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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter Ended
September 30, 1995
Commission File Number 1-2723
ATHEY PRODUCTS CORPORATION
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(Exact name of registrant as specified in charter)
Delaware 36-0753480
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Route 1-A North, P. O. Box 669, Raleigh, North Carolina 27602
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 919-556-5171
Not Applicable
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Former name, former address and former fiscal year
if changed since last report
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 and 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 .
Number of Common Shares Outstanding as of September 30, 1995: 3,973,459
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ATHEY PRODUCTS CORPORATION
I N D E X
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of September 30, 1995
(unaudited) and December 31, 1994. 3 & 4
Statements of Operations for the nine
months ended September 30, 1995 (unaudited)
and September 30, 1994 (unaudited). 5
Statements of Operations for the three
months ended September 30, 1995 (unaudited)
and September 30, 1994 (unaudited). 6
Statements of Cash Flows for the nine
months ended September 30, 1995
(unaudited) and September 30, 1994 (unaudited). 7
Notes to Financial Statements. 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 ,10 & 11
PART II. OTHER INFORMATION 11
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ATHEY PRODUCTS CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,140,238 $ 2,645,641
Accounts receivable (less allowances for doubtful receivables
of $290,751 and $250,000 in 1995 and 1994, respectively) 2,618,245 6,478,847
Inventories 14,948,099 14,755,922
Prepaid expenses 269,658 205,915
Refundable income taxes 296,132 -
Deferred income taxes 677,000 902,000
Total current assets 22,949,372 24,988,325
OTHER ASSETS:
Marketable securities (including unrealized holding gain of
$149,068 and $47,284 in 1995 and 1994, respectively) 1,094,819 993,035
Goodwill 200,000 200,000
Other 24,357 26,653
Total other assets 1,319,176 1,219,688
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 319,769 319,769
Buildings 3,980,866 3,921,111
Machinery and equipment 6,423,970 6,163,978
10,724,605 10,404,858
Less accumulated depreciation (6,545,168) (6,190,104)
Total property, plant and equipment, net 4,179,437 4,214,754
$ 28,447,985 $ 30,422,767
</TABLE>
See notes to financial statements.
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ATHEY PRODUCTS CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ - $ 99,595
Current portion of obligations under capital lease 6,916 41,130
Accounts payable 726,913 2,412,884
Employee compensation and amounts withheld 488,168 635,655
Accrued pension and other expenses 702,231 631,999
Warranty reserve 668,000 780,000
Income taxes payable - 113,500
Total current liabilities 2,592,228 4,714,763
NONCURRENT LIABILITIES:
Obligations under capital lease 99,431 99,431
Deferred income taxes 346,300 336,000
Total noncurrent liabilities 445,731 435,431
SHAREHOLDERS' EQUITY:
Common stock, par value $2 per share:
Authorized 10,000,000 shares;
Issued 4,020,459 shares 8,040,918 8,040,918
Additional paid-in capital 16,218,394 16,218,394
Retained earnings 1,256,892 1,186,616
Unrealized gain on marketable securities
available-for-sale, net of related tax affect 98,384 31,207
Less cost of 47,000 common shares in treasury (204,562) (204,562)
Total shareholders' equity 25,410,026 25,272,573
$ 28,447,985 $ 30,422,767
</TABLE>
See notes to financial statements.
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ATHEY PRODUCTS CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended Nine Months End
September 30, 1995 September 30, 1994
(Unaudited) (Unaudited)
<S> <C> <C>
NET SALES $ 25,307,860 $ 30,254,181
COST OF SALES 20,599,028 23,665,360
Gross profit 4,708,832 6,588,821
Selling, administrative and
engineering expenses 4,758,456 5,209,456
Earnings (loss) from operations (49,624) 1,379,365
Other income 256,196 116,719
Other expenses (12,896) (104,553)
Earnings before income taxes 193,676 1,391,531
Income tax expense 123,400 473,000
NET EARNINGS $ 70,276 $ 918,531
NET EARNINGS PER SHARE $ 0.02 $ 0.23
WEIGHTED AVERAGE SHARES
OUTSTANDING 3,973,459 3,973,459
</TABLE>
See notes to financial statements.
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ATHEY PRODUCTS CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Three Months End
September 30, 1995 September 30, 1994
(Unaudited) (Unaudited)
<S> <C> <C>
NET SALES $ 6,077,772 $ 9,332,487
COST OF SALES 5,158,227 7,192,747
Gross profit 919,545 2,139,740
Selling, administrative and
engineering expenses 1,444,697 1,671,278
Earnings (loss) from operations (525,152) 468,462
Other income 83,471 38,917
Other expenses (4,186) (7,323)
Earnings (loss) before income taxes (445,867) 500,056
Income tax expense (benefit) (94,100) 169,900
NET EARNINGS (LOSS) $ (351,767) $ 330,156
NET EARNINGS (LOSS) PER SHARE $ (0.09) $ 0.08
WEIGHTED AVERAGE SHARES
OUTSTANDING 3,973,459 3,973,459
</TABLE>
See notes to financial statements.
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ATHEY PRODUCTS CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended Nine Months End
September 30, 1995 September 30, 1994
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 70,276 $ 918,531
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Depreciation and amortization 355,064 398,902
Provision for doubtful accounts 40,751 85,665
Provision for deferred income taxes 200,693 (356,000)
(Gain) Loss on sale of equipment 961 (3,800)
Changes in operating assets and liabilities:
Accounts receivable 3,819,851 (2,898,543)
Notes receivable - (5,111)
Inventories (192,177) 1,003,274
Prepaid expenses and other assets (61,447) (346,008)
Refundable income taxes (296,132) 1,616,072
Accounts payable (1,685,971) (481,578)
Employee compensation and amounts withheld (147,487) 124,083
Accrued pension and other expenses 70,232 239,318
Warranty reserve (112,000) 409,155
Income taxes payable (113,500) 420,589
Net cash provided by operating activities 1,949,114 1,124,549
INVESTING ACTIVITIES:
Purchase of plant and equipment (368,351) (157,842)
Proceeds from sale of equipment 47,643 -
Net cash used in investing activities (320,708) (157,842)
FINANCING ACTIVITIES:
Proceeds from line of credit - 1,600,000
Repayment of line of credit - (1,600,000)
Principal paid on obligations under capital lease (34,214) (33,476)
Principal paid on debt (99,595) (100,000)
Net cash used in financing activities (133,809) (133,476)
NET INCREASE IN CASH
AND CASH EQUIVALENTS 1,494,597 833,231
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 2,645,641 2,112,410
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 4,140,238 $ 2,945,641
SUPPLEMENTAL CASH FLOW DISCLOSURES
Income taxes paid (Refunded) $ 354,410 $ (1,286,072)
Interest paid $ 7,404 $ 34,940
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING ACTIVITIES:
Capital lease obligations incurred
for use of equipment $ - $ 34,238
</TABLE>
See notes to financial statements.
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ATHEY PRODUCTS CORPORATION
NOTES TO FINANCIAL STATEMENTS
I. The condensed financial statements included herein have been prepared by
Athey Products Corporation (the "Company"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations; however, the Company believes that the disclosures are
adequate to make the information presented not misleading. It is suggested
that these financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's latest annual
report on Form 10-K for the year ended December 31, 1994.
II. The financial information reflects all adjustments which are, in the
opinion of Management, necessary to a fair presentation of the results for
the interim period presented.
III. Earnings per share are computed on the basis of the weighted average
number of shares outstanding during the period, which were 3,973,459.
Certain 1994 financial statement amounts have been reclassified to conform
with the 1995 presentation with no effect on net income.
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ATHEY PRODUCTS CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Nine Months Ended September 30, 1995
as compared to
Nine Months Ended September 30, 1994
The Company generated net sales of $25,307,860 in the nine months ended
September 30, 1995, as compared to $30,254,181 for the same period in 1994. The
$4,946,321 or 16.3% decrease in sales was primarily attributable to a decline in
the number of units shipped during the period. The sales decline was partially
offset by slightly higher average unit selling prices. The higher volume in the
number of units sold in the first three quarters of 1994 stemmed from a major
contract originally executed with the City of New York in 1993.
Gross profit expressed as a percentage of net sales was 18.6% in the nine months
ended September 30, 1995 as compared to 21.8% experienced during the same period
in 1994. This decrease in gross margin reflects reduced productivity levels
associated with the lower volume of shipments and higher manufacturing overhead.
The Company's selling, administrative and engineering expenses during the first
nine months of 1995 were $4,758,456, or 18.8% of net sales, compared to
$5,209,456, or 17.2% of net sales in the first three quarters of 1994. The main
cause for this $451,000 decline was a decrease in warranty reserves for extended
service warranty plans.
Other income for the nine months ended September 30, 1995 was $256,196 as
compared to $116,719 for the same period in 1994. The increase in other income
was mainly due to slightly higher rates of return on invested cash and a higher
average investment portfolio of cash and cash equivalents. Included in other
income for the first three quarters of 1994 was $77,008 in interest income and
$28,000 of equipment rental income.
Other expenses were $12,896 for the nine months ended September 30, 1995 as
compared to the $104,553 recorded in the first nine months of 1994. Other
expenses in 1994 included $34,940 in interest expense and the effect of the
early termination, and associated write-down, of the unamortized portion of a
licensing and distributor agreement.
Net earnings for the nine months ended September 30, 1995 was $70,276 or $.02
per share, as compared to net earnings of $918,531 or $ .23 per share for the
same period in 1994.
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Three Months Ended September 30, 1995 ("Third Quarter 1995")
as compared to
Three Months Ended September 30, 1994 ("Third Quarter 1994")
The Company's net sales for the Third Quarter 1995 were $6,077,772, representing
a 34.9% decline from net sales of $9,332,487 achieved in the Third Quarter 1994.
The sales decline was primarily attributable to a decrease in the number of
units shipped during the period. Last year's net sales reflect the effect of
volume gains in the number of units sold stemming from a major contract
originally executed with the City of New York in 1993.
The gross profit margin was 15.1% of net sales for the Third Quarter 1995
compared with 22.9% in the Third Quarter 1994. The decrease in gross margin
stems from inefficiencies associated with the lower overall sales volume levels
experienced in the third quarter of 1995.
Selling, administrative and engineering expenses declined $226,581, or 13.6% to
$1,444,697 in the Third Quarter 1995 as compared to $1,671,278 recorded in the
Third Quarter 1994. This decline in large part reflects lower legal and
professional fees and a decrease in warranty reserves for extended service
warranty plans.
Other income was $83,471 in the Third Quarter 1995, up from $38,917 reported for
the Third Quarter 1994. The increase in other income was mainly due to a higher
average investment portfolio of cash and cash equivalents.
Net loss after tax for the Third Quarter 1995 was $351,767 or $ .09 per share,
as compared to net earnings after tax of $330,156 or $ .08 per share recorded
for the same period in 1994.
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Effects of Inflation
The Company attempts to minimize the impact of inflation on production and
operating costs through cost control programs and productivity improvements.
Over the past three years, the rate of inflation has not had significant impact
on the Company's operations. Prices paid for raw materials and other
manufacturing inputs have remained fairly stable throughout this period. On a
longer-term basis, the Company has demonstrated an ability to adjust the selling
prices of its products in reaction to changing costs.
Liquidity and Capital Resources
At September 30, 1995 the Company had working capital of $20,357,144. The ratio
of current assets to current liabilities was 8.9 to 1 and the debt to equity
ratio was .12 to 1.
This compares to working capital of $20,273,562; a ratio of current assets to
current liabilities of 5.3 to 1; and a debt to equity ratio of .20 to 1 at
December 31, 1994.
At September 30, 1995, cash and cash equivalents were $4,140,238, up $1,494,597
from $2,645,641 at December 31, 1994 primarily as a result of cash generated
from operating activities.
The Company generally relies upon internally generated funds to satisfy working
capital requirements and to fund capital expenditures. The Company utilized and
repaid $1,600,000 of its short-term credit line during the six months ended June
30, 1994 to assist in financing the production of units associated with the
executed orders received from New York in 1993. Other than utilizing the
available line of credit as needed, the Company does not presently plan to
borrow long-term funds or sell securities.
The Company believes that existing working capital, cash flow from future
operations, and the available bank line of credit provide adequate resources to
finance the cash requirements of future capital expenditures.
On November 1, 1995, the Company's Board of Directors authorized the repurchase
of up to 200,000 shares of the Company's common stock.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities. None
Item 3. Defaults upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K. None.
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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.
ATHEY PRODUCTS CORPORATION
Date: November 8, 1995 (Signature of James H. Stumpo)
James H. Stumpo, President
Date: November 8, 1995 (Signature of Franz M. Ahting)
Franz M. Ahting, V.P. Finance
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 4,140,238
<SECURITIES> 0
<RECEIVABLES> 2,618,245
<ALLOWANCES> 290,751
<INVENTORY> 14,948,099
<CURRENT-ASSETS> 22,949,372
<PP&E> 10,724,605
<DEPRECIATION> 6,545,168
<TOTAL-ASSETS> 28,447,985
<CURRENT-LIABILITIES> 2,592,228
<BONDS> 0
<COMMON> 8,040,918
0
0
<OTHER-SE> 17,369,108
<TOTAL-LIABILITY-AND-EQUITY> 28,447,985
<SALES> 25,307,860
<TOTAL-REVENUES> 0
<CGS> 20,599,028
<TOTAL-COSTS> 4,758,456
<OTHER-EXPENSES> 5,492
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,404
<INCOME-PRETAX> 193,676
<INCOME-TAX> 123,400
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,276
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
