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, 1997.
[ ] 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, 1997 was 9,317,580.
<PAGE>
PART I ITEM I FINANCIAL STATEMENTS
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
ACCOUNT DESCRIPTION SEPTEMBER 30 DECEMBER 31
1997 1996
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 818 $ 3,382
RECEIVABLES - NET 41,569 34,603
INVENTORIES 54,581 56,764
REFUNDABLE INCOME TAX 2,071
PREPAID EXPENSES AND OTHER 13,294 7,507
TOTAL CURRENT ASSETS 110,262 104,327
PROPERTY AND EQUIPMENT - NET 62,890 54,317
OTHER ASSETS 9,283 9,209
TOTAL ASSETS $182,435 $167,853
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
NOTES PAYABLE $1,551
CURRENT MATURITIES OF LONG-TERM DEBT $ 602 500
ACCOUNTS PAYABLE - TRADE 18,308 14,614
OTHER ACCRUED LIABILITIES 26,721 17,778
TOTAL CURRENT LIABILITIES 45,631 34,443
LONG-TERM DEBT,
LESS CURRENT MATURITIES 29,910 30,497
OTHER LONG-TERM LIABILITIES 4,257 3,520
TOTAL SHAREHOLDERS' EQUITY 102,637 99,393
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $182,435 $167,853
<PAGE>
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1997 1996 1997 1996
NET SALES $65,040 $47,182 $201,179 $169,964
COST OF SALES 50,407 35,898 152,906 129,553
GROSS PROFIT 14,633 11,284 48,273 40,411
S,G, & A EXPENSES 9,439 9,167 28,569 29,579
INCOME FROM OPERATIONS 5,194 2,117 19,704 10,832
INTEREST EXPENSE 512 557 1,690 1,180
OTHER INCOME, NET OF EXPENSE (2) 112 194 335
INCOME BEFORE INCOME TAXES 4,680 1,672 18,208 9,987
INCOME TAXES 1,859 651 7,237 3,895
NET INCOME $2,821 $1,021 $10,971 $6,092
EARNINGS PER COMMON SHARE $0.30 $0.10 $1.14 $0.61
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT SHARES
OUTSTANDING 9,317,580 10,037,199 9,635,563 10,050,881
<PAGE>
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SEPTEMBER 30 SEPTEMBER 30
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $10,971 $6,092
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES:
DEPRECIATION AND AMORTIZATION 4,587 4,074
PROVISION FOR DOUBTFUL ACCOUNTS 280 395
PROVISION FOR INVENTORY RESERVE 1,189 1,303
PROVISION FOR WARRANTY RESERVE 2,371 1,721
(GAIN) LOSS ON SALE OF FIXED ASSETS 462 (74)
PROVISION FOR PENSION RESERVE 70
(INCREASE) DECREASE IN:
RECEIVABLES (5,362) (1,046)
FINANCE RECEIVABLES (1,745) (5,226)
INVENTORIES (6,331) (7,397)
PREPAID EXPENSES AND OTHER (5,786) 569
OTHER RECEIVABLES (423) (1,496)
OTHER ASSETS (99) 1,722
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE 3,694 1,093
ACCRUED PRODUCT WARRANTY (1,216) (1,989)
OTHER ACCRUED LIABILITIES 623 (8,565)
INCOME TAXES PAYABLE 9,973 1,899
TOTAL ADJUSTMENTS 2,217 (12,947)
NET CASH (USED) BY OPERATING ACTIVITIES 13,188 (6,855)
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF PROPERTY
AND EQUIPMENT - NET 338 1,228
EXPENDITURES FOR PROPERTY AND EQUIPMENT (6,327) (5,570)
NET CASH USED BY INVESTING ACTIVITIES (5,989) (4,342)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET BORROWINGS UNDER REVOLVING
CREDIT AGREEMENT 2,080 10,460
ISSUER SELF TENDER OFFER STOCK (7,760)
BORROWINGS (REPAYMENTS) UNDER LOAN AND
NOTE AGREEMENTS (4,116) 1,548
CASH PAID FOR TREASURY STOCK (768)
PROCEEDS FROM ISSUANCE OF COMMON STOCK 33 42
NET CASH PROVIDED BY FINANCING ACTIVITIES (9,763) 11,282
NET INCREASE (DECREASE) IN CASH (2,564) 85
CASH AT BEGINNING OF PERIOD 3,382 3,133
CASH AT END OF PERIOD $818 $3,218
<PAGE>
ASTEC INDUSTRIES, INC.
INDEX
Page Number
PART I - Financial Information
Item 1. Financial Statements-Unaudited
Consolidated Balance Sheets as of
September 30, 1997and December 31, 1996
Consolidated Statements of Income
for the Three Months and Nine Months
Ended September 30, 1997 and 1996
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1997 and 1996
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 $1,266,000 and
$1,267,000 for September 30, 1997 and December 31, 1996, 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,
1997 1996
Raw Materials $ 23,234 $ 23,541
Work-in-Process 10,396 9,038
Finished Goods 20,951 24,185
Total $56,578 $58,760
4. Property and equipment is stated at cost. Property and equipment is net of
accumulated depreciation of $30,977,000 and $27,066,000 for September 30,
1997 and December 31, 1996, 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 the Company is contingently liable for customer debt
aggregating approximately $2,327,000 at September 30, 1997 and $4,618,000 at
December 31, 1996.
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 - 85% of Astec's business volume normally occurs during
the first nine months of each year.
9. In February, 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per share and
to restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of
stock options will be excluded. The impact is immaterial.
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 include market conditions in the road building and related
construction equipment industry, competition in the Company's markets from
existing and new competitors and the products or services they provide, the
ability to expand in existing markets and penetrate new markets, federal and
state legislation affecting infrastructure, and other 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 such statements are made. The
Company undertakes no obligation to publicly release any change to these
forward-looking statements that may result from events
or circumstances occurring after the date such statements are made or to
reflect the occurrence of unanticipated events.
On October 16, 1997, the Company announced that it entered into an agreement
to purchase the Construction Equipment Division of Portec, Inc., located in
Yankton, South Dakota. The business designs, manufactures and markets
well-known lines of aggregate processing equipment, including the Pioneer line
of jaw crushers, the Kolberg line of sand classification equipment and portable
conveyers, and Portec Environmental products such as portable screening
plants utilized in the recycle and aggregate markets. The transaction is
scheduled to close during the fourth quarter of 1997, and is still subject to
regulatory approval.
Results of Operations
For the three-months ended September 30, 1997, net sales increased to $
65,040,000 from $47,182,000 for the three-months ended September 30, 1996,
representing a 37.9% increase. International sales for the third quarter of
1997 were $16,022,000 compared to $12,713,000 for the third quarter of
1996, an increase of $3,309,000 or 26.0%. International sales represented
24.6% and 26.9% of total sales for the third quarter of 1997 and 1996,
respectively. The increase in both domestic and international sales
reflects the continued strength of the U.S. economy and improving economic
conditions in several international markets in which the Company sells its
products. For the nine-month period ended September 30, 1997, net sales
were $201,179,000 compared to $169,964,000 for the same period of 1996,
representing a 18.4% increase. International sales represented 19.2% and
16.7% of total net sales for the nine months ended September 30, 1997 and
1996, respectively. The increase in international sales during
the third quarter of 1997 is due mainly to increased sales of asphalt
plants, paving equipment and related components.
Gross profit for the quarter ended September 30, 1997 increased to $14,633,000
from $11,284,000 for the quarter ended September 30, 1996, while the gross
profit percentage for the three months ended September 30, 1997 decreased to
22.5% from 23.9% for the same period of 1996. The decrease in the gross
profit percentage for the three months ended September 30, 1997 relates mainly
to product mix sold during the period. Gross profit for the nine months ended
September 30, 1997 increased to $48,273,000, for a gross profit percentage
of 24.0%, compared to $40,411,000 for a gross profit percentage of 23.8%
for the same period of 1996.
Selling, general, and administrative expenses for the third quarter of 1997
were $9,439,000 or 14.5% of net sales, compared to $9,167,000 or 19.4% of net
sales for the same period of 1996. Selling, general and administrative
expenses for the nine months ended September 30, 1997 were $28,569,000 or
14.2% of net sales and $29,579,000 or 17.4% of net sales for the nine months
ended September 30, 1996. The decrease in selling, general and administrative
expenses for the nine months ended September 30, 1997 compared to the same
period of 1996 related mainly to decreased legal fees and repossession
expenses related to a foreign sale.
Interest expense decreased to $512,000 for the quarter ended September 30,
1997 from $557,000 for the quarter ended September 30, 1996. Interest expense
as a percentage of net sales decreased to .8% for the quarter ended
September 30, 1997 compared to 1.2% for the same period of 1996. Interest
expense for the nine months ended September 30, 1997 increased to $1,690,000
compared to $1,180,000 for the same period of 1996. The decrease in interest
expense for the three months ended September 30, 1997 is attributable to
decreased usage of the Company's revolving line of credit. The increase in
interest expense for the nine months ended September 30, 1997 relates to
increased usage of the Company's revolving line of credit for increased
trade receivables, additional debt at the subsidiary level related to the
captive finance company, and proceeds used for the purchase of the Company's
stock in an issuer self-tender offer completed during the second quarter of
1997.
Net other expense was $2,000 for the quarter ended September 30, 1997,
compared to Other income, net of expense, of $112,000 for the quarter ended
September 30, 1996. Other income, net of other expense, decreased to
$194,000 for the nine months ended September 30, 1997 from $335,000 for
the same period of 1996. The decrease in other income, net of other expense,
relates to decreased license fee income, the write-off of fixed assets being
replaced, and decreased interest income during 1997 compared to 1996.
Income tax expense for the third quarter of 1997 increased to $1,859,000
compared to $651,000 at September 30, 1996, for an increase of $1,208,000.
Tax expense is 2.9% and 1.4% of net sales for the quarters ended September
30, 1997 and 1996, respectively. The effective tax rate for the second quarter
of 1997 is 39.7% compared to an effective rate of 38.9% for the third quarter
of 1996. Income tax expense for the nine months ended September 30, 1997
increased to $7,237,000 compared to $3,895,000 for the nine months ended
September 30, 1996. Tax expense is 3.6% and 2.3% of net sales for the nine
months ended September 30, 1997 and 1996, respectively. The effective tax
rate for the six months ended September 30, 1997 is 36% compared to the
effective tax rate for the nine months ended September 30, 1996 of 39%.
The decrease in the effective tax rate for the nine months ended September 30,
1997 compared to the same period last year relates minority interest income
using the equity method of accounting, included in other income, which is
already net of income taxes which are recorded on the books of the minority
interest.
Backlog of orders at September 30, 1997 was $41,400,000 compared to
$30,176,000 at September 30, 1996. The majority of this improvement relates
to a significant increase in domestic and international orders of two
subsidiaries.
Liquidity and Capital Resources
As of September 30, 1997, the Company had working capital of $64,631,000
compared to $74,019,000 at September 30, 1996.
Total short-term borrowings, including current maturities of long-term debt,
were $602,000 at September 30, 1997 compared to $2,203,000 at September 30,
1996. Long-term debt less current maturities was $27,728,000 at September
30, 1997 and $29,910,000 at September 30, 1996. Debt did not decrease
further during 1997 since cash generated during 1997 was used to purchase
726,619 shares of its common stock at $10.50 per share in an issuer self-tender
offer.
Capital expenditures in 1997, for plant expansion and for further m
odernization of the Company's manufacturing processes, are expected to
approach $9,640,000. The Company expects to finance these
expenditures using internally generated funds. Capital expenditures at
September 30, 1997 were $6,327,000. Capital expenditures for the last quarter
of 1997 will include new and upgraded plant equipment and the first
installment of a new mainframe computer system at one location.
At September 30, 1997, the outstanding balance on the Company's revolving
line of credit was $6,395,000 while the outstanding balance on the line of
credit of the Company's finance subsidiary was $11,515,000. Both lines of
credit contain certain restrictive covenants which require the Company to
maintain certain levels of net worth, leverage, fixed charge and interest
expense ratios, and capital expenditure limits. The Company was in
compliance with all financial covenants at September 30, 1997.
Contingencies
The Company is engaged in certain pending litigation involving claims or
other matters arising in the ordinary 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 $12,000,000 subject to a substantial self-
insured retention for the larger subsidiaries, and a $50,000 deductible for the
smaller subsidiaries, 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.
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 any 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
10K for the year ended December 31, 1996. 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.
No reports on Form 8-K have been filed during the quarter ended September 30,
1997.
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)
11/13 /97 /s/ J. Don Brock
Date J. Don Brock
Chairman of the Board
and President
11/13 /97 /s/ Richard W. Bethea, Jr.
Date Richard W. Bethea
Vice President, Corporate
Counsel and Secretary
<PAGE>
EXHIBIT 11
Statement Regarding Computation of Per Share Earnings
ASTEC INDUSTRIES, INC.
EXHIBIT (11) - COMPUTATIONS OF EARNINGS PER SHARE
September 30, 1997 and 1996
(in thousands)
Three months ended Nine months ended
Shares for Earnings Per
Share Computations: 9/30/97 9/30/96 9/30/97 9/30/96
Primary:
Weighted average
outstanding during
the year 9,318 10,037 9,636 10,051
Common Stock equivalents
for stock options 209 108 148 112
Total 9,527 10,145 9,784 10,163
Fully Diluted:
Weighted average
outstanding during
the year 9,318 10,037 9,636 10,051
Common Stock equivalents
for stock options 238 109 239 112
Total 9,556 10,146 9,875 10,163
Earnings applicable to Common Stock:
Net Income $2,821 $1,021 $10,971 $6,092
Earnings Per Share (Based
on Weighted Average Number
of Common Equivalent
Shares Outstanding):
Net Income $.30 $.10 $1.14 $.61
Additional Computations of EPS:
Fully Diluted:
Net Income $.30 $.10 $1.14 $.61
Dilutive effect of common stock 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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