PART I ASTEC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED) ACCOUNT DESCRIPTION MARCH 31 DECEMBER MARCH 31 1996 1995 1995 ASSETS CURRENT ASSETS CASH AND CASH EQUIVALENTS $1,190 $3,133 $2,725 RECEIVABLES - NET 29,999 27,671 36,974 INVENTORIES 59,805 55,883 69,585 REFUNDABLE INCOME TAX 2,342 PREPAID EXPENSES AND OTHER 9,216 7,567 5,760 TOTAL CURRENT ASSETS 100,210 96,596 115,044 PROPERTY AND EQUIPMENT - NET 53,500 51,709 46,715 OTHER ASSETS 3,270 6,051 12,865 TOTAL ASSETS $156,980 $154,356 $174,624 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES NOTES PAYABLE $1,222 $3 $7,887 CURRENT MATURITIES OF LONG-TERM DEBT 598 771 517 ACCOUNTS PAYABLE - TRADE 18,930 15,878 20,641 OTHER ACCRUED LIABILITIES 20,131 21,929 28,048 TOTAL CURRENT LIABILITIES 40,881 38,581 57,093 LONG-TERM DEBT, LESS CURRENT MATURITIES 17,795 17,150 23,310 OTHER LONG-TERM LIABILITIES 317 2,724 295 TOTAL SHAREHOLDERS' EQUITY 97,987 95,901 93,926 TOTAL LIABILITIES AND SHAREHOLDER' EQUITY $156,980 $154,356 $174,624
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE INFORMATION) (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1996 1995 NET SALES $59,570 $57,544 COST OF SALES 45,748 43,907 GROSS PROFIT 13,822 13,637 S,G, & A EXPENSES 8,779 9,448 PATENT SUIT EXPENSES 219 60 INCOME FROM OPERATIONS 4,824 4,129 INTEREST EXPENSE 282 467 OTHER INCOME, NET OF EXPENSE 231 543 INCOME BEFORE INCOME TAXES 4,773 4,205 INCOME TAXES 1,947 1,689 NET INCOME $2,826 $2,516 EARNINGS PER COMMON SHARE $0.28 $0.25 WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 10,078,397 10,010,574 ASTEC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) MARCH 31, MARCH 31, 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME $2,826 $2,516 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: DEPRECIATION AND AMORTIZATION 1,396 1,317 PROVISION FOR DOUBTFUL ACCOUNTS 113 87 PROVISION FOR INVENTORY RESERVE 472 490 PROVISION FOR WARRANTY RESERVE 627 941 FOREIGN CURRENCY TRANSLATION ADJUSTMENT (10) (GAIN) LOSS ON SALE OF FIXED ASSETS (7) (52) (INCREASE) DECREASE IN: RECEIVABLES (2,535) (6,673) INVENTORIES (4,394) (13,073) PREPAID EXPENSES AND OTHER 692 (374) OTHER RECEIVABLES 95 (76) OTHER ASSETS 2,697 (106) INCREASE (DECREASE) IN: ACCOUNTS PAYABLE 3,052 6,229 ACCRUED PRODUCT WARRANTY (565) (726) OTHER ACCRUED LIABILITIES (7,271) 75 TAXES PAYABLE 2,990 1,129 TOTAL ADJUSTMENTS (2,638) (10,822) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 188 (8,306) CASH FLOWS FROM INVESTING ACTIVITIES: PROCEEDS FROM SALE OF PROPERTY AND EQUIPMENT - NET 50 10 EXPENDITURES FOR PROPERTY AND EQUIPMENT (3,146) (5,266) CASH PAYMENTS IN CONNECTION WITH BUSINESS COMBINATION, NET OF CASH ACQUIRED (835) NET CASH USED BY INVESTING ACTIVITIES (3,096) (6,091) CASH FLOWS FROM FINANCING ACTIVITIES: NET BORROWINGS UNDER REVOLVING CREDIT LOAN 472 7,615 BORROWINGS (REPAYMENTS) UNDER LOAN AND NOTE AGREEMENTS 1,219 (964) CASH PAID FOR TREASURY STOCK (768) PROCEEDS FROM ISSUANCE OF COMMON STOCK 42 NET CASH PROVIDED BY FINANCING ACTIVITIES 965 6,651 NET (DECREASE) IN CASH (1,943) (7,746) CASH AT BEGINNING OF PERIOD 3,133 10,471 CASH AT END OF PERIOD $1,190 $2,725
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, 1996. [ ] 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 incorporation or organization) Identification No.) 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 March 31, 1996 was 10,037,199. ASTEC INDUSTRIES, INC. INDEX Page Number PART I - Financial Information Item 1. Financial Statements-Unaudited Consolidated Balance Sheets as of March 31, 1996, December 31, 1995 and March 31, 1995 Consolidated Statements of Income for the Three Months Ended March 31, 1996 and 1995 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1996 and 1995 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 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 $1,257,000, $1,279,000 and $1,864,000 for March 31, 1996, December 31, 1995 and March 31, 1995, 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, March 31, 1996 1995 1995 Raw Materials $25,639 $23,710 $23,822 Work-in-Process 11,607 10,385 20,390 Finished Goods 22,559 21,788 25,373 Total $59,805 $55,883 $69,585 4. Property and equipment is stated at cost. Property and equipment is net of accumulated depreciation of $24,164,000, $22,957,000 and $22,493,000 for March 31, 1996, December 31, 1995, and March 31, 1995, 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 $7,423,000 at March 31, 1996, $7,362,000 at December 31, 1995, and $12,485,000 at March 31, 1995. 7. There has been one development 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 Astec's business volume normally occurs during the first three months of each year. 9. As disclosed in Note 2 to the Company's financial statements included in the 1995 Annual Report, the Company acquired the remaining shares of Wibau-Astec on November 7, 1994 and on October 17, 1994 the Company acquired the operating assets and liabilities of Gibat Ohl, and subsequently changed its name to Astec-Europa. Effective June 30, 1995 the Company sold 100% of the stock of Wibau-Astec to Wirtgen Gesellschaft mit beschrankter Haftung, a German equipment manufacturer. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - CONT. Also, as disclosed in Note 3 to the Company's financial statements included in the 1995 Annual Report, the Company determined that it would no longer support Astec-Europa and on February 6, 1996, Astec-Europa management filed a request for bankruptcy in Germany. The following unaudited pro forma summary presents the consolidated results of operations for the three months ended March 31, 1995 as if the disposition of Wibau-Astec and the abandonment of Astec-Europa had occurred at the beginning of 1995 after giving effect to certain adjustments. The pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results that would have occurred had the transactions occurred at the beginning of 1995 or of results which may occur in the future. (in thousands) Three months ended March 31, 1995 Net sales $53,224 Net income 3,009 Net income per common and common equivalent share $ .30 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Results of Operations For the three-months ended March 31, 1996, net sales increased to $59,570,000 from $57,544,000 for the three-months ended March 31, 1995, representing a 3.5% increase. International sales for the first quarter of 1996 were $10,087,000 compared to $8,036,000 for the first quarter of 1995, an increase of $2,051,000 or 25.50%. International sales represent 16.9% and 14.0% of total sales for the first quarter of 1996 and 1995, respectively. Gross profit for the quarter ended March 31, 1996 increased slightly to $13,822,000, from $13,637,000 for the quarter ended March 31, 1995. The gross profit percentage for the three months ended March 31, 1996 and 1995 was 23.2% and 23.7%, respectively. Competition has been intense in the asphalt plant industry during late 1995 and early 1996 with aggressive pricing by several competitors negatively affecting industry margins. Selling, general, and administrative expenses for the first quarter of 1996 were $8,998,000 or 15.1% of net sales, compared to $9,508,000 or 16.5% of net sales for the same period of 1995. During the first quarter of 1995 the selling, general and administrative expenses for the German operations, totaling $1,399,000, were included in consolidated operations. Selling, general and administrative expenses increased approximately $889,000 for the first quarter of 1996 over the first quarter of 1995, excluding German operations. Expenses related to the Con-Expo trade show and legal fees related to the Gencor patent litigation were approximately $255,000 and $219,000, respectively in the first quarter of 1996. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION - CONT. Interest expense decreased to $282,000 for the quarter ended March 31, 1996 from $467,000 for the quarter ended March 31, 1995. Interest expense as a percentage of net sales decreased to .5% for the quarter ended March 31, 1996 from .8% for the same period of 1995. The decrease in interest expense for the first quarter of 1996 is attributable to lower daily balances on the Company's revolving line of credit. Other income, net of other expense, was $231,000, or .4% of net sales for the quarter ended March 31, 1996, compared to other income, net of other expense of $543,000, or .9% of net sales for the quarter ended March 31, 1995. Income tax expense for the first quarter of 1996 increased to $1,947,000 from $1,689,000 at March 31, 1995, an increase of $258,000 or 15.3%. Tax expense is 3.3% and 2.9% of net sales for the quarters ended March 31, 1996 and 1995, respectively. The effective tax rate for the first quarter of 1996 is 40.8% compared to an effective rate of 40.2% for the first quarter of 1995. Backlog of orders at March 31, 1996 was $33,702,000 compared to $54,790,000 at March 31, 1995. The backlog at March 31, 1995 included $12,000,000 of international orders for one subsidiary. Although international prospects are strong, that subsidiary has no international orders as of March 31, 1996. Our current backlog is much weaker than in 1995, but we expect sales to improve. Earnings per share were $.28 for the first quarter of 1996 compared to $.25 for the same period of 1995. See Note 9 to "Notes to Unaudited Consolidated Financial Statements" for discussion of earnings per share excluding the operations of Germany for 1995. Liquidity and Capital Resources As of March 31, 1996, the Company had working capital of $59,329,000 compared to $57,951,000 at March 31, 1995. Total short-term borrowings, including current maturities of long-term debt, were $1,820,000 at March 31, 1996. Long-term debt less current maturities was $17,795,000 at March 31, 1996. Debt outstanding at March 31, 1996 consists of industrial revenue bonds issued to finance capital expenditures, a demand note payable to a related party (See Part -2, Item 13, "Certain Relationships and Related Transactions" of this Report) and the revolving line of credit. Capital expenditures in 1996, for plant expansion and for further modernization of the Company's manufacturing processes, are expected to approach $5,500,000. The Company expects to finance these expenditures using internally generated funds. Capital expenditures at March 31, 1996 were $3,146,000. The Company maintains a $22,000,000 unsecured revolving line of credit with The First National Bank of Chicago that expires June 30, 1997. The outstanding balance on the revolving line of credit at March 31, 1996 was $5,295,000. The Company was in compliance with all financial covenants at March 31, 1996. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION - CONT. 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. On October 28, 1993, the Company was named as a defendant in a patent infringement action brought by Gencor, Inc., a manufacturer of a competing line of asphalt plants, seeking monetary damages and an injunction to cease an alleged infringement of a patent on certain components used in the production of its asphalt plant product line. This case was filed in the U.S. District Court for the Middle District of Florida, Orlando Division, and went to trial on January 22, 1996. On February 3, 1996, the jury returned a verdict in the Company's favor holding that Astec's Double Barrel drum mixer does not infringe the Gencor patent in question. Judgment on that jury verdict was entered by the Court on February 5, 1996. It is anticipated that Gencor will appeal. Management believes that Gencor's anticipated appeal is without merit. In a personal injury and product liability case styled Juana Irma Suarez and Susana Medina Juarez v. Astec Industries, Inc., Barber-Greene Company, et al., in the District Court of Tarrant County Texas, 153rd Judicial District, Civil Action No. 153-123018-89, after the first case ended in a mistrial, the jury in a second trial during the week of September 19, 1994, returned a verdict against the Company for compensatory damages in the amount of $485,300, plus statutory prejudgment interest commonly allowed in such cases under Texas law. The Company appealed to the Texas Court of Appeals which on April 11, 1996 affirmed the judgment. The affirmed judgment, together with estimated prejudgment interest, will be approximately $900,000. Settlement discussions are under way with the plaintiffs under the terms of which the Company would forego a further appeal to the Texas Supreme Court in return for a reduced amount being paid to the Plaintiffs. The Company has already asked the Texas Court of Appeals to reconsider its ruling. Regardless of the outcome, the Company anticipates asking its liability insurance carrier to reimburse it for that portion of any amount paid to the Plaintiffs and incurred in defense costs which exceeds the $1,000,000 self-insured retention that is in effect in this case. With the exception of the Suarez litigation, for which the Company did not anticipate an adverse verdict and, therefore, did not establish a reserve, management has reviewed all claims and lawsuits and, upon the advice of its litigation counsel, has made provision for any estimable losses, not withstanding the foregoing, the Company is unable to predict the ultimate outcome of the outstanding claims and lawsuits. PART II - OTHER INFORMATION Item 1. Legal Proceedings There has been one development 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, 1995, described on Part I-Item 2, "Contingencies" of this report. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part I - Item 2 "Contingencies" of this Report. 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. The Company filed a report on Form 8-K on February 9, 1996 and a report on Form 8-K/A on February 9, 1996. 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) 5/7 /96 /s/ J. Don Brock Date J. Don Brock Chairman of the Board and President 5/7 /96 /s/ Albert E. Guth Date Albert E. Guth Senior Vice President Treasurer , Secretary and Principal Financial Officer EXHIBIT 11 Statement Regarding Computation of Per Share Earnings ASTEC INDUSTRIES, INC. EXHIBIT (11) - COMPUTATIONS OF EARNINGS PER SHARE 3/31/96 (in thousands) Shares for Earnings Per Share Computations: Primary: Weighted average outstanding during year 10,078 Common Stock equivalents for stock options 113 TOTAL 10,191 Fully Diluted: Weighted average outstanding during year 10,078 Common Stock equivalents for stock options 114 TOTAL 10,192 Earnings Applicable to Common Stock: Net Income $ 2,826 Earnings Per Share (Based on Weighted Average Number of Common and Common Equivalent Shares Outstanding): Net Income $.28 Additional Computations of EPS: Fully Diluted: Net Income $ .28 The Exhibits are numbered in accordance with Item 601 of Regulation S-K. Dilutive effect of common stock equivalents 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.