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, 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 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, 1997 was 9,317,580.
ASTEC INDUSTRIES, INC.
INDEX
Page Number
PART I - Financial Information
Item 1. Financial Statements-Unaudited
Consolidated Balance Sheets as of
June 30, 1997and December 31, 1996
Consolidated Statements of Income
for the Three Months and Six Months
Ended June 30, 1997 and 1996
Consolidated Statements of Cash Flows
for the Six Months Ended June 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
PART I ITEM I FINANCIAL STATEMENTS
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
ACCOUNT DESCRIPTION JUNE 30 DECEMBER 31
1997 1996
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 8,725 $ 3,382
RECEIVABLES - NET 42,717 34,603
INVENTORIES 56,310 56,764
REFUNDABLE INCOME TAX 2,071
PREPAID EXPENSES AND OTHER 10,144 7,507
TOTAL CURRENT ASSETS 117,896 104,327
PROPERTY AND EQUIPMENT - NET 60,169 54,317
OTHER ASSETS 11,770 9,209
TOTAL ASSETS $189,835 $167,853
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
NOTES PAYABLE $ 1,551
CURRENT MATURITIES OF LONG-TERM DEBT $ 602 500
ACCOUNTS PAYABLE - TRADE 21,372 14,614
OTHER ACCRUED LIABILITIES 24,301 17,778
TOTAL CURRENT LIABILITIES 46,275 34,443
LONG-TERM DEBT,
LESS CURRENT MATURITIES 38,754 30,497
OTHER LONG-TERM LIABILITIES 4,964 3,520
TOTAL SHAREHOLDERS' EQUITY 99,842 99,393
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $189,835 $167,853
<PAGE>
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
1997 1996 1997 1996
NET SALES $73,159 $63,212 $136,139 $122,782
COST OF SALES 55,394 47,907 102,499 93,655
GROSS PROFIT 17,765 15,305 33,640 29,127
S,G, & A EXPENSES 9,557 11,414 19,130 20,412
INCOME FROM OPERATIONS 8,208 3,891 14,510 8,715
INTEREST EXPENSE 625 341 1,178 623
OTHER INCOME, NET OF
EXPENSE 92 (8) 196 223
INCOME BEFORE INCOME
TAXES 7,675 3,542 13,528 8,315
INCOME TAXES 3,050 1,297 5,378 3,244
NET INCOME $4,625 $2,245 $8,150 $5,071
EARNINGS PER COMMON SHARE $0.48 $0.22 $0.83 $0.50
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING 9,557,125 10,037,199 9,797,189 10,057,798
<PAGE>
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
JUNE 30, JUNE 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 8,150 $ 5,071
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES:
DEPRECIATION AND AMORTIZATION 3,066 2,814
PROVISION FOR DOUBTFUL ACCOUNTS 160 249
PROVISION FOR INVENTORY RESERVE 841 1,436
PROVISION FOR WARRANTY RESERVE 1,713 1,415
(GAIN) LOSS ON SALE OF FIXED ASSETS 462 (104)
PROVISION FOR PENSION RESERVE 50
(INCREASE) DECREASE IN:
TRADE RECEIVABLES (5,227) (4,567)
FINANCE RECEIVABLES (10,454)
INVENTORIES (386) (2,852)
PREPAID EXPENSES AND OTHER (2,636) 877
OTHER RECEIVABLES (1,236) (1,646)
OTHER ASSETS 242 2,398
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE 6,758 96
ACCRUED PRODUCT WARRANTY (811) (1,112)
OTHER ACCRUED LIABILITIES 804 (9,797)
TAXES PAYABLE 8,333 1,705
TOTAL ADJUSTMENTS 1,629 (9,038)
NET CASH (USED) BY OPERATING ACTIVITIES 9,779 (3,967)
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF PROPERTY AND
EQUIPMENT - NET 285 1,190
EXPENDITURES FOR PROPERTY AND EQUIPMENT (3,828) (4,638)
NET CASH USED BY INVESTING ACTIVITIES (3,543) (3,448)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET BORROWINGS (REPAYMENTS) UNDER REVOLVING
CREDIT LOAN (1,756) 7,507
TENDER OFFER STOCK REPURCHASE (7,733)
BORROWINGS UNDER LOAN AND NOTE
AGREEMENTS 8,564 1,690
CASH PAID FOR TREASURY STOCK (768)
PROCEEDS FROM ISSUANCE OF COMMON STOCK 32 42
NET CASH PROVIDED BY FINANCING ACTIVITIES (893) 8,471
NET INCREASE (DECREASE) IN CASH 5,343 1,056
CASH AT BEGINNING OF PERIOD 3,382 3,133
CASH AT END OF PERIOD $8,725 $4,189
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 $1,173,000 and
$1,267,000 for June 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)
June 30, December 31,
1997 1996
Raw Materials $ 23,118 $ 23,541
Work-in-Process 11,057 9,038
Finished Goods 22,135 24,185
Total $ 56,310 $ 56,764
4. Property and equipment is stated at cost. Property and equipment is net of
accumulated depreciation of $29,568,000 and $27,066,000 for June 30, 1997and
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 $3,174,000 at June 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 50-55% of Astec's business volume normally occurs during the
first six 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.
Results of Operations
For the three-months ended June 30, 1997, net sales increased to $73,159,000
from $63,212,000 for the three-months ended June 30, 1996, representing a
15.7% increase. This increase reflects the continued strength of the U.S.
economy and improving economic conditions in several international
markets in which the Company sells its products. International sales for the
second quarter of 1997 were $11,673,000 compared to $6,044,000 for the second
quarter of 1996, an increase of $5,629,000 or 93.1%. International sales
represented 16.0% and 9.6% of total sales for the second quarter of 1997 and
1996, respectively. For the six-month period ended June 30, 1997, net sales
were $136,139,000 compared to $122,782,000 for the same period of 1996,
representing a 10.9% increase. International sales represented
16.6% and 13.1% of total net sales for the six months ended June 30, 1997 and
1996, respectively. The increase in international sales during the second
quarter of 1997 is due mainly to increased sales of asphalt
plants and related equipment.
Gross profit for the quarter ended June 30, 1997 increased to $17,765,000,
from $15,305,000 for the quarter ended June 30, 1996, while the gross profit
percentage for the three months ended June 30, 1997 and 1996 remained at 24.2%.
Gross profit for the six months ended June 30, 1997 increased to
24.7% from 23.7% for the same period of 1996.
Selling, general, and administrative expenses for the second quarter of 1997
were $9,557,000 or 13.1% of net sales, compared to $11,375,000 or 18.0% of net
sales for the same period of 1996. Selling, general and administrative
expenses for the six months ended June 30, 1997 were $19,130,000 or 14.1% of
net sales and $20,154,000 or 16.4% of net sales for the six months ended June
30, 1996. The decrease in selling, general and administrative expenses for
the three and six months ended June 30, 1997 compared to the same period of
1996 related mainly to decreased legal fees and repossession expenses.
Interest expense increased to $625,000 for the quarter ended June 30, 1997
from $341,000 for the quarter ended June 30, 1996. Interest expense as a
percentage of net sales increased to .8% for the quarter ended June 30,
1997 from .5% for the same period of 1996. Interest expense for the six months
ended June 30, 1997 increased to $1,178,000 from $623,000 for the same period
of 1996. The increase in interest expense for the three and six months
ended June 30, 1997 is attributable to increased usage of the Company's
revolving line of credit for increased accounts receivables, additional debt
at the subsidiary level, and proceeds used for the purchase of the Company's
stock in the issuer self-tender offer. Additional debt at the subsidiary
level consists of notes payable for financing of equipment in inventory at one
location and the revolving line of credit at the Company's captive finance
company.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION - CONT.
Other income, net of other expense, was $92,000 for the quarter ended June 30,
1997, compared to net other expense, of $8,000 for the quarter ended June 30,
1996. Other income, net of other expense, decreased to $196,000 for the six
months ended June 30, 1997 from $223,000 for the same period of 1996. The
decrease in other income, net of other expense, relates to decreased license
fee and interest income during 1997 compared to 1996.
Income tax expense for the second quarter of 1997 increased to $3,050,000
from $1,297,000 at June 30, 1996, an increase of $1,753,000. Tax expense is
4.2% and 2.1% of net sales for the quarters ended June 30, 1997 and 1996,
respectively. The effective tax rate for the second quarter of 1997 is 39.7%
compared to an effective rate of 36.6% for the second quarter of 1996. Income
tax expense for the six months ended June 30, 1997 increased to $5,378,000
from $3,244,000 for the six months ended June 30, 1996. Tax expense is 4.0%
and 2.3% of net sales for the six months ended June 30, 1997 and 1996,
respectively. The effective tax rate for the six months ended June 30, 1997
is 40% compared to the effective tax rate for the six months ended June 30,
1996 of 39%.
Backlog of orders at June 30, 1997 was $49,957,000 compared to $28,623,000 at
June 30, 1996. The majority of this improvement relates to a significant
increase in domestic orders for the products of one subsidiary.
Liquidity and Capital Resources
As of June 30, 1997, the Company had working capital of $71,621,000 compared
to $69,307,000 at June 30, 1996.
Total short-term borrowings, including current maturities of long-term debt,
were $602,000 at June 30, 1997 compared to $2,194,000 at June 30, 1996.
Long-term debt less current maturities was $38,754,000 at June 30, 1997 and
$24,928,000 at June 30, 1996. The increase of debt outstanding at June
30, 1997 compared to the same period of 1996 is due to the utilization of
revolving lines of credit for working capital needs, and the issuance of
notes payable to finance equipment in inventory by one subsidiary.
Capital expenditures in 1997, for plant expansion and for further
modernization of the Company's manufacturing processes, are expected to
approach $7,700,000. The Company expects to finance these expenditures
using internally generated funds. Capital expenditures at June 30, 1997
were $3,828,000.
During April, 1997 the Company's Board of Directors approved an issuer
self-tender offer to purchase up to 2,000,000 shares of the Company's Common
Stock, representing approximately 20% of the Company's outstanding shares of
common stock as of March 10, 1997. On May 2, 1997 the Company
announced that the Company accepted for payment all shares validly tendered
and not withdrawn prior to the expiration date at the purchase price of $10.50
per share. The Company purchased 726,619 shares of its common stock in
connection with this self-tender offer.
In connection with the issuer self-tender offer, the Company entered into an
amended and restated Credit Agreement, dated as of May 5, 1997, with the First
National Bank of Chicago for an unsecured revolving line of credit in the
amount of $40,000,000 which expires on May 3, 2002. Due to the increased
level of borrowing permitted under this amended credit facility, the new
loan agreement contains various restrictive covenants related to the
Company's operations and interest rates that fluctuate in relation to
certain ratios.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION - CONT.
The captive finance company which operates as a subsidiary of the Company,
maintains a separate $15,000,000 revolving line of credit with CIT
Group/Equipment Financing and AmSouth Bank. This line of credit is
guaranteed by the Company. At June 30, 1997, the outstanding balance on the
Company's revolving line of credit was $11,566,000 while the outstanding
balance on the line of credit of the Company's finance subsidiary was
$14,435,000. 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
June 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 $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.
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
June 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.
<PAGE>
ASTEC INDUSTRIES, INC.
(Registrant)
8/11/97 /s/ J. Don Brock
Date J. Don Brock
Chairman of the Board
and President
8/11/97 /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
<PAGE>
ASTEC INDUSTRIES, INC.
EXHIBIT (11) - COMPUTATIONS OF EARNINGS PER SHARE
June 30, 1997 and 1996
(in thousands)
Shares for Earnings Per Share Computations:
1997 1996
Primary:
Weighted average outstanding during the year 9,797 10,058
Common Stock equivalents for stock options 118 113
Total 9,915 10,171
Fully Diluted:
Weighted average outstanding during the year 9,797 10,058
Common Stock equivalents for stock options 157 113
Total 9,954 10,171
Earnings applicable to Common Stock:
Net Income $8,150 $5,071
Earnings Per Share (Based on
Weighted Average Number of Common
Equivalent Shares Outstanding):
Net Income $.83 $.50
Additional Computations of EPS:
Fully Diluted:
Net Income $.83 $.50
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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