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
March 31, 1996
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
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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 March 31, 1996: 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 March 31, 1996
(unaudited) and December 31, 1995. 3 & 4
Statements of Operations for the three
months ended March 31, 1996 (unaudited)
and March 31, 1995 (unaudited). 5
Statements of Cash Flows for the three
months ended March 31, 1996
(unaudited) and March 31, 1995 (unaudited). 6
Notes to Financial Statements. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 & 9
PART II. OTHER INFORMATION 10
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ATHEY PRODUCTS CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
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(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 180,169 $ 3,072,088
Accounts receivable (less allowances for doubtful receivables
of $300,000 and $300,000 in 1996 and 1995, respectively) 6,243,772 2,369,107
Inventories 16,717,195 17,022,201
Prepaid expenses 208,962 179,054
Refundable Income Taxes 531,000 531,517
Deferred income taxes 806,435 834,100
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Total current assets 24,687,533 24,008,067
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OTHER ASSETS:
Marketable securities (including unrealized holding gain of
$313,302 and $5,699 in 1996 and 1995, respectively) 1,259,053 951,450
Goodwill 200,000 200,000
Other 24,357 24,358
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Total other assets 1,483,410 1,175,808
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PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 47,785 319,769
Buildings 3,468,837 4,017,505
Machinery and equipment 5,141,438 6,359,255
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8,658,060 10,696,529
Less accumulated depreciation (5,150,781) (6,554,487)
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Total property, plant and equipment, net 3,507,279 4,142,042
------------ ------------
$ 29,678,222 $ 29,325,917
============ ============
</TABLE>
See notes to financial statements.
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<PAGE>
ATHEY PRODUCTS CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
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(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of obligations under capital lease $ 31,592 $ 42,012
Accounts payable 1,653,679 1,890,865
Employee compensation and amounts withheld 459,210 444,116
Accrued pension and other expenses 526,336 543,635
Warranty reserve 670,420 635,500
Income taxes payable 234,185 -
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Total current liabilities 3,575,422 3,556,128
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NONCURRENT LIABILITIES:
Obligations under capital lease 57,419 57,419
Deferred income taxes 323,390 464,500
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Total noncurrent liabilities 380,809 521,919
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SHAREHOLDERS' EQUITY:
Common stock, par value $2 per share:
Authorized 10,000,000 shares;
Issued 4,020,459 shares 8,040,918 8,040,918
Additional paid-in capital 16,218,394 16,218,394
Retained earnings 1,460,398 1,189,359
Unrealized gain on marketable securities
available-for-sale, net of related tax effect 206,843 3,761
Less cost of 47,000 common shares in treasury (204,562) (204,562)
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Total shareholders' equity 25,721,991 25,247,870
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$ 29,678,222 $29,325,917
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</TABLE>
See notes to financial statements.
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ATHEY PRODUCTS CORPORATION
STATEMENTS OF OPERATIONS
Three Months Ended Three Months Ended
March 31, 1996 March 31, 1995
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(Unaudited) (Unaudited
NET SALES $ 9,021,033 $ 10,494,108
Cost of Goods Sold 7,557,489 8,223,505
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Gross profit 1,463,544 2,270,603
Selling, administrative and
engineering expenses 1,538,699 1,645,472
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Earnings (loss) from operations (75,155) 625,131
Other income 367,406 68,353
Other expenses 4,502 11,103
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Earnings before income taxes 287,749 682,381
Income tax expense 16,710 232,000
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NET EARNINGS $ 271,039 $ 450,381
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NET EARNINGS PER SHARE $ 0.07 $ 0.11
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WEIGHTED AVERAGE SHARES
OUTSTANDING 3,973,459 3,973,459
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See notes to financial statements.
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ATHEY PRODUCTS CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1996 March 31, 1995
------------------ ----------------
(Unaudited) (Unaudited
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 271,039 $ 450,381
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Depreciation and amortization 107,001 102,136
Provision for deferred income taxes (217,996) 30,000
(Gain) loss on sale of equipment (237,144) 960
Changes in operating assets and liabilities:
Accounts receivable (3,874,665) 2,202,664
Inventories 305,006 384,139
Prepaid expenses and other assets (29,907) 84,643
Refundable income taxes 517 -
Accounts payable (237,186) (720,400)
Employee compensation and amounts withheld 15,094 1,309
Accrued pension and other expenses (17,299) 84,391
Warranty reserve 34,920 (30,445)
Income taxes payable 234,185 90,221
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Net cash provided by (used in) operating
activities (3,646,405) 2,679,999
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INVESTING ACTIVITIES:
Purchase of plant and equipment (163,325) (89,494)
Proceeds from sale of property and equipment 928,231 47,643
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Net cash provided by (used in) investing
activities 764,906 (41,851)
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FINANCING ACTIVITIES:
Principal paid on obligations under capital
lease (10,420) (13,613)
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Net cash used in financing
activities (10,420) (13,613)
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NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (2,891,919) 2,624,535
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 3,072,088 2,645,641
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 180,169 $ 5,270,176
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SUPPLEMENTAL CASH FLOW DISCLOSURES
Income taxes paid (recoveries) $ - $ -
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Interest paid $ 3,649 $ 2,750
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</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, 1995.
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 1995
financial statement amounts have been reclassified to conform with the 1996
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
During 1995, a restructuring program was developed that is intended to
significantly reduce the Company's cost structure and improve productivity. This
restructuring program involved reductions in the number of employees,
consolidation of manufacturing facilities, and disposition of assets that were
no longer productive. Subsequent to year-end, in February, 1996, as part of this
restructuring program, the Company sold its South Dakota land, building and
certain inventory and manufacturing equipment. The remaining inventory and
equipment were transferred to the Company's Raleigh, North Carolina
manufacturing plant.
Three Months Ended March 31, 1996 ("First Quarter 1996")
as compared to
Three Months Ended March 31, 1995 ("First Quarter 1995")
The Company's net sales for the First Quarter 1996 were $9,021,033, a 14.0%
decrease from the $10,494,108 recorded in the First Quarter 1995. The sales
decline reflected a 9.5% decease in the number of sweepers shipped, as well as a
decrease in replacement part sales. This decline in sweeper sales was primarily
attributable to the severe winter weather experienced in the Company's
Northeastern markets. The lower sales volume was partially offset by a slightly
higher average unit selling price.
Cost of Sales as a percentage of net sales was 83.8% in the First Quarter 1996
as compared to 78.4% in the First Quarter 1995. The increase in the cost of
sales was primarily due to manufacturing inefficiencies resulting from lower
unit volume, introduction of a new regenerative air sweeper product line and
commencement of the production of selected products in the Company's Raleigh,
North Carolina facility transferred from the Company's South Dakota facility. In
addition, cost of sales in 1996 reflected expenditures associated with the
disposal and write down to net realizable values of certain assets.
The Company's selling, administrative and engineering expenses increased from
15.7% to 17.1% of net sales, while in dollar terms they decreased $106,773 to
$1,538,699. Approximately $127,000 of First Quarter 1996 expenses were related
to the final two months of operations of the manufacturing facility in Sioux
Falls, South Dakota.
Other income for the First Quarter 1996 was $367,406 as compared to $68,353 in
the First Quarter 1995. Included in other income for the First Quarter 1996
was $234,355 which represents the gain from the Company's sale of its
South Dakota land, building and certain related inventory and manufacturing
equipment. The Company also received $85,343 in 1996 representing a prorata
distribution of reorganization proceeds in a bankruptcy case in which the
Company was a creditor. The Company had recorded $110,953 as a receivable, of
which the entire amount had been reserved at December 31, 1995. In addition,
interest income declined from $67,020 in 1995 to $33,000 in 1996 due primarily
to a lower average investment in cash and cash equivalents which was partially
offset by slightly higher interest rates.
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<PAGE>
The 5.8% income tax expense rate for the First Quarter 1996 reflects a 30.2%
credit from the reduction in valuation allowance.
Net earnings after tax for the First Quarter 1996 were $271,039 or $.07 per
share, as compared to $450,381 or $.11 per share for the First Quarter 1995.
Effects of Inflation
The Company attempts to minimize the impact of inflation on production and
operating costs through cost control programs and productivity improvements. 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 March 31, 1996 the Company had working capital of $21,112,111. The ratio of
current assets to current liabilities was 6.9 to 1 and the debt to equity ratio
was .15 to 1.
This compares to working capital of $20,451,939; a ratio of current assets to
current liabilities of 6.8 to 1; and a debt to equity ratio of .16 to 1 at
December 31, 1995.
At March 31, 1996, cash and cash equivalents were $180,169, down $2,891,919 from
$3,072,088 at December 31, 1995, with a corresponding increase in accounts
receivable
The Company generally relies upon internally generated funds to satisfy working
capital requirements and to fund capital expenditures. 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.
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<PAGE>
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.
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: May 14, 1996 /s/ James H. Stumpo
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James H. Stumpo, President
Date: May 14, 1996 /s/ Franz M. Ahting
- - --------------------------- -------------------
Franz M. Ahting, V.P. Finance
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 180,169
<SECURITIES> 0
<RECEIVABLES> 6,543,772
<ALLOWANCES> (300,000)
<INVENTORY> 16,717,195
<CURRENT-ASSETS> 24,687,533
<PP&E> 8,658,060
<DEPRECIATION> (5,150,781)
<TOTAL-ASSETS> 29,678,222
<CURRENT-LIABILITIES> 3,575,422
<BONDS> 0
0
0
<COMMON> 24,259,312
<OTHER-SE> 1,462,679
<TOTAL-LIABILITY-AND-EQUITY> 29,678,222
<SALES> 9,021,033
<TOTAL-REVENUES> 9,021,033
<CGS> 7,557,489
<TOTAL-COSTS> 1,583,699
<OTHER-EXPENSES> 702
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,800
<INCOME-PRETAX> 287,749
<INCOME-TAX> 16,710
<INCOME-CONTINUING> 271,039
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 271,039
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
