SECURITIES & EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934. For the
quarterly period ended September 30, 1996.
[ ] 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
incorporation or organization) Identification No.)
4101 Jerome Avenue, Chattanooga, Tennessee 37407
(Address of Principal Executive Offices) (Zip Code)
(423) 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
September 30, 1996 was 10,037,199.
<PAGE>
ASTEC INDUSTRIES, INC.
INDEX
Page Number
PART I - Financial Information
Item 1. Financial Statements-Unaudited
Consolidated Balance Sheets as of
September 30, 1996, December 31, 1995
and September 30, 1995
Consolidated Statements of Income
for the Three Months and Nine Months
Ended September 30, 1996 and 1995
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1996
and 1995
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
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
(IN THOUSANDS)
SEPTEMBER DECEMBER SEPTEMBER
1996 1995 1995
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $3,218 $3,133 $2,008
RECEIVABLES - NET 35,044 27,671 41,906
INVENTORIES 61,977 55,883 56,410
REFUNDABLE INCOME TAXES 2,342
PREPAID EXPENSES AND OTHER 9,221 7,567 4,595
TOTAL CURRENT ASSETS 109,460 96,596 104,919
PROPERTY AND EQUIPMENT - NET 52,171 51,709 48,922
OTHER ASSETS 4,329 6,051 11,016
TOTAL ASSETS $165,960 $154,356 $164,857
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
NOTES PAYABLE $1,551 $3 $1,917
CURRENT MATURITIES OF LONG-TERM 652 771 500
ACCOUNTS PAYABLE - TRADE 16,971 15,878 16,271
OTHER ACCRUED LIABILITIES 16,267 21,929 17,471
TOTAL CURRENT LIABILITIES 35,441 38,581 36,159
LONG-TERM DEBT, LESS CURRENT
MATURITIES 27,728 17,150 26,780
OTHER LONG-TERM LIABILITIES 1,537 2,724 654
TOTAL SHAREHOLDERS' EQUITY 101,254 95,901 101,264
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $165,960 $154,356 $164,857
<TABLE>
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(IN THOUSANDS)
<CAPTION>
THREE MONTHS NINE MONTHS ENDED
ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30
1996 1995 1996 1995
<CAPTION>
<S> <C> <C> <C> <C>
NET SALES $47,182 $65,015 $169,964 $192,927
COST OF SALES 35,898 51,717 129,553 151,981
GROSS PROFIT 11,284 13,298 40,411 40,946
S,G, & A EXPENSES 9,166 9,109 29,320 29,282
PATENT SUIT DAMAGES & EXPENSES 1 146 259 369
INCOME FROM OPERATIONS 2,117 4,043 10,832 11,295
INTEREST EXPENSE 557 546 1,180 1,618
OTHER INCOME, NET OF EXPENSE 112 367 335 5,533
INCOME BEFORE INCOME TAXES 1,672 3,864 9,987 15,210
INCOME TAXES 651 1,096 3,895 5,196
NET INCOME $1,021 $2,768 $6,092 $10,014
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE $0.10 $0.27 $0.61 $0.99
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING 10,037,199 10,092,199 10,050,881 10,065,100
</TABLE>
<PAGE>
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
SEPTEMBER SEPTEMBER 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $6,092 $10,014
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH (USED) BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 4,074 3,796
PROVISION FOR DOUBTFUL ACCOUNTS 395 265
PROVISION FOR INVENTORY RESERVE 1,303 1,806
PROVISION FOR WARRANTY RESERVE 1,721 2,670
FOREIGN CURRENCY TRANSLATION ADJUSTMENT (265)
(GAIN) LOSS ON SALE OF FIXED ASS (74) 146
GAIN ON SALE OF BUSINESS (2,688)
PROVISION FOR PENSION RESERVE 70
PROVISION FOR LEGAL RESERVES 120
(INCREASE) DECREASE IN:
RECEIVABLES (6,272) (13,869)
INVENTORIES (7,397) (4,815)
PREPAID EXPENSES AND OTHER 569 497
OTHER RECEIVABLES (1,496) 269
OTHER NON-CURRENT ASSETS 1,722 376
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE 1,093 4,647
ACCRUED PRODUCT WARRANTY (1,989) (2,940)
OTHER ACCRUED LIABILITIES (8,685) (7,559)
TAXES PAYABLE 1,899 (104)
TOTAL ADJUSTMENTS (12,947) (17,768)
NET CASH (USED) BY OPERATING ACT (6,855) (7,754)
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF PROPERTY
AND EQUIPMENT - NET 1,228 86
EXPENDITURES FOR PROPERTY AND EQUIPMENT (5,570) (10,525)
NET CASH OUTFLOW WITH SALE OF BUSINESS (919)
CASH PAYMENTS IN CONNECTION WITH BUSINESS
COMBINATION, NET OF CASH ACQUIRED (835)
NET CASH USED BY INVESTING ACTIVITIES (4,342) (12,193)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET BORROWINGS UNDER REVOLVING
CREDIT LOAN 10,460 10,489
BORROWINGS UNDER LOAN AND NOTE
AGREEMENTS 1,548 985
CASH PAID FOR TREASURY STOCK (768)
PROCEEDS FROM ISSUANCE OF COMMON 42 10
NET CASH PROVIDED BY FINANCING ACTIVITIES 11,282 11,484
NET INCREASE (DECREASE) IN CASH 85 (8,463)
CASH AT BEGINNING OF PERIOD 3,133 10,471
CASH AT END OF PERIOD $3,218 $2,008
<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 $1,378,000, $1,279,000 and $1,671,000
for September 30, 1996, December 31, 1995 and September 30,
1995, respectively.
3. Inventories are stated at the lower of first-in, first-out,
cost or market and consist of the following:
(in thousands)
September 30, December 31, September 30,
1996 1995 1995
Raw Materials $26,377 $23,710 $25,471
Work-in-Process 11,753 10,385 9,526
Finished Goods 23,847 21,788 21,413
Total $61,977 $55,883 $56,410
4. Property and equipment is stated at cost. Property and
equipment is net of accumulated
depreciation of $26,215,000, $22,957,000 and $23,264,000 for
September 30, 1996, December 31, 1995
and September 30, 1995, 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 the
Company's products through arrangements in
which the Company was contingently liable for customer debt
aggregating approximately $4,987,000 at
September 30, 1996, $7,362,000 at December 31, 1995, and
$7,639,000 at September 30, 1995.
7. There have been no material developments in legal
proceedings previously reported. See
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" in Part I -Item
2 "Contingencies" of this Report.
8. Approximately 80% of the Company's business volume
normally occurs during the first nine
months of each year.
9. As disclosed in Note 2 to the Company's financial
statements included in the 1994 Annual
Report, the Company acquired the remaining shares of Wibau-
Astec on November 7, 1994 and on October
17, 1994 the Company acquired the operating assets and liabilities
of Gibat Ohl. Effective June 30, 1995
the Company sold 100% of the stock of Wibau-Astec to Wirtgen
Gesellschaft mit beschrankter Haftung, a
German equipment manufacturer. The following unaudited pro
forma summary presents the consolidated
results of operations for the three and nine months ended
September 30, 1995 as if the acquisition of Gibat
Ohl and the disposition of Wibau-Astec had occurred at the
beginning of these years after giving effect to
certain adjustments. The pro forma results have been prepared
for comparative purposes only and do not
purport to be indicative of the results that would have occurred
had the transaction occurred at the
beginning of 1995 or of results which may occur in the future.
(in thousands)
Three months Nine months
ended ended
September 30, 1995 September 30, 1995
Net sales $65,015 $188,116
Net income 2,768 8,463
Net income per common and
common equivalent
share $.27 $.84
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Results of Operations
When used in this report, press releases and elsewhere by
management or the Company from time
to time, the words, "believes, "anticipates", and "expects" and
similar expressions are intended to identify
forward-looking statements that involve certain risks and
uncertainties. A variety of factors could cause
actual results to differ materially from those anticipated in the
Company's forward-looking statements,
some of which are included in the risk factors that are discussed
from time to time in the Company's SEC
reports. Readers are cautioned not to place undue reliance on
these forward-looking statements, which
speak only as of the date of such statements. The Company
undertakes no obligation to publicly release
the results of any revisions to these forward-looking statements
that may be made to reflect the results,
events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
For the three-month period ended September 30, 1996,
net sales were $47,182,000, a decrease of
$17,833,000, or 27.4% from the three month period ended
September 30, 1995. Excluding sales of the
Company's former German operations, net sales decreased by
$8,838,000 or 15.8% from the comparable
period last year. International sales by domestic subsidiaries
decreased to $12,250,000 for the quarter
ended September 30, 1996 from $15,203,000 for the quarter
ended September 30, 1995, representing a
$2,953,000 or 19.4% decrease. The Company attributes this
decline to softness in international sales of its
asphalt plants offset by improved performance in other product
lines. International sales by domestic
subsidiaries represent 26.0% and 23.4% of total sales for the
three months ended September 30, 1996 and
1995, respectively. The decrease in net sales for the three months
ended September 30, 1996 is attributed
to the decline in international sales and weakness in domestic
sales for the Company's trenching and
aggregate crushing product lines.
For the nine-month period ended September 30, 1996, net sales
were $169,964,000 compared to
net sales of $192,927,000 for the same period of 1995,
representing an 11.9% decrease. Excluding the
sales of the former German operations, net sales increased
$806,000 for the nine months ended September
30, 1996 from the comparable period in 1995. Including the sales
from the former German operations,
international sales decreased 35.2% to $28,381,000 for the nine-
month period ended September 30, 1996
from $43,806,000 for the comparable period in 1995. The
decrease in international sales for the nine
months ended September 30, 1996 compared to the same period
of 1995 is due, in significant part, to
import duties and other artificial barriers to certain markets
recently imposed by a foreign government in a
country in which the Company's prior year sales totaled
approximately $7,900,000 and to a general
weakness in the Company's asphalt plant product line in other
foreign markets. International sales from
domestic subsidiaries represent 16.7% and 22.7% of total net
sales for the nine months ended September
30, 1996 and 1995, respectively.
Gross profit for the quarter ended September 30, 1996
decreased to $11,284,000 from
$13,298,000 for the quarter ended September 30, 1995. The
gross profit percentage for the three months
ended September 30, 1996 and 1995 was 23.9% and 20.5%,
respectively. Gross profit for the nine months
ended September 30, 1996 decreased to $40,411,000 from
$40,946,000 at September 30, 1995, a 1.3%
decrease, however, the gross profit percentage increased to
23.8% for the nine months ended September
30, 1996 from 21.2% for the same period of 1995. While the
decrease in gross profit for the three and nine
months ended September 30, 1996 relates mainly to reduced sales
volume, the gross profit percentage was
positively impacted by increased margins on one product line and
improved manufacturing efficiencies
from prior year capital expenditures. The gross profit percentage
was impacted negatively by the decrease
in international sales which tend to have a higher gross profit
margin.
Selling, general, and administrative expenses for the
third quarter of 1996 were $9,167,000 or
19.4% of net sales, compared to $9,255,000 or 14.2% of net sales
for the same period of 1995. Excluding
the former German operations, selling, general and administrative
expenses increased $780,000 for the
third quarter of 1996 compared to the third quarter of 1995. The
increase in selling, general and
administrative expenses for the three months ended September
30, 1996 is principally due to an increase in
research and development costs. For the nine months ended
September 30, 1996 and 1995, selling, general
and administrative expenses were $29,579,000 or 17.4% of net
sales, and $29,651,000 or 15.4% of net
sales, respectively. Excluding the former German operations,
selling, general and administrative expenses
increased $4,494,000 for the nine months ended September 30,
1996 compared to the same period of 1995.
Significant increases in selling, general and administrative
expenses in 1996 are primarily due to increased
research and development costs, the loss on repossession of an
asphalt plant sold to a German customer;
increased selling salaries, benefits and related travel expenses, and
Con-Expo exhibition expenses. Legal
expenses for the three and nine month periods ended September
30, 1996 were reduced by $312,000 due to
the recovery in the third quarter from the Company's insurance
carrier of legal expenses related to a
product liability case tried earlier this year.
Interest expense increased $11,000 to $557,000 for the
quarter ended September 30, 1996 from
$546,000 for the quarter ended September 30, 1995. Interest
expense as a percentage of net sales
increased to 1.2% for the quarter ended September 30, 1996 from
0.8% for the same period of 1995.
Excluding the former German operations, interest expense
increased $55,000 for the three months ended
September 30, 1996 compared to the same period in 1995.
Interest expense for the nine months ended
September 30, 1996 and 1995 was $1,180,000 or .7% of net sales
and $1,618,000 or .8% of net sales,
respectively. Excluding the former German operations, interest
expense decreased $128,000 for the nine
months ended September 1996 compared to the same periods in
1995. The fluctuations in interest expense
for the three and nine months ended September 30, 1996
compared to the same periods in 1995 relate to
borrowings under of the Company's revolving line of credit.
Other income, net of other expense, was $112,000 or
0.2% of net sales for the quarter ended
September 30, 1996, compared to other income, net of expense,
of $367,000 or 0.6% of net sales for the
quarter ended September 30, 1995. Other income for the third
quarter of 1995, excluding the former
German operations, was $384,000. Other income, net of expense,
for the quarter ended September 30,
1995 includes $150,000 from a settlement related to the violation
of a patent owned by the Company.
Other income, net of expense, decreased to $335,000 for the nine
months ended September 30, 1996 from
$5,533,000 for the nine months ended September 30, 1995. In
addition to the cash settlement above, other
income for the nine months ended September 30, 1995 includes a
pre-tax gain and related other income
from the sale of Wibau-Astec of approximately $4,220,000,
vendor rebates and royalties of approximately
$194,000, interest income of approximately $250,000, and rental
income unrelated to equipment of
approximately $123,000. Other income for the nine-month
period ended September 30, 1996 was further
reduced by additional losses incurred in connection with the
disposition of assets in 1996 compared to such
period in 1995.
Backlog at September 30, 1996 was $30,176,000
compared to $27,100,000 at September 30,
1995, excluding the former German operations. The Company
attributes this increase to normal
fluctuations in sales volume. Including the Company's former
German operations, the backlog at
September 30, 1995 was $29,721,000.
Earnings per share were $.10 for the third quarter of
1996 compared to $.27 for the same period
of 1995. Earnings per share for the nine months ended September
30, 1996 were $.61 compared to $.99
for the same period in 1995. Excluding the former German
operations, earnings per share were $.84 for
the nine months ended September 30, 1995.
Liquidity and Capital Resources
As of September 30, 1996, the Company had working
capital of $74,019,000 compared to
$68,760,000 at September 30, 1995.
Total short-term borrowings, including current maturities
of long-term debt, were $2,203,000 and
$2,417,000 at September 30, 1996 and 1995, respectively.
Excluding the former German operations, the
short-term borrowings, including current maturities of long-term
debt, at September 30, 1995 were
$506,000. The increase in short-term borrowings for the three
month period ended September 30, 1996 is
attributed to short-term notes payable to finance rental trenching
equipment and a loan from the
Company's President and Chief Executive Officer to supplement
its working capital revolving credit
facility. The Company executed a demand note payable to Dr.
Brock on March 18, 1996 bearing interest
at a rate equal to that paid to The First National Bank of Chicago
under the Company's unsecured
revolving line of credit. At the time Dr. Brock loaned these funds
to the Company, the Company's
outstanding balance under its $22,000,000 credit facility was
$9,605,000. To date, interest of
approximately $54,000 has been accrued with respect to this loan.
Long-term debt, less current maturities
was $27,728,000 at September 30,1996 and $27,242,000 at
September 30, 1995. The former German
operations had no outstanding long-term debt at September 30,
1995. Debt outstanding at September 30,
1996 consists of industrial revenue bonds issued to finance capital
expenditures, short term notes payable
and the outstanding balance on the revolving line of credit.
Capital expenditures in 1996 for plant expansion and for
further modernization of the Company's
manufacturing processes are expected to approach $6,000,000.
The Company expects to finance these
expenditures using internally generated funds. Capital
expenditures for the nine month period ended
September 30, 1996 were $5,570,000 compared to $10,525,000
for the same period in 1995. The decrease
in the level of capital expenditures is attributed to the completion
of several plant modernization projects
by the Company.
In July, 1994, the Company obtained an unsecured
revolving line of credit for $15,000,000 from
The First National Bank of Chicago that was to expire on
September 30, 1997. On May 22, 1995, the
Company amended the agreement to increase the revolving credit
available to $22,000,000. On June 28,
1996 the revolving line of credit termination date was extended to
June 30, 1999. The outstanding balance
under this credit facility at September 30, 1996 was $14,442,000.
The Company was in compliance with
all financial covenants at September 30, 1996.
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
$8,000,000, subject to a substantial self-
insured retention pursuant to which the Company has the right to
coordinate and control the management
of its claims and the defense of these actions.
Management has reviewed all claims and lawsuits and,
upon the advice of its litigation counsel,
has made provision for any estimable losses.
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 Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996,
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.
PART II - OTHER INFORMATION - CONT.
Item 6. Exhibits and Reports on Form 8-K
(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 September 30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
ASTEC INDUSTRIES, INC.
(Registrant)
11/14/96 /s/ J. Don Brock
Date J.Don Brock
Chairman of the Board
and President
11/14/96 /s/ Albert E. Guth
Date Albert E. Guth
Senior Vice President
Secretary
EXHIBIT 11
Statement Regarding Computation of Per Share Earnings
ASTEC INDUSTRIES, INC.
EXHIBIT (11) - COMPUTATIONS OF EARNINGS PER
SHARE
Three months ended Nine months ended
9/30/96 9/30/95 9/30/96 9/30/95
Shares for Earnings Per Share Computations:
(in thousands)
Primary:
Weighted average outstanding
during year 10,037 10,092 10,051 10,065
Common stock equivalents
for stock options 108 121 112 124
Total 10,145 10,213 10,163 10,189
Fully Diluted:
Weighted average
outstanding during year 10,037 10,092 10,051 10,065
Common stock equivalents
for stock options 109 122 112 125
Total 10,146 10,214 10,163 10,190
Earnings Applicable to Common Stock:
Net income $1,021 $2,768 $6,092 $10,014
Earnings Per Share (Based on Weighted
Average Number of Common and Common
Equivalent Shares Outstanding):
Net income $.10 $.27 $.61 $.99
Additional Computations of EPS:
Fully Diluted:
Net income $.10 $.27 $.61 $.99
The Exhibits are numbered in accordance with Item 601 of
Regulation S-K. 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.
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