<TABLE>
PART I ITEM I FINANCIAL STATEMENTS
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
ACCOUNT DESCRIPTION JUNE 30 DECEMBER 31 JUNE 30
1994 1993 1993
<CAPTION>
ASSETS
CURRENT ASSETS
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS $3,126 $3,458 $25,692
RECEIVABLES - NET 24,914 19,091 22,637
INVENTORIES 45,911 40,006 35,851
PREPAID EXPENSES AND OTHER 3,532 1,622 816
PATENT DAMAGE ESCROW FUNDS 12,446 12,309 11,780
TOTAL CURRENT ASSETS 89,929 76,486 96,776
PROPERTY AND EQUIPMENT - NET 34,841 23,659 19,253
OTHER ASSETS 4,420 2,822 2,127
TOTAL ASSETS $129,190 $102,967 $118,156
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
<CAPTION>
CURRENT MATURITIES OF LONG-TERM DEBT $500 $10 $6,028
ACCOUNTS PAYABLE - TRADE 15,263 10,170 14,519
RESERVE FOR PATENT DAMAGES 13,387 13,250 12,721
OTHER ACCRUED LIABILITIES 12,721 12,289 11,663
TOTAL CURRENT LIABILITIES 41,871 35,719 44,931
LONG-TERM DEBT, LESS CURRENT MATURITIES 13,500 10,000
OTHER LONG-TERM LIABILITIES 1,602 3,143 3,425
TOTAL SHAREHOLDERS' EQUITY 72,217 64,105 59,800
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $129,190 $102,967 $118,156
</TABLE>
<PAGE>
<TABLE>
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
THREE MONTHS ENDED SIX MONTHS ENDED
1994 1993 1994 1993
<CAPTION>
<S> <C> <C> <C> <C>
NET SALES $62,694 $52,436 $108,920 $95,837
COST OF SALES 48,681 40,558 83,878 73,579
GROSS PROFIT 14,013 11,878 25,042 22,258
S,G, & A EXPENSES 8,136 8,079 15,834 16,770
PATENT SUIT DAMAGES & EXPENSES 71 75 162 184
INCOME FROM OPERATIONS 5,806 3,724 9,046 5,304
INTEREST EXPENSE 141 687 212 1,444
OTHER INCOME, NET OF EXPENSE (129) 526 (323) 1,348
INCOME BEFORE INCOME TAXES 5,536 3,563 8,511 5,208
INCOME TAXES 324 82 423 149
NET INCOME $5,212 $3,481 $8,088 $5,059
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE * $0.53 $0.45 $0.83 $0.67
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING * 9,801,556 7,782,948 9,798,921 7,578,894
</TABLE>
[FN]
* 1993 RESTATED TO RETROACTIVELY REFLECT THE TWO-FOR-ONE STOCK SPLIT EFFECTED
IN THE FORM OF A DIVIDEND ON AUGUST 12, 1993.
<PAGE>
<TABLE>
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
JUNE 30 JUNE 30
1994 1993
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<CAPTION>
<S> <C> <C>
NET INCOME $8,088 $5,059
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 1,867 1,549
PROVISION FOR DOUBTFUL ACCOUNTS 124 125
PROVISION FOR INVENTORY RESERVE 576 985
PROVISION FOR WARRANTY RESERVE 1,856 1,748
PROVISION FOR PENSION LIABILITY 35
GAIN ON SALE OF FIXED ASSETS (18) (14)
(INCREASE) DECREASE IN:
RECEIVABLES (6,551) (10,411)
INVENTORIES (6,482) 3,133
PREPAID EXPENSES AND OTHER (1,815) 128
PATENT DAMAGE ESCROW FUNDS (137) (190)
OTHER RECEIVABLES 602 380
OTHER ASSETS (1,780) 311
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE 5,093 5,404
ACCRUED PRODUCT WARRANTY (1,130) (1,067)
OTHER ACCRUED LIABILITIES (1,431) 1,362
TAXES PAYABLE (404) 189
RESERVE FOR PATENT DAMAGES 137 166
TOTAL ADJUSTMENTS (9,493) 3,833
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (1,405) 8,892
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF PROPERTY
AND EQUIPMENT - NET 58 24
EXPENDITURES FOR PROPERTY AND EQUIPMENT (12,999) (2,834)
NET CASH USED BY INVESTING ACTIVITIES (12,941) (2,810)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET BORROWINGS UNDER REVOLVING
CREDIT LOAN (4,675)
BORROWINGS (REPAYMENTS) UNDER LOAN
AND NOTE AGREEMENTS 13,990 (5,060)
PROCEEDS FROM ISSUANCE OF COMMON STOCK 24 27,111
NET CASH PROVIDED BY FINANCING ACTIVITIES 14,014 17,376
NET INCREASE (DECREASE) IN CASH (332) 23,458
CASH AT BEGINNING OF PERIOD 3,458 2,234
CASH AT END OF PERIOD $3,126 $25,692
</TABLE>
<PAGE>
FORM 10-Q
SECURITIES & EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[ X ] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934. For the quarterly period ended June 30, 1994.
[ ] 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 0-14714
Astec Industries, Inc.
(Exact Name of Registrant as Specified in its Charter)
Tennessee 62-0873631
(State or other jurisdiction of I.R.S. Employer Identification No.)
incorporation or organization)
4101 Jerome Avenue, Chattanooga, Tennessee 37407
(Address of Principal Executive Offices) (Zip Code)
(615) 867-4210
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the 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 requirements for the past 90 days.
YES___X______ NO__________
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of registrant's Common Stock, par value $0.20
per share, as of June 30, 1994 was 9,803,402.
<PAGE>
ASTEC INDUSTRIES, INC.
INDEX
Page Number
PART I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 1994, December 31, 1993
and June 30, 1993
Consolidated Statements of Income
for the Three and Six Months Ended
June 30, 1994 and 1993
Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1994
and 1993
Notes to Unaudited 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 6. Exhibits
Signature Page
<PAGE>
ASTEC INDUSTRIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. The information contained in the unaudited consolidated balance sheets,
the unaudited consolidated statements of income, and the unaudited
consolidated statements of cash flows reflect all adjustments consisting of
normal recurring accruals which are, in the opinion of management,
necessary to present a fair statement of the results for the periods
covered.
2. Receivables are net of allowance for doubtful accounts of $ 1,292,000,
$1,191,000 and $953,000 for June 30, 1994, December 31, 1993 and June 30,
1993, respectively.
3. Inventories are stated at the lower of first-in, first-out cost or market
and consist of the following:
(in thousands)
June 30, 1994 December 31, 1993 June 30, 1993
Raw Materials $ 19,193 $ 18,419 $ 17,795
Work-in-Process 9,160 6,018 6,503
Finished Goods 17,558 15,569 11,553
$ 45,911 $ 40,006 $ 35,851
4. Property and equipment is stated at cost. Property and equipment is
net of accumulated depreciation of $21,560,000, $20,062,000 and $18,984,000
for June 30, 1994, December 31, 1993 and June 30, 1993, respectively.
5. Earnings per share are computed in accordance with APB No. 15 and are based
on the weighted average number of shares outstanding for each respective
period.
6. Certain customers have financed purchases of Astec products through
arrangements in which Astec is contingently liable for customer debt
aggregating approximately $11,079,000 at June 30,1994, $13,700,000 at
December 31, 1993, and $7,526,000 at June 30, 1993.
7. There have been material developments in legal proceedings previously
reported. See Management's Discussion and Analysis of Financial Conditions
and Results of Operations in Part I - Item 2 Contingencies of this Report.
8. Approximately 50 - 55% of Astec's business volume normally occurs during the
first six months of each year.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Results of Operations
For the three-month period ended June 30, 1994, net sales increased by
$10,258,000 compared to sales for the three-month period ended June 30,1993,
representing a 19.6% increase. International sales increased $917,000 for the
quarter ended June 30, 1994 compared to the quarter ended June 30, 1993. For
the six-month period ended June 30, 1994, net sales increased $13,083,000
compared to net sales for the same period of 1993, representing a 13.7%
increase.
Gross profit increased $2,135,000 for the quarter ended June 30, 1994 compared
to the quarter ended June 30, 1993. For the six months ended June 30, 1994,
the gross profit increased $2,784,000 compared to the prior year. The gross
profit percentage for the six months ended June 30, 1994 was 23.0% compared
to 23.2% for the same period in 1993.
Selling, general, and administrative expenses as a percentage of net sales were
13.0% for the quarter ended June 30, 1994 compared to 15.4% in the second
quarter of 1993. For the six months ended June 30, 1994, selling, general,
and administrative expenses as percent of net sales were 14.5% compared to
17.5% for the six months ended June 30, 1993. The decrease in both the second
quarter and the year-to-date is mainly due to decreased legal fees and the lack
of ConExpo trade show expenses as incurred during the second quarter of 1993.
Interest expense decreased to $141,000 for the quarter ended June 30, 1994 from
$687,000 for the quarter ended June 30, 1993. Interest expense as a percentage
of net sales decreased to .2% for the quarter ended June 30, 1994 from 1.3% for
the same period of 1993. For the six months ended June 30, 1994, interest
expense was .2% of net sales compared to 1.5% for the same period in the prior
year. The decrease in interest expense is attributable to the decrease in
long-term debt.
Other income, net of other expense, decreased to a net expense of $129,000,
or .2% of net sales for the quarter ended June 30, 1994, compared to a net other
income of $526,000, or 1.0% of net sales for the quarter ended June 30, 1993.
Other income, net of other expense for the six months ended June 30, 1994 is a
net expense of $323,000, or .3% of net sales compared to a net other income of
$1,348,000, or 1.4% of net sales for the same period last year. Decreases are
principally attributed to losses of approximately $501,000 for the second
quarter of 1994 and $1,224,000 for the six months ended June 30, 1994
relative to the Wibau-Astec joint venture and decreased license fee income.
License fee income decreased approximately $424,000 for the six-months ended
June 30, 1994 compared to the same period last year.
Backlog at June 30, 1994 was $37,714,000 compared to $27,938,000 at June 30,
1993.
<PAGE>
Earnings per share were $.53 for the second quarter of 1994 compared to $.45
for the same period of 1993. For the six months ended June 30, 1994, earnings
per share were $.83 compared to $.67 for the same period last year. Earnings
per share have been restated to retroactively reflect the two-for-one stock
split effected in the form of a dividend on August 12, 1993.
Liquidity and Capital Resources
As of June 30, 1994, the Company had working capital of $48,058,000 compared
to $51,845,000 at June 30, 1993. In July, 1993 the Company used $10,000,000 of
working capital, generated from a public secondary stock offering, to repay
long-term debt outstanding at June 30, 1993.
Total short-term borrowings, including current maturities of long-term debt,
were $500,000 at June 30, 1994. Long-term debt less current maturities was
$13,500,000 at June 30,1994. Debt outstanding at June 30, 1994 relates to
industrial revenue bonds issued during the first half of 1994 to finance
capital expenditures.
With the purchase and renovation of a facility for Trencor, Inc., capital
expenditures for 1994 for plant expansion and further modernization of the
Company's manufacturing processes, we now expect capital expenditures to
approach approximately $22,000,000 for the year. These expenditures are being
financed using internally generated funds and industrial revenue bonds.
Capital expenditures at June 30,1994 were $12,999,000.
At June 30, 1994, the Company had a revolving credit loan agreement with The
First National Bank of Chicago which had been in place since 1987. The line of
credit was $15,000,000 and there were no balances outstanding under the line
at June 30, 1994. The Company was in compliance with all financial covenants
at June 30, 1994.
In July, 1994, a new loan agreement was signed for $15,000,000 with The
First National Bank of Chicago that expires June 30, 1997. The new loan
agreement is unsecured.
The Company was previously involved in negotiations with Crown Andersen, Inc.,
(Crown), a publicly held manufacturer of engineered products to clean and
restore the environment, to acquire Crown in a stock-for-stock merger.
During the second quarter it was determined that a merger was not in the best
interests of the companies or their shareholders and negotiations were
terminated.
Contingencies
The Company is engaged in certain pending litigation involving claims or other
matters arising in the normal course of business. Most of these claims involve
product liability or other tort claims for property damage or personal injury
against which the Company is insured. As a part of its litigation management
program, the Company maintains general liability insurance covering product
liability and other similar tort claims providing the Company coverage of
$8,000,00 subject to a substantial self-insured retention under the terms of
which the Company has the right to coordinate and control management of its
claims and the defense of these actions.
<PAGE>
The Company and its former Barber-Greene subsidiary (now Telsmith, Inc.) are
defendants in two patent infringement actions brought by CMI Corporation (CMI),
a competitor, seeking monetary damages and an injunction to cease the alleged
infringement.
The U.S. District Court for the Eastern District of Tennessee ruled in 1988 in
the Robert L. Mendenhall and CMI case against Astec and Astec's counterclaims
against CMI that the trial of the cases be bifurcated into two sequential
phases, liability and damages. In the liability phase of the trial in 1988,
the Court determined that two CMI patents were valid and infringed by Astec
and that three Astec patents were valid and infringed by CMI. Both CMI and
Astec appealed the Court's decision. In separate decisions rendered in
September 1989 and in November 1989, the Court of Appeals for the Federal
Circuit affirmed the District Court's decisions with respect to validity and
infringement of both the CMI and Astec patents.
During July and August 1990, a bench trial was held in the U.S. District Court
for the Eastern District of Tennessee to determine damages in connection with
the foregoing suit. The trial covered the calculation of damages against
Astec with respect to two CMI patents and against CMI with respect to three
Astec patents. On June 20, 1991, the Court entered its findings on the
damages phase of the litigation rejecting CMI's claims for profits and
damages in excess of $50,000,000 and determined that damages would be
calculated based on reasonable royalties. In connection with this
finding, the court ruled that Astec owes CMI damages $8,463,000 plus
pre-judgment interest of $5,309,000 and attorneys' fees of $737,000
and that CMI in turn owes Astec damages of $667,000 plus $391,000 of
pre-judgment interest. The net damages and expenses determined by the
Court to be payable to CMI total approximately $13,451,000.
In the foregoing litigation, the Court ruled that both CMI and Astec are to
pay royalties on patented articles sold. However, in computing the royalties
owed by Astec to CMI, the Court included the entire asphalt plant price
(the convoyed price) in its computations, while only specific patented
articles were considered in the computation of royalties owed by CMI to Astec.
In the opinion of the Company and its litigation counsel the Court's method
of computation is contrary to law and is inconsistent with the Court's
rulings on other issues in the case. Based on the Court's method of
computation, Astec is being required to pay royalties to CMI on Astec's own
patented equipment which CMI has been found to have infringed. The Company
appealed the Court's decision on these computations and other issues.
Pending the outcome of the appeal, the Company was directed by the
Court to pledge substantially all of its real property and to deposit
approximately $3,000,000 in an escrow to secure the judgment against the
Company.
<PAGE>
In the CMI and Robert L Mendenhall case against Barber-Greene, on October 24,
1990, the U.S. District Court for the Northern District of Illinois amended a
previous order and determined that the Company was liable for approximately
$2,838,000 in pre-judgment interest in addition to the previously announced
jury verdict of approximately $4,457,000. CMI filed an appeal regarding the
trial court's determination of pre-judgment interest. The Barber-Greene
Company also filed an appeal. In connection with such appeal, the Company
deposited in an account at the Court's direction, approximately
$7,295,000 representing the amount of the judgment (including pre-judgment
interest which is the subject of the appeal) entered by the trial court.
One CMI patent and all but one claim of a second patent used as a basis for
their suit against Astec and Barber-Greene, were invalidated in a jury trial
in Cedar Rapids, Iowa in a suit against Cedarapids, Inc. CMI appealed the
decision to the U.S. Court of Appeals for the Federal Circuit. Astec also
appealed the two CMI cases discussed above to the U.S. Court of Appeals for
the Federal Circuit. Oral argument in all three appeals was heard concurrently
by the Federal Circuit on December 7, 1992. The invalidity decision in the
Cedarapids case was upheld and CMI then petitioned the U.S. Supreme
Court to review the case. In April 1994, the Supreme Court declined to do
so, thus leaving the Federal Circuit's decision in the Cedarapids case intact.
On June 9, 1994, the Company announced that the United States Court of Appeals
for the Federal Circuit had reversed, and did not remand to the lower court for
further proceedings, the judgments previously entered against Astec and its
former Barber-Greene subsidiary in the Robert L. Mendenhall and CMI
Corporation patent litigation. Those judgments had totaled approximately
$22 million. The Federal Circuit Court ruled in favor of Astec because
the allegedly infringing patents had been held invalid in a separate
third party case. CMI has asked the Federal Circuit to reconsider
its decision and to have all of the Federal Circuit judges rehear the appeal.
The Company has responded to this request. The Company's legal counsel does
not consider it likely that the Federal Circuit will grant CMI's request,
or if it does, that the decision will be overturned. A ruling is
expected during the third quarter.
It is the opinion of the Company's litigation counsel that the Court has a
strong legal basis for setting aside both the CMI vs. Astec and CMI vs.
Barber-Greene decisions. However, because of the uncertainties inherent in
the litigation process, there can be no assurances as to the ultimate
resolution of these lawsuits. An unfavorable result on appeal
could have a material adverse effect on the Company's results of operations
and financial condition, however, management believes that the Company can
satisfy its cash needs from funds already deposited in escrow and, to the
extent necessary, from cash flow or through additional short or long-term
borrowing.
The Company's Telsmith subsidiary is also a defendant in a patent infringement
action brought by Nordberg, Inc. , a manufacturer of a competing line of rock
crushing equipment, seeking monetary damages and an injunction to cease an
alleged infringement of a patent on certain components used in the production
of its rock crushing equipment. This case, being heard before the U.S.
District Court for the Eastern District of Wisconsin, has been bifurcated
into liability and damages phases. The liability phase was tried on
January 11, 1993, however no decision has been rendered by the Court.
Because of the uncertainties inherent in the litigation process, the Company is
unable to predict the ultimate outcome of this litigation.
<PAGE>
Management has reviewed all claims and lawsuits and, upon the advice of its
litigation counsel, has made provision for any estimable losses; however, the
Company is unable to predict the ultimate outcome of the outstanding claims
and lawsuits.
Effective January 1, 1994, the Company guaranteed 50% of the debt utilized by
Wibau-Astec under credit agreements with three German banks. The amount
outstanding under these agreements at June 30, 1994 was approximately
$5,463,000.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There have been material developments in the legal proceedings previously
reported by the registrant since the filing of its Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, described on Part I-Item 2,
Contingencies of this report. See Management's Discussion and Analysis of
Financial Condition and Results of Operations in Part I - Item 2
Contingencies of this Report.
Item 6. Exhibits
(a) The following Exhibits are filed with this Report:
11 Statement Regarding Computation of Per Share Earnings.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed for the three months
ended June 30, 1994.
[FN]
The Exhibits are numbered in accordance with Item 601 of Regulation S-K.
<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.
ASTEC INDUSTRIES, INC.
(Registrant)
08/10/94 /s/ J. Don Brock
Date J. Don Brock
Chairman of the Board
and President
08/10/94 /s/ Albert E. Guth
Date Albert E. Guth
Senior Vice President
Treasurer , Secretary
and Principal Financial
Officer
<PAGE>
EXHIBIT 11
Statement Regarding Computation of Per Share Earnings
<PAGE>
<TABLE>
ASTEC INDUSTRIES, INC.
EXHIBIT (11) - COMPUTATIONS OF EARNINGS PER SHARE
6/30/94
(in thousands)
Shares for Earnings Per Share Computations:
<CAPTION>
Primary:
<CAPTION>
<S> <C>
Weighted average outstanding during year 9,799
Common Stock equivalents for stock options 151
TOTAL 9,950
Fully Diluted:
Weighted average outstanding during year 9,799
Common Stock equivalents for stock options 154
TOTAL 9,953
Earnings Applicable to Common Stock:
Net Income 8,088
Earnings Per Share (Based on Weighted Average Number
of Common and Common Equivalent Shares Outstanding):
Net Income .83
Additional Computations of EPS:
Fully Diluted:
Net Income .83
</TABLE>
[FN]
Dilutive effect of common stock equivalents on both primary and fully diluted
Earnings Per Share is less than 3% and, in accordance with APB Opinion No. 15,
Earnings Per Share on the face of the Statements of income is based on only
the weighted average number of common shares outstanding. The above
calculations have been provided for reporting purposes only.
Earnings per share have been restated to retroactively reflect the two-for-one
stock split effected in the form of a dividend on August 12, 1993.
