<TABLE>
PART I ITEM I FINANCIAL STATEMENTS
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
ACCOUNT DESCRIPTION MARCH 31 DECEMBER 31 MARCH 31
1994 1993 1993
ASSETS
CURRENT ASSETS
<CAPTION>
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS $7,208 $3,458 $1,252
RECEIVABLES - NET 22,937 19,091 23,930
INVENTORIES 48,712 40,006 40,746
PREPAID EXPENSES AND OTHER 1,542 1,622 1,174
PATENT DAMAGE ESCROW FUNDS 12,387 12,309 11,682
TOTAL CURRENT ASSETS 92,786 76,486 78,784
PROPERTY AND EQUIPMENT - NET 31,063 23,659 18,538
OTHER ASSETS 2,511 2,822 4,424
TOTAL ASSETS $126,360 $102,967 $101,746
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
<CAPTION>
CURRENT MATURITIES OF LONG-TERM DEBT $500 $10 $2,849
ACCOUNTS PAYABLE - TRADE 16,464 10,170 13,825
RESERVE FOR PATENT DAMAGES 13,327 13,250 12,646
OTHER ACCRUED LIABILITIES 15,359 12,289 11,576
TOTAL CURRENT LIABILITIES 45,650 35,719 40,896
LONG-TERM DEBT, LESS CURRENT MATURITIES 10,605 25,745
OTHER LONG-TERM LIABILITIES 3,123 3,143 5,650
TOTAL SHAREHOLDERS' EQUITY 66,982 64,105 29,455
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $126,360 $102,967 $101,746
</TABLE>
<PAGE>
<TABLE>
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
THREE MONTHS ENDED
MARCH 31
1994 1993
<CAPTION>
<S> <C> <C>
NET SALES $46,226 $43,401
COST OF SALES 35,197 33,021
GROSS PROFIT 11,029 10,380
S,G, & A EXPENSES 7,698 8,691
PATENT SUIT DAMAGES & EXPENSES 91 109
INCOME FROM OPERATIONS 3,240 1,580
INTEREST EXPENSE 71 757
OTHER INCOME, NET OF EXPENSE (194) 822
INCOME BEFORE INCOME TAXES 2,975 1,645
INCOME TAXES 99 67
NET INCOME $2,876 $1,578
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE * $0.29 $0.22
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING * 9,796,258 7,372,566
</TABLE>
[FN]
* 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)
THREE MONTHS ENDED
MARCH 31 MARCH 31
1994 1993
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<CAPTION>
<S> <C> <C>
NET INCOME $2,876 $1,578
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 921 775
PROVISION FOR DOUBTFUL ACCOUNTS 124 108
PROVISION FOR INVENTORY RESERVE 372 427
PROVISION FOR WARRANTY RESERVE 695 787
PROVISION FOR PENSION LIABILITY 0 24
GAIN ON SALE OF FIXED ASSETS (8)
(INCREASE) DECREASE IN:
RECEIVABLES (4,581) (10,886)
INVENTORIES (9,078) (1,203)
PREPAID EXPENSES AND OTHER 60 56
PATENT DAMAGE ESCROW FUNDS (78) (92)
OTHER RECEIVABLES 611 (420)
OTHER ASSETS 269 (2,219)
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE 6,294 4,710
ACCRUED PRODUCT WARRANTY (341) (463)
OTHER ACCRUED LIABILITIES 3,327 3,878
TAXES PAYABLE (612) 178
RESERVE FOR PATENT DAMAGES 78 92
TOTAL ADJUSTMENTS (1,947) (4,248)
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 929 (2,670)
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF PROPERTY
AND EQUIPMENT - NET 22 6
EXPENDITURES FOR PROPERTY
AND EQUIPMENT (8,297) (1,395)
NET CASH USED BY INVESTING ACTIVITIES (8,275) (1,389)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET BORROWINGS UNDER REVOLVING
CREDIT LOAN 5,105 5,090
BORROWINGS UNDER LOAN AND NOTE
AGREEMENTS 5,990 (2,259)
PROCEEDS FROM ISSUANCE OF COMMON STOCK 1 246
NET CASH PROVIDED BY FINANCING
ACTIVITIES 11,096 3,077
NET INCREASE (DECREASE) IN CASH 3,750 (982)
CASH AT BEGINNING OF PERIOD 3,458 2,234
CASH AT END OF PERIOD $7,208 $1,252
</TABLE>
<PAGE>
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 March 31, 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 ISSUER
The number of shares outstanding of registrant's Common Stock, par value
$0.20 per share, as of March 31, 1994 was 9,796,258.
<PAGE>
ASTEC INDUSTRIES, INC
INDEX
Page Number
PART I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1994, December 31, 1993 and
March 31, 1993 1
Consolidated Statements of Income
for the Three Months Ended
March 31, 1994 and 1993 2
Consolidated Statements of Cash Flows
for the Three Months Ended March 31,
1994 and 1993 3
Notes to Unaudited Consolidated Financial
Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 5
PART II - Other Information
Item 1. Legal Proceedings 8
Item 6. Exhibits 9
Signature Page 10
<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 $1,306,000,
$1,191,000 and $1,095,000 for March 31, 1994, December 31, 1993 and March 31,
1993, respectively.
3. Inventories are stated at the lower of first-in, first-out cost or
market and consist of the following:
March 31, December 31, March 31
1994 1993 1993
Raw Materials $21,394 $18,419 $19,791
Work-in-Process 8,162 6,018 8,149
Finished Goods 19,156 15,568 12,806
$48,712 $40,005 $40,746
4. Property and equipment is stated at cost. Property and equipment is
net of accumulated depreciation of $20,866,000, $20,062,000, and $18,332,000
for March 31, 1994, December 31, 1993, and March 31, 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 $14,557,000 at March 31, 1994, $13,700,000 at
December 31, 1993 and $5,992,000 at March 31, 1993.
There have been no 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.
7. Approximately 20-30% of Astec's business volume normally occurs during
the first three months of each year.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
For the three-month period ended March 31, 1994, net sales increased by
$2,825,000 compared to sales for the three-month period ended March 31, 1993,
representing a 6.5% increase. International sales decreased $711,000 for the
quarter ended March 31, 1994 compared to the quarter ended March 31, 1993.
International sales as a percentage of total sales decreased to 17.1% for the
quarter ended March 31, 1994 from 19.8% for the quarter ended March 31, 1993.
Gross profit increased $649,000 for the quarter ended March 31, 1994 compared
to the quarter ended March 31, 1993. The gross margin remained constant at
23.9% for the quarters ended March 31, 1994 and 1993.
Selling, general, and administrative expenses as a percentage of net sales
were 16.7% for the quarter ended March 31, 1994 down from 20.0% for the same
quarter last year. The decrease in selling, general and administrative for
the first quarter of 1994 is mainly attributed to decreased legal fees,
international dealer commissions and the lack of ConExpo trade show expenses
as incurred during the same period last year.
Patent suit damages and expenses were .2% of net sales for the quarter ended
March 31, 1994 compared to .3% for the quarter ended March 31, 1993. See
"Contingencies". The appeals for the patent cases were heard concurrently on
December 7, 1992. A decision is expected from the Court sometime in the
third or fourth quarter of 1994.
Interest expense decreased to $71,000 for the quarter ended March 31, 1994
from $757,000 for the quarter ended March 31, 1993. Interest expense as a
percentage of net sales decreased to .2% for the quarter ended March 31, 1994
from 1.7% for the same period of 1993. The decrease in interest expense is
attributable to the reduction of long-term debt.
Other income net of other expense decreased to a net expense of $194,000 for
the quarter ended March 31, 1994 compared to net other income of $822,000 for
the same period last year. Contributing to the decrease in other income, net
of expense for the first quarter of 1994 is a loss of $723,000 from the
Wibau-Astec joint venture. Effective July 1, 1993 the Company owned 50% of
Wibau-Astec which is accounted for using the equity method of accounting.
In addition, license fee income decreased by $356,000 during the first quarter
of 1994 compared to the first quarter of 1993.
Backlog at March 31, 1994 was $54,593,000 compared to $37,161,000 at March
31, 1993.
Earnings per share were $.29 for the first quarter of 1994 compared to $.22
for the same period of 1993. 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.
<PAGE>
Liquidity and Capital Resources
As of March 31, 1994, the Company had working capital of $47,136,000 compared
to $37,888,000 at March 31, 1993. Working capital increased in the first
quarter primarily due to an increase in the Company's inventory and cash. The
increased cash is from a recent Industrial Revenue Bond issue by the Company's
Telsmith, Inc. subsidiary for use in capital expansion. The current ratio was
2.0 and 1.9 at March 31, 1994 and 1993, respectively.
Total short-term borrowings, including current maturities of long-term debt,
were $500,000 at March 31, 1994. Long-term debt less current maturities was
$10,605,000 at March 31, 1994. Long-term debt decreased as a result of the
pay-off of the Principal Mutual Senior and Subordinated Notes during the
second and third quarters of 1993. At March 31, 1994, the Company had
approximately $5,105,000 of outstanding long-term indebtedness under its
revolving credit agreement with The First National Bank of Chicago.
Capital expenditures are budgeted at $13,142,000 for 1994 for plant expansion
and to further modernize some of the Company's manufacturing processes.
These expenditures are being financed using internally generated funds and
industrial revenue bonds. Capital expenditures through March 31, 1994
were $8,297,000.
The Company has a revolving credit loan agreement with The First National
Bank of Chicago which has been in place since 1987. The current line of
credit is $15,000,000. This credit facility has been renewed through
March 31, 1996 and the Company is currently negotiating an extended and
revised credit agreement. The Company was in compliance with all financial
covenants at March 31, 1994.
On February 16, 1994 the City of Mequon, Wisconsin issued Variable Rate
Demand Industrial Revenue Bonds, Series 1994, in the amount of $6,000,000 in
accordance with a loan agreement between the City of Mequon and Telsmith,
Inc., an Astec subsidiary. The Bonds become due and payable in $500,000
annual increments which commence on February 1, 1995 and end in 2006.
On April 29, 1994, the City of Grapevine, Texas Industrial Development
Corporation issued Industrial Development Revenue Bonds, Series 1994 in the
amount of $8,000,000 pursuant to a loan agreement between the issuer and
Trenco Jetco, Inc., an Astec subsidiary. The Bonds are supported by an
Initial Letter of Credit issued by the First National Bank of Chicago. The
Bonds mature on April 1, 2019.
The Company is 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. Preliminary terms
which have been discussed would provide for Astec to issue Astec common stock
in exchange for Crown common stock, resulting in the issuance of approximately
670,000 shares of Astec common stock. Crown stock would be valued at
approximately $8 per share in the merger. Any possible transaction with Crown
is subject to numerous conditions, including final agreement on the terms and
conditions, negotiation and execution of a definitive agreement, completion of
due diligence, and other customary closing conditions.
<PAGE>
Contingencies
The Company is involved in two ongoing patent lawsuits with CMI Corporation
and has various other claims and lawsuits outstanding in the normal course of
business. Management has reviewed all claims and lawsuits and, upon the
advice of counsel, has made provisions for estimated losses. However, any
damages ultimately assessed against the Company as a result of any litigation
could exceed the recorded provisions for loss.
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 $6 million subject to a substantial self-insured retention under the terms
of which the Company has the right to coordinate and control the management of
its claims and the defense of these actions.
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 lost 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 of $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 has 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 has 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 has 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. It is the opinion of the Company's litigation counsel that the Court
may have a 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. While a
decision could be announced at any time, the Company expects the decision to
be rendered sometime in the third or fourth quarter of 1994.
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.
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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There have been no 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. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Part I -
Item 2 "Contingencies" of this Report.
<PAGE>
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
March 31, 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)
04/29/94 /s/ J. Don Brock
Date J. Don Brock
Chairman of the Board
and President
04/29/94 /s/ Albert E. Guth
Date Albert E. Guth
Senior Vice President
Secretary and Principal
Financial Officer
<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)
04/29/94
Date J. Don Brock
Chairman of the Board
and President
04/29/94
Date Albert E. Guth
Senior Vice President
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
3/31/94
Shares for Earnings Per Share Computations:*
Primary:
<CAPTION>
<S> <C>
Weighted average outstanding during year 9,796
Common Stock equivalents for stock options 154
TOTAL 9,950
<S> <C>
Fully Diluted:
Weighted average outstanding during year 9,796
Common Stock equivalents for stock options 160
TOTAL 9,956
Earnings Applicable to Common Stock:
Net Income $ 2,876
Earnings Per Share (Based on Weighted Average Number
of Common and Common Equivalent Shares Outstanding):
Net Income $ 0.29
Additional Computations of EPS:
Fully Diluted:
Net Income $ 0.29
</TABLE>
[FN]
*Note
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, Earning Per Share on the face of the income statements 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.
