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 March 31, 1998.
[ ] 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 _______
Indicate the number of shares outstanding of each of
the registrant's classes of stock as of the latest
practicable date.
Class Outstanding at March 31, 1998
Common Stock, par value $0.20 9,360,580
<PAGE>
ASTEC INDUSTRIES, INC.
INDEX
Page Number
PART I - Financial Information
Item 1. Financial Statements-Unaudited
Consolidated Balance Sheets as of
March 31, 1998 and December 31, 1997 1
Consolidated Statements of Income
for the Three Months Ended March 31,
1998 and 1997 2
Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1998
and 1997 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 7
Item 6. Exhibits and Reports on Form 8-K 7
<PAGE>
PART I ITEM I FINANCIAL STATEMENTS
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
ACCOUNT DESCRIPTION MARCH 31, DECEMBER 31,
1998 1997
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $1,781 $2,926
RECEIVABLES - NET 53,748 38,771
INVENTORIES 74,262 69,395
PREPAID EXPENSES AND OTHER 10,114 7,530
TOTAL CURRENT ASSETS 139,905 118,622
PROPERTY AND EQUIPMENT - NET 63,028 61,605
OTHER ASSETS 15,318 12,016
TOTAL ASSETS $218,251 $192,243
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
CURRENT MATURITIES OF LONG-TERM DEBT $500 $500
ACCOUNTS PAYABLE - TRADE 27,604 21,422
OTHER ACCRUED LIABILITIES 31,098 25,242
TOTAL CURRENT LIABILITIES 59,202 47,164
LONG-TERM DEBT, LESS CURRENT 42,716 35,230
MATURITIES
OTHER LONG-TERM LIABILITIES 5,107 4,237
TOTAL SHAREHOLDERS' EQUITY 111,226 105,612
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $218,251 $192,243
<PAGE>
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31
1998 1997
NET SALES $88,164 $62,980
COST OF SALES 65,860 47,105
GROSS PROFIT 22,304 15,875
S,G, & A EXPENSES 12,673 9,612
INCOME FROM OPERATIONS 9,631 6,263
INTEREST EXPENSE 549 553
OTHER INCOME, NET OF EXPENSE 173 104
INCOME BEFORE INCOME TAXES 9,255 5,814
INCOME TAXES 3,696 2,328
NET INCOME $5,559 $3,486
EARNINGS PER COMMON SHARE
BASIC $0.60 $0.35
DILUTED $0.58 $0.35
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC 9,335,247 10,039,921
DILUTED 9,578,007 10,145,060
<PAGE>
MARCH 31, MARCH 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $5,559 $3,525
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES:
DEPRECIATION AND AMORTIZATION 1,842 1,491
PROVISION FOR DOUBTFUL ACCOUNTS 128 74
PROVISION FOR INVENTORY RESERVE 504 380
PROVISION FOR WARRANTY RESERVE 1,332 491
(GAIN) LOSS ON SALE OF FIXED ASSETS (50) 296
(INCREASE) DECREASE IN:
TRADE RECEIVABLES (8,746) (6,017)
FINANCE RECEIVABLES (9,386) (4,198)
INVENTORIES (5,166) (6,997)
PREPAID EXPENSES AND OTHER (2,579) (1,256)
OTHER RECEIVABLES (236) 451
OTHER NON-CURRENT ASSETS (169) 29
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE 6,182 7,252
ACCRUED PRODUCT WARRANTY (958) (70)
OTHER ACCRUED LIABILITIES 2,622 3,821
INCOME TAXES PAYABLE 3,730 5,328
TOTAL ADJUSTMENTS (10,950) 1,075
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES (5,391) 4,600
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF PROPERTY
AND EQUIPMENT - NET 284 271
EXPENDITURES FOR PROPERTY AND EQUIPMENT (3,578) (1,591)
NET CASH USED BY INVESTING ACTIVITIES (3,294) (1,320)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET BORROWINGS (REPAYMENTS) UNDER REVOLVING
CREDIT AGREEMENT 7,485 (3,322)
BORROWINGS UNDER LOAN AND
NOTE AGREEMENTS 2,008
PROCEEDS FROM ISSUANCE OF COMMON STOCK 55 32
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,540 (1,282)
NET INCREASE (DECREASE) IN CASH (1,145) 1,998
CASH AT BEGINNING OF PERIOD 2,926 3,382
CASH AT END OF PERIOD $1,781 $5,380
<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 $1,101,000, $1,342,000 and $1,258,000 for March 31, 1998,
December 31, 1997 and March 31, 1997, respectively.
3. Inventories are stated at the lower of first-in, first-
out, cost or market and consist of the following:
(in thousands)
March 31, December 31,
1998 1997
Raw Materials $ 30,537 $ 27,987
Work-in-Process 19,726 15,920
Finished Goods 23,999 25,488
Total $ 74,262 $ 69,395
4. Property and equipment is stated at cost. Property and
equipment is net of accumulated depreciation of
$32,812,000, $31,747,000 and $28,353,000 for March 31,
1998, December 31, 1997, and March 31, 1997, respectively.
5. Earnings per share are computed in accordance with SFAS
No. 128 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 $1,424,000 at March 31, 1998, $1,793,000 at
December 31, 1997, and $3,278,000 at March 31, 1997.
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 20-30% of the Company'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 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
obligations to publicly release the results of any revisions
to these forward-looking statements that may be made to
reflect events or circumstances after the date such
statements are made or to reflect the occurrence of
unanticipated events.
Results of Operations
For the three-months ended March 31, 1998, net sales
increased to $88,164,000 from $62,980,000 for the three-
months ended March 31, 1997, representing a 40.0% increase.
The acquisition of Kolberg-Pioneer, Inc. during December,
1997, accounts for approximately $13,000,000 of the increase
in sales for the first quarter of 1998 compared to the first
quarter of 1997. The remainder of the large increase in
sales for the first quarter of 1998 compared to the first
quarter of 1997 related to increased sales of asphalt plants
and related components. International sales for the first
quarter of 1998 remained relatively level at $10,782,000
compared to $10,921,000 during the first quarter of 1997.
International sales represented 12.2% and 17.3% of total
sales for the first quarter of 1998 and 1997, respectively.
The decrease in the percentage of international sales to
total sales for the current quarter compared to the same
period for the prior year is due mainly to the significant
increase in domestic sales.
Gross profit for the quarter ended March 31, 1998
increased to $22,304,000, from $15,875,000 for the quarter
ended March 31, 1997, while the gross profit percentage for
the three months ended March 31, 1998 increased slightly to
25.3% from 25.2% at March 31, 1997. The increase in the
gross profit for the quarter ended March 31, 1998 compared
to the same quarter in 1997 relates mainly to the increase
in total sales volume.
Selling, general, and administrative expenses for the
first quarter of 1998 were $12,673,000 or 14.4% of net
sales, compared to $9,573,000 or 15.2% of net sales for the
same period of 1997. The increase in selling, general and
administrative expenses for the quarter ended March 31, 1998
compared to the same quarter in 1997, related primarily to
the acquisition of Kolberg-Pioneer and to increased asphalt
plant sales volume .
Interest expense decreased slightly to $549,000 for the
quarter ended March 31, 1998 from $553,000 for the quarter
ended March 31, 1997. Interest expense as a percentage of
net sales decreased to .6% for the quarter ended March 31,
1998 from .9% for the same period of 1997.
Other income, net of other expense, was $173,000, or
.2% of net sales for the quarter ended March 31, 1998,
compared to other income, net of other expense, of
$104,000, or .2% of net sales for the quarter ended March
31, 1997.
Income tax expense for the first quarter of 1998
increased to $3,696,000 from $2,328,000 at March 31, 1997,
an increase of $1,368,000 or 58.8%. Tax expense is 4.2% and
3.7% of net sales for the quarters ended March 31, 1998 and
1997, respectively. The effective tax rate for the first
quarter of 1998 is 39.9% compared to an effective rate of
39.8% for the first quarter of 1997.
Backlog of orders at March 31, 1998 was $76,607,000
compared to $68,399,000 at March 31, 1997. For comparison,
the backlog of Kolberg-Pioneer is included in the prior year
backlog amount. The majority of the increase in the backlog
for the current quarter compared to the prior year quarter
relates to a significant increase in domestic orders for the
asphalt plants and related components.
Liquidity and Capital Resources
As of March 31, 1998, the Company had working capital
of $80,703,000 compared to $68,230,000 at March 31, 1997.
Total short-term borrowings, including current
maturities of long-term debt, were $500,000 at March 31,
1998 compared to $1,925,000 at March 31, 1997. During the
second and third quarters of 1997, the Company paid off
short-term equipment financing notes totaling $1,425,000,
the remaining debt at March 31, 1998 consists of current
maturities for outstanding Industrial Revenue Bonds. Long-
term debt less current maturities was $42,716,000 at March
31, 1998 and $29,309,000 at March 31, 1997. The increase in
outstanding debt at March 31, 1998 compared to the same
period of 1997 is due to the utilization of revolving lines
of credit for the purchase of Kolberg-Pioneer, Inc. in
December, 1997 and for working capital needs. The Company
plans to utilize $9,000,000 of industrial revenue bonds to
help finance this acquisition.
Capital expenditures in 1998, for plant expansion and
for further modernization of the Company's manufacturing
processes, are expected to approach $9,800,000. The
Company expects to finance these expenditures using
internally generated funds. Capital expenditures at March
31, 1998 were $3,578,000.
The Company has an unsecured revolving credit loan
agreement with First Chicago NBD. The line of credit is
$70,000,000. This credit facility expires November 22,
2002. At March 31, 1998, $31,216,000 of the line of credit
was utilized. Principal covenants under the First Chicago
credit agreement include ( i ) the maintenance of certain
levels of net worth and compliance with certain net worth,
leverage and interest coverage ratios, (ii) a limitation on
capital expenditures and rental expense, (iii) a
prohibition against dividends, and (iv) a prohibition on
large acquisitions except upon the consent of the lenders.
As part of the Company's $70,000,000 revolving credit
facility, Astec Financial Services, Inc. has a segregated
portion of up to a $30,000,000 line of credit. At March 31,
1998, Astec Financial Services had utilized $5,566,000 of
this line which in included in the above stated utilization.
Advances under this line are limited to _Eligible
Receivables_ of Astec Financial Services as defined in the
credit agreement. The Company and Astec Financial Services
were in compliance with all financial covenants related to
the line of credit at March 31, 1998.
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 10-K for the year ended
December 31, 1997. 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) Exhibits
Index to Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the
quarter ended March 31, 1998.
<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)
5/8/98 /s/ J. Don Brock
Date J. Don Brock
Chairman of the Board
and President
5/8/98 /s/ Richard W. Bethea, Jr.
Date Richard W. Bethea
Vice President, Corporate
Counsel and Secretary
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