PART I
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
ACCOUNT DESCRIPTION JUNE 30 DECEMBER JUNE 30
1996 1995 1995
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $4,189 $3,133 $1,751
RECEIVABLES - NET 33,636 27,671 40,674
INVENTORIES 57,299 55,883 62,267
REFUNDABLE INCOME TAX 2,342
PREPAID EXPENSES AND OTHER 9,032 7,567 6,247
TOTAL CURRENT ASSETS 104,156 96,596 110,939
PROPERTY AND EQUIPMENT-NET 52,600 51,709 48,468
OTHER ASSETS 3,501 6,051 12,586
TOTAL ASSETS $160,257 $154,356 $171,993
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
NOTES PAYABLE $1,694 $3 $1,098
CURRENT MATURITIES OF LONG-
TERM DEBT 500 771 500
ACCOUNTS PAYABLE - TRADE 15,974 15,878 22,911
OTHER ACCRUED LIABILITIES 16,681 21,929 18,624
TOTAL CURRENT LIABILITIES 34,849 38,581 43,133
LONG-TERM DEBT, LESS
CURRENT MATURITIES 24,928 17,150 29,900
OTHER LONG-TERM LIABILITIES 247 2,724 227
TOTAL SHAREHOLDERS' EQUITY 100,233 95,901 98,733
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $160,257 $154,356 $171,993
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
(UNAUDITED)
THREE
MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
NET SALES $63,212 $70,368 $122,782 $127,912
COST OF SALES 47907 56357 93655 100264
GROSS PROFIT 15305 14011 29127 27648
S,G, & A EXPENSES 11375 10249 20154 19697
PATENT SUIT EXPENSES 39 639 258 699
INCOME FROM OPERATIONS 3891 3123 8715 7252
INTEREST EXPENSE 341 605 623 1072
OTHER INCOME, NET OF EXPENSE -8 4623 223 5166
INCOME BEFORE INCOME TAXES 3542 7141 8315 11346
INCOME TAXES 1297 2411 3244 4100
NET INCOME $2,245 $4,730 $5,071 $7,246
EARNINGS PER COMMON SHARE $0.22 $0.47 $0.50 $0.72
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES 10037199 10091634 10057798 10051326
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
JUNE 30, JUNE 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $5,071 $7,246
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 2,814 2,664
PROVISION FOR DOUBTFUL ACCOUNTS 249 147
PROVISION FOR INVENTORY RESERVE 1,436 964
PROVISION FOR WARRANTY RESERVE 1,415 2,553
FOREIGN CURRENCY TRANSLATION ADJUSTMENT (28)
(GAIN) LOSS ON SALE OF FIXED ASSTS (104) 106
GAIN ON SALE OF BUSINESS (2,688)
PROVISION FOR PENSSION 50
(INCREASE) DECREASE IN:
RECEIVABLES (4,567) (11,816)
INVENTORIES (2,852) (9,831)
PREPAID EXPENSES AND OTHER 877 (1,171)
OTHER RECEIVABLES (1,646) (434)
OTHER ASSETS 2,398 (1,292)
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE 96 11,287
ACCRUED PRODUCT WARRANTY (1,112) (2,621)
OTHER ACCRUED LIABILITIES (9,797) (6,118)
TAXES PAYABLE 1,705 (1,023)
TOTAL ADJUSTMENTS (9,038) (19,301)
NET CASH (USED) BY OPERATIONS (3,967) (12,055)
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF PROPERTY
AND EQUIPMENT - NET 1,190 92
EXPENDITURES FOR PROPERTY AND EQUIPMENT (4,638) (8,788)
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 (3,448) (10,450)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET BORROWINGS UNDER REVOLVING
CREDIT LOAN 7,507 13,609
BORROWINGS UNDER LOAN AND NOTE
AGREEMENTS 1,690 166
CASH PAID FOR TREASURY STOCK (768)
PROCEEDS FROM ISSUANCE OF COMMON STOCK 42 10
NET CASH PROVIDED BY FINANCING ACTIVITIES 8,471 13,785
NET INCREASE (DECREASE) IN CASH 1,056 (8,720)
CASH AT BEGINNING OF PERIOD 3,133 10,471
CASH AT END OF PERIOD $4,189 $1,751
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 June 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 Identification No.)
incorporation or organization)
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 June 30, 1996 was 10,037,199.
ASTEC INDUSTRIES, INC.
INDEX
Page Number
PART I - Financial Information
Item 1. Financial Statements-Unaudited
Consolidated Balance Sheets as of
June 30, 1996, December 31, 1995
and June 30, 1995
Consolidated Statements of Income
for the Three Months and Six Months
Ended June 30, 1996 and 1995
Consolidated Statements of Cash Flows
for the Six Months Ended June 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.
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
$1,304,000, $1,279,000 and $1,308,000 for June 30, 1996, December 31, 1995
and June 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)
June 30, December 31, June 30,
1996 1995 1995
Raw Materials $26,045 $23,710 $21,679
Work-in-Process 10,989 10,385 12,966
Finished Goods 20,264 21,788 27,622
Total $57,299 $55,883 $62,267
4. Property and equipment is stated at cost. Property and equipment
is net of accumulated
depreciation of $25,052,000, $22,957,000 and $23,637,000 for June 30,
1996, December 31, 1995 and June 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 Astec products
through arrangements in
which Astec is contingently liable for customer debt aggregating
approximately $6,730,000 at
June 30, 1996, $7,362,000 at December 31, 1995, and $11,660,000 at
June 30, 1995.
7. There has been a material development 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 50-55% of Astec's business volume normally
occurs during the first six months of each year.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS - CONT.
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 six
months ended June 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 Six months
ended ended
June 30, 1995 June 30, 1995
Net sales $67,901 $123,101
Net income 2,484 5,168
Net income per common
and common equivalent
shares $.25 $.51
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
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
the date thereof. 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.
During the second quarter of 1996, the Board of Directors voted to form a
new financial
subsidiary called Astec Financial Services. Al Guth, Senior Vice President
of Astec Industries,
Inc., is President of this subsidiary. We believe the formation of this
subsidiary will enhance the
sale of our equipment by offering our customers access to capital through a
lender that
understands the equipment being purchased and the construction industry
in general. Also, during
the second quarter we began the operation of Pavement Technology, Inc.,
located in Conyers,
Georgia. Astec Industries, Inc., is a fifty percent shareholder of this
company. Pavement
Technology will manufacture an asphalt pavement analyzer, vibratory
compactor, and package
mix design laboratory. This will allow our customers to purchase a
complete design laboratory
from one source. The pavement analyzer has been accepted by certain
states and universities as a
new proof tester for measuring rutting, fatigue, and water susceptibility in
hot mix asphalt. This
group of equipment adds a new product to the services and equipment
we provide our customers.
Results of Operations
Sales for the quarter ended June 30, 1996, were $63,212,000
compared to sales of
$70,368,000 for the quarter ended June 30, 1995. Excluding the results of
the company's former
German subsidiaries, which were disposed of during 1995, sales for the
quarter ended June 30,
1995 were $59,915,000. International sales represent 9.6% and 28.2% of
total sales for the three
months ended June 30, 1996 and 1995, respectively. For the six-month
period ended June 30,
1996, net sales were $122,782,000 compared to net sales of $127,912,000
for the same period of
1995, representing a 4.0% decrease. Excluding the former German
subsidiaries, sales were
$113,138,000 for the six months ended June 30, 1995. For the six months
ended June 30, 1996,
international sales decreased to $16,131,000 from $27,883,000 for the six
months ended June 30,
1995, representing a 42.1% decrease. International sales from domestic
subsidiaries represent
13.1% and 21.8% of total net sales, for the six months ended June 30,
1996 and 1995,
respectively. The decrease in international sales for the six months ended
June 30, 1996 was due
mainly to several large shipments to China during the second quarter of
1995.
Gross profit for the quarter ended June 30, 1996 increased to
$15,305,000, from
$14,011,000 for the quarter ended June 30, 1995. The gross profit
percentage for the three
months ended June 30, 1996 and 1995 was 24.2% and 19.9%, respectively.
Gross profit for the
six months ended June 30, 1996 increased to $29,127,000 from
$27,648,000 at June 30, 1995, a
5.3% increase. The gross profit percentage for the six months increased to
23.7% at June 30,
1996 from 21.6% at June 30, 1995. The gross profit improvement is the
result of a combination
of several negative and positive factors. A negative impact was generated
by reduced volume in
one subsidiary, primarily from reduced international sales, and an
intentional reduction in
production volume while increasing sales to improve inventory turns. The
gross margin was
affected positively by a very profitable job, realization of benefits of
consolidation of facilities and
prior year capital expenditures, reduction of sales of units with negative
gross margins, and the
sale of the German operations which had low gross margins.
Selling, general, and administrative expenses for the second
quarter of 1996 were
$11,414,000 or 18.1% of net sales, compared to $10,888,000 or 15.5% of
net sales for the same
period of 1995. For the six months ended June 30, 1996 and 1995, selling,
general and
administrative expenses were $20,412,000 or 16.6% of net sales and
$20,396,000 or 15.9% of net
sales, respectively. Significant increases in selling, general and
administrative expenses in 1996
are primarily due to increased research and development, the loss on
repossession of an asphalt
plant sold to a German customer, and legal expenses (see "Contingencies")
as well as increased
selling salaries and Con-Expo exhibition expenses.
Interest expense decreased to $341,000 for the quarter ended
June 30, 1996 from
$605,000 for the quarter ended June 30, 1995. Interest expense as a
percentage of net sales
decreased to .5% for the quarter ended June 30, 1996 from .9% for the
same period of 1995. The
decrease in interest expense for the second quarter of 1996 is attributable
to decreased usage of the
Company's revolving line of credit. Interest expense for the six months
ended June 30, 1996 and
1995 was $623,000 and $1,072,000, respectively. Interest for the six
months ended June 30,
1995 included $266,000 of expense related to the former German
operations, while the remainder
of the decrease relates to decreased usage of the Company's revolving line
of credit.
Other income, net of other expense was a net expense of $8,000,
or 0.01% of net sales
for the quarter ended June 30, 1996, compared to other income, net of
expense of $4,623,000, or
6.6% of net sales for the quarter ended June 30, 1995. Included in other
income, net of expense for the quarter ended June 30, 1995 is a pre-tax gain
and related other income from the sale of
Wibau-Astec of approximately $4,220,000. Other income, net of expense
was $223,000 for the
six months ended June 30, 1996 compared to other income, net of expense
$5,166,000 for the six
months ended June 30, 1995. Excluding the former German operations,
other income, net of
expense was approximately $595,000 for the six months ended June 30, 1995.
Net income for the quarter ended June 30, 1996, was $2,245,000
or $.22 per share
compared to net income of $4,730,000 or $.47 per share for the quarter
ended June 30, 1995.
Excluding the results of the Company's former German subsidiaries, net
income for the quarter
ended June 30, 1995 was $2,193,000 or $.22 per share. Net income for the
six months ended June
30, 1996 was $5,071,000 or $.50 per share compared to net income of
$7,246,000 or $.72 per
share for the six months ended June 30, 1995. Excluding the former
German subsidiaries, net
income for the six months ended June 30, 1995 was $5,203,000 or $.52
per share.
Backlog at June 30, 1996 was $28,623,000 compared to
$39,555,000 at June 30, 1995.
The backlog at June 30, 1995 excludes amounts from the former German
operations. The
decrease in the backlog from 1995 to 1996 relates primarily to the decrease
in international and
soil remediation orders.
Liquidity and Capital Resources
As of June 30, 1996, the Company had working capital of
$69,307,000 compared to $67,806,000 at June 30, 1995.
Total short-term borrowings, including current maturities of
long-term debt, were
$2,194,000 at June 30, 1996. Long-term debt less current maturities was
$24,928,000 at June 30,
1996. Debt outstanding at June 30, 1996 consists of industrial revenue
bonds issued in prior years
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
$5,600,000. The Company
expects to finance these expenditures using internally generated funds.
Capital expenditures at
June 30, 1996 were $4,638,000.
In June, 1996, an unsecured revolving line of credit for
$22,000,000, which originally
expired on June 30, 1997, was renewed, and the expiration date extended
to June 30, 1999, with
The First National Bank of Chicago . The outstanding balance on the
revolving line of credit at
June 30, 1996 was $11,011,000. The Company was in compliance with all
financial covenants at June 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 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.
On October 28, 1993, the Company was named as a defendant in
a patent infringement
action brought by Gencor, Inc., a manufacturer of a competing line of
asphalt plants, seeking
monetary damages and an injunction to cease an alleged infringement of a
patent on certain
components used in the production of the Company's asphalt plant product
line. The
case was filed in the U.S. District Court for the Middle District of Florida,
Orlando Division, and
went to trial on January 22, 1996. On February 3, 1996, the jury returned
a verdict in the
Company's favor holding that Astec's Double Barrel drum mixer does not
infringe the Gencor
patent in question. Judgment on that jury verdict was entered by the Court
on February 5, 1996.
Subsequently, Gencor appealed to the United States Court of Appeals for
the Federal Circuit. In
early July, 1996, the Company and Gencor entered into a settlement of the
case on appeal and two
other lawsuits pending between the parties, one in the United States
District Court for the Eastern
District of Tennessee at Chattanooga in which the Company was suing
Gencor for infringement of
certain patents held by the Company which claims were originally the
subject of a counterclaim
by the Company against Gencor in the Florida litigation which was settled
in July; and the other
involving a suit filed by Gencor against the Company in the United States
District Court for the
Middle District of Florida, Orlando Division, in January, 1996, seeking to
recover certain
expenses incurred by Gencor in connection with the earlier patent
infringement case which was
tried in January 1996. Under the terms of the settlement, each of the
pending cases was
dismissed, with prejudice, with each party bearing its own costs. No
payments were made by
either party to the other in connection with the settlement as a result of
which all litigation
between the Company and Gencor is now ended.
In a personal injury and product liability case styled Juana Irma
Suarez and Susana
Median Guars v. Astec Industries, Inc., Barber-Greene Company, et al., in
the District Court of
Tarrant County Texas, 153rd Judicial District, Civil Action No. 153-
123018-89, after the first case
ended in a mistrial, the jury in a second trial during the week of September
19, 1994, returned a
verdict against the Company for compensatory damages in the amount of
$485,300, plus statutory
prejudgment interest commonly allowed in such cases under Texas law.
The Company appealed
to the Texas Court of Appeals which on April 11, 1996 affirmed the
judgment. The final
resolution was reached in May 1996, at which time the Company paid
$830,000 to the plaintiffs.
Management has reviewed all claims and lawsuits and, upon the
advice of its litigation
counsel, has made provision for any estimable losses. Notwithstanding the
foregoing, the
Company is unable to predict the ultimate outcome of the outstanding
claims and lawsuits.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There has been a material development in the legal proceedings
previously reported by
the registrant since the filing of its Quarterly Report on Form 10Q for the
quarter ended March
31, 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.
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 June 30, 1996.
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)
8/15/96 /s/ J. Don Brock
Date J. Don Brock
Chairman of the Board
and President
8/15/96 /s/ Albert E. Guth
Date Albert E. Guth
Senior Vice President
Treasurer, Secretary
and Principal Financial
Officer
EXHIBIT 11
Statement Regarding Computation of Per Share Earnings
ASTEC INDUSTRIES, INC.
EXHIBIT (11) - COMPUTATIONS OF EARNINGS PER SHARE
6/30/96
(in thousands)
Shares for Earnings Per Share Computations:
Primary:
Weighted average outstanding during year 10,058
Common Stock equivalents for stock options 113
TOTAL 10,171
Fully Diluted:
Weighted average outstanding during year 10,058
Common Stock equivalents for stock options 113
TOTAL 10,171
Earnings Applicable to Common Stock:
Net Income $ 5,071
Earnings Per Share (Based on Weighted
Average Number of Common and Common
Equivalent Shares Outstanding):
Net Income $.50
Additional Computations of EPS:
Fully Diluted:
Net Income $ .50
The Exhibits are numbered in accordance with Item 601 of Regulation S-K.
[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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Dollars in Thousands
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,189
<SECURITIES> 0
<RECEIVABLES> 33,636
<ALLOWANCES> 1,304
<INVENTORY> 57,299
<CURRENT-ASSETS> 104,156
<PP&E> 52,600
<DEPRECIATION> 25,052
<TOTAL-ASSETS> 160,257
<CURRENT-LIABILITIES> 34,849
<BONDS> 0
0
0
<COMMON> 2,020
<OTHER-SE> 98,213
<TOTAL-LIABILITY-AND-EQUITY> 160,257
<SALES> 122,782
<TOTAL-REVENUES> 122,782
<CGS> 93,655
<TOTAL-COSTS> 93,655
<OTHER-EXPENSES> 20,412
<LOSS-PROVISION> 249
<INTEREST-EXPENSE> 623
<INCOME-PRETAX> 8,315
<INCOME-TAX> 3,244
<INCOME-CONTINUING> 55,071
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,071
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
