder thereof.
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
JUNE 30, 1997
Net income $ 6,206,000
Weighted average of outstanding shares of
common stock 8,080,000 -
Weighted average of effect of assumed exercise
of outstanding stock options 173,000 -
--------- -----------
8,253,000 $ 6,206,000
========= ===========
Earnings per common share $ .75
===========
FOR THE THREE MONTHS ENDED
JUNE 30, 1996
Net income $ 5,542,000
Weighted average of outstanding shares of -
common stock 9,096,000
Weight average of effect of assumed exercise
of outstanding stock options - -
--------- -----------
9,096,000 $ 5,542,000
========= ===========
Earnings per common share $ .61
===========
<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 SIX MONTHS ENDED
JUNE 30, 1997
Net income $ 11,377,000
Weighted average of outstanding shares of
common stock 8,134,000 -
Weighted average of effect of assumed exercise
of outstanding stock options 87,000 -
--------- ------------
8,221,000 $ 11,377,000
========= ============
Earnings per common share $ 1.38
============
FOR THE SIX MONTHS ENDED
JUNE 30, 1996
Net income $ 10,660,000
Weighted average of outstanding shares of -
common stock 9,115,000
Weighted average of effect of assumed exercise
of outstanding stock options - -
--------- ------------
9,115,000 $ 10,660,000
========= ============
Earnings per common share $ 1.17
============
<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
JUNE 30, 1997
Net income $ 6,206,000
Weighted average of outstanding shares of
common stock 8,080,000 -
Weighted average of effect of assumed
exercise of outstanding stock options 258,000 -
--------- ------------
8,338,000 $ 6,206,000
========= ============
Earnings per common share $ .74
============
FOR THE THREE MONTHS ENDED
JUNE 30, 1996
Net income $ 5,542,000
Weighted average of outstanding shares of -
common stock 9,096,000
Weighted average of effect of assumed exercise
of outstanding stock options - -
---------- ------------
9,096,000 $ 5,542,000
========== ============
Earnings per common share $ .61
============
<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 SIX MONTHS ENDED
JUNE 30, 1997
Net income $ 11,377,000
Weighted average of outstanding shares of
common stock 8,134,000 -
Weighted average of effect of assumed exercise
of outstanding stock options 129,000 -
--------- ------------
8,263,000 $ 11,377,000
========= ============
Earnings per common share $ 1.38
============
FOR THE SIX MONTHS ENDED
JUNE 30, 1996
Net income $ 10,660,000
Weighted average of outstanding shares of -
common stock 9,115,000
Weighted average of effect of assumed exercise
of outstanding stock options - -
--------- ------------
9,115,000 $ 10,660,000
========= ============
Earnings per common share $ 1.17
============
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS STATEMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT JUNE 30, 1997 AND THE CONSOLIDATED STATEMENT OF
INCOME AND THE CONSOLIDATED STATEMENT OF CASH FLOW FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 000003941
<NAME> ALLIED PRODUCTS CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> dollars
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Jun-30-1997
<EXCHANGE-RATE> 1.000
<CASH> 1,168
<SECURITIES> 0
<RECEIVABLES> 75,669
<ALLOWANCES> 680
<INVENTORY> 61,307
<CURRENT-ASSETS> 152,172
<PP&E> 94,698
<DEPRECIATION> 51,865
<TOTAL-ASSETS> 203,051
<CURRENT-LIABILITIES> 101,468
<BONDS> 393
0
0
<COMMON> 94
<OTHER-SE> 92,032
<TOTAL-LIABILITY-AND-EQUITY> 203,051
<SALES> 149,783
<TOTAL-REVENUES> 149,783
<CGS> 112,549
<TOTAL-COSTS> 112,549
<OTHER-EXPENSES> 19,461
<LOSS-PROVISION> 76
<INTEREST-EXPENSE> 1,652
<INCOME-PRETAX> 17,773
<INCOME-TAX> 6,396
<INCOME-CONTINUING> 11,377
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,377
<EPS-PRIMARY> 1.38
<EPS-DILUTED> 1.38
</TABLE>
