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 June 30, 1995
Commission File Number 1-2723
ATHEY PRODUCTS CORPORATION
(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
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 919-556-5171
Not Applicable
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 Ex-change 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 June 30, 1995: 3,973,459
<PAGE>
ATHEY PRODUCTS CORPORATION
I N D E X
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of June 30, 1995
(unaudited) and December 31, 1994. 3 & 4
Statements of Operations for the six
months ended June 30, 1995 (unaudited)
and June 30, 1994 (unaudited). 5
Statements of Operations for the three
months ended June 30, 1995 (unaudited)
and June 30, 1994 (unaudited). 6
Statements of Cash Flows for the six
months ended June 30, 1995
(unaudited) and June 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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<PAGE>
ATHEY PRODUCTS CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,848,917 $ 2,645,641
Accounts receivable (less allowances for doubtful receivables 3,527,606 6,478,847
of $286,498 and $250,000 in 1995 and 1994, respectively)
Inventories 14,654,826 14,755,922
Prepaid expenses 15,394 205,915
Refundable income taxes 53,139 -
Deferred income taxes 846,000 902,000
Total current assets 23,945,882 24,988,325
OTHER ASSETS:
Marketable securities (including unrealized holding gain of
$305,481 and $47,284 in 1995 and 1994, respectively) 1,251,232 993,035
Goodwill 200,000 200,000
Other 24,931 26,653
Total other assets 1,476,163 1,219,688
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 319,769 319,769
Buildings 3,978,418 3,921,111
Machinery and equipment 6,311,072 6,163,978
10,609,259 10,404,858
Less accumulated depreciation (6,411,779) (6,190,104)
Total property, plant and equipment, net 4,197,480 4,214,754
$ 29,619,525 $ 30,422,767
</TABLE>
See notes to financial statements.
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<PAGE>
ATHEY PRODUCTS CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 99,595 $ 99,595
Current portion of obligations under capital lease 24,099 41,130
Accounts payable 1,129,272 2,412,884
Employee compensation and amounts withheld 588,120 635,655
Accrued pension and other expenses 675,892 631,999
Warranty reserve 718,505 780,000
Income taxes payable - 113,500
Total current liabilities 3,235,483 4,714,763
NONCURRENT LIABILITIES:
Obligations under capital lease 99,431 99,431
Deferred income taxes 419,586 336,000
Total noncurrent liabilities 519,017 435,431
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 1,608,658 1,186,616
Unrealized gain on marketable securities
available-for-sale, net of related tax affect 201,617 31,207
Less cost of 47,000 common shares in treasury (204,562) (204,562)
Total shareholders' equity 25,865,025 25,272,573
$ 29,619,525 $ 30,422,767
</TABLE>
See notes to financial statements.
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<PAGE>
ATHEY PRODUCTS CORPORATION
STATEMENTS OF OPERATIONS
Six Months Ended Six Months Ended
June 30, 1995 June 30, 1994
(Unaudited) (Unaudited)
NET SALES $ 19,230,088 $ 20,921,694
COST OF SALES 15,339,524 16,361,584
Gross profit 3,890,564 4,560,110
Selling, administrative and
engineering expenses 3,415,037 3,649,207
Earnings from operations 475,527 910,903
Other income 172,725 77,802
Other expenses (8,710) (97,231)
Earnings before income taxes 639,542 891,474
Income tax expense 217,500 303,100
NET EARNINGS $ 422,042 $ 588,374
NET EARNINGS PER SHARE $ 0.11 $ 0.15
WEIGHTED AVERAGE SHARES
OUTSTANDING 3,973,459 3,973,459
See notes to financial statements.
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<PAGE>
ATHEY PRODUCTS CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1995 June 30, 1994
(Unaudited) (Unaudited)
<S> <C> <C>
NET SALES $ 8,735,980 $ 11,494,330
COST OF SALES 7,116,019 8,770,628
Gross profit 1,619,961 2,723,702
Selling, administrative and
engineering expenses 1,766,565 2,011,775
Earnings (loss) from operations (146,604) 711,927
Other income 104,372 19,857
Other expenses (607) (17,208)
Earnings (loss) before income taxes (42,839) 714,576
Income tax expense (benefit) (14,500) 243,000
NET EARNINGS (LOSS) $ (28,339) $ 471,576
NET EARNINGS (LOSS) PER SHARE $ (0.01) $ 0.12
WEIGHTED AVERAGE SHARES
OUTSTANDING 3,973,459 3,973,459
</TABLE>
See notes to financial statements.
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<PAGE>
ATHEY PRODUCTS CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1995 June 30, 1994
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 422,042 $ 588,374
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Depreciation and amortization 221,674 278,664
Provision for doubtful accounts 36,498 51,413
Provision for deferred income taxes 51,800 -
Loss on sale of equipment 960 -
Changes in operating assets and liabilities:
Accounts receivable 2,914,743 (4,463,135)
Notes receivable - (10,111)
Inventories 101,096 1,324,677
Prepaid expenses and other assets 192,243 (383,341)
Refundable income taxes (53,139) 1,537,661
Accounts payable (1,283,612) (991,383)
Employee compensation and amounts withheld (47,535) 52,525
Accrued pension and other expenses 43,893 427,338
Warranty reserve (61,495) 309,515
Income taxes payable (113,500) 303,100
Net cash provided by (used in) operating activities 2,425,668 (974,703)
INVESTING ACTIVITIES:
Purchase of plant and equipment (253,004) (123,387)
Proceeds from sale of equipment 47,643 -
Net cash used in investing activities (205,361) (123,387)
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 (17,031) (19,094)
Net cash used in financing activities (17,031) (19,094)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,203,276 (1,117,184)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 2,645,641 2,112,408
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 4,848,917 $ 995,224
SUPPLEMENTAL CASH FLOW DISCLOSURES
Income taxes paid $ 332,339 $ -
Interest paid $ 4,899 $ 29,504
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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<PAGE>
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. All earnings per share data have been adjusted
to give effect to a 5% stock dividend paid on July 22, 1994.
Certain 1994 financial statement amounts have been reclassified to
conform with the 1995 presentation with no effect on net income.
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<PAGE>
ATHEY PRODUCTS CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Six Months Ended June 30, 1995
as compared to
Six Months Ended June 30, 1994
The Company generated net sales of $19,230,088 in the six months
ended June 30, 1995, as compared to $20,921,694 for the same period in
1994. The $1,691,606 or 8.1% decrease in sales was primarily
attributable to a decline in the number of units shipped during the
period. The higher volume in the number of units sold in the first half
of 1994 stemmed from a major contract executed with the City of New
York. The sales decline was partially offset by slightly higher
average unit selling prices.
Gross profit expressed as a percentage of net sales was 20.2% in
the six months ended June 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 six months of 1995 were $3,415,037, or 17.8%
of net sales, compared to $3,649,207, or 17.4% of net sales in the
first half of 1994. The main cause for this $234,170 decline was
a decrease in extended service warranty reserves.
Other income for the six months ended June 30, 1995 was $172,725 as
compared to $77,802 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 half of 1994 was
$51,296 in interest income and $20,124 of equipment rental income.
Other expenses were $8,710 for the six months ended June 30, 1995 as
compared to the $97,231 recorded in the first six months of 1994.
Other expenses in 1994 included $29,504 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 six months ended June 30, 1995 was $422,042
or $ 0.11 per share, as compared to net income of $588,374 or $ .15 per
share for the same period in 1994.
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<PAGE>
Three Months Ended June 30, 1995 ("Second Quarter 1995")
as compared to
Three Months Ended June 30, 1994 ("Second Quarter 1994")
The Company's net sales for the Second Quarter 1995 were $8,735,980,
representing a 24.0% decline from net sales of $11,494,330 achieved in
the Second Quarter 1994. The sales decline was primarily
attributable to a decrease in the number of units shipped and fewer
replacement part sales 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 18.5% of net sales for the Second
Quarter 1995 compared with 23.7% in the Second Quarter 1994. The
decrease in gross margin stems from an increase in manufacturing
overhead and inefficiencies associated with the lower overall
sales volume levels experienced in the first half of 1995.
Selling, administrative and engineering expenses declined $245,210,
or 12.2% to $1,766,565 in the Second Quarter 1995 as compared to
$2,011,775 recorded in the Second 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 $104,372 in the Second Quarter 1995, up from
$19,857 reported for the Second 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 Second Quarter 1995 was $28,339 or $ .01
per share, as compared to net earnings after tax of $471,576 or $ .12
per share recorded for the same period in 1994.
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<PAGE>
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 June 30, 1995 the Company had working capital of
$20,710,399. The ratio of current assets to current liabilities
was 7.4 to 1 and the debt to equity ratio was .15 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 June 30, 1995, cash and cash equivalents were $4,848,917, up
$2,203,276 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 resource to finance the cash requirements of future
capital expenditures.
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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<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.
ATHEY PRODUCTS CORPORATION
Date: August 8, 1995
_____________________________
James H. Stumpo, President
Date: August 8, 1995
_____________________________
Franz M. Ahting, V.P. Finance
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