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, 1997. [ ] 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 _______ 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, 1997 was 10,044,199.
ASTEC INDUSTRIES, INC. INDEX Page Number PART I - Financial Information Item 1. Financial Statements-Unaudited Consolidated Balance Sheets as of March 31, 1997, December 31, 1996 and March 31, 1996 Consolidated Statements of Income for the Three Months Ended March 31, 1997 and 1996 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1997 and 1996 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 PART I ITEM I FINANCIAL STATEMENTS ASTEC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED) ACCOUNT DESCRIPTION MARCH 31 DECEMBER 31 1997 1996 ASSETS CURRENT ASSETS CASH AND CASH EQUIVALENTS $ 5,380 $ 3,382 RECEIVABLES - NET 40,394 34,603 INVENTORIES 61,257 56,764 REFUNDABLE INCOME TAX 2,071 PREPAID EXPENSES AND OTHER 8,765 7,507 TOTAL CURRENT ASSETS 115,796 104,327 PROPERTY AND EQUIPMENT - NET 56,035 54,317 OTHER ASSETS 13,018 9,209 TOTAL ASSETS $184,849 $167,853 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES NOTES PAYABLE $ 473 $ 1,551 CURRENT MATURITIES OF LONG-TERM DEBT 1,452 500 ACCOUNTS PAYABLE - TRADE 21,865 14,614 OTHER ACCRUED LIABILITIES 23,776 17,778 TOTAL CURRENT LIABILITIES 47,566 34,443 LONG-TERM DEBT, LESS CURRENT MATURITIES 29,309 30,497 OTHER LONG-TERM LIABILITIES 5,024 3,520 TOTAL SHAREHOLDERS' EQUITY 102,950 99,393 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $184,849 $167,853
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE INFORMATION) (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1997 1996 NET SALES $62,980 $59,570 COST OF SALES 47,105 45,748 GROSS PROFIT 15,875 13,822 S,G, & A EXPENSES 9,573 8,998 INCOME FROM OPERATIONS 6,302 4,824 INTEREST EXPENSE 553 282 OTHER INCOME, NET OF EXPENSE 104 231 INCOME BEFORE INCOME TAXES 5,853 4,773 INCOME TAXES 2,328 1,947 NET INCOME $3,525 $2,826 EARNINGS PER COMMON SHARE $0.35 $0.28 WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 10,039,921 10,078,397
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) MARCH 31, MARCH 31, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME $3,525 $2,826 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: DEPRECIATION AND AMORTIZATION 1,491 1,396 PROVISION FOR DOUBTFUL ACCOUNTS 74 113 PROVISION FOR INVENTORY RESERVE 380 472 PROVISION FOR WARRANTY RESERVE 491 627 (GAIN) LOSS ON SALE OF FIXED ASSETS 296 (7) (INCREASE) DECREASE IN: TRADE RECEIVABLES (6,017) (2,535) FINANCE RECEIVABLES (4,198) INVENTORIES (6,997) (4,394) PREPAID EXPENSES AND OTHER (1,256) 692 OTHER RECEIVABLES 451 95 OTHER ASSETS 29 2,697 INCREASE (DECREASE) IN: ACCOUNTS PAYABLE 7,252 3,052 ACCRUED PRODUCT WARRANTY (70) (565) OTHER ACCRUED LIABILITIES 3,821 (7,271) TAXES PAYABLE 5,328 2,990 TOTAL ADJUSTMENTS 1,075 (2,638) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 4,600 188 CASH FLOWS FROM INVESTING ACTIVITIES: PROCEEDS FROM SALE OF PROPERTY AND EQUIPMENT - NET 271 50 EXPENDITURES FOR PROPERTY AND EQUIPMENT (1,591) (3,146) NET CASH USED BY INVESTING ACTIVITIES (1,320) (3,096) CASH FLOWS FROM FINANCING ACTIVITIES: NET BORROWINGS (REPAYMENTS) UNDER REVOLVING CREDIT LOAN (3,322) 472 NET BORROWINGS UNDER LOAN AND NOTE AGREEMENTS 2,008 1,219 CASH PAID FOR TREASURY STOCK (768) PROCEEDS FROM ISSUANCE OF COMMON STOCK 32 42 NET CASH PROVIDED BY FINANCING ACTIVITIES (1,282) 965 NET (DECREASE) IN CASH 1,998 (1,943) CASH AT BEGINNING OF PERIOD 3,382 3,133 CASH AT END OF PERIOD $5,380 $1,190
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 $1,258,000, $1,267,000 and $1,257,000 for March 31, 1997, December 31, 1996 and March 31, 1996, 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, 1997 1996 1996 Raw Materials $ 24,813 $ 23,541 $ 25,639 Work-in-Process 11,252 9,038 11,607 Finished Goods 25,192 24,185 22,559 Total $ 61,257 $ 56,764 $ 59,805 4. Property and equipment is stated at cost. Property and equipment is net of accumulated depreciation of $28,353,000, $27,066,000 and $24,164,000 for March 31, 1997, December 31, 1996, and March 31, 1996, 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 $3,278,000 at March 31, 1997, $4,618,000 at December 31, 1996, and $7,423,000 at March 31, 1996. 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 Astec's business volume normally occurs during the first three months of each year. 9. In February, 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The Company has not yet determined what the impact of Statement 128 will be on the calculation of fully diluted earnings per share. 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, 1997, net sales increased to $62,980,000 from $59,570,000 for the three-months ended March 31, 1996, representing a 5.7% increase. International sales for the first quarter of 1997 were $10,921,000 compared to $10,087,000 for the first quarter of 1996, an increase of $834,000 or 8.30%. International sales represent 17.3% and 16.9% of total sales for the first quarter of 1997 and 1996, respectively. Gross profit for the quarter ended March 31, 1997 increased to $15,875,000, from $13,822,000 for the quarter ended March 31, 1996, while the gross profit percentage for the three months ended March 31, 1997 increased to 25.2% from 23.2% at March 31, 1996. Increased gross profit relates to improved margins on some product lines and improved efficiencies at some manufacturing locations. Selling, general, and administrative expenses for the first quarter of 1997 were $9,573,000 or 15.2% of net sales, compared to $8,998,000 or 15.1% of net sales for the same period of 1996. Interest expense increased to $553,000 for the quarter ended March 31, 1997 from $282,000 for the quarter ended March 31, 1996. Interest expense as a percentage of net sales increased to .9% for the quarter ended March 31, 1997 from .5% for the same period of 1996. The increase in interest expense for the first quarter of 1997 is mainly attributable to increased usage of the Company's revolving line of credit in connection with increased inventory and accounts receivable. The increase in interest expense is also attributable to additional debt at the subsidiary level. Additional debt at the subsidiary level consists of notes payable for financing of equipment in inventory at one location and the revolving line of credit at the Company's captive finance company. Other income, net of other expense, was $104,000, or .2% of net sales for the quarter ended March 31, 1997, compared to other income, net of other expense, of $231,000, or .4% of net sales for the quarter ended March 31, 1996. The decrease in other income, net of other expense, relates to decreased license fee and interest income during 1997 compared to 1996. Income tax expense for the first quarter of 1997 increased to $2,328,000 from $1,947,000 at March 31, 1996, an increase of $381,000 or 19.6%. Tax expense is 3.7% and 3.3% of net sales for the quarters ended March 31, 1997 and 1996, respectively. The effective tax rate for the first quarter of 1997 is 39.7% compared to an effective rate of 40.8% for the first quarter of 1996. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION - CONT. Backlog of orders at March 31, 1997 was $60,193,000 compared to $33,702,000 at March 31, 1996. The majority of the increase relates to a significant increase in domestic orders for the products of one subsidiary. Liquidity and Capital Resources As of March 31, 1997, the Company had working capital of $68,230,000 compared to $59,329,000 at March 31, 1996. Total short-term borrowings, including current maturities of long- term debt, were $1,925,000 at March 31, 1997 compared to $1,820,000 at March 31, 1996. Long-term debt less current maturities was $29,309,000 at March 31, 1997 and $17,795,000 at March 31, 1996. The increase of debt outstanding at March 31, 1997 compared to the same period of 1996 is due to the utilization of revolving lines of credit for working capital needs, and the issuance of notes payable to finance equipment in inventory by one subsidiary. Capital expenditures in 1997, for plant expansion and for further modernization of the Company's manufacturing processes, are expected to approach $7,700,000. The Company expects to finance these expenditures using internally generated funds. Capital expenditures at March 31, 1997 were $1,591,000. During April, 1997 the Company's Board of Directors approved an issuer self-tender offer to purchase up to 2,000,000 shares of the Company's Common Stock, representing approximately 20% of the Company's outstanding shares of common stock as of March 10, 1997. On May 2, 1997 the Company announced that the Company accepted for payment all shares validly tendered and not withdrawn prior to the expiration date at the purchase price of $10.50. The Company purchased 726,619 shares of its common stock in connection with their self-tender offer. In connection with the above stock purchase, the Company entered into an amended and restated Credit Agreement, dated as of May 5, 1997, with the First National Bank of Chicago for an unsecured revolving line of credit in the amount of $40,000,000 which expires on May 3, 2002. Due to the increased level of borrowing, the new loan agreement contains restrictive principal covenant requirements and interest rates that fluctuate in relation to the leverage ratio. The captive finance company which operates as a subsidiary of the Company, maintains a $15,000,000 revolving line of credit with AmSouth Bank. The line of credit is guaranteed by the Company. At March 3, 1997, the outstanding balance on the First Chicago revolving line of credit was $10,000,000 while the outstanding balance on the line of credit of the subsidiary was $6,308,000. Both lines of credit contain principal covenants which require the Company to maintain certain levels of net worth, leverage, fixed charge and interest expense ratios, and limits capital expenditures. The Company was in compliance with all financial covenants at March 31, 1997. 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'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION - CONT. 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 10K for the year ended December 31, 1996. 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) The following Exhibits are filed with this Report: 11 Statement Regarding Computation of Per Share Earnings. (b) Reports on Form 8-K. No reports on Form 8-K have been filed during the quarter ended March 31, 1997. 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) 5/12 /97 /s/ J. Don Brock Date J. Don Brock Chairman of the Board and President 5/12 /97 /s/ Richard W. Bethea, Jr. Date Richard W. Bethea Vice President, Corporate Counsel and Secretary
EXHIBIT 11 Statement Regarding Computation of Per Share Earnings
ASTEC INDUSTRIES, INC. EXHIBIT (11) - COMPUTATIONS OF EARNINGS PER SHARE March 31, 1997 and 1996 (in thousands) Shares for Earnings Per Share Computations: 1997 1996 Primary: Weighted average outstanding during the year 10,040 10,078 Common Stock equivalents for stock options 103 113 Total 10,143 10,191 Fully Diluted: Weighted average outstanding during the year 10,040 10,078 Common Stock equivalents for stock options 111 114 Total 10,151 10,192 Earnings applicable to Common Stock: Net Income $3,525 $2,826 Earnings Per Share (Based on Weighted Average Number of Common Equivalent Shares Outstanding): Net Income $.35 $.28 Additional Computations of EPS: Fully Diluted: Net Income $.35 $.28 [FN] Dilutive effect of common stock 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.